<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------------
AMENDMENT NO. 1
TO
SCHEDULE 13E-3
RULE 13E-3 TRANSACTION STATEMENT
(PURSUANT TO SECTION 13(e) OF THE SECURITIES EXCHANGE ACT OF 1934)
---------------------------
CAMBRIDGE HOLDINGS, LTD.
(NAME OF ISSUER)
CAMBRIDGE HOLDINGS, LTD.
(NAME OF PERSON(S) FILING STATEMENT)
COMMON STOCK, $.025 PAR VALUE
(TITLE OF CLASS OF SECURITIES)
132198201
(CUSIP NUMBER OF CLASS OF SECURITIES)
---------------------------
GREGORY PUSEY,
PRESIDENT
CAMBRIDGE HOLDINGS, LTD.
1722 BUFFEHR CREEK ROAD
VAIL, COLORADO 81657
(970) 479-2800
COPY TO:
ROBERT M. BEARMAN
BEARMAN TALESNICK & CLOWDUS PROFESSIONAL CORPORATION
1200 SEVENTEENTH STREET, SUITE 2600
DENVER, COLORADO 80202-5826
(303) 572-6500
<PAGE>
THIS STATEMENT IS FILED IN CONNECTION WITH (CHECK THE APPROPRIATE BOX):
a. [ ] The filing of solicitation materials or an information
statement subject to Registration 14A [17 CFR 240.14a-1 to
240.14b. Regulation 14C [17 CFR 240.14c-1 to 240.14c-101] or
Rule 13e-3(c) [Section 240.13e-3(c) under the Securities
Exchange Act of 1933.
b. [ ] The filing of a registration statement under the
Securities Act of 1933.
c. [X] A tender offer.
d. [ ] None of the above.
Check the following box if the soliciting materials or information
statement referred to in checking box (a) are preliminary copies: [ ]
CALCULATION OF FILING FEE
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
AMOUNT OF
TRANSACTION VALUATION* FILING FEE**
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
<S> <C>
$540,000 $108.00+
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
</TABLE>
* Assumes purchase of 1,200,000 Shares of Common Stock at $0.45 per
share.
** Calculated based on the transaction valuation multiplied by
one-fiftieth of one percent.
+ Previously paid.
[X] Check box if any part of the fee is offset as provided by
Rule 0-11(a)(2) and identify the filing with which the offsetting
fee was previously paid.
Identify the previous filing by registration statement number, or the
Form or Schedule and the date of its filing.
Amount Previously Paid: $108 Filing Party: Cambridge Holdings, Ltd.
Form or Registration No.: Schedule 13E-4 Date Filed: November 24, 1998
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
INTRODUCTION
Cambridge Holdings, Ltd., a Colorado corporation (the "Company") hereby
amends and supplements its Rule 13e-3 Transaction Statement on Schedule 13E-3,
filed with the Securities and Exchange Commission (the "Commission") on
November 24, 1998 (the "Schedule 13E-3"). Capitalized terms not defined
herein have the meaning ascribed to them in the Schedule 13E-3.
This Schedule 13E-3 is being filed based on the Company's understanding that
the SEC's staff interprets Rules 13e-3(a)(3)(ii)(A) to require the filing of
a Schedule 13E-3 whenever there is a possibility that an issuer tender offer
could cause a class of equity securities of the issuer which is subject to
Section 12(g) or 15(c) of the Exchange Act to be held of record by less than
300 persons. The Company currently has approximately 1,081 shareholders of
record. Although the Company believes it is unlikely the issuer tender offer
will result in the number of record holders decreasing to less than 300, it
is possible that this could occur.
Based on information provided by the Tender Agent for the Tender Offer, as of
5:00 P.M. on December 18, 1998, approximately 593,528 Shares of the Company's
common stock from 42 shareholders had been tendered and not withdrawn.
<PAGE>
Item 4. TERMS OF THE TRANSACTION.
Item 4(a) is amended as follows:
(a) SEE "Introduction" and Sections 1 and 6 of the Offer to
Purchase, as supplemented by the Supplement to the Offer to Purchase.
<PAGE>
Item 8. FAIRNESS OF THE TRANSACTION.
Item 8 is amended as follows:
(a)-(b) SEE "Special Factors" in the Offer to Purchase, as
supplemented by the Supplement to the Offer to Purchase.
<PAGE>
Item 16. ADDITIONAL INFORMATION.
Item 16 is amended as follows:
Additional information with respect to the Offer is provided in the
Offer to Purchase, as supplemented by the Supplement to the Offer to Purchase.
Item 17. MATERIAL TO BE FILED AS EXHIBITS.
Item 17 of the Schedule 13E-3 is hereby amended to add the
following exhibit:
(d) Offer to Purchase dated November 24, 1998.
(d)-1 Supplement to Offer to Purchase dated November 24, 1998,
dated December 22, 1998.
CAMBRIDGE HOLDINGS, LTD.
(a Colorado corporation)
Date: December 22, 1998 By: /s/ Gregory Pusey
----------------------------
Gregory Pusey, President
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C>
99.A Offer to Purchase dated November 24, 1998.
99.A-1 Supplement to Offer to Purchase dated November 24, 1998,
dated December 22, 1998.
</TABLE>
<PAGE>
OFFER TO PURCHASE FOR CASH UP TO
1,200,000 SHARES OF ITS COMMON STOCK
AT $0.45 PER SHARE
BY
CAMBRIDGE HOLDINGS, LTD.
THE OFFER, PRORATION PERIOD AND WITHDRAWAL
RIGHTS EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
DECEMBER 28, 1998, UNLESS THE OFFER IS EXTENDED
Cambridge Holdings, Ltd., a Colorado corporation, with its principal
business offices located at 1722 Buffehr Creek Road, Vail, Colorado 81657 (the
"Company"), invites its shareholders to tender shares of its $.025 par value
Common Stock (the "Shares") to the Company at the price of $0.45 per Share, net
to the seller in cash (the "Purchase Price"), upon the terms and subject to the
conditions set forth herein and in the related Letter of Transmittal which
together constitute the "Offer." All Shares properly tendered and not withdrawn
will be purchased at the Purchase Price, upon the terms and subject to the
conditions of the Offer, including the proration provisions. The proration will
generally not be applicable to persons who own fewer than 100 Shares. SEE
Section 1. The Company reserves the right, in its sole discretion, to purchase
more than 1,200,000 Shares pursuant to the Offer. SEE Section 14.
THE OFFER IS NOT CONDITIONED ON ANY MINIMUM NUMBER OF SHARES BEING
TENDERED. THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER CONDITIONS. SEE
SECTION 6.
The Shares are traded on the Electronic Bulletin Board system operated by
The Nasdaq Stock Market. The symbol is "CDGD." Trading in the Shares has been
limited and sporadic. On November 23, 1998, the last full trading day on the
Electronic Bulletin Board prior to the announcement and commencement of the
Offer, the high and low bid prices per Share as reported were $0.38.
THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED THE OFFER. HOWEVER,
NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO
SHAREHOLDERS AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING THEIR SHARES.
EACH SHAREHOLDER MUST MAKE THE DECISION WHETHER TO TENDER SHARES AND, IF SO, HOW
MANY SHARES. THE COMPANY HAS BEEN ADVISED THAT TWO OF ITS FOUR DIRECTORS INTEND
TO TENDER ALL OF THE SHARES OWNED BY THEM (AN AGGREGATE OF 189,190 SHARES)
PURSUANT TO THE OFFER.
<PAGE>
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR MERITS OF
SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED
IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
2
<PAGE>
IMPORTANT
Any shareholder wishing to tender his or her Shares should complete and
sign the Letter of Transmittal (or a facsimile thereof) in accordance with
the instructions in the Letter of Transmittal and either mail or deliver it
with stock certificates for such Shares and any other required documents to
Corporate Stock Transfer, Inc., 370 Seventeenth Street, Suite 2350, Denver,
Colorado 80202-4614 (the "Tender Agent"). Alternatively, the Shares may be
tendered pursuant to the procedure for book-entry tender set forth in Section
3. Holders of Shares registered in the name of a broker, dealer, commercial
bank, trust company or other nominee should contact such person if they
desire to tender their Shares. Any shareholder who desires to tender Shares
and whose certificates for such Shares cannot be delivered to the Tender
Agent or who cannot comply with the procedure for book-entry transfer or
whose other required documents cannot be delivered to the Tender Agent, in
any case, by the expiration of the Offer must tender such Shares pursuant to
the guaranteed delivery procedure set forth in Section 3.
TO PROPERLY TENDER SHARES, SHAREHOLDERS MUST VALIDLY COMPLETE THE LETTER
OF TRANSMITTAL.
Questions and requests for assistance or for additional copies of this
Offer to Purchase, the Letter of Transmittal and the Notice of Guaranteed
Delivery may be directed to the Tender Agent or to the Company at their
respective addresses and telephone numbers set forth below. A shareholder
may also contact brokers, dealers, commercial banks, trust companies or other
nominees for assistance concerning the Offer.
THE COMPANY HAS NOT AUTHORIZED ANY PERSON TO MAKE ANY RECOMMENDATION ON
BEHALF OF THE COMPANY AS TO WHETHER SHAREHOLDERS SHOULD TENDER OR REFRAIN
FROM TENDERING SHARES PURSUANT TO THE OFFER. THE COMPANY HAS NOT AUTHORIZED
ANY PERSON TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION IN
CONNECTION WITH THE OFFER OTHER THAN THOSE CONTAINED HEREIN OR IN THE RELATED
LETTER OF TRANSMITTAL. IF GIVEN OR MADE, ANY SUCH RECOMMENDATION OR ANY SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY.
November 24, 1998
CAMBRIDGE HOLDINGS, LTD. CORPORATE STOCK TRANSFER, INC.
1722 Buffehr Creek Road 370 Seventeenth Street, Suite 2350
Vail, Colorado 81657 Denver, Colorado 80202-4614
Telephone: (970) 479-2800 Telephone: (303) 595-3300
Fax: (970) 479-2822 Fax: (303) 592-8821
<PAGE>
CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS
Forward-looking statements, within the meaning of Section 21E of the
Securities Exchange Act of 1934 are made throughout these documents, and
sometimes are preceded by, followed by or include the words "intends,"
"believes," "expects," "anticipates," "should" or similar expressions. The
Company's results of operations and liquidity status may differ materially
from those in the forward-looking statements. Such statements are based on
management's current views and assumptions, and involve risks and
uncertainties that could affect expected results. For example, any of the
following factors cumulatively or individually may affect expected results:
the Company is engaged in the highly competitive real estate industry and may
be deemed to be at a competitive disadvantage because of its small size, lack
of management depth and limited capital resources; its two developed
properties near Vail, Colorado have been built as luxury residences on a
speculative basis with no assurance of sale; the Company has recently
purchased property in Glenwood Springs, Colorado but has not determined its
plans for this property; the Company's ability to develop and sell properties
may be affected by general economic and market conditions, and high-end
luxury properties in resort communities may be particularly susceptible to
economic downturns; the Company's ability to grow may be dependent upon
obtaining additional financing and the Company has no available lines of
credit or other external resources for obtaining such financing; and due to,
among other things, the Company's small size and limited development history,
the Company may encounter substantial difficulties in obtaining financing and
in pursuing the growth of the Company.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C>
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .i
SPECIAL FACTORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .iii
THE OFFER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
1. Number of Shares; Proration. . . . . . . . . . . . . . . . . . . . . . . . . . .1
2. Purpose of the Offer; Certain Effects of the Offer . . . . . . . . . . . . . . .2
3. Procedures for Tendering Shares. . . . . . . . . . . . . . . . . . . . . . . . .3
4. Withdrawal Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
5. Acceptance for Payment and Payment for Shares. . . . . . . . . . . . . . . . . .7
6. Certain Conditions of the Offer. . . . . . . . . . . . . . . . . . . . . . . . .8
7. Price Range of Shares; Dividends . . . . . . . . . . . . . . . . . . . . . . . .8
8. Source and Amount of Funds . . . . . . . . . . . . . . . . . . . . . . . . . . .9
9. Certain Information Concerning the Company . . . . . . . . . . . . . . . . . . .9
10. Interests of Directors and Officers; Transactions and
Arrangements Concerning Shares. . . . . . . . . . . . . . . . . . . . . . . .10
11. Effects of the Offer on the Market for Shares;
Registration under the Exchange Act . . . . . . . . . . . . . . . . . . . . .12
12. Certain Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
13. Certain Federal Income Tax Consequences . . . . . . . . . . . . . . . . . . . .13
14. Extension of Offer; Termination; Amendment. . . . . . . . . . . . . . . . . . .14
15. Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
16. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
</TABLE>
<PAGE>
INTRODUCTION
Cambridge Holdings, Ltd., a Colorado corporation (the "Company"),
invites its shareholders to tender shares of the Company's $.025 par value
Common Stock (the "Shares") at the price of $0.45 per Share, net to the
Seller in cash (the "Purchase Price"), upon the terms and subject to the
conditions set forth herein and in the related Letter of Transmittal which
together constitute the "Offer." All Shares properly tendered and not
withdrawn will be purchased at the Purchase Price, upon the terms and subject
to the conditions of the Offer, including the proration provisions. The
Company reserves the right, in its sole discretion, to purchase more than
1,200,000 Shares pursuant to the Offer. SEE Section 14.
THE OFFER IS NOT CONDITIONED ON ANY MINIMUM NUMBER OF SHARES BEING
TENDERED. THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER CONDITIONS. SEE
SECTION 6.
THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED THE OFFER. HOWEVER,
NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO
SHAREHOLDERS AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING THEIR SHARES.
EACH SHAREHOLDER MUST MAKE THE DECISION WHETHER TO TENDER SHARES AND, IF SO,
HOW MANY SHARES. THE COMPANY HAS BEEN ADVISED THAT TWO OF ITS FOUR DIRECTORS
INTEND TO TENDER ALL OF THE SHARES OWNED BY THEM (AN AGGREGATE OF 189,190
SHARES) PURSUANT TO THE OFFER.
Upon the terms and subject to the conditions of the Offer, if at the
expiration of the Offer more than 1,200,000 Shares (or such greater number of
Shares as the Company may elect to purchase) are properly tendered and not
withdrawn, the Company will buy Shares first from all the Odd Lot Holders (as
defined in Section 1) who properly tender all their Shares, and then on a pro
rata basis from all other shareholders who properly tender Shares (and, in
each case, do not withdraw them prior to the expiration of the Offer). The
Company will return at its own expense all Shares not purchased pursuant to
the Offer. SEE Section 1.
The Purchase Price will be paid net to the tendering shareholder in cash
for all Shares purchased. Tendering shareholders who are registered holders
will not be obligated to pay brokerage commissions, solicitation fees on the
purchase of Shares by the Company. Shareholders holding Shares through
brokers or banks are urged to consult such brokers or banks to determine
whether transaction costs are applicable if shareholders tender Shares
through such brokers or banks and not directly to the Tender Agent. HOWEVER,
ANY TENDERING SHAREHOLDER OR OTHER PAYEE WHO FAILS TO COMPLETE, SIGN AND
RETURN TO THE TENDER AGENT THE SUBSTITUTE FORM W-9 THAT IS INCLUDED AS PART
OF THE LETTER OF TRANSMITTAL MAY BE SUBJECT TO REQUIRED UNITED STATES FEDERAL
INCOME TAX BACKUP WITHHOLDING OF 31% OF THE GROSS PROCEEDS PAYABLE TO SUCH
SHAREHOLDER OR OTHER PAYEE PURSUANT TO THE OFFER. SEE Section 3. The
Company will pay all fees and expenses of the Tender Agent incurred in
connection with the Offer. SEE Section 15.
<PAGE>
As of November 23, 1998, the Company had issued and outstanding 3,408,400
Shares and had reserved 160,000 Shares for issuance upon exercise of outstanding
stock options. The 1,200,000 Shares that the Company is offering to purchase
pursuant to the Offer represent approximately 35.2% of the Company's Shares
outstanding on November 23, 1998 (approximately 33.6% assuming exercise of
outstanding options). The Shares are traded on the Electronic Bulletin Board
system operated by The Nasdaq Stock Market under the symbol "CDGD." On
November 23, 1998, the last full trading day prior to the announcement and
commencement of the Offer, the high and low bid prices per Share as reported
were $0.38. See Section 7.
ii
<PAGE>
SPECIAL FACTORS
Shareholders of the Company are urged to consider the following special
factors, as well as other information appearing in this Offer to Purchase, in
determining whether to tender their Shares. In addition, shareholders should
consider their particular financial circumstances, investment objectives and
tax situation. SEE Section 13 for a discussion of federal tax consequences.
- The Company has been engaged in real estate operations since 1991 when
it acquired a three story office building in Colorado Springs,
Colorado. The Company sold this building and the adjacent land in
fiscal 1996. In fiscal 1997 the Company purchased two undeveloped
lots near Vail, Colorado. These lots have been developed as luxury
residences, but remain unsold. The Company purchased three acres of
raw land in Glenwood Springs, Colorado; however, the Company has not
made a determination of whether to develop this property.
- The Company's Board of Directors (the "Board") believes that other
opportunities for real estate development may be available to the
Company; however, the real estate industry is highly competitive and
the Company may be deemed to be at a competitive disadvantage because
of its small size, lack of management depth and limited capital
resources.
- The Company intends to consider other real estate development
activities, as well as other business opportunities. In addition to
real property acquisitions, the Company may consider the possible
acquisition of, or merger with, another business entity, or other
types of business transactions. The Company does not intend to limit
its search to companies in real estate activities. However, the
Company has no contracts, understandings or arrangements to acquire
any other real estate properties, or to enter into any mergers or
other business combinations.
- For the past several years, the Company's stock has been traded on the
Electronic Bulletin Board system. Although this system is operated by
The Nasdaq Stock Market, Inc., trading on this system is not typically
as active as trading on Nasdaq or a national securities exchange. The
Company does not qualify for trading on Nasdaq or a national
securities exchange. Trading in the Shares has been sporadic and
limited for the past several years.
- On November 23, 1998, the last trading day prior to the announcement
and commencement of the Offer, the high and low bid price of the
Shares was $0.38. Since the quarter ended March 31, 1997, the highest
bid price for the Shares was $0.41. For the preceding three quarters,
the highest bid price was $0.63; however, the Company does not believe
that any significant sales were effected at these prices.
- At November 23, 1998, the Company had approximately 1,081 shareholders
of record, including approximately 493 holders who owned less than 100
Shares. It is likely that the transaction costs incurred in
connection with open market transactions
iii
<PAGE>
would exceed the amount to be received by shareholders who own fewer
than 100 Shares in the sale of those Shares. If the Shares are
tendered by the registered owner directly to the Tender Agent in the
Offer, the usual transaction costs associated with market sales would
be avoided. Accordingly, the Offer will provide many shareholders
with the opportunity to receive cash from the sale of their Shares
which they would otherwise not be able to obtain.
- The Board has considered the possibility of the Company making open
market purchases of the Shares. However, due to the limited trading
volume, and the requirements of Rule 10b-18 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), this is not a
viable alternative.
- The Board has also considered the possibility of liquidation of the
Company. Set forth below is certain financial information regarding
the Company. At September 30, 1998, the book value per Share was
$0.95. The recent Share price reflects a discount of approximately
56.8% to the Company's book value per Share at September 30, 1998.
The Board has a long-term corporate goal of seeking to increase
shareholder value, and believes that the Company has reasonable
prospects to achieve this objective. Accordingly, the Board
determined not to present a liquidation proposal to the Company, but
instead to present this Offer as a voluntary, non-coercive proposal to
those shareholders who may be seeking near-term liquidity from their
investment in the Shares.
- Although the Board believes that there are significant risks
associated with the Company's operations, the Board has determined
that the Company's financial condition, including recent trading
prices of the Shares, make this an attractive time to repurchase a
significant portion of the outstanding Shares. In the view of the
Board, the Offer represents an attractive investment that should
benefit the Company and its shareholders over the long-term. The
Board believes that the Offer is fair to the shareholders of the
Company in that it will permit shareholders who desire to sell their
Shares the opportunity to do so while affording shareholders who
determine not to accept the Offer a proportionate increase in their
relative equity interest in the Company, and thus in the Company's
future earnings and assets subject to the Company's right to issue
additional Shares and other equity securities in the future.
- In determining the Purchase Price in the Offer, the Board gave
predominant weight to the current trading price of the Shares and the
trading prices of the Shares during the past two years. The Board
also believed that the Purchase Price should be at a significant
discount to book value per Share to provide the shareholders who
determine not to tender Shares the opportunity to share in the
potential long-term growth of the Company. The Company has received
no offers during the preceding eighteen months for the merger or
consolidation of the Company, the sale of all or substantially all of
the assets of the Company or of a controlling interest in the Shares.
iv
<PAGE>
- The Shares are currently registered under the Exchange Act. SEE
Section 11. If the number of holders of record of the Shares were
reduced to less than 300 as a result of the Offer, the Company could
choose to terminate registration of the Shares upon application of the
Company to the Securities and Exchange Commission. However, the Board
has resolved that the Company will not make such application during
the current fiscal year ending June 30, 1999. The Company is not
making this offer as a part of any plan to terminate its registration
under the Exchange Act, or as a "first step" in a "going private"
transaction. The purpose of the Offer is to provide shareholders who
desire to sell their Shares with the opportunity to do so at a price
which is consistent with recent trading prices of the Shares, and to
provide those shareholders who do not wish to tender their Shares to
take advantage of what the Board determines is an attractive time to
repurchase a significant portion of the outstanding Shares. The Board
makes no prediction as to the future trading prices of the Shares, nor
can it be assured that the long-term outlook for the Company will be
positive.
- Shareholders contemplating whether to tender their Shares should
consider that the Company has not retained any financial advisor or
investment banking firm to assist the Company in determining the price
and terms of the Offer or whether the Offer is adequate to tendering
shareholders. The Company also has not requested any report, opinion,
or appraisal relating to the fairness of the Purchase Price. No
unaffiliated representative has been retained to act solely on behalf
of the unaffiliated shareholders for the purposes of negotiating the
terms of the Offer. The Offer was approved by a majority of the Board
who are not employees of the Company.
CERTAIN FINANCIAL INFORMATION.
<TABLE>
<CAPTION>
Years Ended Unaudited Pro Forma
June 30, Three Months Ended Offer
September 30,
---------------------- ----------------------- ---------
Dollars in Thousands Except Per
Share Data
- --------------------------------
1997 1998 1997 1998 9/30/98
---------- ---------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Statements of Operations:
Revenues $328.4 $178.1 $36.2 $(133.0) $(133.0)
Net Income (Loss) 103.2 (136.5) (10.6) (182.3) (182.3)
Income (Loss) Per Share .03 ( .04) Nil ( .05) ( .08)
Weighted Average Shares 3.4 3.4 3.4 3.4 2.2
Outstanding
Balance Sheet:
Working Capital $2952.9 $3456.6 $2014.1 $3195.2 $2615.2
Total Assets 3756.5 4184.5 4442.3 3909.3 3329.3
Shareholders' Equity 3693.3 3495.2 3708.9 3230.5 2650.5
Book Value Per Share 1.09 1.03 1.09 .95 1.20
</TABLE>
v
<PAGE>
The following notes describe the pro forma adjustments relating to the
Offer:
(1) Assumes that the Company acquires 1,200,000 Shares pursuant to the
Offer at $0.45 per Share. The total cost of $580,000 includes an estimated
$40,000 in transaction costs required to effect the Offer. Assumed costs
have been included in the balance sheet information.
(2) The weighted average shares outstanding has been adjusted assuming
the acquisition of 1,200,000 Shares pursuant to the Offer.
(3) Book value per Share outstanding has been calculated by dividing
the adjusted shareholders' equity by the number of Shares to be outstanding
assuming tender of the maximum of 1,200,000 Shares.
vi
<PAGE>
THE OFFER
1. NUMBER OF SHARES; PRORATION
Upon the terms and subject to the conditions of the Offer, the Company
will purchase 1,200,000 Shares or such lesser number of Shares as are
properly tendered (and not withdrawn in accordance with Section 4) prior to
the Expiration Date (as defined below) at the Purchase Price.
The term "Expiration Date" means 5:00 P.M., New York City time, on
December 28, 1998 unless and until the Company, in its sole discretion, shall
have extended the period of time during which the Offer will remain open, in
which event the term "Expiration Date" shall refer to the latest time and
date at which the Offer, as so extended by the Company, shall expire. SEE
Section 14 for a description of the Company's right to extend, delay,
terminate or amend the Offer. The Company reserves the right to purchase
more than 1,200,000 Shares pursuant to the Offer. In accordance with
applicable regulations of the Securities and Exchange Commission (the
"Commission"), the Company may purchase pursuant to the Offer an additional
amount of Shares not to exceed 2% of the outstanding Shares as of the date
hereof without amending or extending the Offer. SEE Section 14. In the
event of an over-subscription of the Offer as described below, Shares
tendered at or below the Purchase Price prior to the Expiration Date will be
subject to proration, except for Odd Lots as explained below. The proration
period also expires on the Expiration Date.
If the number of Shares validly tendered and not withdrawn on or prior
to the Expiration Date is less than or equal to 1,200,000 Shares (or such
greater number of Shares as the Company may elect to purchase pursuant to the
Offer), the Company will, upon the terms and subject to the conditions of the
Offer, purchase at the Purchase Price all Shares so tendered.
PRIORITY OF PURCHASES. Upon the terms and subject to the conditions of
the Offer, if more than 1,200,000 Shares (or such greater number of Shares as
the Company may elect to purchase) have been properly tendered and not
withdrawn prior to the Expiration Date, the Company will purchase properly
tendered Shares on the basis set forth below:
(a) First, all Shares tendered and not withdrawn prior to the Expiration
Date by any Odd Lot Holder (as defined below) who:
(i) Tenders all Shares beneficially owned by such Odd Lot Holder
(tenders of less than all Shares owned by such shareholder will not qualify
for this preference); and
(ii) Completes the box captioned "Odd Lots" on the Letter of
Transmittal and if applicable, on the Notice of Guaranteed Delivery; and
(b) Second, after purchase of all of the foregoing Shares, all other
Shares properly tendered and not withdrawn prior to the Expiration Date, on a
pro rata basis (with appropriate adjustments to avoid purchases of fractional
Shares) as described below.
<PAGE>
ODD LOTS. For purposes of the Offer, the term "Odd Lots" shall mean all
Shares properly tendered prior to the Expiration Date and not withdrawn by
any person (an "Odd Lot Holder") who owned, beneficially or of record, as of
the close of business on November 23, 1998 and as of the Expiration Date, an
aggregate of fewer than 100 Shares and so certified in the appropriate place
on the Letter of Transmittal and, if applicable, on the Notice of Guaranteed
Delivery. In order to qualify for this preference, an Odd Lot Holder must
tender all such Shares in accordance with the procedures described in Section
3. As set forth above, Odd Lots will be accepted for payment before
proration, if any, of the purchase of other tendered Shares. This preference
is not available to partial tenders or to beneficial or record holders of an
aggregate of 100 or more Shares, even if such holders have separate accounts
or certificates representing fewer than 100 Shares. By accepting the Offer,
an Odd Lot Holder would not only avoid payment of brokerage commissions, but
also would avoid any applicable Odd Lot discounts in a sale of such
shareholder's Shares. Any shareholder wishing to tender all such
shareholder's Shares pursuant to this Section should complete the box
captioned "Odd Lots" on the Letter of Transmittal and, if applicable, on the
Notice of Guaranteed Delivery.
PRORATION. In the event that proration of tendered Shares is required,
the Company will determine the proration factor as soon as practicable
following the Expiration Date. Proration for each shareholder tendering
Shares, other than Odd Lot Holders, shall be based on the ratio of the number
of Shares properly tendered and not withdrawn by such shareholder to the
total number of Shares properly tendered and not withdrawn by all
shareholders, other than Odd Lot Holders. Because of the difficulty in
determining the number of Shares properly tendered (including Shares tendered
by guaranteed delivery procedures, as described in Section 3) and not
withdrawn, and because of the Odd Lot procedure, the Company does not expect
that it will be able to announce the final proration factor or commence
payment for any Shares purchased pursuant to the Offer until approximately
five business days after the Expiration Date.
This Offer to Purchase and the related Letter of Transmittal will be
mailed to record holders of Shares and will be furnished to brokers, banks
and similar persons whose names, or the names of whose nominees, appear on
the Company's shareholder list or, if applicable, who are listed as
participants in a clearing agency's security position listing for subsequent
transmittal to beneficial owners of Shares.
2. PURPOSE OF THE OFFER; CERTAIN EFFECTS OF THE OFFER.
The Offer provides shareholders who are considering a sale of all or a
portion of their Shares with the opportunity to sell those Shares for cash
without, where Shares are tendered by the registered owner thereof directly
to the Tender Agent, the usual transaction costs associated with market
sales. The Offer also allows shareholders, other than Odd Lot Holders, to
sell a portion of their Shares while retaining a continuing equity interest
in the Company. Shareholders who determine not to accept the Offer will
realize a proportionate increase in their relative equity interest in the
Company, and thus in the Company's future earnings and assets, subject to the
Company's right to issue additional Shares and other equity securities in the
future.
The Board of Directors of the Company has determined that the Company's
financial condition and outlook and current market conditions make this an
attractive time to repurchase a
2
<PAGE>
significant portion of the outstanding Shares. In the view of the Board of
Directors, the Offer represents an opportunity for the Company to purchase
Shares that it would be otherwise unable to purchase in the open market due
to the limited trading volume in the public market for the Shares. The Board
also believes that the repurchase is an attractive investment that should
benefit the Company and its shareholders over the long-term. In particular,
the Board believes that the purchase of Shares at this time is consistent
with the Company's long-term corporate goal of seeking to increase
shareholder value. The funds required to complete the Offer and pay related
expenses will be provided from the Company's existing cash. SEE Section 8.
The Company may in the future purchase additional Shares in the open
market, in private transactions, through tender offers or otherwise, subject
to the approval of the Board. Presently, the Company does not have a stock
repurchase authorization other than an authorization for this Offer. Rule
13e-4 under the Exchange Act prohibits the Company and its affiliates from
purchasing any Shares, other than pursuant to the Offer, until at least ten
business days after the Expiration Date. Any possible future purchases by
the Company will depend on many factors, including the market price of the
Shares, the results of the Offer, the Company's business and financial
position and general economic and market conditions.
Shares the Company acquires pursuant to the Offer will be held in the
Company's treasury (unless and until the Company determines to retire such
Shares) and will be available for the Company to issue without further
shareholder action (except as required by applicable law) for purposes
including, but not limited to, the acquisition of other businesses, the
raising of additional capital for use in the Company's business and the
satisfaction of obligations under existing or future employee benefit plans.
The Company has no current plans for the issuance of the Shares repurchased
pursuant to the Offer. Except as disclosed in this Offer to Purchase, the
Company currently has no plans or proposals that relate or would result in
(a) the acquisition by any person of additional securities of the Company or
the disposition of securities of the Company; (b) an extraordinary corporate
transaction, such as a merger, reorganization, or liquidation, involving the
Company or any or all of its subsidiaries; (c) a sale or transfer of a
material amount of assets of the Company; (d) any change in the present Board
or management of the Company; (e) any material change in the present dividend
rate or policy (the Company presently pays no dividends), or indebtedness or
capitalization of the Company; (f) any other material changes in the
Company's corporate structure or business; (g) any material change in the
Company's Articles of Incorporation or Bylaws or any actions which may impede
the acquisition of control of the Company by any person; (h) a class of
equity security of the Company being delisted from a national securities
exchange; (i) a class of equity security of the Company becoming eligible for
termination of registration pursuant to Section 12(g)(4) of the Exchange Act;
or (j) the suspension of the Company's obligation to file reports pursuant to
Section 15(d) of the Exchange Act.
3. PROCEDURES FOR TENDERING SHARES.
VALID TENDER. For a shareholder to validly tender Shares pursuant to
the Offer, either (a) the certificates for such Shares (or confirmation of
receipt of such Shares pursuant to the procedures for book-entry transfer set
forth below), together with a properly completed and duly executed Letter of
Transmittal (or manually signed facsimile thereof) including any required
signature guarantees
3
<PAGE>
and any other documents required by the Letter of
Transmittal, must be received prior to 5:00 P.M., New York City time, on the
Expiration Date by the Tender Agent at its address set forth in this Offer to
Purchase or (b) the tendering shareholder must comply with guaranteed delivery
procedures set forth below. Odd Lot Holders who tender all such Shares must
complete box captioned "Odd Lots" on the Letter of Transmittal and, if
applicable, on the Notice of Guaranteed Delivery, to qualify for the
preferential treatment available to Odd Lot Holders as set forth in Section 1.
SHAREHOLDERS WHO HOLD SHARES THROUGH BROKERS OR BANKS ARE URGED TO CONSULT
SUCH BROKERS OR BANKS TO DETERMINE WHETHER TRANSACTION COSTS ARE APPLICABLE IF
SHAREHOLDERS TENDER SHARES THROUGH SUCH BROKERS OR BANKS AND NOT DIRECTLY TO THE
TENDER AGENT.
SIGNATURE GUARANTEES AND METHOD OF DELIVERY. No signature guarantee is
required (a) if the Letter of Transmittal is signed by the registered holder
of the Shares (which term, for purposes of this Section 3, shall include any
participant in The Depository Trust Company (the "Book-Entry Transfer
Facility") whose names appears on a security position listing as the owner of
the Shares tendered therewith and such holder has not completed either the
box entitled "Special Delivery Instructions" or the box entitled "Special
Payment Instructions" on the Letter of Transmittal, or (b) if Shares are
tendered for the account of a member in good standing of the Security
Transfer Agents Medallion Program, the New York Stock Exchange Medallion
Signature Guaranty Program or the Stock Exchange Medallion Program (each such
entity being hereinafter referred to as an "Eligible Institution"). SEE
Instruction 1 of the Letter of Transmittal. If a certificate for Shares is
registered in the name of a person other than the person executing a Letter
of Transmittal, or if payment is to be made, or Shares not purchased or
tendered are to be issued, to a person other than the registered holder, then
the certificate must be endorsed or accompanied by an appropriate stock
power, in either case, signed exactly as the name of the registered holder
appears on the certificate, or stock power guaranteed by an Eligible
Institution.
In all cases, payment for Shares tendered and accepted payment pursuant
to the Offer will be made only after timely receipt by the Tender Agent of
Certificates for such Shares (or a timely confirmation of a book-entry
transfer of such Shares into the Tender Agent's account at the Book-Entry
Transfer Facility as described above), a properly completed and duly
executed Letter of Transmittal (or manually signed facsimile thereof) and any
other documents required by the Letter of Transmittal.
BOOK-ENTRY DELIVERY. The Tender Agent will establish an account with
respect to the Shares for purposes of the Offer at the Book-Entry Transfer
Facility within two business days after the date of this Offer, and any
financial institution that is a participant in the Book-Entry Transfer
Facility's system may make book-entry delivery of the Shares by causing such
facility to transfer Shares into the Tender Agent's account in accordance
with the Book-Entry Transfer Facility's procedures for transfer. Although
delivery of Shares may be effected through a book-entry transfer into the
Tender Agent's account at the Book-Entry Transfer Facility, either (a) a
properly completed and duly executed Letter of Transmittal (or a manually
signed facsimile thereof) with any required signature guarantees and any
other required documents must, in any case, be transmitted to and
4
<PAGE>
received by the Tender Agent at its address set forth in this Offer to
Purchase prior to the Expiration Date, or (b) the guaranteed delivery
procedure described below must be followed.
DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY DOES NOT
CONSTITUTE DELIVERY TO THE TENDER AGENT.
GUARANTEED DELIVERY. If a shareholder desires to tender Shares pursuant
to the Offer and such shareholder's certificates for the Shares are not
immediately available or the procedure for book-entry transfer cannot be
completed on a timely basis or time will not permit all required documents to
reach the Tender Agent prior to the Expiration Date, such shareholder's
tender may be effected if all of the following conditions are met:
(a) Such tender is made by or through an Eligible Institution;
(b) The Tender Agent receives by hand, mail, overnight carrier,
telegram or facsimile transmission, prior to the Expiration Date, a properly
completed and duly executed Notice of Guaranteed Delivery substantially in
the form the Company has provided with this Offer to Purchase, including
(where required) a signature guarantee by an Eligible Institution; and
(c) The certificates for all tendered Shares, in proper form for
transfer (or confirmation of book-entry transfer of such Shares into the
Tender Agent's account at the Book-Entry Transfer Facility), together with a
properly completed and duly executed Letter of Transmittal (or a manually
signed facsimile thereof) and any required signature guarantees or other
documents required by the Letter of Transmittal, are received by the Tender
Agent within three business days after the date of receipt by the Tender
Agent of such Notice of Guaranteed Delivery.
DETERMINATION OF VALIDITY. All questions as to the number of Shares to
be accepted and the validity, form, eligibility (including time of receipt)
and acceptance for payment of any tender of Shares will be determined by the
Company, in its sole discretion, and its determination shall be final and
binding on all parties. The Company reserves the absolute right to reject
any or all tenders of any Shares that it determines are not in proper form or
the acceptance for payment of or payment for which may, in the opinion of the
Company's counsel, be unlawful. The Company also reserves the absolute right
to waive any of the conditions of the Offer or any defect or irregularity in
any tender with respect to any particular Shares or any particular
shareholder and the Company's interpretation of the terms of the Offer will
be final and binding on all parties. No tender of Shares will be deemed to
have been properly made until all defects or irregularities have been cured
by the tendering shareholder to the satisfaction of the Company or waived by
the Company. Neither the Company nor the Tender Agent or any other person
shall be obligated to give notice of any defects or irregularities in
tenders, nor shall any of them incur any liability for failure to give any
such notice.
TENDERING SHAREHOLDER'S REPRESENTATION AND WARRANTY; COMPANY'S
ACCEPTANCE CONSTITUTES AN AGREEMENT. A tender of Shares pursuant to any of
the procedures described above will constitute the tendering shareholder's
acceptance of the terms and conditions of the Offer, as well as the tendering
shareholder's representation and warranty to the Company that (a) such
5
<PAGE>
shareholder has a net long position in the Shares being tendered within the
meaning of Rule 14e-4 promulgated by the Commission under the Exchange Act
and (b) the tender of such Shares complies with Rule 14e-4. It is a
violation of Rule 14e-4 for a person, directly or indirectly, to tender
Shares for such person's own account unless, at the time of tender and at the
end of the proration period or period during which Shares are accepted by lot
(including any extensions thereof), the person so tendering (i) has a net
long position equal to or greater than the amount of (x) Shares tendered or
(y) other securities convertible into or exchangeable or exercisable for the
Shares tendered and will acquire such Shares for tender by conversion,
exchange or exercise and (ii) will deliver or cause to be delivered such
Shares in accordance with the terms of the Offer. Rule 14e-4 provides a
similar restriction applicable to the tender or guarantee of a tender on
behalf of another person. The Company's acceptance for payment of Shares
tendered pursuant to the Offer will constitute a binding agreement between
the tendering shareholder and the Company upon the terms and conditions of
the Offer.
LOST OR DESTROYED CERTIFICATES. Shareholders whose certificates for
their Shares have been lost, stolen, misplaced or destroyed must contact the
Tender Agent at (303) 595-3300 for instructions as to documents which will be
required to be submitted together with the Letter of Transmittal in order to
replace certificates representing the Shares.
BACKUP WITHHOLDING. In order to avoid "backup withholding" of federal
income tax payments of cash pursuant to the Offer, a shareholder tendering
Shares in the Offer must, unless an exemption applies, provide the Tender
Agent with such shareholder's correct taxpayer identification number ("TIN")
on a Substitute Form W-9 and certify under penalties of perjury that such TIN
is correct and that such shareholder is not subject to backup withholding.
If a shareholder does not provide such shareholder's correct TIN or fails to
provide the certifications described above, the Internal Revenue Service (the
"IRS") may impose a penalty upon such shareholder, and payment of cash to
such shareholder pursuant to the Offer may be subject to backup withholding
of 31%. All shareholders surrendering Shares pursuant to the Offer should
complete and sign Substitute Form W-9 included as part of the Letter of
Transmittal to provide the information and certifications necessary to avoid
backup withholding (unless an applicable exemption exists and is proved in a
manner satisfactory to the Company and the Tender Agent). Certain
shareholders (including, among others, all corporations and certain foreign
individuals and entities) are not subject to backup withholding. In order to
avoid backup withholding, non-corporate foreign shareholders should submit
IRS Form W-8 attesting to that shareholder's exempt status. Such statements
can be obtained from the Tender Agent. SEE Instruction 13 of the Letter of
Transmittal.
4. WITHDRAWAL RIGHTS.
Except as otherwise provided in this Section 4, tenders of the Shares
are irrevocable. The Shares tendered pursuant to the Offer may be withdrawn
pursuant to the procedures set forth below at any time prior to the
Expiration Date and, unless theretofore accepted for payment by the Company
pursuant to the Offer, may also be withdrawn at any time after 5:00 p.m., New
York City time, on December 28, 1998, or such later time as may apply if the
Offer is extended.
6
<PAGE>
If the Company extends the Offer, is delayed in its acceptance for
payment of Shares or is unable to accept Shares for payment pursuant to the
Offer for any reason, then, without prejudice to the Company's rights under
the Offer, the Tender Agent may, nevertheless, on behalf of the Company,
retain tendered Shares, and such Shares may not be withdrawn except to the
extent that tendering shareholders are entitled to withdrawal rights as
described in this Section 4. Any such delay will be by an extension of the
Offer to the extent required by law.
For a withdrawal to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Tender Agent
at its address and must specify the name of the person having tendered the
Shares to be withdrawn, the number of the Shares to be withdrawn and the name
of the registered holder of the Shares to be withdrawn, if different from the
name of the person who tendered the Shares. If certificates for the Shares
have been delivered or otherwise identified to the Tender Agent, then, prior
to the physical release of such certificates, the serial numbers shown on
such certificates must be submitted to the Tender Agent and, unless such
Shares have been tendered by an Eligible Institution, the signatures on the
notice of withdrawal must be guaranteed by an Eligible Institution. If the
Shares have been delivered pursuant to the procedure for book-entry transfer
as set forth in Section 3, any notice of withdrawal must also specify the
name and number of the account at the appropriate Book-Entry Transfer
Facility to be credited with the withdrawn Shares and otherwise comply with
such Book-Entry Transfer Facility's procedures. Withdrawals of tenders of
the Shares may not be rescinded, and any Shares properly withdrawn will
thereafter be deemed as not validly tendered for purposes of the Offer.
However, withdrawn Shares may be retendered by again following one of the
procedures described in Section 3 at any time prior to the Expiration Date.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by the Company in its sole
discretion, which determination will be final and binding. Neither the
Company, the Tender Agent nor any other person will be under any duty to give
notification of any defects or irregularities in any notice of withdrawal or
incur any liability for failure to give any such notification.
5. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES
Upon the terms and subject to the conditions of the Offer, as promptly
as practicable following the Expiration Date, the Company will accept for
payment and pay for Shares properly tendered and not withdrawn prior to the
Expiration Date. The Company will pay for Shares purchased pursuant to the
Offer by depositing the aggregate Purchase Price therefor with the Tender
Agent, which will act as agent for tendering shareholders for the purpose of
receiving payment from the Company and transmitting payment to the tendering
shareholders.
In the event of proration, the Company will determine the proration
factor and pay for those tendered shares accepted for payment as soon as
practicable after the Expiration Date. Certificates for all Shares tendered
and not purchased, including Shares not purchased due to proration, will be
returned (or, in the case of Shares tendered by book-entry transfer, such
Shares will be credited to the account maintained with the applicable
Book-Entry Transfer Facility by the participant therein who so delivered such
Shares) to the tendering shareholder at the Company's expense as promptly
7
<PAGE>
as practicable after the Expiration Date. Under no circumstances will
interest on the Purchase Price be paid by the Company by reason of any delay
in making payment. In addition, if certain events occur, the Company may not
be obligated to purchase Shares pursuant to the Offer. SEE Section 6.
6. CERTAIN CONDITIONS OF THE OFFER
Notwithstanding any other provision of the Offer, the Company shall not
be required to accept for payment, purchase or pay for any Shares tendered,
and may terminate or amend the Offer or may postpone the acceptance for
payment of, or the purchase of and the payment for Shares tendered, subject
to Rule 13e-4(f) under the Exchange Act, if at any time on or after November
24, 1998 and prior to the time of payment for Shares tendered any of the
following events shall have occurred (or shall have been determined by the
Company to have occurred) that, in the Company's sole judgment in any such
case and regardless of the circumstances giving rise thereto (including any
action or omission to act by the Company), makes it inadvisable to proceed
with an Offer or with such acceptance for payment:
(a) There shall have been threatened, instituted or pending any action
or proceeding by any government or governmental, regulatory or administrative
agency, authority or tribunal or any other person, domestic or foreign,
before any court, authority, agency or tribunal that directly or indirectly
(i) challenges the making of the Offer, the acquisition of some or all of the
Shares pursued in the Offer or otherwise relates in any manner to the Offer,
or (ii) in the Company's sole judgment, could materially and adversely affect
the business, condition (financial or other), income, operations or prospects
of the Company, or otherwise materially impair in any way the contemplated
future conduct of the Company or materially impair the contemplated benefits
of the Offer to the Company; or
(b) there shall have been any action threatened, pending or taken, or
approval withheld, or any statute, rule, regulation, judgment, order or
injunction threatened, proposed, sought, promulgated, enacted, entered,
amended, enforced or deemed to be applicable to the Offer or the Company or
any of its subsidiaries, by any court or any authority, agency or tribunal
that, in the Company's sole judgment, would or might directly or indirectly
(i) make the acceptance for payment of, or payment for, some or all of the
Shares illegal or otherwise restrict or prohibit consummation of the Offer,
(ii) delay or restrict the ability of the Company, or render the Company
unable, to accept for payment or pay for some or all of the Shares, (iii)
materially impair the contemplated benefits of the Offer to the Company or
(iv) materially and adversely affect the business, condition (financial or
other), income, operations or prospects of the Company and its subsidiaries,
taken as a whole, or otherwise materially impair in any way the contemplated
future conduct of the business of the Company or any of its subsidiaries;
(c) any change or changes shall have occurred or are threatened in the
business, financial condition, assets, income, operations, prospects or stock
ownership of the Company that, in the Company's sole judgment, is or may be
material to the Company.
The foregoing conditions are for the sole benefit of the Company and may
be asserted by the Company regardless of the circumstances (including any
action or inaction by the Company) giving rise to any such condition, and may
be waived by the Company, in whole or in part, at any time and from time to
time in its sole discretion. The Company's failure at any time to exercise
any of the foregoing rights shall not be deemed a waiver of any such right
and each such right shall be deemed an ongoing right which may be asserted at
any time and from time to time. Any determination by the Company concerning
the events described above will be final and binding.
7. PRICE RANGE OF SHARES; DIVIDENDS.
The Shares are traded on the Electronic Bulletin Board system operated
by The Nasdaq Stock Market under the symbol "CDGD." Trading in the Shares in
the over-the-counter market has been limited and sporadic and the quotations
set forth below are not necessarily indicative of actual market conditions.
Further, these prices reflect inter-dealer prices without retail mark-up,
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<PAGE>
mark-down, or commission and may not necessarily reflect actual transactions.
Set forth in the following table are high and low bid prices for the
Shares for the indicated fiscal quarters.
<TABLE>
<CAPTION>
Quarter Ended High Bid Low Bid
------------- -------- -------
<S> <C> <C>
September 30, 1998 $ 11/32 $ 9/32
June 30, 1998 9/32 9/32
March 31, 1998 9/32 9/32
December 31, 1997 13/32 1/4
September 30, 1997 13/32 3/8
June 30, 1997 3/8 3/8
March 31, 1997 5/8 3/8
December 31, 1996 5/8 1/2
September 30, 1996 1/2 1/4
</TABLE>
On November 23, 1998, the last trading day prior to the announcement and
commencement of the Offer, the high and low bid price of the Shares was
$0.38. The Company has not paid any dividends on the Shares.
8. SOURCE AND AMOUNT OF FUNDS.
Assuming the Company purchases 1,200,000 Shares pursuant to the Offer at
the Purchase Price, the Company expects the maximum aggregate cost, including
all fees and expenses applicable to the Offer, to be approximately $580,000.
It is anticipated that the Company will fund the purchase of the Shares
pursuant to the Offer and the payment of related fees and expenses from its
existing cash resources.
9. CERTAIN INFORMATION CONCERNING THE COMPANY.
GENERAL. The Company was incorporated under the laws of the State of
Colorado on June 23, 1980 under the name, Jones Optical Company. The
Company's name was changed to Cambridge Holdings, Ltd. in August 1988. The
Company has been engaged in real estate operations since 1991 when it
acquired a three story office building in Colorado Springs, Colorado. The
Company completed the sale of this building and adjacent land in fiscal 1996.
During fiscal 1997, the Company purchased two undeveloped lots in the Vail,
Colorado area. Each of these lots has been conveyed to a limited liability
company managed by the Zneimer Company, Inc., an experienced real estate
developer located in Vail. Each of the Company and the Zneimer Company, Inc.
hold a 50% interest in the profits and losses of each limited liability
company. The two lots purchased by the Company are known as Lot 2 and Lot
19. The luxury residences on Lot 2 and Lot 19 were completed and offered for
sale in January 1998 and June 1998, respectively. Neither residence has been
sold.
During fiscal 1998, the Company purchased commercial raw land in Glenwood
Springs, Colorado with the intent of developing the property into
condominium/office units. However, as no commitments were obtained for the
purchase of these units, the Company determined not to
9
<PAGE>
proceed with construction. The Company has improved the lots by beginning
some engineering and permits for water and sewer taps. The Company is
currently studying various options with respect to this property.
From time to time, the Company considers other real estate development
activities, as well as other business opportunities. In addition to real
property acquisitions, the Company may consider the possible acquisition of,
or merger with, another business entity, or other types of business
transactions. The Company does not intend to limit its search to companies in
real estate activities. At present, the Company has no understandings,
arrangements, or agreements to acquire any other real estate properties, or
to acquire or merge with any other business entities.
Attached to this Offer to Purchase are the following Schedules:
Schedule I - The Company's Report on Form 10-QSB for the quarter
ended September 30, 1998, as filed with the Commission.
Schedule II - Audited financial statements for the two fiscal years
ended June 30, 1998.
Schedule III - Summary biographical information regarding the
directors and executive officers of the Company.
The Company is subject to the informational requirements of the Exchange
Act and, in accordance therewith, files reports relating to its business,
financial condition and other matters. Information as of particular dates
concerning the Company's directors and officers, their remuneration, stock
options and other matters, the principal holders of the Company's securities
and any material interests of such persons and transactions with the Company
is required to be disclosed in reports filed with the Commission. Such
reports can be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Room 2120,
Washington, D.C. 20549; at its regional offices located at 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511 and 7 World Trade Center,
New York, New York 10048. Copies of such material may also be obtained by
mail, upon payment of the Commission's customary charges, from the Public
Reference Section of the Commission at Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549. The Commission also maintains a Web site that
can be accessed at HTTP://WWW.SEC.GOV and contains reports and other
information regarding registrants that file electronically with the
Commission. In addition, the Company will furnish without charge to each
person to whom this Offer is delivered a copy of the Company's Form 10-KSB
for the fiscal year ended June 30, 1998, as well as other reports filed with
the Commission, upon request to the Company, 1722 Buffehr Creek Road, Vail,
Colorado 81657.
10. INTERESTS OF DIRECTORS AND OFFICERS; TRANSACTIONS AND ARRANGEMENTS
CONCERNING SHARES.
As of November 23, 1998, the Company had issued and outstanding
3,408,400 Shares and had reserved 160,000 Shares for issuance upon exercise
of outstanding stock options. The 1,200,000
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<PAGE>
Shares that the Company is offering to purchase represent approximately 35.2%
of the Company's Shares outstanding on November 23, 1998 (approximately 33.6%
assuming exercise of outstanding options). As of November 23, 1998, the
Company's directors and executive officers as a group (four persons)
beneficially owned an aggregate of 1,870,408 Shares representing
approximately 53.9% of the outstanding Shares, assuming exercise by such
persons of their currently exercisable options. Two of the Company's four
executive officers and directors, John H. Altshuler, M.D. and Donald E.
Yager, have advised the Company that they intend to tender all the Shares
owned by them pursuant to the Offer. Dr. Altshuler and Mr. Yager own 129,190
Shares and 60,000 Shares, respectively. Dr. Altshuler and Mr. Yager each own
options to acquire up to 20,000 Shares, which will be retained by them. If
the Company purchases 1,200,000 Shares pursuant to the Offer, and no
executive officer or director other than Dr. Altshuler and Mr. Yager tenders
Shares pursuant to the Offer, then after the purchase of Shares pursuant to
the Offer, the Company's executive officers and directors as a group would
own beneficially approximately 71.0% of the outstanding Shares immediately
after the Offer, assuming the exercise by such persons of their currently
exercisable options.
Based on the Company's records and on information provided to the
Company by its directors and executive officers, neither the Company nor, to
the best of the Company's knowledge, any of the directors or executive
officers of the Company has effected any transactions involving the Shares
since July 1, 1996, except as follows:
Greg Pusey, President, Treasurer and Director, purchased 240 Shares
at a price of $0.34 per Share on December 9, 1997 and 3,000 Shares
at a price of $0.375 per Share on October 28, 1998.
John H. Altshuler, Director, exercised options to purchase an
aggregate of 30,000 Shares at prices ranging from $0.28 to $0.34375
per Share on August 5, 1996.
Scott Menefee, Director, exercised options to purchase (i) 10,000
Shares at a price of $0.28 per Share on August 31, 1996, (ii)
10,000 Shares at a price of $0.32 per Share on August 31, 1997 and
(iii) 10,000 Shares at a price of $0.34375 per Share on August 31,
1998.
Neither the Company nor, to the best of the Company's knowledge, any of
its affiliates, directors or executive officers, is a party to any contract,
arrangement, understanding or relationship with any other person relating,
directly or indirectly to the Offer with respect to any securities of the
Company including, but not limited to, any contract, arrangement,
understanding or relationship concerning the transfer or the voting of any
such securities, joint ventures, loan or option arrangements, puts or calls,
guarantees of loans, guarantees against loss or the giving or withholding of
proxies, consents or authorizations.
11
<PAGE>
11. EFFECTS OF THE OFFER ON THE MARKET FOR SHARES; REGISTRATION UNDER THE
EXCHANGE ACT.
MARKET FOR THE SHARES. The Shares have traded on the Electronic
Bulletin Board for the last several years. Trading in this over-the-counter
market has been limited and sporadic. The purchase of Shares pursuant to the
Offer will reduce the number of Shares that might otherwise trade publicly,
as well as reducing the number of holders of Shares. The extent of the
public market in the Shares and the availability of quotations in the
over-the-counter market in the future may depend upon many factors, including
the number of shareholders and/or the aggregate market value of the Shares
remaining at such time, and the interest in maintaining a market in the
Shares on the part of securities firms. The Company cannot predict whether
the reduction in the number of Shares that might otherwise trade publicly
would have an adverse effect on the market for or marketability of the Shares
or whether it would cause future market prices to be greater or less than the
Purchase Price.
EXCHANGE ACT REGISTRATION. The Shares are currently registered under
the Exchange Act. Registration of the Shares under the Exchange Act may be
terminated upon application of the Company to the Commission, if the Shares
are neither listed on a national securities exchange nor held by 300 or more
holders of record. Termination of registration of the Shares under the
Exchange Act would substantially reduce the information required to be
furnished by the Company to its shareholders and to the Commission and would
make certain provisions of the Exchange Act no longer applicable to the
Company, such as (a) the short-swing profit recovery provisions of Section
16(b) of the Exchange Act, (b) the requirement of furnishing a proxy or
information statement pursuant to Section 14(a) or (c) of the Exchange Act in
connection with shareholders' meetings and the related requirement of
furnishing an annual report to shareholders and (c) the requirements of Rule
13e-3 under the Exchange Act with respect to "going private" transactions.
Furthermore, the ability of "affiliates" of the Company and persons holding
"restricted securities" of the Company to dispose of such securities pursuant
to Rule 144 promulgated under the Securities Act of 1933, as amended, may be
impaired or eliminated.
The Company cannot predict whether the purchase of Shares pursuant to
the Offer will reduce the number of holders of record of the Shares to less
than 300. At present, the Company has approximately 1,081 holders of record
of its Shares. If the number of holders of record of the Shares were reduced
to less than 300 as a result of the Offer, the Company could choose to
terminate registration of the Shares upon application of the Company to the
Commission. However, the Board of Directors has resolved that the Company
will not make such application during the current fiscal year ending June 30,
1999.
12. CERTAIN LEGAL MATTERS.
The Company is not aware of any license or regulatory permit that appears
to be material to the Company's business that might be adversely affected by the
Company's acquisition of the Shares as contemplated herein or of any approval or
other action by a domestic or foreign governmental, administrative or regulatory
agency or authority that would be required or desirable for the acquisition and
ownership of the Shares by the Company as contemplated herein. Should any such
12
<PAGE>
approval or other action be required, the Company presently contemplates that
such approval or other action will be sought. The Company is unable to
predict whether it may determine that it is required to delay the acceptance
for payment of or payment for Shares tendered pursuant to the Offer pending
the outcome of any such matter. There can be no assurance that any such
approval or other action, if needed, would be obtained or would be obtained
without substantial conditions, or that the failure to obtain any such
approval or other action might not result in adverse consequences to the
Company's business. SEE Section 6 for certain conditions to the Offer.
Under the laws of the State of Colorado and the Company's Articles of
Incorporation, no appraisal rights are provided to the shareholders of the
Company in connection with the Offer.
13. CERTAIN FEDERAL INCOME TAX CONSEQUENCES.
The following discussion is a summary of certain material federal income
tax consequences of the Offer to holders of Shares who hold the Shares as
capital assets. The discussion set forth below is for general information
only and may not apply to particular categories of holders of Shares subject
to special treatment under the Internal Revenue Code of 1986, as amended.
The discussion is based on the Code as in effect on the date of this Offer,
as well as regulations promulgated thereunder and existing administrative
interpretations and court decisions.
The receipt of cash for Shares pursuant to the Offer will be a taxable
transaction for federal income tax purposes (and also may be a taxable
transaction under applicable state, local and other income tax laws). In
general, for federal income tax purposes, a shareholder will recognize gain
or loss in an amount equal to the difference between such shareholder's
adjusted tax basis in the Shares sold pursuant to the Offer and the amount of
cash received therefor by such shareholder. Such gain or loss will generally
be capital gain or loss if the Shares are held as a capital asset and will be
long-term capital gain or loss if such Shares are held for more than one year
at the time of the sale.
Shareholders who do not tender Shares pursuant to the Offer will not
incur any federal income tax liability as a result of the consummation of the
Offer.
SEE Section 3 with respect to the application of federal income tax
withholdings to payments made to non-United States holders and backup
withholding tax requirements.
THE FEDERAL INCOME TAX CONSEQUENCES SET FORTH ABOVE ARE INCLUDED FOR
GENERAL INFORMATIONAL PURPOSES ONLY AND ARE BASED UPON CURRENT LAW. BECAUSE
INDIVIDUAL CIRCUMSTANCES MAY DIFFER, EACH SHAREHOLDER SHOULD CONSULT SUCH
SHAREHOLDER'S OWN TAX ADVISOR TO DETERMINE THE APPLICABILITY OF THE RULES
DISCUSSED ABOVE TO SUCH SHAREHOLDER AND THE PARTICULAR TAX EFFECTS TO SUCH
SHAREHOLDER OF THE OFFER, INCLUDING THE APPLICATION AND EFFECT OF STATE,
LOCAL, FOREIGN AND OTHER INCOME TAX LAWS.
13
<PAGE>
14. EXTENSION OF OFFER; TERMINATION; AMENDMENT.
The Company expressly reserves the right, in its sole discretion, at any
time and from time to time, and regardless of whether or not any of the
events set forth in Section 6 shall have occurred or shall be deemed by the
Company to have occurred, to extend the period of time during which the Offer
is open and thereby delay acceptance for payment of, and payment for, any
Shares by giving oral or written notice of such extension to the Tender Agent
and making a public announcement thereof. The Company also expressly
reserves the right, in its sole discretion, to terminate the Offer and not
accept for payment or pay for any Shares not theretofore accepted for payment
or paid for or, subject to applicable law, to postpone payment for Shares
upon the occurrence of any of the conditions specified in Section 6 hereof by
giving oral or written notice of such termination or postponement to the
Tender Agent and making a public announcement thereof. The Company's
reservation of the right to delay payment for Shares which it has accepted
for payment is limited by Rule 13e-4(f)(5) promulgated under the Exchange Act
which requires that the Company must pay the consideration offered or return
the Shares tendered promptly after termination or withdrawal of the tender
offer. Subject to compliance with applicable law, the Company further
reserves the right, in its sole discretion, and regardless of whether any of
the events set forth in Section 6 shall have occurred or shall be deemed by
the Company to have occurred, to amend the Offer in any respect (including,
without limitation, by decreasing or increasing the consideration offered in
the Offer to holders of Shares or by decreasing or increasing the number of
Shares being sought in the Offer). Amendments to the Offer may be made at
any time and from time to time effected by public announcement thereof, such
announcement, in the case of an extension, to be issued no later than 9:00
a.m., New York City time, on the next business day after the last previously
scheduled or announced expiration date.
If the Company materially changes the terms of the Offer or the
information concerning the Offer, or if it waives a material condition of the
Offer, the Company will extend the Offer to the extent required by Rules
13e-4(d)(2) and 13e-4(e)(2) promulgated under the Exchange Act. These rules
require that the minimum period during which an offer must remain open
following material changes in the terms of the Offer or information
concerning the Offer (other than a change in price or a change in percentage
of securities sought) will depend on the facts and circumstances, including
the relative materiality of such terms or information. If (a) the Company
increases or decreases the price to be paid for Shares, or the number of
Shares being sought in the Offer and, in the event of an increase in the
number of Shares being sought, such increase exceeds 2% of the outstanding
Shares and (b) the Offer is scheduled to expire at any time earlier than the
expiration of a period ending on the tenth business day from, and including,
the date that such notice of an increase or decrease is first published, sent
or given in the manner specified, the Offer will be extended until the
expiration of such period of ten business days. For the purposes of the
Offer, a "business day" means any day other than a Saturday, Sunday or
federal holiday.
15. FEES AND EXPENSES.
The Company has retained Corporate Stock Transfer, Inc., which acts as
transfer agent for the Shares, as the Tender Agent. The Tender Agent has not
been retained to make solicitations or recommendations in its role as Tender
Agent. The Tender Agent will receive reasonable and
14
<PAGE>
customary compensation for its services, will be reimbursed for certain
reasonable out-of-pocket expenses and will be indemnified against certain
liabilities and expenses in connection therewith, including certain
liabilities under the federal securities laws. Brokers, dealers, commercial
banks and trust companies will be reimbursed by the Company for customary
mailing and handling expenses incurred by them in forwarding offering
material to their customers. The Company will not pay any fees or
commissions to any broker, dealer or other person for soliciting tenders of
Shares pursuant to the Offer.
16. MISCELLANEOUS.
The Company is not aware of any jurisdiction where the making of the
Offer is not in compliance with applicable law. If the Company becomes aware
of any jurisdiction where the making of the Offer is not in compliance with
any valid applicable law, the Company will make a good faith effort to comply
with such law. If, after such good faith effort, the Company cannot comply
with such law, the Offer will not be made to (nor will tenders be accepted
from or on behalf of) the holders of Shares residing in such jurisdiction.
In any jurisdiction the securities or blue sky laws of which require the
Offer to be made by a licensed broker or dealer, the Offer shall be deemed
to be made on behalf of the Company by one or more registered brokers or
dealers which are licensed under the laws of such jurisdiction.
Pursuant to Rule 13e-4 of the General Rules and Regulations under the
Exchange Act, the Company has filed with the Commission an Issuer Tender
Offer Statement on Schedule 13e-4 which contains additional information with
respect to the Offer. Such Schedule 13e-4 including the exhibits and any
amendments thereto, may be examined, and copies may be obtained, at the same
places and in the same manner as is set forth in Section 9 with respect to
information concerning the Company.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF THE COMPANY IN CONNECTION WITH THE OFFER OTHER
THAN THOSE CONTAINED IN THIS OFFER TO PURCHASE OR IN THE RELATED LETTER OF
TRANSMITTAL. IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY.
CAMBRIDGE HOLDINGS, LTD.
1722 Buffehr Creek Road
Vail, Colorado 81657
Telephone: (970) 479-2800
November 24, 1998.
15
<PAGE>
SCHEDULE I
REPORT ON FORM 10-QSB
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998
<PAGE>
U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 1998
( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ TO ______________
Commission file number 0-12962
CAMBRIDGE HOLDINGS, LTD.
(Exact name of small business issuer as specified in its charter)
Colorado 84-0826695
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
1722 Buffehr Creek Road, 81657
Vail, Colorado (Zip Code)
(Address of principal executive offices)
Issuer's telephone number, including area code (970) 479-2800
Check whether the Issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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
State the number of shares outstanding of each of the Issuer's classes of common
stock, as of the latest practicable date.
Class Outstanding at November 5, 1998
Common Stock, $.025 par value 3,408,400
<PAGE>
CAMBRIDGE HOLDINGS, LTD.
FORM 10-QSB
TABLE OF CONTENTS
<TABLE>
<S> <C>
Part I. Financial Information ...............................................3
Balance Sheets as of September 30, 1998 and June 30, 1998.................4 & 5
Statements of Operations for the three month periods ended September 30,
1998 and September 30, 1997 ..................................................6
Statements of Cash Flows for the three month periods ended September 30,
1998 and September 30, 1997 ..................................................7
Management's Discussion and Analysis of Financial Condition and Results
of Operations .............................................................8-12
Part II. Other Information..................................................13
Signature Page ..............................................................14
</TABLE>
Form 10-QSB
Page 2 of 14
<PAGE>
CAMBRIDGE HOLDINGS, LTD.
FORM 10-QSB
SEPTEMBER 30, 1998
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
The unaudited financial statements reflect all adjustments and contain all
information necessary, in the opinion of management, for a fair presentation of
the financial position and results of operation for the interim periods reported
when these statements are read in conjunction with the notes to financial
statements included in the Registrant's Form 10-KSB for the year ended June 30,
1998.
Form 10-QSB
Page 3 of 14
<PAGE>
CAMBRIDGE HOLDINGS, LTD.
BALANCE SHEET
<TABLE>
<CAPTION>
SEPTEMBER 30, JUNE 30,
1998 1998
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT:
Cash and cash equivalents $1,579,440 $1,674,523
Investment securities - available for sale, net
allowance for potential losses of $102,000 431,007 570,848
Investment in Partnership -- 101,278
Notes receivable-related party 794,337 774,303
Convertible notes receivable 40,375 42,500
Prepaids and other 41,520 43,212
Real estate developments 939,199 939,199
Deferred Income Tax 48,000 --
- ---------------------------------------------------------------------------------
Total current assets 3,873,878 4,145,863
- ---------------------------------------------------------------------------------
LONG-TERM ASSETS
Fixed assets 35,396 38,600
- ---------------------------------------------------------------------------------
$3,909,274 $4,184,463
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
</TABLE>
Form 10-QSB
Page 4 of 14
<PAGE>
CAMBRIDGE HOLDINGS, LTD.
BALANCE SHEET
<TABLE>
<CAPTION>
SEPTEMBER 30, JUNE 30,
1998 1998
(Unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accrued liabilities $ 9,146 $ 12,393
Deferred income taxes -- 6,054
Notes Payable 669,579 670,789
- ----------------------------------------------------------------------------------
Total current liabilities 678,725 689,236
- ----------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY:
Common Stock - $.025 par value, 15,000,000
shares authorized: 3,408,400 shares
issued and outstanding as of September 30, 1998
and 3,398,400 shares issued and outstanding as
of June 30, 1998 85,211 84,960
Additional paid-in capital 3,180,921 3,177,735
Retained earnings 39,664 221,992
Net unrealized gain (loss) on investment
securities available for sale (75,247) 10,540
- ----------------------------------------------------------------------------------
Total stockholders' equity 3,230,549 3,495,227
- ----------------------------------------------------------------------------------
$ 3,909,274 $4,184,463
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
</TABLE>
Form 10-QSB
Page 5 of 14
<PAGE>
CAMBRIDGE HOLDINGS, LTD.
STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
SEPTEMBER 30, 1998 SEPTEMBER 30, 1997
<S> <C> <C>
REVENUES:
Realized gains (losses) on
sales of investment securities -- $ 5,730
Unrealized Gains (losses) on
securities held for trading $ (41,151) --
Loss on write-down of
partnership investment (101,278) --
Interest and dividend income 9,386 30,510
- --------------------------------------------------------------------------
Total revenues (133,043) 36,240
- --------------------------------------------------------------------------
EXPENSES:
Operating, general, and
administrative 34,201 36,001
Interest 15,084 10,862
- --------------------------------------------------------------------------
Total expenses 49,285 46,863
- --------------------------------------------------------------------------
NET LOSS $ (182,328) $ (10,623)
OTHER COMPREHENSIVE INCOME,
NET OF INCOME TAX:
Unrealized holding gains (losses) (85,787) 20,003
- --------------------------------------------------------------------------
COMPREHENSIVE INCOME (LOSS) $ (268,115) $ 9,380
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
BASIC AND DILUTED INCOME (LOSS)
PER COMMON SHARE: $ (.05) nil
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
WEIGHTED AVERAGE NUMBER OF
COMMON AND COMMON EQUIVALENT
SHARES OUTSTANDING 3,402,356 3,388,400
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
</TABLE>
Form 10-QSB
Page 6 of 14
<PAGE>
CAMBRIDGE HOLDINGS, LTD.
STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
SEPTEMBER 30, 1998 SEPTEMBER 30, 1997
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ (182,328) $ (10,623)
Adjustment to reconcile net income (loss)
to cash provided by operating activities:
Realized (Gains) Losses on sales of
investment securities -- (5,730)
Unrealized loss on trading securities 41,151 --
Depreciation and amortization 3,205
Loss on write-down of investments 101,278 --
Changes in operating assets and liabilities:
Prepaids and other 1,693 47,283
Accounts payable and accrued liabilities (3,248) (4,810)
- --------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES (38,249) 26,120
- --------------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Purchase of land -- (250,000)
Purchase of investment securities -- (23,121)
Proceeds from sales of investment securities -- 86,762
Collections on note receivable 2,125 64,375
Purchase of note receivable-related party (20,035) --
Purchase of automobile -- (43,657)
Decrease in value of trading securities (41,151) --
- --------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED
IN) INVESTING ACTIVITIES (59,061) (165,641)
- --------------------------------------------------------------------------------------------
FINANCING ACTIVITIES:
Principal payments on notes payable (1,210) --
Proceeds from exercise of stock options 3,437 3,200
- --------------------------------------------------------------------------------------------
Net cash provided by
financing activities 2,227 3,200
- --------------------------------------------------------------------------------------------
DECREASE IN CASH (95,083) (136,321)
CASH AND CASH EQUIVALENTS,
beginning of period 1,674,523 1,640,216
- --------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS,
end of period $ 1,579,440 $ 1,503,895
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
</TABLE>
Form 10-QSB
Page 7 of 14
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information set forth in "Management's Discussion and Analysis of Financial
Condition and Results of Operations" below includes "forward looking statements"
within the meaning of Section 27A of the Securities Act, and is subject to the
safe harbor created by that section. Factors that could cause actual results to
differ materially from these contained in the forward looking statements are set
forth in "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
LIQUIDITY AND CAPITAL RESOURCES
During the fiscal year ended June 30, 1997, the Company purchased in two
separate transactions from two different unaffiliated sellers of raw land in an
area known as Cordillera Valley Club in Eagle County, Colorado west of Vail.
Each lot was conveyed to a limited liability company which the Company is a
member with a 50% interest. Each lot has been developed with a separate luxury
residence.
The two lots purchased by the Company are known as Lot 2 and Lot 19, which were
purchased for $357,000 and $366,000, respectively. CVC Lot 2 LLC and CVC Lot 19
LLC are limited liability companies organized in Colorado in March 1997. Zneimer
Company, Inc. is the manager of both LLC's. CVC Lot 2 LLC and CVC Lot 19 LLC
were formed for the limited purpose of developing, constructing and selling a
residential dwelling upon their lots unless otherwise agreed to by both members.
The members of CVC Lot 2 LLC and CVC Lot 19 LLC are the Company and Zneimer
Company, Inc., each of which has contributed $1,000 to the capital of the LLC's
and each of which has a 50% interest in the net profits and losses of the LLC's.
In May 1997, the Company conveyed Lot 2 to CVC Lot 2 LLC in consideration for a
promissory note for $357,000 secured by a mortgage on the Lot 2 property. The
note bears interest at the prime rate at the Firstbank of Avon, as changed from
time to time, which commenced at 8.5%. The note is due on the earlier of sale of
the property or December 31, 1998. CVC Lot 2 LLC has obtained a construction
loan of $963,700 from the Firstbank of Avon, Colorado, which construction loan
has been guaranteed by Zneimer Company, Inc. and its sole shareholder Edward J.
Zneimer. The construction loan bears interest at the prime rate of the Firstbank
of Avon as changed from time to time, which commenced at 8.5%. The construction
loan matures on May 10, 1999 and is secured by a mortgage on the Lot 2 property.
The mortgage held by the Company to secure its note made by CVC Lot 2 LLC has
been subordinated to the construction loan. Zneimer Company, Inc. and Mr.
Zneimer, individually, have guaranteed 50% of the principal amount of the note
made by CVC Lot 2 LLC to the Company.
Form 10-QSB
Page 8 of 14
<PAGE>
In February 1998, the Company entered an agreement to loan CVC Lot 2 LLC as much
as $56,250, secured by a Third Mortgage Deed to provide additional capital
required to complete the development and sale of the Lot 2 property. The loan
earns interest at a rate of 12%. CVC Lot 2 LLC has subsequently borrowed the
entire amount available of $56,250. Beginning in August 1998, the Company and
Zneimer Company have contributed equally such additional capital required to
complete the development and sale of the Lot 2 property in the form of unsecured
loans, subject to a maximum of $100,000 each. The Company has contributed an
additional $27,763 as of the date of this filing.
In the event the additional capital contributions and proceeds of the
construction loan are still insufficient to enable CVC Lot 2 LLC to sell the Lot
2 property, Zneimer Company, Inc. has agreed with the Company to purchase a 50%
interest in the Company's note from CVC Lot 2 LLC at a purchase price equal to
50% of the original principal amount, in which event the guaranty to the Company
will be canceled. As of the date of this filing, the Company has not exercised
this option.
Construction on Lot 2 was completed in early 1998 and modifications were
undertaken in mid-1998. The general contractor was Integrated Resources LLC,
which is owned and managed by Mr. Zneimer. The residence is a custom-designed
single-family home featuring an open, multi-level floor plan with high ceilings
and large covered porches overlooking the Tom Fazio designed Cordillera Valley
Golf Club golf course. The home includes four bedrooms, 4 1/2 baths, three
fireplaces and an oversized three-car garage. The Lot 2 property has been listed
for sale at $1,595,000. Due to the inability to sell the home to date,
management is in the process of making changes to the house to make it more
saleable and is concerned that the anticipated profit may not be earned.
The transactions involving Lot 19 were substantially identical to those
involving Lot 2 except that the entity to which Lot 19 was conveyed was CVC Lot
19 LLC, the amount paid for Lot 19 was $366,000 and the construction loan was
for $1,019,000. An additional agreement was made between the Company and CVC #19
LLC in September 1998 in which the Company agreed to loan CVC Lot 19 LLC an
additional $50,000, secured by a Third Mortgage Deed to provide additional
capital required to complete the development and sale of the Lot 19 property.
The loan earns interest at a rate of 12%. CVC Lot 19 LLC has not borrowed any
funds as of the date of this filing. The Company and Zneimer Company, Inc. have
agreed that they will each contribute such additional capital contributions to
CVC Lot 19 LLC in the form of unsecured loans, subject to a maximum of $100,000
each, as may be required to complete the development and sale of the Lot 19
property. In September 1998, the Company and Zneimer Company each contributed
$12,280 which is the only additional capital contributed thus far. Construction
on Lot 19 was completed in 1998 and the listed price for the property is
$1,595,000.
Form 10-QSB
Page 9 of 14
<PAGE>
The lots are located in Cordillera Valley Club, a mountain golf community of 1
to 11-acre home sites and custom-designed residences, tennis courts, 15 miles of
hiking and cross-country ski trails, a fly-fishing river, mountain bike and
nature trails. The lots are being developed in a golf community planned with
care for natural aesthetic values. Accordingly, the home sites in the community
are being developed to minimize the impact of development upon the varied
vegetation and indigenous wildlife unique to the area. Deer and elk grazing and
calving areas have been carefully preserved along with native grasses, shrubs
and trees. The home sites in the community have been planned to maximize
mountain views, as well as the extensive aspen groves, forests of fir and
spruce, and varied terrain of adjacent canyons and draws which is characteristic
of the area.
Cordillera Valley Club is located in an area referred to as the "Upper Eagle
Valley" which lies west of Vail. The Vail and Beaver Creek resorts are located
25 and 15 minutes away, respectively, by car from Cordillera. Vail was founded
in 1962, and is now the nation's largest ski area by acreage of skiable terrain.
The economy of the Upper Eagle Valley is based primarily upon the resort
industry, with major revenues being derived from skiing, real estate
concessions, restaurants, and short-term lodging. Cordillera is primarily a
second home/resort community. As such, it may have a greater than average
susceptibility to general economic conditions, and may be impacted by the cost,
accessibility and continued desirability of area recreational facilities such as
the Vail and Beaver Creek ski areas as well as the private golf facilities. In
addition, there will be significant competition from other developers in
Cordillera as well as other developments in the area, including some which are
in close proximity to Cordillera. The impact of this competition cannot be
assessed because future demand cannot be predicted with accuracy and the factors
influencing the success of each development are speculative.
During the quarter ended September 30, 1997, the Company purchased
approximately three acres of raw land in Glenwood Springs, Colorado for
$925,000, including a mortgage of $675,000. The mortgage bears interest at 9%
per annum, payable $5,431 per month and is due on July 15, 1999. The Company
anticipates either refinancing this loan upon maturity or selling the
property to pay the mortgage. Plans to build a condominium/office
development on one acre of this property have been developed and discussed
with the City of Glenwood Springs, subject to the fulfillment of certain
conditions, a final decision regarding development of the project has not
been made. In the event the Company determines to proceed with the project,
it is anticipated that the Company will enter into an arrangement with
Zneimer Company, Inc. to develop this property.
The Company is currently considering other real estate development activities,
as well as other business opportunities. In addition to real property
acquisitions, the Company may consider the possible acquisition of, or merger
with, another business entity, or other type of business transactions. The
Company does not intend to limit its search to companies in real estate
activities.
Form 10-QSB
Page 10 of 14
<PAGE>
For the three month period ended September 30, 1998, operating activities used
cash of $38,200. Prepaid expenses decreased by approximately $1,700 in the three
month period ended September 30, 1998. The Company recorded depreciation on
fixed assets of $3,200. Accounts payable and accrued liabilities decreased by
$3,200.
The Company wrote-down the value of an investment which was determined to be
worthless for $101,300. The Company is considering taking legal action to
recover this investment, although no proceedings have started as of the date of
this document. The prices of the securities held by the Company are often highly
volatile. In addition, trading in these securities may be thin or there may be
other impediments to, or restrictions on transfer.
Cash used for investing activities was $59,100 during the three month period
ended September 30, 1998, of which approximately $20,035 was loaned to
related parties, CVC #19 LLC and CVC #2 LLC and $2,125 was the collection of
notes receivable. Cash decreased $41,200 related to value changes in trading
securities.
Financing activities during the three month period ended September 30, 1998
provided cash of $2,200 of which $3,400 was generated from the exercise of stock
options net of repurchases and $1,200 was principal payments on notes payable.
At September 30, 1998, the Company had cash and cash equivalents of $1,579,400
and working capital of $3,195,153. The Company believes that its working capital
is adequate for its present real estate expenditures as described above. The
Company has no understandings or agreements on any other particular property or
business. Any such future acquisitions or other business arrangements could
involve substantial expenditures. Moreover, the Company could incur substantial
expenses in connection with the evaluation of business opportunities. In its
consideration of potential business opportunities, the Company expects to
consider the potential effect on its liquidity.
NET INCOME (LOSS) PER SHARE
Through June 30, 1998 the Company followed the provisions of Accounting
Principles Board Opinion (APB) No. 15, "Earnings Per Share". Effective for the
year that will end June 30, 1998, the Company implemented Statement of Financial
Accounting Standards (SFAS) No. 128, "Earnings Per Share". SFAS No. 128 provides
for the calculation of "Basic" and "Diluted" earnings per share. Basic earnings
per share includes no dilution and is computed by dividing income available to
common stockholders by the weighted average number of common shares outstanding
for the period. Diluted earnings per share reflects the potential dilution of
securities that could share in the earnings of an entity, similar to fully
diluted earnings per share. In loss periods, dilutive common equivalent shares
are excluded as the effect would be anti-dilutive. Basic and diluted earnings
per share are the same for all periods presented.
Form 10-QSB
Page 11 of 14
<PAGE>
Options to purchase 130,000 shares of common stock were not included in the
compu- tation of diluted EPS because their effect was anti-dilutive for the
three months ended September 30, 1998. None of the options were exercised as of
the date of this filing.
NEW ACCOUNTING PRONOUNCEMENTS
Effective July 1,1998, Cambridge Holdings, Ltd. adopted FASB Statement No. 130,
REPORTING COMPREHENSIVE INCOME. Statement No. 130 requires the reporting of
comprehensive income in addition to net income from operations. Comprehensive
income is a more inclusive financial reporting methodology that includes
disclosure of certain financial information that historically has not been
recognized in the calculation of net income.
The Company at the end of the quarter held securities classified as
available-for-sale, which have unrealized losses of $129,301 before tax. The
before tax and after tax amount for the securities held, as well as the tax
(expense)/benefit of those securities held at September 30, 1998 and 1997 is
presented below.
<TABLE>
<CAPTION>
Tax
Before (Expense)/ After
Three months ended Sept. 30, 1998 Tax Benefit Tax
--- ------- ---
<S> <C> <C> <C>
Unrealized holding losses $(139,841) $54,054 $(85,787)
Reclassification adjustment for
Gains/losses included in net income -- -- --
--------- ------- --------
$(139,841) $54,054 $(85,787)
--------- ------- --------
--------- ------- --------
</TABLE>
Also, in June 1997, FASB issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information" which supersedes SFAS No. 14, "Financial
Reporting for Segments of a Business Enterprise." SFAS No. 131 establishes
standards for the way that public companies report information about operating
segments in annual financial statements and requires reporting of selected
information about operating segments in interim financial statements issued to
the public. It also establishes standards for disclosures regarding products and
services, geographic areas and major customers. SFAS No. 131 defines operating
segments as components of a company about which separate financial information
is available that is evaluated regularly by the chief operating decision maker
in deciding how to allocate resources and in assessing performance.
In February 1998, the FASB issued SFAS No. 132, "Employer' Disclosures about
adopted Pensions and Other Postretirement Benefits" which standardizes the
disclosure requirements for pensions and other postretirement benefits and
requires additional information on changes in the benefit obligations and fair
values of plan assets that will facilitate financial analysis. SFAS No. 132 is
effective for years beginning after December 15, 1997 and requires comparative
information for earlier years to be restated, unless such information is not
readily available. Management believes the adoption of this statement will have
no material impact on the Company's financial statements.
Form 10-QSB
Page 12 of 14
<PAGE>
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" which requires companies to record
derivatives on the balance sheet as assets or liabilities, measured at fair
market value. Gains or losses resulting from changes in the values of those
derivatives would be accounted for depending on the use of the derivative and
whether it qualifies for hedge accounting. The key criterion for hedge
accounting is that the hedging relationship must be highly effective in
achieving offsetting changes in fair value or cash flows. SFAS No. 133 is
effective for fiscal years beginning after June 15, 1999. Management believes
the adoption of this statement will have no material impact on the Company's
financial statements.
YEAR 2000 COMPLIANCE
The Company has completed a review and risk assessment of all technology items
used in its operations. The Company believes that the year 2000 problem will
pose no significant operational problems. The Company's accounting software
program as well as other office software will be upgraded during 1999 to be year
2000 compliant. The Company estimates that the cost of the upgrades will be
approximately $1,000. The Company will review the status of the year 2000 issues
with its financial institutions.
RESULTS OF OPERATIONS.
THREE MONTH PERIOD ENDED SEPTEMBER 30, 1998 COMPARED TO THREE MONTH PERIOD
ENDED SEPTEMBER 30, 1997 The Company's revenues for the three month period
ended September 30, 1998 totaled approximately $9,400, consisting of interest
on temporary cash on hand and other money market instruments. Revenues for
the three month period ended September 30, 1997 totaled approximately
$36,200, which consisted of interest income of $30,500 and realized gains of
$5,700.
During the three month period ended September 30, 1998, the Company incurred
a write-down of investments of $101,300 and a net decrease in the valuation
of bonds and other securities held for trading of $41,151 compared to $0 for
the quarter ended September 30, 1997. The investment written off during the
quarter was an investment in a partnership that management considers to be
worthless. The decrease in the value of the bonds is directly related to the
decline in market conditions. Management does not feel that the first quarter
results of operations are indicative of the expected full-year results as the
partnership write-off is a one-time charge and it is expected that the market
will recover.
During the three month periods ended September 30, 1998 and September 30, 1997,
the Company incurred operating, general and administrative costs of
approximately $49,300 and $46,900, respectively. The Company had losses before
any income tax benefit for the three month period ended September 30, 1998 of
approximately $182,300 as compared with $10,600 for the three month period ended
September 30, 1997.
PART II. OTHER INFORMATION
Not Applicable.
From 10-QSB
Page 13 of 14
<PAGE>
CAMBRIDGE HOLDINGS, LTD.
FORM 10-QSB
SEPTEMBER 30, 1998
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CAMBRIDGE HOLDINGS, LTD.
November 16, 1998 By: /s/ Gregory Pusey
-------------------------------------
Gregory Pusey
President, Treasurer and Director
Form 10-QSB
Page 14 of 14
<PAGE>
SCHEDULE II
AUDITED FINANCIAL STATEMENTS FOR THE
TWO FISCAL YEARS ENDED JUNE 30, 1998 AND 1997
<PAGE>
CAMBRIDGE HOLDINGS, LTD.
INDEX TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS F-2
BALANCE SHEET AS OF JUNE 30, 1998 F-3 - F-4
STATEMENTS OF OPERATIONS FOR THE YEARS ENDED
JUNE 30, 1998 AND 1997 F-5
STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE
YEARS ENDED JUNE 30, 1998 AND 1997 F-6
STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED
JUNE 30, 1998 AND 1997 F-7 - F-8
SUMMARY OF ACCOUNTING POLICIES F-9 - F-12
NOTES TO FINANCIAL STATEMENTS F-13 - F-18
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors and Stockholders
Cambridge Holdings, Ltd.
Vail, Colorado
We have audited the accompanying balance sheet of Cambridge Holdings, Ltd. as of
June 30, 1998 and the related statements of operations, stockholders' equity and
cash flows for each of the two years then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Cambridge Holdings, Ltd. at
June 30, 1998, and the results of its operations and its cash flows for each of
the two years then ended, in conformity with generally accepted accounting
principles.
/S/ BDO Seidman, LLP
Denver, Colorado
September 14, 1998
F-2
<PAGE>
CAMBRIDGE HOLDINGS, LTD.
BALANCE SHEET
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
JUNE 30, 1998
- --------------------------------------------------------------------------------
ASSETS
<S> <C>
CURRENT:
Cash and cash equivalents $ 1,674,523
Investment securities - available for sale, net of allowance
for potential losses of $102,000 (Note 1) 570,848
Investment in partnership (Note 2) 101,278
Notes receivable - related party (Note 3) 774,303
Convertible notes receivable (Note 4) 42,500
Prepaids and other 43,212
Real estate developments (Note 6) 939,199
- --------------------------------------------------------------------------------
Total current assets 4,145,863
Other assets 38,600
- --------------------------------------------------------------------------------
$ 4,184,463
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING SUMMARY OF ACCOUNTING POLICIES AND NOTES TO FINANCIAL
STATEMENTS.
F-3
<PAGE>
CAMBRIDGE HOLDINGS, LTD.
BALANCE SHEET
(CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
JUNE 30, 1998
- --------------------------------------------------------------------------------
<S> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accrued liabilities $ 12,393
Deferred income taxes (Note 5) 6,054
Notes payable (Note 6) 670,789
- --------------------------------------------------------------------------------
Total current liabilities 689,236
- --------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY (Note 7):
Common stock, $.025 par value; 15,000,000 shares
authorized; 3,398,400 issued and outstanding 84,960
Additional paid-in capital 3,177,735
Retained earnings 221,992
Net unrealized gain on securities
available for sale (Note 1) 10,540
- --------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 3,495,227
- --------------------------------------------------------------------------------
$ 4,184,463
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING SUMMARY OF ACCOUNTING POLICIES AND NOTES TO FINANCIAL
STATEMENTS.
F-4
<PAGE>
CAMBRIDGE HOLDINGS, LTD.
STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30, 1998 1997
- -----------------------------------------------------------------------------------
<S> <C> <C>
REVENUES:
Net gain on sales of
investment securities (Note 1) $ 44,203 $ 165,765
Interest and dividend income 133,865 162,678
- -----------------------------------------------------------------------------------
Total revenues 178,068 328,443
- -----------------------------------------------------------------------------------
EXPENSES:
Operating, general, and administrative 166,866 176,099
Investment write-off 102,000 -
Interest expense 55,719 100
- -----------------------------------------------------------------------------------
Total expenses 324,585 176,199
- -----------------------------------------------------------------------------------
INCOME (LOSS) BEFORE INCOME TAXES (146,517) 152,244
INCOME TAX EXPENSE (BENEFIT) (Note 5) (10,000) 49,000
- -----------------------------------------------------------------------------------
NET INCOME (LOSS) $ (136,517) $ 103,244
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
BASIC AND DILUTED INCOME (LOSS) PER COMMON SHARE $ (.04) $ .03
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 3,396,948 3,382,567
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING SUMMARY OF ACCOUNTING POLICIES AND NOTES TO FINANCIAL
STATEMENTS.
F-5
<PAGE>
CAMBRIDGE HOLDINGS, LTD.
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Net Unrealized
Gain (Loss) on
Common Stock Additional Securities Total
------------------------ Paid-in Retained Available Stockholders'
YEARS ENDED JUNE 30, 1998 AND 1997 Shares Amount Capital Earnings For Sale Equity
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, July 1, 1996 3,348,400 $ 83,710 $ 3,163,547 $ 255,265 $ 468,336 $ 3,970,858
Net income - - - 103,244 - 103,244
Shares issued from
exercise of stock options 40,000 1,000 11,238 - - 12,238
Net unrealized loss on
securities available
for sale - - - - (393,055) (393,055)
- ----------------------------------------------------------------------------------------------------------------------------------
BALANCE, June 30, 1997 3,388,400 84,710 3,174,785 358,509 75,281 3,693,285
Net loss (136,517) - (136,517)
Shares issued from
exercise of stock options 10,000 250 2,950 - - 3,200
Net unrealized loss on
securities available
for sale (Note 1) - - - - (64,741) (64,741)
- ----------------------------------------------------------------------------------------------------------------------------------
BALANCE, June 30, 1998 3,398,400 $ 84,960 $ 3,177,735 $ 221,992 $ 10,540 $ 3,495,227
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING SUMMARY OF ACCOUNTING POLICIES AND NOTES TO FINANCIAL
STATEMENTS.
F-6
<PAGE>
CAMBRIDGE HOLDINGS, LTD.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
YEARS ENDED JUNE 30, 1998 1997
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ (136,517) $ 103,244
Adjustments to reconcile net income to cash
provided by (used in) operating activities:
Provision for possible losses 102,000 -
Interest income paid in investment securities (22,500) -
Depreciation and amortization 11,940 178
Gain on sale of investment securities (44,203) (165,765)
Changes in operating assets and liabilities:
Prepaids and other 111,876 (118,590)
Accrued liabilities and other (830) 10,074
- ---------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities 21,766 (170,859)
- ---------------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Purchase of property (264,199) (737,428)
Proceeds from sale of short-term investments - 1,493,687
Purchase of investment securities (234,453) (602,066)
Proceeds from sale of investment securities 214,112 616,649
Purchase of equipment and improvements (47,533) -
Investments in notes receivable (36,875) (225,000)
Investments in partnerships - (101,278)
Collections on note receivable 382,500 50,000
- ---------------------------------------------------------------------------------------------
Net cash provided by investing activities 13,552 494,564
- ---------------------------------------------------------------------------------------------
</TABLE>
F-7
<PAGE>
CAMBRIDGE HOLDINGS, LTD.
STATEMENTS OF CASH FLOWS
(CONTINUED)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
YEARS ENDED JUNE 30, 1998 1997
- --------------------------------------------------------------------------------------
<S> <C> <C>
FINANCING ACTIVITIES:
Principal payments on notes payable (4,211) -
Proceeds from exercise of stock options 3,200 12,238
- --------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities (1,011) 12,238
- --------------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 34,307 335,943
CASH AND CASH EQUIVALENTS, beginning of year 1,640,216 1,304,273
- --------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, end of year $ 1,674,523 $ 1,640,216
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING SUMMARY OF ACCOUNTING POLICIES AND NOTES TO FINANCIAL
STATEMENTS.
F-8
<PAGE>
CAMBRIDGE HOLDINGS, LTD.
SUMMARY OF ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BUSINESS The Company was incorporated on June 23, 1980 under the laws
of the State of Colorado. On September 27, 1991, the
Company acquired Corporate Centre, a three story office
building located in Colorado Springs, Colorado. Corporate
Centre was sold during the year ended June 30, 1997. The
Company has purchased two undeveloped lots in the Cordillera
Valley Club, located near Vail, Colorado and has contributed
the properties to two separate limited liability companies
(LLC's). With their partner in the LLC's, the Company has
built a separate luxury residence on each parcel for resale.
The Company also explores other business acquisitions,
opportunities and investments.
CONCENTRATIONS OF The Company's financial instruments that are exposed to
CREDIT RISK concentrations of credit risk consist primarily of cash
balances in excess of the insurance provided by governmental
insurance authorities. The Company has not experienced any
losses on such accounts.
USE OF ESTIMATES The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results
could differ from those estimates.
INVESTMENT Investment securities classified as available for sale are
SECURITIES those securities that the Company does not have the positive
intent to hold to maturity or does not intend to trade
actively. These securities are reported at fair value with
unrealized gains and losses reported as a net amount (net of
applicable income taxes) as a separate component of
stockholders' equity.
FAIR VALUE OF Unless otherwise specified, the Company believes the
FINANCIAL carrying value of financial instruments approximates their
INSTRUMENTS fair value.
REVENUE Interest and dividend income is recorded on the accrual
RECOGNITION basis. Gain (loss) on sales of securities is recognized at
time of sale.
INVESTMENT IN Investment in partnership are accounted for by the cost
PARTNERSHIP method.
INVESTMENT IN LLC Investments in LLCs are accounted for under the equity
method.
LONG-LIVED ASSETS Long-lived assets are reviewed for impairment whenever
events or changes in circumstances indicate that the
carrying amount may not be recoverable. If the expected
undiscounted future cash flow from the use of the assets
and its eventual disposition is less than the carrying
amount of the assets, an impairment loss is recognized
and measured using the asset's fair value.
F-9
<PAGE>
CAMBRIDGE HOLDINGS, LTD.
SUMMARY OF ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INCOME TAXES The Company follows the provisions of Statement of Financial
Accounting Standards No. 109 - Accounting for Income Taxes.
Under SFAS No. 109, the Company's policy is to provide
deferred income taxes related to items that result in
differences between the financial reporting and tax basis of
assets and liabilities.
NET INCOME During fiscal 1998, the Company adopted SFAS No. 128, which
PER SHARE provides for the calculation of "Basic" and "Diluted"
earnings per share. Basic earnings per share includes no
dilution and is computed by dividing income (loss) available
to common shareholders by the weighted average number of
common shares outstanding for the period. Diluted earnings
per share reflects the potential dilution of securities that
could share in the earnings of an entity, similar to fully
diluted earnings per share. In loss periods, dilutive
common equivalent shares are excluded as the effect would be
anti-dilutive. Basic and diluted earnings are the same for
all periods presented.
Options to purchase 160,000 shares of common stock were not
included in the computation of diluted earnings per share as
their effect was anti-dilutive for the year ended June 30,
1998.
CASH EQUIVALENTS The Company considers all highly liquid investments
purchased with an original maturity of three months or less
to be cash equivalents.
STOCK OPTION PLANS The Company applies Accounting Principles Board Opinion 25,
"Accounting for Stock Issued to Employees," (APB Opinion 25)
and related Interpretations in accounting for all stock
option plans. Under APB Opinion 25, no compensation cost
has been recognized for stock options granted as the option
price equals or exceeds the market price of the underlying
common stock on the date of grant.
Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation, "(SFAS No. 123)
requires the Company to provide pro forma information
regarding net income as if compensation cost for the
Company's stock option plans had been determined in
accordance with the fair value based method prescribed in
SFAS.
F-10
<PAGE>
CAMBRIDGE HOLDINGS, LTD.
SUMMARY OF ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NEW ACCOUNTING In June 1997, the Financial Accounting Standards Board
PRONOUNCEMENTS issued Statement of Financial Accounting Standards No. 130,
Reporting Comprehensive Income (SFAS 130), which establishes
standards for reporting and display of comprehensive income,
its components and accumulated balances.
Comprehensive income is defined to include all changes in
equity except those resulting from investments by owners and
distributions to owners. Among other disclosures, SFAS 130
requires that all items that are required to be recognized
under current accounting standards as components of
comprehensive income be reported in a financial statement
that is displayed with the same prominence as other
financial statements.
Also, in June 1997, FASB issued SFAS No. 131, "Disclosures
about Segments of an Enterprise and Related Information"
which supersedes SFAS No.14, "Financial Reporting for
Segments of a Business Enterprise." SFAS No. 131
establishes standards for the way that public companies
report information about operating segments in annual
financial statements and requires reporting of selected
information about operating segments in interim financial
statements issued to the public. It also establishes
standards for disclosures regarding products and services,
geographic areas and major customers. SFAS No. 131 defines
operating segments as components of a company about which
separate financial information is available that is
evaluated regularly by the chief operating decision maker in
deciding how to allocate resources and in assessing
performance.
SFAS 130 and 131 are effective for financial statements for
periods beginning after December 15, 1997 and requires
comparative information for earlier years to be restated.
Because of the recent issuance of the standard, management
has been unable to fully evaluate the impact, if any, the
standard may have on future financial statement disclosures.
Results of operations and financial position, however, will
be unaffected by implementation of this standard.
In February 1998, the FASB issued SFAS No. 132, "Employers'
Disclosures about Pensions and Other Postretirement
Benefits" which standardizes the disclosure requirements for
pensions and other postretirement benefits and requires
additional information on changes in the benefit obligations
and fair values of plan assets that will facilitate
financial analysis. SFAS No. 132 is effective for years
beginning after December 15, 1997, and requires comparative
information for earlier years to be restated,
F-11
<PAGE>
CAMBRIDGE HOLDINGS, LTD.
SUMMARY OF ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
unless such information is not readily available.
Management believes the adoption of this statement will have
no material impact on the Company's financial statements.
In June 1998, the FASB issued SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities" which
requires companies to record derivatives on the balance
sheet as assets or liabilities, measured at fair market
value. Gains or losses resulting from changes in the values
of those derivatives would be accounted for depending on the
use of the derivative and whether it qualifies for hedge
accounting. The key criterion for hedge accounting is that
the hedging relationship must be highly effective in
achieving offsetting changes in fair value or cash flows.
SFAS No. 133 is effective for fiscal years beginning after
June 15, 1999. Management believes the adoption of this
statement will have no material impact on the Company's
financial statements.
RECLASSIFICATIONS Certain items included in the prior years' financial
statements have been reclassified to conform to current year
presentation.
F-12
<PAGE>
CAMBRIDGE HOLDINGS, LTD.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. INVESTMENT At June 30, 1998 the Company's market value of available for
SECURITIES sale securities consisted of:
<TABLE>
<CAPTION>
Gross Gross Estimated
Unrealized Unrealized Fair
Cost Gains Losses Value
-------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common and
preferred stocks $554,619 $ 16,229 $ - $570,848
-------------------------------------------------------------------------
-------------------------------------------------------------------------
</TABLE>
The Company realized net gains of $44,203 and $165,765 on
the sale of investment securities for the years ended June
30, 1998 and 1997.
2. INVESTMENT IN The Company invested $100,000 for a 10% interest in a
PARTNERSHIP Partnership which entered into a bridge financing agreement
with a third party in the year ended June 30, 1997. Under
the terms of the financing arrangement, the partnership was
to receive 8% interest on the amount advanced plus stock of
the borrower. The amount was collateralized by assets of
the third party. The advances were repaid to the
partnership in 1998 and the Company received a distribution
from the partnership of common shares of the third party.
The partnership has now invested in a venture capital fund.
3. NOTES In February 1997, the Company entered into agreements to
RECEIVABLE become a member of two limited liability companies with the
RELATED PARTY Zneimer Company, an experienced real estate developer in the
Vail, Colorado area. The Company and the Zneimer Company
each hold a 50% interest in these companies, each of which
will build a separate luxury residence in the Vail Valley
for resale. In December 1996 the Company purchased raw land
near Vail for $366,400. This land which is known as
Cordillera Valley Club Lot #19 was conveyed to the limited
liability company entitled CVC Lot 19, LLC in August 1997.
In January 1997 the Company purchased raw land near Vail
known as Cordillera Valley Club Lot #2 for $356,700. This
lot was conveyed to the liability company known as CVC Lot
2, LLC in May 1997. In both cases, the Company received a
secured promissory note in an amount equal to the purchase
price for the real estate plus expenses, which will be
subordinate to the secured construction loan provided by a
financial institution. The Zneimer Company and Mr. Zneimer
personally guaranteed one half the original principal amount
of the note to be issued to the Company. This guarantee
took place simultaneously with the conveyance of each
property to the applicable limited liability company.
F-13
<PAGE>
CAMBRIDGE HOLDINGS, LTD.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4. CONVERTIBLE The Company has invested in a convertible note receivable
NOTES with interest at 12% of $42,500. The note is secured by
RECEIVABLE assets of the borrower. The note is convertible into common
stock of the borrower at the registration date.
5. INCOME Income taxes (benefit) consisted of the following:
TAXES
(BENEFIT)
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30, 1998 1997
----------------------------------------------------
<S> <C> <C>
CURRENT
Federal $ (9,000) $ 41,000
State (1,000) 8,000
----------------------------------------------------
$ (10,000) $ 49,000
----------------------------------------------------
----------------------------------------------------
</TABLE>
The types of temporary differences between the tax basis of
assets and liabilities that give rise to a significant
portion of the net deferred tax liability and their
approximate tax effects are as follows:
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30, 1998 1997
----------------------------------------------------------------
<S> <C> <C>
DEFERRED TAX ASSETS:
Allowance for losses on investments $ 38,000 $ -
----------------------------------------------------------------
Net deferred tax assets 38,000 -
Less valuation allowance (38,000) -
----------------------------------------------------------------
Net deferred tax assets - -
DEFERRED TAX LIABILITIES -
Net unrealized gain on securities
available for sale 6,054 50,000
----------------------------------------------------------------
Net deferred taxes $ 6,054 $ 50,000
----------------------------------------------------------------
----------------------------------------------------------------
</TABLE>
F-14
<PAGE>
CAMBRIDGE HOLDINGS, LTD.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
A reconciliation of income taxes at the federal statutory
rate to the effective tax rate is as follows:
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30, 1998 1997
------------------------------------------------------------------
<S> <C> <C>
Income taxes computed at the federal
statutory rate $ (50,000) $ 41,000
State income taxes, net of federal
benefit (5,000) 8,000
Increase in valuation allowance 38,000 -
Other (7,000) -
------------------------------------------------------------------
Income tax expense (benefit) $ (10,000) $ 49,000
------------------------------------------------------------------
------------------------------------------------------------------
</TABLE>
6. NOTES The Company purchased a parcel of raw land in Glenwood
PAYABLE Springs, Colorado in July 1997. The Company purchased the
land for $925,000 with cash and a note for $675,000. The
note bears interest at 9% and matures on July 15, 1999. The
note also requires monthly payments of $5,431. The loan is
collateralized by the parcel of raw land.
7. STOCK OPTIONS 1988 STOCK OPTION PLAN
The Company's 1988 Stock Option Plan, as amended, has a
maximum of 400,000 common shares reserved to be issued to
key employees upon the exercise of options granted under the
Plan. The option price of shares may not be less than the
fair market value of common stock on the date of grant. The
exercise term will not exceed five years from the date of
the grant. The Plan expired in May 1998. Individual grants
expire under the terms of the option agreements.
F-15
<PAGE>
CAMBRIDGE HOLDINGS, LTD.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NON-DISCRETIONARY STOCK OPTION PLAN
The Company's Non-Discretionary Stock Option Plan (the
"Plan"), as amended, is intended to reward non-employee
directors' contributions to the Company. The number of
shares of common stock reserved for issuance pursuant to the
Plan is 250,000. Pursuant to the terms of the Plan, on
September 1 of each year, options to purchase an additional
10,000 shares will be granted to each non-employee director.
The option price of shares under this Plan may not be less
than the fair market value of common stock on the date of
grant. The exercise term will expire three years from the
date of grant. The Plan expired in September 1997.
Individual grants of options expire under the terms of the
option agreements.
FASB Statement 123, "Accounting for Stock-Based
Compensation" (SFAS No. 123), requires the Company to
provide pro forma information regarding net income and net
income per share as if compensation costs for the Company's
stock option plans and other stock awards had been
determined in accordance with fair value based methods
prescribed in SFAS No. 123. Under the accounting provisions
for SFAS No. 123, the Company's net income per share would
have been equal to historical net income per share.
F-16
<PAGE>
CAMBRIDGE HOLDINGS, LTD.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
A summary of the status of the Company's stock option plans
and outstanding options as of June 30, 1998 and 1997 and
changes during the years ending on those dates is presented
below:
<TABLE>
<CAPTION>
1998 1997
------------------------------------------------------------------------------------
Weighted Weighted
Average Average
Range of Exercise Range of Exercise
Shares Price Shares Price
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Outstanding, beginning
of year 170,000 $ .52522 215,000 $ .39756
Granted - - 30,000 .87500
Cancelled - - (35,000) .28000
Exercised 10,000 .32000 (40,000) .30593
------------------------------------------------------------------------------------
Outstanding, end of year 160,000 $ .53805 170,000 $ .52522
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
Options exercisable, end
of year 160,000 $ .53805 170,000 $ .52522
Weighted average fair
value of options granted
during the year $ - $ .87500
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
</TABLE>
F-17
<PAGE>
CAMBRIDGE HOLDINGS, LTD.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The following table summarizes information about stock
options outstanding at June 30, 1998:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Weighted
Average Weighted Weighted
Range of Number Remaining Average Number Average
Exercise Outstanding Contractual Exercise Exercisable Exercise
Prices at 6/30/98 Life Price at 6/30/98 Price
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ .32000 20,000 .16 $ .32000 20,000 $ .32000
.34375 10,000 .06 .34375 10,000 .34375
.87500 30,000 .69 .87500 30,000 .87500
.50000 100,000 .27 .50000 100,000 .50000
--------------------------------------------------------------------------------------
$.32000-
.87500 160,000 .81969 $ .53805 160,000 $ .53805
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
</TABLE>
8. RELATED PARTY The Company shares corporate office space and
TRANSACTIONS administrative staff with an affiliate of the Company. The
Company paid its affiliate approximately $750 per month for
these facilities and services.
The Company's president was a member of the Board of
Directors of Nutrition for Life, Inc. ("NFL") in which
investment securities are classified as available for sale
and at June 30, 1998. The investments had an estimated fair
value of $66,116. The Company's president has resigned from
the Board of Directors of NFL in August 1998.
9. SUPPLEMENTAL
DISCLOSURES OF
CASH FLOW
INFORMATION
<TABLE>
<CAPTION>
1998 1997
-----------------------------------------------------------
<S> <C> <C>
Cash paid during year for:
Interest $ 55,532 $ 100
Income taxes - 49,000
-----------------------------------------------------------
-----------------------------------------------------------
</TABLE>
The Company's purchase of a parcel of land in Glenwood
Springs included a mortgage note of $675,000.
F-18
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CAMBRIDGE HOLDINGS, LTD.
Date: October 8, 1998 By: /s/ Gregory Pusey
--------------------------------------
Gregory Pusey
President, Treasurer and Director
In accordance with the requirements of the Exchange Act, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated
Date: October 8, 1998 By: /s/ Gregory Pusey
--------------------------------------
Gregory Pusey
President, Treasurer and Director
Date: October 8, 1998 By: /s/ Donald E. Yager
--------------------------------------
Donald E. Yager
Secretary and Director
Date: October 8, 1998 By: /s/ John H. Altshuler
--------------------------------------
John H. Altshuler, Director
Date: October 8, 1998 By: /s/ Scott Menefee
--------------------------------------
Scott Menefee, Director
2
<PAGE>
SCHEDULE III
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The name, business address, present principal occupation or employment and
five-year employment history of each of the directors and executive officers
of the Company are set forth below. Each person identified below is a
citizen of the United States.
Name and Business Address Occupation and Employment
------------------------- -------------------------
John H. Altshuler Dr. Altshuler is a medical doctor with a
7485 Peakview specialty in hematology. He maintains a
Englewood, Colorado 80110 laboratory and a private medical practice and
serves as a medical consultant. Dr. Altshuler
has been engaged in these activities for
approximately the past 30 years. Dr. Altshuler
has served as a director of the Company since
1991. Dr. Altshuler owns beneficially 149,190
Shares, including options to purchase up to
20,000 Shares. He intends to tender all 129,190
shares currently held by him.
Scott L. Menefee Mr. Menefee has served as a Real Estate Manager
1330 Seventeenth Street for Opus Northwest, L.L.C., a large commercial
Denver, Colorado 80202 real estate development firm, since September
1997. Immediately prior thereto, he served as a
Leasing Manager for Vector Property Services,
L.L.C. From September 1992 to February 1997,
Mr. Menefee was a Leasing Manager for Brookfield
Development. Mr. Menefee has served as a
director of the Company since 1993. Mr. Menefee
owns beneficially 50,000 Shares, including
options to purchase up to 20,000 Shares. Mr.
Menefee does not intend to tender any Shares in
the Offer.
Gregory Pusey Mr. Pusey is the president, treasurer and
1722 Buffehr Creek Road director of the Company. He has served as a
Vail, Colorado 81657 director since 1982, and became president in
1988. Mr. Pusey is also the president of
Livingston Capital, Ltd., a venture capital and
business consulting firm, and an officer and
director of Advanced Nutraceuticals, Inc., a
company formed to acquire manufacturers and
suppliers of nutritional supplements. Mr. Pusey
owns beneficially 1,591,218 Shares. Mr. Pusey
does not intend to tender any Shares in the
Offer.
Donald E. Yager Since 1968, Mr. Yager has served as president
3200 West 72nd Avenue and director of Yager Realty, Inc., a real
Westminster, Colorado 80030 estate agency and development company located in
Westminster, Colorado, a suburb of Denver,
Colorado. Mr. Yager has served as a director of
the Company since 1988. Mr. Yager is the
father-in-law of Mr. Pusey. Mr. Yager owns
beneficially 80,000 Shares, including options to
purchase up to 20,000 Shares. He intends to
tender all 60,000 Shares currently held by him
in the Offer.
3
<PAGE>
SUPPLEMENT TO
OFFER TO PURCHASE FOR CASH UP TO
1,200,000 SHARES OF ITS COMMON STOCK
AT $.045 PER SHARE
BY
CAMBRIDGE HOLDINGS, LTD.
Cambridge Holdings, Ltd., a Colorado corporation (the "Company"),
supplements and amends its Offer to Purchase, dated November 24, 1998,
regarding the invitation to the Company's shareholders to tender shares of
the Company's $.025 par value common stock (the "Shares"), as follows:
1. The Company has extended the Expiration Date as described in the Offer
to Purchase to 5:00 P.M., New York City Time, on January 12, 1999.
2. Based on information provided by the Tender Agent for the Tender
Offer, as of 5:00 P.M. on December 18, 1998, approximately 593,528 Shares of the
Company's Common Stock from 42 shareholders had been tendered and not withdrawn.
3. The following is added to the Section entitled, CAUTIONARY STATEMENT
ON FORWARD-LOOKING STATEMENTS:
The protection of the disclosure liability safe harbor for
forward-looking statements provided in Section 21E of the Securities
Exchange Act of 1934 is not applicable to forward-looking statements
made in the Offer to Purchase and this Supplement.
4. The following is added to the Section entitled, SPECIAL FACTORS:
Special factors were detailed in the Offer to Purchase which
shareholders are urged to consider in determining whether to tender
their Shares. On the basis of those special factors, as well as other
information in the Offer to Purchase, the Company believes the Offer
is fair to unaffiliated shareholders and that its belief is
reasonable.
In forming its belief, the Company considered many factors,
including the uncertain nature of the Company's real estate
development activities and economic and financial conditions
generally, as well as the following factors:
-- Current Market Prices: The Purchase Price of $0.45 per
Share was higher than the market price of $0.38 per
Share on the last trading day prior to the announcement
and commencement of the Offer.
<PAGE>
-- Historical Market Prices: Since the quarter ended March 31,
1997, the highest bid price for the Shares was $0.41. For
the preceding three quarters, the highest bid price was
$0.63; however, the Company does not believe that any
significant sales were effected at these prices.
Accordingly, the Company believes that shareholders of the
Company have not been able to effect sales of their Shares
in approximately the past three years at prices higher than
the Purchase Price. Moreover, due to the limited and
sporadic nature of trading in the Shares, the Company
believes that the Offer represents a viable means for
shareholders to sell their Shares at a price which is
higher than what could have been received by them in the
recent past.
-- Net Book Value: At September 30, 1998, the book value per
Share was $0.95. The recent Share price of $0.38 reflects a
discount of approximately 56.8% to the Company's book value
per Share at September 30, 1998. The Purchase Price of
$0.45 per Share reflects a discount of approximately 52.6%
to the Company's book value per Share on September 30, 1998.
The Board believed that the Purchase Price should be at a
significant discount to book value per Share to provide the
shareholders who determined not to tender Shares the
opportunity to share in the potential long-term growth of
the Company. In making this determination, the Board
considered the nature of the Company's assets, a principal
amount of which are related to real estate development
properties. These properties, if and when sold, could yield
values which are significantly greater or lower than cost,
due to the nature of the real estate business. The Board
believes that the Purchase Price is fair to unaffiliated
shareholders, notwithstanding the significant discount to
book value per Share, due to the nature of the Company's
real estate business activities, the other factors
considered in determining the Purchase Price, and the
voluntary, non-coercive nature of the Offer.
-- Going Concern Value: Although the Board considered the
factors discussed herein, the Board did not make any
specific attempt to estimate the going concern value of the
Company. However, the Company has no staff or internal
organization, a limited inventory of property, limited
capital resources and is at a competitive disadvantage due
to its small size.
-- Liquidation Value: The Board considered the possibility of
liquidation of the Company, but did not attempt to assess a
valuation for liquidation. As a principal amount of the
Company's assets consists of interests in real
2
<PAGE>
estate, liquidation values may be difficult to estimate.
Two of the real estate properties in which the Company
has an interest are being offered for sale, but no offers
have been received. The Board believes that liquidation, if
done in an orderly fashion, should result in a value close
to book value. However, no assurance can be given that this
would occur. The Board determined not to present a
liquidation proposal to the shareholders of the Company, but
instead to present this Offer as a voluntary, non-coercive
proposal to those shareholders who may be seeking near-term
liquidity from their investment in the Shares.
-- Other Offers: The Company has received no offers during the
preceding 18 months for the merger or consolidation of the
Company, the sale of all or substantially all of the assets
of the Company, or of a controlling interest in the Shares.
5. Section 6 entitled, CERTAIN CONDITIONS OF THE OFFER is amended by
substitution of the following:
Notwithstanding any other provision of the Offer, the Company shall not be
required to accept for payment, purchase or pay for any Shares tendered, and may
terminate or amend the Offer or may postpone the acceptance for payment of, or
the purchase of and the payment for Shares tendered, subject to Rule 13e-4(f)
under the Exchange Act, if at any time on or after November 24, 1998 and prior
to the Expiration Date any of the following events shall have occurred (or shall
have been determined by the Company to have occurred) that regardless of the
circumstances giving rise thereto (including any action or omission to act by
the Company), makes it inadvisable to proceed with an Offer or with such
acceptance for payment:
(a) There shall have been threatened, instituted or pending any action or
proceeding by any government or governmental, regulatory or administrative
agency, authority or tribunal or any other person, domestic or foreign, before
any court, authority, agency or tribunal that directly or indirectly (i)
challenges the making of the Offer, the acquisition of some or all of the Shares
pursued in the Offer or otherwise relates in any manner to the Offer, or (ii)
could materially and adversely affect the business, condition (financial or
other), income, operations or prospects of the Company, or otherwise materially
impair in any way the contemplated future conduct of the Company or materially
impair the contemplated benefits of the Offer to the Company; or
(b) there shall have been any action threatened, pending or taken, or
approval withheld, or any statute, rule, regulation, judgment, order or
injunction threatened, proposed, sought, promulgated, enacted, entered, amended,
enforced or deemed to be applicable to the Offer or the
3
<PAGE>
Company or any of its subsidiaries, by any court or any authority, agency or
tribunal that would or might directly or indirectly (i) make the acceptance
for payment of, or payment for, some or all of the Shares illegal or
otherwise restrict or prohibit consummation of the Offer, (ii) delay or
restrict the ability of the Company, or render the Company unable, to accept
for payment or pay for some or all of the Shares, (iii) materially impair the
contemplated benefits of the Offer to the Company or (iv) materially and
adversely affect the business, condition (financial or other), income,
operations or prospects of the Company and its subsidiaries, taken as a
whole, or otherwise materially impair in any way the contemplated future
conduct of the business of the Company or any of its subsidiaries, or
(c) any change or changes shall have occurred or are threatened in the
business, financial condition, assets, income, operations, prospects or stock
ownership of the Company that is or may be material to the Company.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances (including any action or
inaction by the Company) giving rise to any such condition, and may be waived by
the Company, in whole or in part, at any time and from time to time in its sole
discretion. The Company's failure at any time to exercise any of the foregoing
rights shall not be deemed a waiver of any such right and each such right shall
be deemed an ongoing right which may be asserted at any time and from time to
time. Any determination by the Company concerning the events described above
will be final and binding.
The date of the Supplement is December 22, 1998.
4
