<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 MARCH 31, 1998
( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ TO ______________
Commission file 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
incorporation or organization) Identification Number)
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 May 15, 1998
Common Stock, $.025 par value 3,398,400
<PAGE>
CAMBRIDGE HOLDINGS, LTD.
FORM 10-QSB
TABLE OF CONTENTS
Part I. Financial Information........................................... 3
Balance Sheets as of March 31, 1998 and June 30, 1997.................... 4 & 5
Statements of Operations for the nine month periods ended March 31,
1998 and March 31, 1997.................................................. 6
Statements of Cash Flows for the nine month periods ended March 31,
1998 and March 31, 1997.................................................. 7
Management's Discussion and Analysis of Financial Condition and Results
of Operations............................................................ 8-12
Part II. Other Information.............................................. 12
Signature Page........................................................... 13
Form 10-QSB
Page 2 of 13
<PAGE>
CAMBRIDGE HOLDINGS, LTD.
FORM 10-QSB
MARCH 31, 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,
1997.
Form 10-QSB
Page 3 of 13
<PAGE>
CAMBRIDGE HOLDINGS, LTD.
BALANCE SHEET
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
1998 1997
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT:
Cash and cash equivalents $ 805,852 $1,640,216
Investment securities - available for sale 1,370,639 430,516
Investment securities - available for
sale related party 211,183 263,975
Investment in Partnership 101,278 101,278
Notes receivable 42,500 425,000
Prepaids and other 34,613 155,088
Notes receivable-related party 755,266 356,660
Real estate developments 942,166 380,768
- ------------------------------------------------------------------------------
Total current assets 4,263,497 3,753,501
- ------------------------------------------------------------------------------
LONG-TERM ASSETS
Fixed assets 40,055 3,007
- ------------------------------------------------------------------------------
$4,303,552 $3,756,508
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
</TABLE>
Form 10-QSB
Page 4 of 13
<PAGE>
CAMBRIDGE HOLDINGS, LTD.
BALANCE SHEET
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
1998 1997
(Unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accrued liabilities $17,763 $13,223
Deferred income taxes 50,000 50,000
- ------------------------------------------------------------------------------
Total current liabilities 67,763 63,223
- ------------------------------------------------------------------------------
LONG-TERM LIABILITIES 671,972 -
- ------------------------------------------------------------------------------
739,735 63,223
STOCKHOLDERS' EQUITY:
Common Stock - $.025 par value, 15,000,000
shares authorized: 3,398,400 shares issued
and outstanding as of March 31, 1998 and
3,388,400 shares issued and outstanding as
of June 30, 1997 84,791 84,710
Additional paid-in capital 3,177,904 3,174,785
Retained earnings 262,809 358,509
Net unrealized gain (loss) on investment
securities available for sale 38,313 75,281
- ------------------------------------------------------------------------------
Total stockholders' equity 3,563,817 3,693,285
- ------------------------------------------------------------------------------
$4,303,552 $3,756,508
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
</TABLE>
Form 10-QSB
Page 5 of 13
<PAGE>
CAMBRIDGE HOLDINGS, LTD.
STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS NINE MONTHS NINE MONTHS
ENDED ENDED ENDED ENDED
MAR. 31, 1998 MAR. 31, 1997 MAR. 31, 1998 MAR. 31, 1997
<S> <C> <C> <C> <C>
REVENUES:
Gain (loss) on sales of
investment securities $ - $ 45,318 $ (11,376) $ 236,471
Interest and dividend income 14,857 36,350 70,600 123,744
Misc. Income - - - 577
- -------------------------------------------------------------------------------------------------------
Total revenues 14,857 81,668 59,224 360,792
- -------------------------------------------------------------------------------------------------------
EXPENSES:
Operating, general, and
administrative 38,430 48,648 114,503 128,492
Interest 15,137 - 40,421 30
- -------------------------------------------------------------------------------------------------------
Total expenses 53,567 48,648 154,924 128,522
- -------------------------------------------------------------------------------------------------------
INCOME BEFORE TAXES $(38,710) $33,020 $(95,700) $232,270
TAXES ON INCOME - 5,000 - 74,000
- -------------------------------------------------------------------------------------------------------
NET INCOME $(38,710) $28,020 $(95,700) $158,270
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
BASIC AND DILUTED EARNINGS
(LOSS) PER SHARE: ($.01) $.01 ($.03) $.05
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
BASIC WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 3,398,400 3,388,400 3,398,400 3,379,507
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
</TABLE>
Form 10-QSB
Page 6 of 13
<PAGE>
CAMBRIDGE HOLDINGS, LTD.
STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED ENDED
MARCH 31, 1998 MARCH 31, 1997
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $(95,700) $232,270
Adjustment to reconcile net income (loss)
to cash provided by operating activities:
Losses on sales of investment securities 11,376 -
Depreciation and amortization 11,942 177
Changes in operating assets and liabilities:
Prepaids and other 120,475 (8,678)
Accounts payable and accrued liabilities 4,540 (354)
- ---------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 52,633 223,415
- ---------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Purchase of land (561,398) (751,803)
Purchase of investment securities (1,077,121) (462,455)
Proceeds from sales of investment
securities 141,445 292,840
Net proceeds upon maturity of
short term investments - 1,493,687
Collections on note receivable 382,500 50,000
Purchase of convertible note - (325,000)
Note receivable-related party (398,606) -
Purchase of automobile (43,657) -
Purchase of fixed assets (5,332) -
- ---------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED
IN) INVESTING ACTIVITIES (1,562,169) 297,269
- ---------------------------------------------------------------------------------------
FINANCING ACTIVITIES:
Principal payments on notes payable (3,028) -
Proceeds from notes payable 675,000 -
Proceeds from exercise of stock options 3,200 10,774
- ---------------------------------------------------------------------------------------
Net cash provided by 675,172 10,774
financing activities
- ---------------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH (834,364) 531,458
CASH AND CASH EQUIVALENTS,
beginning of period 1,640,216 1,304,273
- ---------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS,
end of period $ 805,852 $1,835,731
- ---------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------
</TABLE>
Form 10-QSB
Page 7 of 13
<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 unaffiliated sellers raw land in an area known as
Cordillera Valley Club in Eagle County, Colorado west of Vail. The two lots,
known as Lot 2 and Lot 19, were purchased for $357,000 and $366,000,
respectively. Each lot is being developed into a separate luxury residence.
In May 1997, the Company conveyed Lot 2 to CVC Lot 2 LLC for its purchase price
of Lot 2, resulting in no gain or loss to the Company. CVC Lot 2 LLC is a
limited liability company organized in Colorado in March 1997 for the limited
purpose of developing, constructing and selling the residential dwelling on Lot
2. The members of CVC Lot 2 LLC are the Company and Zneimer Company, Inc., each
of which has contributed $1,000 to the capital of CVC Lot 2 LLC and has a 50%
interest in the net profits and losses of CVC Lot 2 LLC. Zneimer Company, Inc.
is the manager of CVC Lot 2 LLC.
CVC Lot 2 LLC paid the Company for Lot 2 by delivery of a promissory note for
$357,000 secured by a mortgage on Lot 2. The note bears interest at the prime
rate at the Firstbank of Avon, as charged from time to time (initially 8.5%, the
"Prime Rate"). The note is due on the earlier of sale of the property or
December 31, 1998. Zneimer Company, Inc., and Edward J. Zneimer and his wife
Toby Zneimer, personally guaranteed 50% of the principal amount of the note. CVC
Lot 2 LLC obtained from the Firstbank of Avon, Colorado, a construction loan of
$963,700, which also has been guaranteed by Zneimer Company, Inc. and its sole
shareholder, Mr. Zneimer. The construction loan bears interest at the prime
rate, matures on May 10,1999 and is secured by a first mortgage on Lot 2.
In February, 1998 the Company agreed to loan CVC Lot 2 LLC up to $56,250 to pay
for interest payments on the construction loan and other costs incurred to sell
Lot 2. The loan bears interest at 12% per annum, is due on the earlier of the
sale of Lot 2 or December 31, 1998. The loan is secured by a third mortgage on
Lot 2, Zneimer Company, Inc.'s interests in CVC Lot 2, LLC and CVC Lot 19, LLC
and the guaranty of Zneimer Company, Inc. and Mr. Zneimer individually. As of
the date of this document, the Company has advanced $43,100 to CVC Lot 2 LLC
pursuant to this loan.
Form 10-QSB
Page 8 of 13
<PAGE>
In the event the capital contributions and proceeds of the construction loan are
insufficient to enable CVC Lot 2 LLC to develop and sell Lot 2, Zneimer Company,
Inc. has agreed to purchase a 50% interest in the $357,000 and the $56,250 notes
at a purchase price equal to 50% of their original principal amounts, in which
event the guarantees to the Company will be canceled. The Company and Zneimer
Company, Inc. have agreed that they will each contribute such additional capital
contributions to CVC Lot 2 LLC in the form of unsecured loans, subject to a
maximum of $100,000 each, as may be required to sell Lot 2.
Construction on Lot 2 was completed in early 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 five
bedrooms, 4 1/2 baths, three fireplaces and an oversized three-car garage. The
Lot 2 property has been listed for sale at $1,750,000.
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. Construction on Lot 19 is scheduled to be completed by June 30,
1998 and the listed price for the property is $1,798,000.
During the quarter ended March 31, 1998, 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. There is no prepayment penalty.
Although plans to build a condominium/office development on one acre of this
property have been approved by 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.
For the nine month period ended March 31, 1998, operating activities generated
positive cash flow of $52,600. Prepaid expenses decreased by approximately
$120,500 in the nine month period ended March 31, 1998 primarily due to a refund
of prepaid income tax. The Company sold investment securities during the nine
month period ended March 31, 1998 resulting in realized losses of $11,400. The
Company recorded depreciation on fixed assets of $11,900. Accounts payable and
accrued liabilities increased by $4,500.
Form 10-QSB
Page 9 of 13
<PAGE>
Cash used in investing activities was $1,562,200 during the nine month period
ended March 31, 1998, of which approximately $1,077,100 was used to purchase
investment securities, $561,400 was used to purchase land, $398,600 was loaned
to CVC #19 LLC and CVC #2 LLC, both related parties, $141,400 was the net
proceeds from sales of investment securities, and $382,500 was the collection of
notes receivable. The Company purchased fixed assets for $49,000. 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.
Financing activities during the nine month period ended March 31, 1998 provided
cash of $675,200 of which $3,200 was generated from the exercise of stock
options net of repurchases, $675,000 was from the proceeds from a mortgage taken
to buy raw land and $3,000 was principal payments against this mortgage.
At March 31, 1998, the Company had cash and cash equivalents of $805,900 and
working capital of $4,195,700. 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.
Options to purchase 160,000 shares of common stock were not included in the
computation of diluted EPS because their effect was anti-dilutive for the nine
months ended March 31, 1998. None of the options were exercised as of the date
of this filing.
Form 10-QSB
Page 10 of 13
<PAGE>
NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board 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, are not expected to be affected by implementation of this
standard.
RESULTS OF OPERATIONS.
NINE MONTH PERIOD ENDED MARCH 31, 1998 COMPARED TO NINE MONTH PERIOD
ENDED MARCH 31, 1997
The Company's revenues for the nine month period ended March 31, 1998 totaled
approximately $59,200, consisting of interest on temporary cash on hand and
other money market instruments and, dividend receipts of $70,600 offset by
realized losses on sales of investment securities of $11,400. Revenues for the
nine month period ended March 31, 1997 totaled approximately $360,800, which
consisted of interest and dividend receipts of $123,700 and realized gains of
$236,500.
Form 10-QSB
Page 11 of 13
<PAGE>
During the nine month periods ended March 31, 1998 and March 31, 1997, the
Company incurred operating, general and administrative costs of approximately
$114,500 and $128,500, respectively. The Company had losses for the nine month
period ended March 31, 1998 of approximately $95,700 as compared with income
before taxes of approximately $158,300 for the nine month period ended March 31,
1997.
PART II. OTHER INFORMATION
Not Applicable.
Form 10-QSB
Page 12 of 13
<PAGE>
CAMBRIDGE HOLDINGS, LTD.
FORM 10-QSB
MARCH 31, 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.
May 15, 1998 By: /s/ Gregory Pusey
--------------------------------------
Gregory Pusey
President, Treasurer and Director
Form 10-QSB
Page 13 of 13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> MAR-31-1998
<CASH> 805,852
<SECURITIES> 1,581,822
<RECEIVABLES> 797,766
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,263,497
<PP&E> 40,055
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,303,552
<CURRENT-LIABILITIES> 67,763
<BONDS> 0
0
0
<COMMON> 84,791
<OTHER-SE> 3,177,904
<TOTAL-LIABILITY-AND-EQUITY> 4,303,552
<SALES> 0
<TOTAL-REVENUES> 59,224
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 114,503
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 40,421
<INCOME-PRETAX> (95,700)
<INCOME-TAX> 0
<INCOME-CONTINUING> (95,700)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (95,700)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
</TABLE>
