<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, 1999
( ) 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 April 23, 1999
Common Stock, $.025 par value 3,080,870
<PAGE>
CAMBRIDGE HOLDINGS, LTD.
FORM 10-QSB
TABLE OF CONTENTS
<TABLE>
<S> <C>
Part I. Financial Information.................................. 3
Balance Sheets as of March 31, 1999 and June 30, 1998........... 4 & 5
Statements of Operations for the nine month periods ended
March 31, 1999 and March 31, 1998............................... 6
Statements of Cash Flows for the nine month periods ended
March 31, 1999 and March 31, 1998............................... 7
Management's Discussion and Analysis of Financial Condition
and Results of Operations....................................... 8-11
Part II. Other Information..................................... 11
Signature Page.................................................. 12
</TABLE>
Form 10-QSB
Page 2 of 12
<PAGE>
CAMBRIDGE HOLDINGS, LTD.
FORM 10-QSB
MARCH 31, 1999
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 12
<PAGE>
CAMBRIDGE HOLDINGS, LTD.
BALANCE SHEET
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
1999 1998
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT:
Cash and cash equivalents $ 1,360,711 $ 1,674,523
Investment securities - available for sale, net
allowance for potential losses of $102,000 353,907 570,848
Investment in Partnership - 101,278
Notes receivable-related party 864,872 774,303
Convertible notes receivable 40,000 42,500
Prepaids and other 36,711 43,212
Real estate developments 939,199 939,199
Deferred Income Tax 48,000 -
- -----------------------------------------------------------------------------------------------
Total current assets 3,643,400 4,145,863
- -----------------------------------------------------------------------------------------------
LONG-TERM ASSETS
Fixed assets 34,896 38,600
- -----------------------------------------------------------------------------------------------
$ 3,678,296 $ 4,184,463
- -----------------------------------------------------------------------------------------------
</TABLE>
Form 10-QSB
Page 4 of 12
<PAGE>
CAMBRIDGE HOLDINGS, LTD.
BALANCE SHEET
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
1999 1998
(Unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accrued liabilities $ 13,002 $ 12,393
Deferred income taxes - 6,054
Notes Payable 667,076 670,789
- -----------------------------------------------------------------------------------------------
Total current liabilities 680,078 689,236
- -----------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY:
Common Stock - $.025 par value, 15,000,000 shares
authorized: 3,080,870 shares issued and outstanding as
of March 31, 1999 and 3,398,400 shares issued and
outstanding as of June 30, 1998 75,652 84,960
Additional paid-in capital 2,995,659 3,177,735
Retained earnings 44,360 221,992
Net unrealized gain (loss) on investment
securities available for sale (117,453) 10,540
- -----------------------------------------------------------------------------------------------
Total stockholders' equity 2,998,218 3,495,227
- -----------------------------------------------------------------------------------------------
$ 3,678,296 $ 4,184,463
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
</TABLE>
Form 10-QSB
Page 5 of 12
<PAGE>
CAMBRIDGE HOLDINGS, LTD.
STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS NINE MONTHS NINE MONTHS
ENDED ENDED ENDED ENDED
MAR. 31, 1999 MAR. 31, 1998 MAR. 31, 1999 MAR. 31, 1998
<S> <C> <C> <C> <C>
REVENUES:
Gain (loss) on sales of
investment securities 87,655 - 86,413 (11,376)
Unrealized Gains (losses) on
securities held for trading 1,374 - (27,555) -
Loss on write-down of
partnership investment - - (101,278) -
Interest and dividend income 22,060 14,857 38,594 70,600
- -----------------------------------------------------------------------------------------------------------
Total revenues 111,089 14,857 (3,826) 59,224
- -----------------------------------------------------------------------------------------------------------
EXPENSES:
Operating, general, and
administrative 38,974 38,430 128,637 114,503
Interest 15,028 15,137 45,168 40,421
- -----------------------------------------------------------------------------------------------------------
Total expenses 54,002 53,567 173,805 154,924
- -----------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) $ 57,087 $ (38,710) $ (177,631) $ (95,700)
OTHER COMPREHENSIVE INCOME,
NET OF TAX:
Unrealized holding
gains (losses) (4,948) - (72,046) -
- -----------------------------------------------------------------------------------------------------------
COMPREHENSIVE INCOME (LOSS) $ 52,139 $ (38,710) $ (249,677) $ (95,700)
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
BASIC AND DILUTED INCOME (LOSS)
PER COMMON SHARE: $ .02 $ (.01) $ (.08) $ (.03)
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
WEIGHTED AVERAGE NUMBER OF
COMMON AND COMMON EQUIVALENT
SHARES OUTSTANDING 3,157,629 3,398,400 3,302,031 3,398,400
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
</TABLE>
Form 10-QSB
Page 6 of 12
<PAGE>
CAMBRIDGE HOLDINGS, LTD.
STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED ENDED
MAR. 31, 1999 MAR. 31, 1998
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ (177,631) $ (95,700)
Adjustment to reconcile net income (loss)
to cash provided by operating activities:
Realized (gains) losses on sales of investment
securities (86,413) 11,376
Depreciation and amortization 10,025 11,942
Loss on write-down of investments 101,278 -
Changes in operating assets and liabilities:
Prepaids and other 6,502 120,475
Accounts payable and accrued liabilities 609 4,540
- -------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES (145,630) 52,633
- -------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Purchase of land - (561,398)
Purchase of investment securities (140,124) (1,077,121)
Proceeds from sales of investment securities 261,430 141,445
Collections on note receivable 2,500 382,500
Purchase of note receivable-related party (90,569) (398,606)
Purchase of automobile - (43,657)
Purchase of fixed assets (6,322) (5,332)
- -------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED
IN) INVESTING ACTIVITIES 26,915 (1,562,169)
- -------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES:
Principal payments on notes payable (3,713) (3,028)
Proceeds from Note Payable - 675,000
Proceeds from exercise of stock options 3,437 3,200
Payments for repurchases of stock (194,821)
- -------------------------------------------------------------------------------------------------
Net cash provided by (used in) (195,097) 675,172
financing activities
- -------------------------------------------------------------------------------------------------
DECREASE IN CASH (313,812) (834,364)
CASH AND CASH EQUIVALENTS,
beginning of period 1,674,523 1,640,216
- -------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS,
end of period $ 1,360,711 $ 805,852
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
</TABLE>
Form 10-QSB
Page 7 of 12
<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 those 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 quarter ended December 31, 1998, the Company commenced an offer to
its shareholders to tender shares of the Company's common stock to the
Company at a price of $.45 per Share. The tender offer was concluded during
the quarter ended March 31, 1999. The Company purchased 382,370 shares for a
total of $172,066 in the tender offer.
During the fiscal year ended June 30, 1997, the Company purchased in two
separate transactions from two different unaffiliated sellers, 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 in which the Company is
a member with a 50% interest (CVC Lot 2 LLC and CVC Lot 19 LLC). Each lot has
been developed with a separate luxury residence and is offered for sale. It
is presently unknown when these properties will be sold or what proceeds will
be realized upon sale. Due to the delay on sale of these properties, the
Company is likely to incur a loss in these transactions and may be
constrained in its ability to engage in other transactions.
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, 1999, operating activities used
cash of $145,600. Prepaid expenses decreased by approximately $6,500 in the
nine month period ended March 31, 1999. The Company recorded depreciation on
fixed assets of $10,000. Accounts payable and accrued liabilities increased
by $600.
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
regarding this investment; however the recovery of any amounts is uncertain.
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.
Form 10-QSB
Page 8 of 12
<PAGE>
Cash provided by investing activities was $26,900 during the nine month
period ended March 31, 1999, of which approximately $90,600 was loaned to
related parties, CVC #19 LLC and CVC #2 LLC, and $2,500 was received from the
collection of notes receivable.
Financing activities during the nine month period ended March 31, 1999 used
cash of $195,100 of which $3,400 was generated from the exercise of stock
options net of repurchases and $3,700 was used for principal payments on
notes payable. The Company repurchased 382,370 shares of its stock for a
total of $172,100 and incurred costs related to the repurchase of $22,700.
At March 31, 1999, the Company had cash and cash equivalents of $1,360,700
and working capital of $2,963,300. The Company believes that its working
capital is adequate for its currently anticipated real estate expenditures.
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, 1999. 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.
Form 10-QSB
Page 9 of 12
<PAGE>
The Company at the end of the quarter held securities classified as
available-for-sale, which have unrealized losses of $117,453 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 March 31, 1999 is presented
below.
<TABLE>
<CAPTION>
Tax
Before (Expense)/ After
Nine months ended March 31, 1999 Tax Benefit Tax
------ ---------- -----
<S> <C> <C> <C>
Unrealized holding losses $(117,453) $ 45,407 $(72,046)
Reclassification adjustment for
Gains/losses included in net income - - -
---------- -------- ---------
$(117,453) $ 45,407 $(72,046)
---------- -------- ---------
---------- -------- ---------
</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.
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.
Form 10-QSB
Page 10 of 12
<PAGE>
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
should not pose significant operational problems. The Company's accounting
software program as well as other office software is expected to 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 is expected to review
the status of the year 2000 issues with its financial institutions.
RESULTS OF OPERATIONS.
NINE MONTH PERIOD ENDED MARCH 31, 1999 COMPARED TO NINE MONTH PERIOD ENDED
MARCH 31, 1998
The Company's revenues for the three month period ended March 31, 1999
totaled approximately $111,100 consisting of interest on temporary cash on
hand and other money market instruments of $22,100, unrealized gains on
securities held for trading of $1,400 and gains on sales of investment
securities of $87,600. Revenues for the three month period ended March 31,
1998 totaled approximately $14,900, which consisted of interest and dividend
receipts.
During the nine month period ended March 31, 1999, 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 $27,600 compared to $0 for the
nine months ended March 31, 1998. 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 believe that the nine month
results of operations are indicative of the expected full-year results as the
partnership write-off is a one-time charge.
During the nine month periods ended March 31, 1999 and March 31, 1998, the
Company incurred operating, general and administrative costs of approximately
$128,600 and $114,500 respectively. The Company had losses before any income
tax benefit for the nine month period ended March 31, 1999 of approximately
$177,600 as compared with $95,700 for the nine month period ended March 31,
1998.
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION
During the quarter ended December 31, 1998, the Company commenced an offer to
its shareholders to tender shares of the Company's common stock to the
Company at a price of $.45 per Share. The tender offer was concluded in the
quarter ended March 31, 1999. The Company purchased 382,370 shares for a
total of $172,066 in the tender offer.
Form 10-QSB
Page 11 of 12
<PAGE>
CAMBRIDGE HOLDINGS, LTD.
FORM 10-QSB
MARCH 31, 1999
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 12, 1999 By: /s/ Gregory Pusey
---------------------------------
Gregory Pusey
President, Treasurer and Director
Form 10-QSB
Page 12 of 12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1998
<PERIOD-END> MAR-31-1999
<CASH> 1,360,711
<SECURITIES> 353,907
<RECEIVABLES> 864,872
<ALLOWANCES> 102,000
<INVENTORY> 0
<CURRENT-ASSETS> 3,643,400
<PP&E> 34,896
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,678,296
<CURRENT-LIABILITIES> 680,078
<BONDS> 667,076
0
0
<COMMON> 75,652
<OTHER-SE> 2,995,659
<TOTAL-LIABILITY-AND-EQUITY> 3,678,296
<SALES> 0
<TOTAL-REVENUES> 111,089
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 38,974
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15,028
<INCOME-PRETAX> 57,087
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 57,087
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
</TABLE>
