Quarterly Report (10-q)
16 May 2016 - 5:07PM
Edgar (US Regulatory)
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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x
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended
March 31, 2016
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from _____________ to _____________
Commission File Number
0-28674
CADUS CORPORATION
(Exact Name of Registrant as Specified on
its Charter)
Delaware
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13-3660391
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(State of Other Jurisdiction of Incorporation or
Organization)
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(I.R.S. Employer Identification No.)
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767 Fifth Avenue, New York, New York
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10153
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(Address of Principal Executive Offices)
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(Zip Code)
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Registrant’s Telephone Number, Including Area Code
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(212) 702-4300
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Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes
x
No
¨
Indicate by check mark whether the registrant
has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted
and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant
was required to submit and post such files).
Yes
x
No
¨
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of
“large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12-b-2
of the Exchange Act). (Check one):
Large accelerated filer
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Accelerated filer
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Non-accelerated filer
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Smaller reporting company
x
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(Do not check if a smaller reporting company)
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Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12-b-2 of the Exchange Act).
Yes
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No
x
The number of shares of registrant’s
common stock, $0.01 par value, outstanding as of April 30, 2016 was 26,288,080.
CADUS CORPORATION
INDEX
SPECIAL NOTE REGARDING FORWARD LOOKING
STATEMENTS
Certain statements in this Quarterly Report
on Form 10-Q constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933
and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact are
“forward-looking statements” for purposes of federal and state securities laws, including any projections or expectations
of earnings, revenue, financial performance, liquidity and capital resources or other financial items; any statement of our plans,
strategies and objectives for our future operations; any statements regarding future economic conditions or performance; any statements
of belief; and any statements of assumption underlying any of the foregoing. Forward-looking statements may include the words “may,”
“will,” “should,” “could,” “would,” “predicts,” “potential,”
“continue,” “expects,” “anticipates,” “future,” “intends,” “plans,”
“believes,” “estimates” and other similar words. Although Cadus Corporation (the “Company”)
believes that the expectations reflected in our forward-looking statements are reasonable, such forward-looking statements involve
known and unknown risks, uncertainties, and other factors which may cause the actual results, performance, or achievements of the
Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking
statements. Factors that could cause or contribute to such differences include, but are not limited to, risks and uncertainties
relating to the Company's ability to acquire residential homes or land for renovation or construction and resale, the Company’s
ability to engage contractors to perform such renovation and construction, the Company’s ability to sell such renovated or
new homes at a profit, the Company’s ability to acquire or invest in other businesses or assets, the Company’s capital
needs and uncertainty of future funding, as well as other risks and uncertainties discussed in the Company’s annual report
on Form 10-K for the year ended December 31, 2015. The forward-looking statements made in this Quarterly Report on Form 10-Q are
made only as of the date hereof and the Company does not have or undertake any obligation to publicly update any forward-looking
statements to reflect subsequent events or circumstances unless otherwise required by law.
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ITEM
1.
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CONDENSED
CONSOLIDATED
FINANCIAL
STATEMENTS
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CADUS CORPORATION
Condensed Consolidated Balance Sheets
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March 31,
2016
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December 31,
2015
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(Unaudited)
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ASSETS
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Assets:
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Real estate held for development
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$
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33,131,389
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$
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32,716,718
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Cash and cash equivalents
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8,203,160
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8,936,147
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Interest receivable
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1,538
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542
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Prepaid and other assets
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58,794
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38,548
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Investment in other ventures
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192,762
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192,692
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Website, net
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18,333
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20,000
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Total assets
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$
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41,605,976
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$
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41,904,647
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LIABILITIES AND STOCKHOLDERS’ EQUITY
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Liabilities:
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Accrued expenses and other liabilities
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$
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231,191
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$
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325,216
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Total liabilities
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231,191
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325,216
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Commitments
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Stockholders’ equity:
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Common stock
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264,297
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264,297
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Additional paid-in capital
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80,291,992
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80,291,992
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Accumulated deficit
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(38,881,429
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)
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(38,676,783
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)
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Treasury stock – at cost
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(300,075
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(300,075
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)
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Total stockholders’ equity
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41,374,785
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41,579,431
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Total liabilities and stockholders’ equity
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$
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41,605,976
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$
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41,904,647
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See accompanying notes to condensed consolidated
financial statements.
CADUS CORPORATION
Condensed Consolidated Statements of
Operations
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Three Months Ended
March 31,
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2016
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2015
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(Unaudited)
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(Unaudited)
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Total revenues
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$
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—
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$
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—
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Costs and expenses:
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General and administrative expenses
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189,209
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208,080
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Real estate expenses
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17,739
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15,589
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Amortization of website
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1,667
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—
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(Gain) loss from equity in other ventures
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(70
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)
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124
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Total costs and expenses
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208,545
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223,793
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Operating loss
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(208,545
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)
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(223,793
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)
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Other income:
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Interest income
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3,899
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279
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Loss before provision for income taxes
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(204,646
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)
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(223,514
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Provision for income taxes
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—
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—
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Net loss
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$
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(204,646
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)
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$
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(223,514
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)
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Basic and diluted net (loss) per weighted average share of common stock outstanding
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$
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(0.01
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)
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$
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(0.01
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Weighted average shares of common stock outstanding – basic and diluted
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26,288,080
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26,288,080
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See accompanying notes to condensed consolidated
financial statements.
CADUS
CORPORATION
Condensed Consolidated Statements of
Cash Flows
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Three Months Ended
March 31,
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2016
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2015
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(Unaudited)
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(Unaudited)
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Cash flows from operating activities:
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Net loss
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$
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(204,646
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$
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(223,514
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)
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Adjustments to reconcile net (loss) to net cash (used in) operating
activities:
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Amortization of website
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1,667
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—
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(Gain) loss from equity in other ventures
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(70
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)
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124
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Changes in assets and liabilities:
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Increase in prepaid and other assets
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(21,242
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)
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(80,564
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Increase in real estate investments
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(414,671
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)
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(407,102
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(Decrease) increase in accrued expenses and other liabilities
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(94,025
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)
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93,723
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Net cash used in operating activities
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(732,987
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)
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(617,333
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Net decrease in cash and cash equivalents
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(732,987
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)
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(617,333
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)
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Cash and cash equivalents - beginning of period
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8,936,147
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11,877,951
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Cash and cash equivalents - end of period
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$
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8,203,160
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$
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11,260,618
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See accompanying notes to condensed consolidated
financial statements.
CADUS CORPORATION
Notes to Condensed Consolidated Financial
Statements (Unaudited)
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Note - 1
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Organization and Basis of Preparation
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The information presented as
of March 31, 2016 and for the three month period then ended is unaudited, but includes all adjustments (consisting only of normal
recurring accruals) that the Company's management believes to be necessary for the fair presentation of results for the periods
presented. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting
principles generally accepted in the United States of America have been omitted pursuant to the requirements of the Securities
and Exchange Commission, although the Company believes that the disclosures included in these financial statements are adequate
to make the information not misleading. The December 31, 2015 condensed consolidated balance sheet was derived from audited consolidated
financial statements. These financial statements should be read in conjunction with the Company's annual report on Form 10-K for
the year ended December 31, 2015.
The consolidated financial statements
include the accounts of Cadus and its wholly owned subsidiaries, Cadus Technologies, Inc., Blivet LLC, MB 2013 LLC and Happy Dragon
LLC. All intercompany balances and transactions have been eliminated in consolidation. The Company operates in one segment: the
purchase of homes and land for purposes of renovation or construction and resale. The Company has decided not to maintain or seek
to license its drug discovery technologies.
The results of operations for
the three month period ended March 31, 2016 is not necessarily indicative of the results to be expected for the year ending December
31, 2016.
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Note - 2
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Cash Equivalents
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The Company includes as cash
equivalents all highly liquid investments with original maturities of three months or less when purchased to be cash equivalents.
There were cash equivalents of $7,804,498 at March 31, 2016 and there were cash equivalents of $8,701,601 at December 31,
2015.
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Note - 3
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Net (Loss) Per Share
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Basic net (loss) per share is
computed by dividing the net (loss) by the weighted average of common shares outstanding. Diluted earnings per share is calculated
based on the weighted average of common shares outstanding plus the effect of common stock equivalents (stock options). There were
no outstanding stock options for the three months ended March 31, 2016 and 2015.
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Note - 4
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Fair Value of Financial Instruments
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The Company uses
financial instruments in the normal course of its business. The carrying values of cash and cash equivalents and accrued
expenses approximate fair value. The fair value of the Company’s investment in a privately held company is not readily
available. The Company believes the fair value of this investment in a privately held company approximated its carrying value
at March 31, 2016 and December 31, 2015.
CADUS CORPORATION
Notes to Condensed Consolidated Financial
Statements (Unaudited)
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Note - 5
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Real Estate Operations
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In connection with the Company’s
program to purchase residential properties for purposes of renovation or construction and resale, as of March 31, 2016, the Company
had purchased for an aggregate original price of approximately $29.9 million, and continued to own, through two indirect wholly-owned
subsidiaries, twelve residential properties in Miami-Dade County, Florida and one residential property in East Hampton, New York.
The company incurred $17,739
in real estate expenses for the three months ended March 31, 2016, and $15,589 for the three months ended March 31, 2015, consisting
of utilities, maintenance and other operating costs and expenses with respect to properties acquired.
Real estate held for development
is recorded at cost. The cost of residential property includes the purchase price of the property, legal fees and other acquisition
costs (e.g. recording, title search, survey, lien and permit searches, and inspection costs). Costs directly related to planning,
developing and constructing a property are capitalized and classified as real estate held for development in the consolidated balance
sheets. Capitalized development costs include interest, property taxes, insurance, and other direct project costs incurred during
the period of development.
After acquisition, real estate
held for development is analyzed periodically for changes in fair values and any subsequent write down is charged to operating
expenses. The Company did not have such a write down during the three months ended March 31, 2016 and 2015.
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Note - 6
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Accrued Expenses
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Accrued expenses consist of
the following:
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March 31, 2016
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December 31, 2015
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Real estate taxes
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$
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108,533
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$
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—
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Real estate costs
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51,431
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283,383
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Legal
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23,399
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17,035
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Accounting
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40,000
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6,065
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Property expenses
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4,533
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16,853
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Stockholder relations
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2,511
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1,250
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Sundry
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784
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630
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$
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231,191
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$
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325,216
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Note - 7
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Recently Issued Accounting Standards
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Recent accounting pronouncements
issued by the FASB, the AICPA and the SEC did not or are not believed by management to have a material impact on the Company’s
present or future consolidated financial statements.
CADUS CORPORATION
Notes to Condensed Consolidated Financial
Statements (Unaudited)
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Note - 8
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Subsequent Events
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The Company has evaluated the
impact of events occurring after March 31, 2016 up to the date of issuance of these consolidated interim financial statements for
adjustment or disclosure.
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ITEM 2.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
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Overview
The Company seeks opportunities to profit
from the purchase of individual homes or individual residential lots for purposes of renovation or construction and resale. The
Company has completed renovation of one home (located at 3437 N. Moorings Way, Coconut Grove, FL) which has been listed for resale
and is currently completing renovation of a second home (located at 3506 Main Lodge Road, Coconut Grove, FL) which has also been
listed for resale. In addition, the following six vacant lots are currently listed for sale:
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18970 N. Bay Road, Sunny Isles Beach, FL 33160
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·
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1420 Biscaya Drive, Surfside, FL 33154
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·
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1211 Stillwater Drive, Miami Beach, FL 33141
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·
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700 88th Street, Surfside, FL 33154
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11400 N. Bayshore Drive, North Miami, FL 33181
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·
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11404 N. Bayshore Drive, North Miami, FL 33181
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The Company has obtained permits for the
construction of a new home on each of two of its vacant lots (one located at 2535 Shelter Avenue, Miami Beach, FL 33140 and the
other at 700 88th Street, Surfside, FL 33154) and is also in the process of obtaining permits for the construction of a new home
on each of two additional lots (located at 2555 Shelter Avenue, Miami Beach, FL 33140 and 241 Atlantic Isle, Sunny Isles Beach,
FL 33160). Previously the Company had been involved in the development and application of drug discovery technologies and later
in the licensing of its technologies. In addition to its real estate activities, the Company may consider acquisitions or investments
in other industries.
At March 31, 2016, the Company had an accumulated
deficit of approximately $38.9 million. The Company’s losses have resulted principally from costs incurred in connection
with its prior biomedical research and development activities and from general and administrative costs associated with the Company’s
operations. These costs have exceeded the Company’s revenues and interest income. The Company expects to generate revenues
in the future only if it is able to profit from its real estate operations.
Results of Operations
Three Month Ended March 31, 2016 and 2015.
Revenues
There were no revenues for the three months
ended March 31, 2016 and for the three months ended March 31, 2015.
Costs and Expenses
General and administrative expenses decreased
to $189,209 for the three months ended March 31, 2016 from $208,080 for the same period in 2015. License fees and patent costs
decreased by $25,201 due to the Company no longer maintaining its drug discovery technologies. Rent decreased by $1,050 due to
the Company no longer leasing storage space. In connection with closing of the storage facility, the Company paid $6,266 for shredding
and transferring records. Payroll and payroll taxes increased by $3,823. Professional Fees decreased by $4,775. There were other
net increases totaling $2,066.
Results of Operations (Continued)
Real estate expenses for the three months
ended March 31, 2016 were $17,739 consisting of maintenance and utilities for properties owned. Real estate expenses for the three
months ended March 31, 2015 were $15,589.
For the three months ended March 31, 2016 and 2015, the Company
recognized a gain of $70 and a loss of $124, respectively, in its investment in Laurel Partners Limited Partnership.
Interest Income
Interest income for the three months ended
March 31, 2016 was $3,899 compared to interest income of $279 for the same period in 2015. This increase is attributable primarily
to an increase in interest rates.
Net (Loss)
Net (loss) for the three months ended March
31, 2016 was $204,646 compared to net loss of $223,514 for the same period in 2015. The decrease in the net loss can be principally
attributed to a decrease in general and administrative expenses of $18,871, and an increase in interest income of $3,620, an increase
in gain from equity in other ventures of $194, offset by an increase in real estate expenses of $2,150 and a $1,667 increase in
amortization of website.
Liquidity and Capital Resources
At March 31, 2016, the Company held cash and cash equivalents
of $8.2 million.
Depending
on the availability of transactions acceptable to the Company in connection with its real estate activities, all or a portion
of the Company’s available cash may be utilized, and the Company may seek debt or additional equity financing. The Company’s
capital requirements may vary as a result of a number of factors, including the transactions, if any, arising from the Company’s
efforts to acquire, renovate, construct and sell residential properties. There can be no assurance that the Company will raise
sufficient capital on a timely basis or on satisfactory terms or at all to meet such capital requirements.
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Item 3.
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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
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Under SEC regulations, we are considered
a smaller reporting company and are not required to provide the information under this item.
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Item 4.
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CONTROLS AND PROCEDURES
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Based on the evaluation of the Company’s
disclosure controls and procedures conducted as of the end of the period covered by this report on Form 10-Q, the Company’s
President and Chief Executive Officer and the Company’s Treasurer (who performs functions similar to those of a principal
financial officer), concluded that the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)
promulgated under the Securities Exchange Act of 1934) are effective. In addition, there has been no change in the Company’s
internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934)
that occurred during the period covered by this report on Form 10-Q that has materially affected, or is reasonably likely to materially
affect, the Company’s internal control over financial reporting. It should be noted that any system of controls, however
well designed and operated, can provide only reasonable assurance, and not absolute assurance, that the objectives of the system
are met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future
events. Because of these and other inherent limitations of control systems, there can be no assurance that any design will succeed
in achieving its stated goals under all potential future conditions, regardless of how remote.
PART II - OTHER INFORMATION
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Item 1.
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Legal Proceedings
.
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None.
There were no material
changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the period ended December 31, 2015 as
filed with the Securities and Exchange Commission on March 30, 2016.
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Item 2.
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Unregistered Sales
of Equity Securities and Use of Proceeds.
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None.
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Item 3.
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Defaults Upon Senior
Securities.
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None.
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Item 4.
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MINE SAFETY DISCLOSURES.
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Not applicable.
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Item 5.
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Other Information
.
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None.
The Exhibits listed in the Exhibit Index
are included in this quarterly report on Form 10-Q.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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CADUS CORPORATION
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(Registrant)
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Dated: May 16, 2016
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By:
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/s/ Hunter C. Gary
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Hunter C. Gary
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President and Chief Executive Officer
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Dated: May 16, 2016
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By:
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/s/ David Blitz
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David Blitz
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Treasurer and Secretary
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EXHIBIT INDEX
The following exhibits are filed as part
of this Quarterly Report on Form 10-Q:
Exhibit No.
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Description
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31.1
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Certification of Chief Executive Officer pursuant to Rules 13a-14 and 15d-14, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
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31.2
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Certification of Chief Financial Officer pursuant to Rules 13a-14 and 15d-14, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
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32.1
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Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
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32.2
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Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
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101.INS
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XBRL Instance Document
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101.SCH
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XBRL Taxonomy Extension Schema
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101.CAL
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XBRL Taxonomy Extension Calculation Linkbase
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101.DEF
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XBRL Taxonomy Extension Definition Linkbase
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101.LAB
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XBRL Taxonomy Extension Label Linkbase
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101.PRE
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XBRL Taxonomy Extension Presentation Linkbase
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