Attached files
| file | filename |
|---|---|
| EX-32.2 - EXHIBIT 32.2 - CADUS CORP | v424122_ex32-2.htm |
| EX-32.1 - EXHIBIT 32.1 - CADUS CORP | v424122_ex32-1.htm |
| EX-31.2 - EXHIBIT 31.2 - CADUS CORP | v424122_ex31-2.htm |
| EX-31.1 - EXHIBIT 31.1 - CADUS CORP | v424122_ex31-1.htm |
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2015
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _____________ to _____________
Commission File Number 0-28674
| CADUS CORPORATION |
| (Exact Name of Registrant as Specified on its Charter) |
| Delaware | 13-3660391 | |
| (State of Other Jurisdiction of Incorporation or Organization) |
(I.R.S. Employer Identification No.) | |
| 767 Fifth Avenue Suite 4700, New York, New York | 10153 | |
| (Address of Principal Executive Offices) | (Zip Code) | |
| Registrant’s Telephone Number, Including Area Code | (212) 702-4300 |
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 ¨ | Accelerated filer ¨ |
| Non-accelerated filer ¨ | Smaller reporting company x |
| (Do not check if a smaller reporting company) |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12-b-2 of the Exchange Act).
Yes ¨ No x
The number of shares of registrant’s common stock, $0.01 par value, outstanding as of October 31, 2015 was 26,288,080.
CADUS CORPORATION
INDEX
| 2 |
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, 2014. 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.
| 3 |
| ITEM 1. | CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
Condensed Consolidated Balance Sheets
| September 30, 2015 | December 31, 2014 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Assets: | ||||||||
| Real estate held for development | $ | 31,984,842 | $ | 30,183,696 | ||||
| Cash and cash equivalents | 9,790,688 | 11,877,951 | ||||||
| Interest receivable | 79 | 156 | ||||||
| Prepaid and other assets | 81,993 | 12,498 | ||||||
| Investment in other ventures | 192,670 | 193,101 | ||||||
| Patents, net | 1 | 1 | ||||||
| Total assets | $ | 42,050,273 | $ | 42,267,403 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Liabilities: | ||||||||
| Accrued expenses and other liabilities | $ | 322,584 | $ | 84,583 | ||||
| Total liabilities | 322,584 | 84,583 | ||||||
| Commitments and contingencies | ||||||||
| Stockholders’ equity: | ||||||||
| Common stock | 264,297 | 264,297 | ||||||
| Additional paid-in capital | 80,291,992 | 80,291,992 | ||||||
| Accumulated deficit | (38,528,525 | ) | (38,073,394 | ) | ||||
| Treasury stock – at cost | (300,075 | ) | (300,075 | ) | ||||
| Total stockholders’ equity | 41,727,689 | 42,182,820 | ||||||
| Total liabilities and stockholders’ equity | $ | 42,050,273 | $ | 42,267,403 | ||||
See accompanying notes to condensed consolidated financial statements.
| 4 |
Condensed Consolidated Statements of Operations
| Three Months Ended September 30, | ||||||||
| 2015 | 2014 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Total revenues | $ | -0- | $ | -0- | ||||
| Costs and expenses: | ||||||||
| General and administrative expenses | 97,325 | 117,887 | ||||||
| Real estate expenses | 13,933 | 25,213 | ||||||
| (Income) from equity in other ventures | (8 | ) | (7 | ) | ||||
| Total costs and expenses | 111,250 | 143,093 | ||||||
| Operating loss | (111,250 | ) | (143,093 | ) | ||||
| Other income: | ||||||||
| Interest income | 255 | 4,712 | ||||||
| Loss before provision for income taxes | (110,995 | ) | (138,381 | ) | ||||
| (Benefit from) provision for income taxes | (11,955 | ) | 2,172 | |||||
| Net loss | $ | (99,040 | ) | $ | (140,553 | ) | ||
| Basic and diluted (loss) per weighted average share of common stock outstanding | $ | (0.00 | ) | $ | (0.01 | ) | ||
| Weighted average shares of common stock outstanding – basic and diluted | 26,288,080 | 26,288,080 | ||||||
See accompanying notes to condensed consolidated financial statements.
| 5 |
Condensed Consolidated Statements of Operations
| Nine Months Ended September 30, | ||||||||
| 2015 | 2014 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Total revenues | $ | -0- | $ | -0- | ||||
| Costs and expenses: | ||||||||
| General and administrative expenses | 422,230 | 482,751 | ||||||
| Real estate expenses | 45,628 | 199,400 | ||||||
| Amortization of patent costs | -0- | 32,235 | ||||||
| Loss from equity in other ventures | 431 | 366 | ||||||
| Total costs and expenses | 468,289 | 714,752 | ||||||
| Operating loss | (468,289 | ) | (714,752 | ) | ||||
| Other income: | ||||||||
| Interest income | 1,203 | 8,537 | ||||||
| Loss before provision for income taxes | (467,086 | ) | (706,215 | ) | ||||
| (Benefit from) provision for income taxes | (11,955 | ) | 2,172 | |||||
| Net loss | $ | (455,131 | ) | $ | (708,387 | ) | ||
| Basic and diluted (loss) per weighted average share of common stock outstanding | $ | (0.02 | ) | $ | (0.04 | ) | ||
| Weighted average shares of common stock outstanding – basic and diluted | 26,288,080 | 18,742,427 | ||||||
See accompanying notes to condensed consolidated financial statements.
| 6 |
Condensed Consolidated Statements of Cash Flows
| Nine Months Ended September 30, | ||||||||
| 2015 | 2014 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | (455,131 | ) | $ | (708,387 | ) | ||
| Adjustments to reconcile net (loss) to net cash (used in) operating activities: | ||||||||
| Amortization of patent costs | -0- | 32,235 | ||||||
| Loss from equity in other ventures | 431 | 366 | ||||||
| Changes in assets and liabilities: | ||||||||
| Increase in prepaid and other assets | (69,418 | ) | (14,385 | ) | ||||
| Decrease in escrow deposits | -0- | 110,000 | ||||||
| Increase in real estate held for development | (1,801,146 | ) | (29,917,249 | ) | ||||
| Increase in accrued expenses and other liabilities | 238,001 | 157,668 | ||||||
| Net cash used in operating activities | (2,087,263 | ) | (30,339,752 | ) | ||||
| Financing activities: | ||||||||
| Capital contributed by shareholder | -0- | 635,900 | ||||||
| Sale of common stock less registration costs | -0- | 19,847,089 | ||||||
| Net cash provided by financing activities | -0- | 20,482,989 | ||||||
| Net decrease in cash and cash equivalents | (2,087,263 | ) | (9,856,763 | ) | ||||
| Cash and cash equivalents - beginning of period | 11,877,951 | 22,134,451 | ||||||
| Cash and cash equivalents - end of period | $ | 9,790,688 | $ | 12,277,688 | ||||
See accompanying notes to condensed consolidated financial statements.
| 7 |
Notes to Condensed Consolidated Financial Statements (Unaudited)
| Note - 1 | Organization and Basis of Preparation |
The information presented as of September 30, 2015 and for the three and nine month periods 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 as permitted by 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, 2014 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, 2014.
The consolidated financial statements include the accounts of Cadus and its wholly owned subsidiaries. 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. As previously reported, the Company will not maintain or seek to license its drug discovery technologies.
The results of operations for the nine month period ended September 30, 2015 is not necessarily indicative of the results to be expected for the year ending December 31, 2015.
| Note - 2 | Cash Equivalents |
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 $9,301,348 at September 30, 2015 and there were cash equivalents of $11,200,483 at December 31, 2014.
| Note - 3 | Net (Loss) Per Share |
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 nine months ended September 30, 2015 and 2014.
| Note - 4 | Fair Value of Financial Instruments |
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 September 30, 2015 and December 31, 2014.
| 8 |
CADUS CORPORATION
Notes to Condensed Consolidated Financial Statements (Unaudited)
| Note - 5 | Real Estate Operations |
In connection with the Company’s program to purchase residential properties for purposes of renovation or construction and resale, as of September 30, 2015, 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 is currently in the process of renovating two homes for resale. The Company is also in the process of obtaining permits for the construction of homes on three of its properties.
The company incurred $45,628 in real estate expenses for the nine months ended September 30, 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 nine months ended September 30, 2015.
| Note - 6 | Accrued Expenses |
Accrued expenses consist of the following:
| September 30, 2015 | December 31, 2014 | |||||||
| Architect costs | $ | 30,140 | $ | 50,638 | ||||
| Franchise tax | -0- | 7,315 | ||||||
| Real estate taxes | 219,111 | -0- | ||||||
| Construction costs | 60,249 | -0- | ||||||
| Legal | 1,446 | 5,314 | ||||||
| Accounting | 4,000 | 2,000 | ||||||
| Property maintenance | 3,792 | 3,506 | ||||||
| Insurance | -0- | 9,544 | ||||||
| Payroll | 3,846 | -0- | ||||||
| Stockholder relations | -0- | 6,266 | ||||||
| $ | 322,584 | $ | 84,583 | |||||
| Note - 7 | Recently Issued Accounting Standards |
Recent accounting pronouncements issued by the Financial Accounting Standards Board did not or are not believed by management to have a material impact on the Company’s present or future consolidated financial statements.
| 9 |
| ITEM 2 | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
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 is currently in the process of renovating two homes for resale. The Company is also in the process of obtaining permits for the construction of homes on three of its properties. 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 September 30, 2015, the Company had an accumulated deficit of approximately $38.5 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 Months Ended September 30, 2015 and 2014.
Revenues
There were no revenues for the three months ended September 30, 2015 and for the three months ended September 30, 2014.
Costs and Expenses
General and administrative expenses decreased to $97,325 for the three months ended September 30, 2015 from $117,887 for the same period in 2014. Patent license fee decreased to $12,500 due to a credit given by licensor, professional fees decreased by $6,841, bank charges decreased by $3,731, offset by net increases of $2,510.
Real estate expenses for the three months ended September 30, 2015 were $13,933 consisting of maintenance and utilities for properties owned. Real estate expenses for the three months ended September 30, 2014 were $25,213 consisting of operating and legal expenses for properties acquired and negotiations for properties that were not acquired.
For the three months ended September 30, 2015 and 2014, the Company recognized income of $8 and $7, respectively, in its investment in Laurel Partners Limited Partnership.
Interest Income
Interest income for the three months ended September 30, 2015 was $255 compared to interest income of $4,712 for the same period in 2014. This decrease is attributable primarily to a decrease in funds being invested.
| 10 |
Results of Operations (Continued)
Net (Loss)
Net loss for the three months ended September 30, 2015 was $99,040 compared to a net loss of $140,553 for the same period in 2014. The decrease in net loss can be principally attributed to a decrease in general and administrative expenses of $20,562, a decrease in real estate expenses of $11,280 and a decrease in franchise taxes of $14,127, offset by a decrease in interest income of $4,457.
Nine Months Ended September 30, 2015 and 2014.
Revenues
There were no revenues for the nine months ended September 30, 2015 and for the nine months ended September 30, 2014.
Costs and Expenses
General and administrative expenses decreased to $422,230 for the nine months ended September 30, 2015 from $482,751 for the same period in 2014. Professional fees decreased by $94,970 for the nine months ended September 30, 2015 from those incurred for the same period in 2014 principally due to required filings with the Securities and Exchange Commission in 2014 as a result of the Company ceasing to be a shell company. Patent license fee decreased by $12,500 due to a credit given by the licensor. Payroll and payroll taxes increased by $35,341 due to the employment of the Company’s President for the entire nine months in 2015. Shareholder relations increased by $12,216 due to printing and mailing costs and service fees relating to the Annual Shareholder’s Meeting in December 2014. There were other net increases of $608.
Real estate expenses for the nine months ended September 30, 2015 were $45,628 consisting of maintenance and utilities for properties owned. Real estate expenses for the nine months ended September 30, 2014 were $199,400 consisting of operating and legal expenses in connection with properties that were acquired and negotiations for properties that were not acquired.
For the nine months ended September 30, 2015 and 2014, the Company recognized a loss of $431 and $366, respectively, in its investment in Laurel Partners Limited Partnership.
Interest Income
Interest income for the nine months ended September 30, 2015 was $1,203 compared to interest income of $8,537 for the same period in 2014. This decrease is attributable primarily to a decrease in funds being invested.
Net (Loss)
Net loss for the nine months ended September 30, 2015 was $455,131 compared to a net loss of $708,387 for the same period in 2014. The decrease in net loss can be principally attributed to a decrease in general and administrative expenses of $60,521, a decrease in real estate expenses of $153,772, a decrease in patent amortization of $32,235, and a decrease in franchise taxes of $14,127 offset by a decrease in interest income of $7,334.
| 11 |
Results of Operations (Continued)
Liquidity and Capital Resources
At September 30, 2015, the Company held cash and cash equivalents of $9.8 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.
| Item 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
Under SEC regulations, we are considered a smaller reporting company and are not required to provide the information under this item.
| Item 4. | CONTROLS AND PROCEDURES |
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.
| 12 |
| Item 1. | Legal Proceedings. |
None.
| Item 1A. | Risk Factors. |
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, 2014 as filed with the Securities and Exchange Commission on March 31, 2015.
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds. |
None.
| Item 3. | Defaults Upon Senior Securities. |
None.
| Item 4. | MINE SAFETY DISCLOSURES. |
Not applicable.
| Item 5. | Other Information. |
None.
| Item 6. | Exhibits. |
The Exhibits listed in the Exhibit Index are included in this quarterly report on Form 10-Q.
| 13 |
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.
| CADUS CORPORATION | ||
| (Registrant) | ||
| Dated: November 13, 2015 | By: | /s/ Hunter C. Gary |
| Hunter C. Gary | ||
| President and Chief Executive Officer | ||
| Dated: November 13, 2015 | By: | /s/ David Blitz |
| David Blitz | ||
| Treasurer and Secretary | ||
| 14 |
The following exhibits are filed as part of this Quarterly Report on Form 10-Q:
| Exhibit No. | Description | |
| 31.1 | 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 | |
| 31.2 | 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 | |
| 32.1 | 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 | |
| 32.2 | 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 | |
| 101.INS | XBRL Instance Document | |
| 101.SCH | XBRL Taxonomy Extension Schema | |
| 101.CAL | XBRL Taxonomy Extension Calculation Linkbase | |
| 101.DEF | XBRL Taxonomy Extension Definition Linkbase | |
| 101.LAB | XBRL Taxonomy Extension Label Linkbase | |
| 101.PRE | XBRL Taxonomy Extension Presentation Linkbase |
| 15 |