Cadus Corp. (fka KDUS)

[Theo]

Form 10-Q for CADUS CORP

Balance Sheet

"14-Nov-2014

Quarterly Report


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

The Company was incorporated in 1992 and until July 30, 1999, devoted substantially all of its resources to the development and application of novel yeast-based and other drug discovery technologies. On July 30, 1999, the Company sold its drug discovery assets and ceased its internal drug discovery operations and research efforts for collaborative partners. Subsequent to the sale of its drug discovery assets, the Company had continued to license, and seek to license, its technologies. It also sought to use all or a portion of its available cash, and where appropriate, seek additional debt or equity financing, to acquire or invest in one or more companies or other assets. Cadus has received no revenues from the licensing of its technologies since 2010, and has not entered into a new license for its technologies since 2000. Cadus may continue to maintain and seek to license or sell its drug discovery technologies, but this will no longer be a focus of Cadus' business plan.

In connection with the Company's program to purchase residential properties for purposes of renovation or construction and resale, as of September 30, 2014, the Company has purchased for an aggregate of approximately $29.9 million, and continues to own, through two indirect wholly-owned subsidiaries, eleven residential properties in Miami-Dade County, Florida. Of these, when purchased, eight properties had existing homes on them and three properties were vacant lots. In addition the Company purchased a vacant lot in East Hampton, New York for approximately $3.1 million. The Company does not currently intend to purchase additional properties until it has begun to sell renovated or newly constructed homes from its existing inventory of properties. To date, with the exception of the contract to purchase the East Hampton property, the Company has concentrated its real estate activities in Miami-Dade County, Florida.

With respect to the Company's existing inventory of properties, except for three existing houses that are under renovation, all other houses have been demolished or are in the process of being demolished. The Company has engaged the architectural firm of Max Strang Architecture, Inc. for schematic design and other architectural services with respect to the homes to be built on the Florida properties and is in the process of engaging an architectural firm with respect to the home to be built on the East Hampton, New York property.

In addition to its real estate activities, Cadus will continue to consider acquisitions or investments in various industries.

The Company conducted a rights offering for the issuance of up to 13,144,040 shares of its common stock pursuant to its S-1 filing with the Securities and Exchange Commission that became effective April 28, 2014. In connection with the rights offering, the Company distributed to the holders of its common stock non-transferable subscription rights to purchase up to 13,144,040 shares of its common stock at $1.53 per share. Effective June 6, 2014, all 13,144,040 shares available in the offering were subscribed and the company received gross proceeds of $20,110,381 less operating costs of approximately $263,300.

At September 30, 2014, the Company had an accumulated deficit of approximately $38.0 million. The Company's losses have resulted principally from costs incurred in connection with its former drug discovery 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. As a result of the sale of its drug discovery assets and the cessation of its internal drug discovery operations and research efforts for collaborative partners, the Company ceased to have research funding revenues and substantially reduced its operating expenses. 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 September 30, 2014 and 2013.

Revenues

There were no revenues for the three months ended September 30, 2014 and for the three months ended September 30, 2013.

Costs and Expenses

General and administrative expenses increased to $117,887 for the three months ended September 30, 2014 from $51,351 for the same period in 2013. Payroll and payroll taxes for the new president was $49,677, legal expenses increased by $16,809 and there were increases in other net expenses of $50.

The Company incurred $25,213 in operating and legal expenses in connection with properties acquired.

For the three months ended September 30, 2014, the Company recognized a gain of $7 in its investment in Laurel Partners Limited Partnership. The gain for the three months ended September 30, 2013 was $7.

Interest Income

Interest income for the three months ended September 30, 2014 was $4,712 compared to interest income of $556 for the same period in 2013. This increase is attributable primarily to interest income on funds received from the sale of common stock in the Company's rights offering that were invested in a bank money market account.

Net (Loss)

Net loss for the three months ended September 30, 2014 was $140,553 compared to a net loss of $72,397 for the same period in 2013. The increase in net loss can be principally attributed to an increase in general and administrative expenses of $66,536 and an increase in real estate expenses of $25,213 offset by an increase in interest income of $4,156 and a decrease in amortization of patent costs of $21,609.

Nine Month Ended September 30, 2014 and 2013.

Revenues

There were no revenues for the nine months ended September 30, 2014 and for the nine months ended September 30, 2013.

Costs and Expenses

General and administrative expenses increased to $482,751 for the nine months ended September 30, 2014 from $251,976 for the same period in 2013. Legal and accounting expenses increased by $113,716 due to the required filing of SEC Form 8-K in connection with the Company ceasing to be a shell company, payroll and payroll taxes for the new president was $124,659, and there were other net decreases of $7,600.

The Company incurred $199,400 in real estate expenses, consisting of real estate taxes and insurance, utilities, maintenance and other operating costs and expenses with respect to properties acquired, as well as transaction costs and expenses, including legal fees and inspection costs, in connection with the proposed acquisition of properties not acquired.

For the nine months ended September 30, 2014 and 2013, the Company recognized losses $366 and $367 in its investment in Laurel Partners Limited Partnership.

Interest Income

Interest income for the nine months ended September 30, 2014 was $8,537 compared to interest income of $1,842 for the same period in 2013. This increase is attributable primarily to interest income on funds received from the sale of common stock in the Company's rights offering that were invested in a bank money market account.

Net (Loss)

Net loss for the nine months ended September 30, 2014 was $708,387 compared to a net loss of $315,326 for the same period in 2013. The increase in net loss can be principally attributed to an increase in general and administrative expenses of $230,775 and an increase in real estate expenses of $199,400 offset by an increase in interest income of $6,695 and a decrease in amortization of patent costs of $32,590.

Liquidity and Capital Resources

At September 30, 2014, the Company held cash and cash equivalents of $12.3 million. The Company's working capital at September 30, 2014 was $42.1 million.

The Company raised additional capital through a rights offering which was completed in June 2014. The Company believes that its existing capital resources will be sufficient to support its operations through the end of 2015. However, this forecast of the period of time through which the Company's financial resources will be adequate to support its operations is a forward-looking statement that may not prove accurate and, as such, actual results may vary. The Company's capital requirements may vary as a result of a number of factors, including transactions arising from the Company's efforts to acquire, renovate, construct and sell residential properties or transactions, if any, to acquire or invest in companies or income-producing assets and the expenses of pursuing such transactions. To fund any such variances in the Company's capital requirements, the Company may seek debt or additional equity financing. 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 "