UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarterly Period Ended September 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-21717
CASCO INTERNATIONAL, INC.
Incorporated - Delaware I.R.S. Identification No. 56-0526145
4205 East Dixon Boulevard, Shelby, North Carolina 28150
Registrant's Telephone Number (704) 482-9591
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
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of latest practicable date 1,783,200 common shares outstanding,
each with par value $0.01, as of November 9, 1999.
<PAGE>
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<CAPTION>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CASCO INTERNATIONAL, INC.
BALANCE SHEETS
September 30, 1999 and December 31, 1998
Unaudited
ASSETS 1999 1998
------------ -----------
<S> <C> <C>
Current Assets:
Cash ........................................ $ 25,479 $ 107,482
Accounts receivable ......................... 2,869,139 5,540,162
Inventory ................................... 4,742,151 5,265,797
Prepaid expenses ............................ 1,079,563 1,096,277
------------ ------------
Total current assets ............ 8,716,332 12,009,718
Buildings and equipment:
Buildings ................................... 2,627,727 2,602,793
Equipment ................................... 3,117,855 2,819,104
------------ ------------
5,745,582 5,421,897
Less accumulated depreciation ............... (2,393,352) (1,974,403)
------------ ------------
3,352,230 3,447,494
Land ............................................. 111,468 111,468
------------ ------------
Total property and equipment, net 3,463,698 3,558,962
Other assets:
Cost in excess of net assets acquired, net of
accumulated amortization of $443,981 and
$342,244 respectively ....................... 2,440,162 2,541,899
Other ............................................ 745,857 732,024
------------ ------------
3,186,019 3,273,923
============ ============
TOTAL ASSETS ..................................... $ 15,366,049 $ 18,842,603
============ ============
The accompanying notes are an integral part of the financial
statements.
</TABLE>
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<TABLE>
<CAPTION>
CASCO INTERNATIONAL, INC.
BALANCE SHEETS
September 30, 1999 and December 31, 1998
Unaudited
LIABILITIES AND STOCKHOLDERS' EQUITY 1999 1998
------------ -----------
<S> <C> <C>
Liabilities:
Accounts payable ............................ $ 114,924 $ 1,234,869
Short-term debt obligations ................. 2,182,507 3,882,269
Accrued liabilities ......................... 191,419 360,370
Advanced deposits-current ................... 1,926,406 1,926,406
------------ ------------
Total current ................... 4,415,256 7,403,914
liabilities
------------ ------------
Long-term debt ................................... 2,220,434 2,413,154
Advanced deposits-noncurrent ..................... 2,370,273 2,653,353
Deferred tax liability ........................... 487,350 492,150
------------ ------------
Total Liabilities ................................ 9,493,313 12,962,571
Commitments and contingencies .................... -- --
Stockholders' equity:
Preferred Shares: $.01 par value; authorized
300,000 shares; none issued and outstanding -- --
Common Shares par value $.01, authorized
5,000,000, issued 1,783,200 ............... 17,832 17,832
Capital in excess of par value .............. 6,417,586 6,417,586
Accumulated deficit ......................... (562,682) (555,386)
------------ ------------
Total stockholders' equity ...... 5,872,736 5,880,032
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ....... $ 15,366,049 $ 18,842,603
============ ============
The accompanying notes are an integral part of the
financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CASCO INTERNATIONAL, INC.
STATEMENTS OF OPERATIONS
For the three months and nine months ended
September 30, 1999 and 1998
Unaudited
Three Months Nine Months
-------------------------- --------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenue ......... $ 4,268,691 $ 3,545,052 $ 16,103,572 $ 13,075,763
Operating costs and expenses:
Cost of goods sold .. 2,258,246 2,025,705 8,565,521 7,352,719
Selling, general and
administrative . 2,175,653 1,748,148 6,724,679 5,595,690
Depreciation and
amortization ... 182,954 141,172 535,709 351,756
------------ ------------ ------------ ------------
Total operating
costs and
expenses . 4,616,853 3,915,025 15,825,909 13,300,165
Operating income (loss) (348,162) (369,973) 277,663 (224,402)
Other income and (expenses)
Interest expense ....... (100,650) (111,223) (289,759) (238,309)
Loss on sale of building -- -- -- (151,144)
------------ ------------ ------------ ------------
Total other
income and
(expenses) .. (100,650) (111,223) (289,759) (389,453)
Income (loss) before income taxes and
extraordinary item ......(448,812) (481,196) (12,096) (613,855)
Deferred (provision) benefit
for income taxes 179,550 182,400 4,800 232,800
------------ ------------ ------------ ------------
Income (loss) before extraordinary gain on
retirement of debt .. (269,262) (298,796) (7,296) (381,055)
------------ ------------ ------------ ------------
Extraordinary gain on retirement of debt (less
applicable income
taxes of $570,000) ... -- -- -- 930,000
------------ ------------ ------------ ------------
Net Income (Loss) .... $ (269,262) $ (298,796) $ (7,296) $ 548,945
============ ============ ============ ============
EARNINGS PER SHARE BASIC AND DILUTIVE
Income (loss) before
extraordinary item .. $ (0.15) $ (0.16) $ 0.00 $ (0.22)
Extraordinary gain
on retirement of debt $ -- $ -- $ -- $ 0.52
============ ============ ============ ============
Net Income (Loss) ..... $ (0.15) $ (0.16) $ 0.00 $ 0.30
============ ============ ============ ============
Weighted average common
shares outstanding ... 1,783,200 1,783,200 1,783,200 1,783,200
============ ============ ============ ============
The accompanying notes are an integral part of the
financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CASCO INTERNATIONAL, INC.
STATEMENTS OF CASH FLOWS
For the nine months ended September 30, 1999 and 1998
Unaudited
1999 1998
--------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) .......................... $ (7,296) 548,945
Adjustments to reconcile net (loss) income to cash
provided by operating activities:
Depreciation and amortization .......... 535,709 351,756
Loss of sale of building ................ -- 151,144
Extraordinary gain on retirement of debt -- (930,000)
Deferred provision (benefit) ............ (4,800) 337,200
Changes in assets and liabilities:
(Increase) decrease in assets:
Accounts receivable .................. 2,671,023 3,071,872
Inventory ............................ 523,646 (943,276)
Prepaid expenses and other assets .... (12,142) (275,477)
Increase (decrease) in liabilities:
Accounts payable and accrued liabilities (1,288,896) (837,388)
Advance deposits ........................ (283,080) 116,439
------------ ------------
Total adjustments ..................... 2,141,460 1,042,270
------------ ------------
Net cash provided by operating activities .......... 2,134,164 1,591,215
------------ ------------
Cash flows from investing activities:
Sale of building .......................... -- 421,187
Payments for purchases of property and equipment (323,685) (657,128)
Payment for acquisition ........................ -- (1,126,633)
----------- ------------
Cash used in investing activities ................... (323,685) (1,362,574)
Cash flows from financing activities:
Proceeds from debt obligation ..................12,968,643 9,013,472
Principal payments on debt ................ (14,861,125) (9,183,036)
------------ ------------
Cash used in financing activities .............. (1,892,482) (169,564)
Increase (decrease) in cash .................... (82,003) 59,077
Cash, beginning of period ...................... 107,482 73,516
------------ ------------
Cash, end of period ............................ $ 25,479 132,593
============ ============
Other Cash Flow Information:
Cash payments during the year for:
Interest ............................... $ 275,986 262,397
Income taxes, net of refunds ........... 23,418 --
The accompanying notes are an integral part of the financial
statements.
</TABLE>
<PAGE>
CASCO INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
Unaudited
The accompanying financial statements have not been audited, but
reflect all adjustments which, in the opinion of management, are necessary for a
fair presentation of financial position, results of operations and cash flows
for the periods presented. All adjustments are of a normal and recurring nature.
These consolidated financial statements should be read in conjunction with the
Company's audited financial statements and notes thereto for the fiscal year
ended December 31, 1998.
Effective at the close of business on December 31, 1996, a tax free
spin off of the Company's common stock from its former parent, Pages, was
completed (the "Distribution"). In the Distribution, for every ten shares of
Pages common stock outstanding on the record date, one and one-half shares of
the Company's common stock was distributed to Pages shareholders.
On January 23, 1998 the Company redeemed, at a discount, the
subordinated debenture due to Pages on January 1, 2002. The debenture in the
original principal amount of $5 million was redeemed for $3.5 million.
Also on January 23, 1998, Huntington National Bank increased the
Company's line of credit from $2 million to $5.5 million from which funds became
available to redeem the subordinated debenture due to Pages. On July 30, 1998,
the Company replaced the line of credit with the Huntington National Bank with a
$5 million line of credit with Branch Banking & Trust.
On March 4, 1998 the Company sold its 167,000 sq. ft. Kings Mountain
warehouse. The sale netted the Company approximately $425,000. Also on March 4,
1998 the Company obtained financing from First National Bank secured by a first
deed of trust on the Shelby facilities. The loan is in the amount of $2,362,500
at an interest rate of prime plus 1/2% and will not increase or decrease more
than two percent. The term of the loan is fifteen years, callable after 5 years.
On July 30, 1998 the Company entered into an agreement with Awards &
Gifts, Inc. and Richard W. Terlau, Jr., providing for the purchase of
substantially all assets and certain liabilities of Awards & Gifts by the
Company. Under the terms of the Asset Purchase Agreement, the assets included
Awards & Gifts customer list, machinery and equipment, inventories, Awards &
Gifts intellectual property assets, prepaid expenses, and general intangibles,
the liabilities included the assumption of an equipment lease and a real
property lease. The purchase price for the assets was $1.5 million with certain
adjustments made for pro-rated items, with $1.3 million in cash and a $200,000
promissory note. The note is secured by an Irrevocable Standby Letter of Credit
issued by Branch Banking & Trust Company. As of September 30, 1999 the Company
owed $100,000 on the promissory note. The purchase price under the Asset
Purchase Agreement was determined by arm's length negotiations between the
parties based on the market value of the assets purchased and sold. The
acquisition was financed with proceeds from its revolving credit facility with
Branch Banking & Trust Company.
<PAGE>
On October 1, 1998 the Company entered into an agreement with American
Awards & Gifts, Inc. and Frank G. and Judith J. McGinnis, providing for the
purchase of substantially all assets and certain liabilities of American Awards
& Gifts, Inc. by the Company. Under the terms of the Asset Purchase Agreement,
the assets included American Awards & Gifts customer list, machinery and
equipment, tools and dies, inventories, intellectual property assets, and
general intangibles, the liabilities included the assumption of certain accounts
payable. The purchase price for the assets was $255,177 with $100,000 in cash
and a $155,177 promissory note. The purchase price under the Asset Purchase
Agreement was determined by arm's length negotiations between the parties based
on the market value of the assets purchased and sold. The goodwill acquired in
this transaction will be amortized over fifteen years using the straight-line
method.
During the three months ended September 30, 1999 no options were granted
under the Company's 1999 Incentive Stock Option Plan.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Quarter and Nine Months Ended September 30, 1999 Compared to Quarter and Nine
Months Ended September 30, 1998:
Revenues for the three months ended September 30, 1999 approximated
$4.27 million, compared to $3.55 million in revenues for the three months ended
September 30, 1998, an increase of 20.41% or approximately $723,000. The
increase is attributable to strong retention of existing customers coupled with
new customers in the new markets with employed recognition consultants and the
acquisitions made by the Company in 1998.
Revenues for the nine months ended September 30, 1999 approximated
$16.10 million, compared to $13.08 million in revenues for the nine months ended
September 30, 1998, an increase of 23.16% or approximately $3.02 million. The
increase is attributable to strong retention of existing customers coupled with
new customers in the new markets with employed recognition consultants and the
acquisitions made by the Company in 1998.
Cost of goods sold for the three months ended September 30, 1999
approximated $2.26 million, compared to approximately $2.03 million of cost of
goods sold for the three months ended September 30, 1998, an increase of 11.48%
or approximately $230,000. The increase in cost of goods sold was attributable
to the increase in revenues. As a percentage of revenues, cost of goods sold
decreased to 52.90% for the three months ended September 30, 1999, from 57.14%
for the three months ended September 30, 1998. The 4.24% decrease in the cost of
goods sold as a percentage of revenues was principally attributable to a change
in product mix and improved inventory purchasing strategy.
Cost of goods sold for the nine months ended September 30, 1999
approximated $8.57 million, compared to approximately $7.35 million of cost of
goods sold for the nine months ended September 30, 1998, an increase of 16.49%
or approximately $1.22 million. The increase in cost of goods sold was
attributable to the increase in revenues. As a percentage of revenues, cost of
goods sold decreased to 53.19% for the nine months ended September 30, 1999,
from 56.23% for the nine months ended September 30, 1998. The 3.04% decrease in
the cost of goods sold, as a percentage of revenues was principally attributable
to a change in product mix, and an improved inventory purchasing strategy.
<PAGE>
Selling, general, and administrative expense for the three months ended
September 30, 1999 approximated $2.18 million, compared to $1.75 million for the
three months ended September 30, 1998, an increase of 24.45% or approximately
$428,000. The increase in selling, general, and administrative expense were
principally attributable to expansion of the internal employed sales force, Y2K
programming and the costs associated with the acquisitions in 1998. As a
percentage of revenues, selling, general and administrative increased to 50.97%
for the three months ended September 30, 1999, from 49.31% for the three months
ended September 30, 1998. The 1.66% increase as a percentage of revenues were
principally attributable to the expansion of the internal employed sales force
and the cost associated with the acquisitions in 1998.
Selling, general, and administrative expense for the nine months ended
September 30, 1999 approximated $6.72 million, compared to $5.60 million for the
nine months ended September 30, 1998, an increase of 20.18% or approximately
$1.12 million. As a percentage of revenues, selling, general and administrative
decreased to 41.76% for the nine months ended September 30, 1999, from 42.79%
for the nine months ended September 30, 1998. The 1.03% decrease as a percentage
of revenues were principally attributable to benefits obtained from aggressive
cost containment policies.
Interest expense was approximately $101,000 for the three months ended
September 30, 1999, compared to $111,000 for the three months ended September
30, 1998, a decrease of approximately $10,000. For the nine months ended
September 30, 1999, interest expense was approximately $290,000 compared to
approximately $238,000 for the nine months ended September 30, 1998, an increase
of approximately $52,000. The increase was attributable to the interest on the
Company's line of credit which was used to finance the acquisitions in 1998. The
average outstanding debt for the first nine months in 1999 approximated $4.7
million compared to $2.7 million for the first nine months in 1998.
Additionally, the average interest rate for the first nine months in 1999
approximated 7.86% compared to approximately 9.11% for the same period in 1998.
Depreciation and amortization expense was approximately $183,000 for
the three months ended September 30, 1999, compared to $141,000 for the three
months ended September 30, 1998, an increase of 29.60% or approximately $42,000.
Depreciation and amortization expense was approximately $536,000 and $352,000
for the nine months ended September 30, 1999 and 1998 respectively, an increase
of 52.30% or approximately $184,000. The increase in depreciation and
amortization expense was principally attributable to the depreciation of newly
acquired assets in 1997 and 1998.
Income tax benefit was $4,800 for the nine months ended September 30,
1999, compared to an income tax benefit of $232,800 for the nine months ended
September 30, 1998. The provisions for income tax benefit were calculated
through the use of estimated income tax rates based upon the income before
taxes.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of liquidity have been cash generated
from operating activities and amounts available under its existing credit
facility and proceeds from the public offering of units consisting of common
stock and warrants during the third quarter of 1997. The Company's primary uses
of funds consist of financing inventory, receivables and acquisitions.
- -------------------------
The Company has adopted a growth strategy which will be accomplished
through increased efforts of the Company's existing highly trained sales force
in order to expand current market share and enter into new markets.
The Company anticipates that operating cash flows during the next twelve
months, coupled with its ability to borrow under the credit facility, will cover
operating expenditures and meet the short-term debt obligations. The Company's
credit facility is due and payable in full on July 30, 1999. The lender has made
a commitment to renew the credit facility when due. The new credit facility will
be due and payable in full on July 30, 2000.
On July 30, 1998 the Company entered into an agreement with Awards &
Gifts, Inc. and Richard W. Terlau, Jr., providing for the purchase of
substantially all assets and certain liabilities of Awards & Gifts by the
Company. Under the terms of the Asset Purchase Agreement, the assets included
Awards & Gifts customer list, machinery and equipment, inventories, Awards &
Gifts intellectual property assets, prepaid expenses, and a real property lease.
The purchase price for the assets was $1.5 million with certain adjustments made
for pro-rated items, with $1.3 million paid in cash and a $200,000 promissory
note. The note is secured by an Irrevocable Standby Letter of Credit issued by
Branch Banking & Trust Company. The purchase price under the Asset Purchase
Agreement was determined by arm's length negotiations between the parties based
on the market value of the assets purchased and sold. The goodwill acquired in
this transaction will be amortized over fifteen years using the straight-line
method. The acquisition was financed with proceeds from the Company's revolving
credit facility with Branch Banking & Trust Company.
On October 1, 1998 the Company entered into an agreement with American
Awards & Gifts, Inc. and Frank G. and Judith J. McGinnis, providing for the
purchase of substantially all assets and certain liabilities of American Awards
& Gifts, Inc. by the Company. Under the terms of the Asset Purchase Agreement,
the assets included American Awards & Gifts customer list, machinery and
equipment, tools and dies, inventories, intellectual property assets, and
general intangibles, the liabilities included the assumption of certain accounts
payable. The purchase price for the assets was $255,177 with $100,000 in cash
and a $155,177 promissory note. The purchase price under the Asset Purchase
Agreement was determined by arm's length negotiations between the parties based
on the market value of the assets purchased and sold. The goodwill acquired in
this transaction will be amortized over fifteen years using the straight-line
method.
Effective at the close of business on December 31, 1996, a tax free spin
off of the Company's common stock from its parent, Pages, was completed (the
"Distribution"). In the Distribution, for every ten shares of Pages common stock
outstanding on the record date, one and one-half shares of the Company's common
stock was distributed to Pages' stockholders. The Company entered into a $5
million, 7% subordinated debenture with Pages simultaneously with the
Distribution in satisfaction of amounts due to Pages by the Company. The excess
of the amount due to Pages as of the Distribution over the $5 million
subordinated debenture was recorded as paid in capital. Principal payments will
be $100,000 per year for the first four years, and a final payment due at the
end of the fifth year for the remaining principal balance. Interest is at 7% per
annum, payable quarterly. Based on the consummation of the Distribution
effective January 1, 1997, the amounts due to Pages previously recorded as
current have been reclassified to long term, thus significantly increasing the
Company's net working capital, as described earlier in this section. The Company
discharged the debenture in full in January 1998 for $3.5 million. The Company
realized an extraordinary gain on retirement of debt of $1.5 million on this
transaction.
<PAGE>
Management believes that present resources will meet anticipated
requirements for operations of the business.
The Company does not anticipate any material expenditures for property
and equipment during the next twelve months, out of the ordinary course of
business.
The Company is aware of no trends or demands, commitments or uncertainties
that will result in, or that management believes are reasonably likely to result
in, the Company's liquidity increasing or decreasing in any material way. The
Company is aware of no legal or other contingencies, the effect of which are
believed by management to be reasonably likely to have a material adverse effect
on the Company's financial statements.
A potential problem exists for all companies that rely on computers as
the year 2000 approaches. The "Year 2000" problem is the result of the past
practice in the computer industry of using two digits rather than four to
identify the applicable year. This practice could result in incorrect results
when the Company's computers or those of the third parties with which it deals
perform arithmetic operations, comparisons or data field sorting involving years
later than 1999.
The Company has conducted a preliminary assessment of its computer
systems to identify items that could be impacted by the Year 2000 issue and
formulated the following course of action. The Company will begin reviewing its
non-information technology systems in mid-1999. Although the Company does not
anticipate that non-information technology systems will pose a major problem, as
its reliance on such systems is relatively small; non-information technology
systems are more difficult to evaluate and repair than information technology
systems and may require replacement. The Company has already begun its review of
its information technology systems and will make necessary software upgrades in
1999. In addition, the Company has been separately evaluating its accounting
software and is currently in the process of implementing a new system with
implementation anticipated to be complete during the fourth quarter of 1999.
The most reasonably likely worst case scenario the Company faces in
regards to Year 2000 problems is a lack of compliance on the part of the third
parties with which it deals. Though not highly dependent on any particular
vendor, the failure on the part of its vendors could result in the Company not
being able to get those supplies it needs to administer its business. The
Company is prepared to find alternative vendors should this problem result and
is considering building up an inventory of any necessary supplies to prevent any
shortage if such an eventuality were to occur.
The Company will utilize both internal and external resources to
reprogram or replace and test all of its software. The Company preliminarily
estimates that it will cost $30,000 to evaluate, reprogram and replace equipment
and software to ensure Year 2000 compliance, of which all $30,000 will likely be
spent on outside consultants. In addition, as discussed above, the Company is
going to spend $40,000 to replace its existing accounting system. Such costs are
being financed through an existing line of credit and will not have a material
adverse effect on the Company's financial condition or results of operations.
The Company is addressing its Year 2000 compliance needs by
implementing a new Enterprise Resource Planning (ERP) application on a new IBM
AS/400 platform. Since its custom written software will be modified to work with
its new ERP system, the Company will design and test its systems to be Year 2000
compliant during 1999.
<PAGE>
SEASONALITY
The Company's business is highly seasonal, with approximately 39% of its
revenues and most of its profits recorded in the months of November, December,
and January. As a result, the Company's working capital requirements are highest
during November and December when the combination of receivables and inventory
are at peak levels. The Company typically experiences losses in its second and
third quarters.
As the results from the Company's growth strategy develop, the effects
of seasonality should be diminished. The business segments on which the Company
has chosen to focus offer steadier revenue flows, as well as more consistent
requirements for working capital.
INFLATION
Although the Company cannot determine the precise effects of inflation,
inflation has an influence on the cost of the Company's products and services,
supplies, salaries, and benefits. The Company attempts to minimize or offset the
effects of inflation through increased sales volumes and sales prices, improved
productivity, alternative sourcing of products and supplies, and reduction of
other costs. The Company generally has been able to offset the impact of price
increases from suppliers by increases in the selling prices of the Company's
products and services.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in this Form 10-Q under "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
regarding matters that are not historical facts and "forward looking statements"
(as such term is defined in the Private Securities Litigation Reform Act of
1996) and because such statements involve risks and uncertainties, actual
results may differ materially from those expressed or implied by such
forward-looking statements. Those statements include remarks regarding the
intent, belief, or current expectations of the Company, its directors, or its
officers with respect to, among other things: (i) future operating cash flows;
(ii) the Company's financing plans, and (iii) the Company's growth strategy,
including the expansion of current market share and the entrance into new
markets. Prospective investors are cautioned that any such forward-looking
statements are not guarantees of future performance and involve risks and
uncertainties, and that actual results may differ materially from those
projected in the forward-looking statements as a result of various factors. The
accompanying information contained in this Form 10-Q, including without
limitation and information set forth under the heading "Management's Discussion
and Analysis of Financial Condition and Results of Operations", identifies
important factors that could cause such differences.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to the impact of interest rate changes on its
debt obligations. The Company is not exposed to foreign currency exchange rate
risk or investment risk.
Interest Rate Risk. The Company's exposure to market rate risk for changes
in interest rates relates primarily to the Company's short-term debt obligation
line of credit. The interest rate on this line of credit is prime plus 1/2
percent. The prime interest rate at September 30, 1999 was 8.25 percent. The
Company's line of credit is renewable and negotiable yearly. The fluctuation of
the interest rate may increase interest expense if the prime interest rate
increases before the line of credit could be renegotiated to a fixed rate loan.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS
The Company is not involved in any material pending legal proceedings,
other than ordinary, routine litigation incidental to its business.
ITEM 2: CHANGES IN SECURITIES
None
ITEM 3: DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5: OTHER INFORMATION
None
ITEM 6: EXHIBITS AND REPORTS ON FORM 8K
Exhibit Method
Number Description of filing
1 Underwriting Agreement 1
2 Agreement and Plan of Merger 1
3 (i).1 Certificate of Incorporation 1
3 (i).2 Certificate of Amendment to
Certificate of Incorporation 1
3 (ii) Bylaws 1
4.1 Form of Stock Certificate 1
4.2 Warrant Agreement 1
4.3 Form of Warrant Certificate 1
4.4 Form of Warrant-R.L. Renck & Company 1
10 .1 1996 Incentive Stock Option Plan 1
<PAGE>
10 .2 Employee Stock Option Plan 1
10 .3 Huntington Loan Documents:
10 .3 .1 Loan and Security Agreement 1
10 .3 .2 Revolving Note 1
10 .3 .3 Commercial Letter of Credit
Reimbursement Agreement 1
10 .3 .4 Deed of Trust, Assignment of
Rents and Security Agreement 1
10 .3 .5 Debt Subordination and
Intercreditor Agreement 1
10 .3 .6 Third Amendment to Loan
and Security Agreement 1
10 .3 .7 Third Note Modification
and Extension Agreement 1
10 .4 Non-Employee Director Stock Option Plan 1
10 .5 Amendment to 1996 Incentive
Stock Option Plan 1
10 .6 1997 Incentive Stock Option Plan 1
10 .7 Charles R. Davis' Performance
Option Agreement 1
10 .8 First National Bank Loan Document 1
10 .9 Branch Banking & Trust Loan Document 1
10.10 1998 Incentive Stock Option Plan 1
10.11 Non-Employee Director Stock Option Plan 1
10.12 1999 Stock Option Plan 2
27 Financial Data Schedule 3
1. Incorporated by reference to the Company's registration statement on Form 10,
file number 0-271717, filed in Washington, D.C.
2. Incorporated by reference to the Company's proxy statement, file number
0-271717, filed in Washington D.C.
3. Filed herewith.
(b) Reports on Form 8-K
None.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
CASCO INTERNATIONAL, INC.
Registrant
Date: November 9, 1999 By: /s/ Jeffrey A. Ross
-------------------
Jeffrey A. Ross
Principal Financial and
Accounting Officer
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<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-START> Jul-1-1999
<PERIOD-END> Sep-30-1999
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0
0
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