SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-KSB
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
Commission File Number: 00-21219
CASDIM INTERNATIONAL SYSTEMS, INC.
(Name of small business issuer in its charter)
Colorado 83-0288100
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
90 Park Avenue
New York, New York 10016 10016
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (212) 984-1090
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
None None
Securities registered pursuant to Section 12(g) of the Act: Common Stock, par
value $0.00001
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months, and (2) has been
subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulations S-B contained in this form, and no disclosure will be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ ]
Issuer's revenues for its most recent fiscal year: $508,713.
The aggregate market value of voting stock held by non-affiliates computed using
the average of the bid and asked prices reported by the Nasdaq Bulletin Board,
on March 26, 1997 was $12,043,815.
As of March 26, 1997, the Registrant had 14,134,001 shares of Common Stock, par
value $0.00001, outstanding.
Transitional Small Business Disclosure Format Yes [ ] No [X].
<PAGE>
PART I
Item 1. Description of Business
General
Casdim International Systems, Inc. and its subsidiaries (collectively
referred to herein as the "Company") is a multimedia and communications company
engaged in the development, marketing, sale and leasing of interactive,
informational and transactional kiosks. The Company is engaged in the
development of interactive televisions, which will be used to provide
interactive programs to link vendors and customers and to supply information and
transactions on demand. Another area of the Company's business is the
development of servers and communications applications for both satellite-based
networks and wide area networks ("WAN"), that will enable vendors to deliver
information services and effect transactions from their place of business.
Recent Developments
In 1996 the Company devoted substantial managerial time and capital
resources to its efforts to enter the North American market. The Company
determined that the best use for its technology in the North American market was
in the context of the lodging industry and in the transmission of electronic
data via satellite.
The Company and Dick Clark International Cable Ventures Ltd. ("Dick Clark
Ventures") have agreed to enter into a joint venture to exploit certain
satellite transmission licenses held by an affiliate of Dick Clark Ventures in
Mexico. These licenses, granted by the Secretaria de Communicaciones y
Transports ("SCT") of Mexico, allow for the installation or utilization of
shared teleports, for the bi-directional transmission of voice, video and data
within the footprint of the Mexican Government's two Solidaridad satellites.
The Company and Dick Clark Ventures have agreed to establish a joint
venture corporation, to be known as Technology Transfer Corporation, to design,
install and operate an advanced communications platform utilizing the satellite
backbone. The Company has agreed to contribute $500,000 to the joint venture.
When activated, the satellite network is intended to provide a variety of
electronic services, currently unavailable on a wide scale in Mexico. Initially,
the joint venture intends to provide electronic transactional services under the
trade name DataMex (TM) which service will include transactional banking via an
interconnected ATM network, point of purchase ("POP") transactions and
international funds transfers. No assurance can be given that this joint venture
will be successful in developing the network or that it will be able to raise
sufficient capital for the initiation of its proposed business.
On March 26, 1997, the Company and Ramada Franchise Systems, Inc. ("RFS"),
a wholly owned subsidiary of HFS Incorporated, announced their agreement to
enter into "alpha" and "beta" testing of Casdim's integrated Information on
Demand System (the "IOD System").
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The IOD System incorporates interactive TV, Internet, video-on-demand,
E-Mail, and a club member facility. The IOD System is designed to utilize a WAN
to link video and data servers via satellites and/or cable TV systems. Hotel
guests will access their TV through the RFS/Casdim default channel. Access to
various services including, E-mail, stock quotes, sports scores,
video-on-demand, airline and car rental reservations and residential real estate
listings will be provided to the hotel guest by the IOD System. Under the
proposed arrangement, Casdim will derive revenues from advertising, vendor
commissions and user fees. RFS currently has over 120,000 lodging rooms in its
franchise network. The Company and RFS have agreed to enter into an agreement
for full system implementation of the IOD System, pursuant to which RFS will
exclusively recommend the IOD System to all of its franchises, upon the
successful completion of the alpha and beta testing at various Ramada Inn
locations. The testing of the IOD System is scheduled to be completed in March
1998. No assurance can be given that such testing will prove successful, or that
the Company will be able to raise sufficient funds to install its IOD System
within the Ramada Inn franchise system.
Products
Historically, the Company's main products and services consisted of:
o the sale and lease of multimedia kiosks;
o the development and sale of databases, kiosk and kiosk home pages,
servers, and communications applications; and
Multimedia Kiosks. The Company's kiosks offer a form of interactive
computerization which allows for easy consumer access to products, services, and
information. Consumers are able to access promotional and educational
information as well as purchase goods and services. Each kiosk consists of a
free-standing, electronic, informational and transactional booth combining a
number of computer peripheral technologies which collect and dispense
information and services. The kiosks are designed to be flexible and
user-friendly in order to meet the diverse needs of users, and are usually
placed in a highly visible and active location to provide services and
information to a wide audience. The kiosks include up-to-date technology in PC
hardware, multimedia, LAN, WAN, satellite communication and applications
generators and are comprised of a processor, disk drives, keyboard, video
display, touch screen, magnetic card reader, a scanner, and printer. Depending
on the application, kiosks may or may not be connected to one or more host
systems.
The manufacture and assembly of kiosks entail five distinct steps:
o Manufacturing of the Kiosk Enclosure. The manufacturing process
takes approximately one to two months, depending on whether the order
consists of an existing model or a new design. Although choice of a
suitable enclosure design is usually chosen from one of the Company's
existing standard models, new designs may be manufactured at the customer's
request. The creation of a new enclosure model takes approximately
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two to three months during which a prototype is built and tested and an
operating plan is developed. The enclosures are designed by Zog Ltd., an
Israel-based industrial design company, which also oversees the
manufacturing process.
o Purchase of Hardware Components. Most of the hardware used in the
kiosks' operating systems is standard and not customized, which provides
the Company with flexibility when a change of manufacturer is needed or
technical modifications are required. The hardware components include
computers and expansion cards, a touchscreen, magnetic card reader, a
printer and communications equipment. Generally, the Company selects a
hardware supplier after comparing the equipment of three or more suppliers
for quality, reliability and durability, as well as adaptability to the
other components in the system, and the supplier's quality of service,
manufacturer's warranty and selling price.
o Integration and Adaptation of Software, Database and Graphics. This
process includes a system design stage, design of the user-interface and
connection of the application components into one complete system. Such
components can include a logging component to register activities made at
the kiosk stand, and a component for display of advertising during idle
time.
o Testing. The retrieval and content of the of information provided by
the individual system is tested before shipping. Great importance is placed
on building mechanisms that will enable easy updates of content items and
automatic distribution of such information to the kiosks.
o Connection of Kiosk Units. This process entails the preparation of
the required infrastructure for connecting a kiosk to the Company's central
control room. Such connections may be implemented through the use of
standard telephone lines, ISDN lines, local Ethernet network, frame relay
lines, point to point lines, or satellite network. The choice of
communication line depends on the number of sites to be connected, the
number of kiosks on the site, the quantity of information to be relayed,
and the frequency of transactions, and the type of project (i.e. credit
card company, medical data bank, etc.). Gilat - Satellite Communications
provides VSATs and hubs for the kiosks' satellite wide area network.
The sales price of a kiosk in Israel, including both equipment and
technology, ranges from $10,000 to $25,000. As of December 31, 1996, the Company
has sold or installed approximately 80 kiosks.
The Company has targeted a base selling price of approximately $15,000 per
unit in the U.S. as a consequence of the increased level of competition in the
U.S. market. In the U.S., prices may range from $13,000 to $150,000 for a highly
sophisticated kiosk.
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In 1996, the Company attempted to emphasize the leasing of kiosks to
shopping malls where they would be placed in strategic locations offering a
diverse network of information and transaction capabilities. In great measure,
the Company was unsuccessful with this marketing approach because it was unable
to obtain long-term exclusive agreements from the shopping malls. Recently, the
Company began to negotiate with several malls in an attempt to obtain long-term
agreements. No assurance can be given that these negotiations will be
successful. The Company has determined that it will in the future concentrate on
the sale of kiosks and obtaining fees from advertising and coupon distribution
from kiosks installed by the Company in high traffic, public areas.
The Company provides technical support to its customers, at approximately
15% of the total value of the system provided. The Company's information and
control center is located at it's head office in Petah Tikva, from which it
monitors all kiosks on the network in real time, allowing for tracking of usage,
up and down time, information received, access time and a multitude of other
functions. This network has been designed to provide flexibility, and the
Company believes it provides an advantage over it's competitors' non-networked
kiosks.
Development and Sale of Databases, Kiosk and Internet Home Pages, Servers,
and Communications Applications. The charge for developing a customer's
interactive program ranges from $20,000 to $200,000. Depending on the project,
the Company's experienced staff is able to respond to every customer's needs
concerning data structure by developing, building, maintaining, and connecting
customized databases to the Company's kiosk network.
Sales, Marketing and Distribution
In 1996, the Company expended substantial efforts on its strategy of
entering the North American market and achieved preliminary success by entering
into relationships with RFS for its IOD System and with Dick Clark Ventures for
the transmission of electronic services via satellite. The Company intends to
devote a substantial portion of its resources to the development and
implementation of the technologies for these projects. No assurance can be given
that these projects will be successful or that the Company will be able to raise
sufficient funding for such projects.
With respect to its historical kiosk business, the Company has developed a
multi-dimensional approach to the information services market by targeting the
underutilized "leisure time" market. The "leisure time" market refers to time
spent between the home and the office, where the customer is more predisposed to
shop or require access to services. The Company has approached the market from
two different avenues. First, targeting markets which are currently
underutilized and have not yet been identified as market niches. Secondly, the
Company attempts to turn kiosks located in high traffic public areas into profit
centers. The markets which the Company targets need not be related, different
information channels can co-exist on a single kiosk, and the consumer can then
choose which channel to use.
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Research and Development
The Company directs its R&D efforts into the integration between various
products in the areas of multimedia platforms, and the development of software,
video and audio products, and animation software, network technologies (LAN,
WAN), and products involved in the areas of fiber distributed data interface
(FDDI) and asynchronous transfer mode (ATM). This approach results in relatively
low cost R&D and allows the Company to integrate a wide range of multimedia
applications.
Simultaneously with the development of kiosks for ongoing projects, the
Company is in the process of developing sub-systems for general use in various
other applications, including:
o HMTL Kiosk: This type of kiosk is suitable for use when vast amounts
of information must be displayed simultaneously, or when the use of
Hypertext Markup Language is required.
o Mall Kiosk: This type of information kiosk enables shoppers to find
a certain store within a mall either alphabetically or by category. The
system also provides printed directions to store locations.
o Bit Technology: The transfer of existing operating systems to 32 bit
technology.
o Updated Central Control System: For controlling the status of the
kiosks and their informational content, receiving reports from the kiosks,
managing service calls and distribution of updates for software and
day-to-day contents.
o Video Conference and Cartographic Information Display System: This
will provide consumers with the ability to engage in video conferencing.
o Continuous Advertising: This component will display advertisements
on a separate screen will be used solely for this purpose. This system will
include a mechanism for determining the frequency and availability of
advertisements according to the amount for transmission time sold.
No assurance can be given that the Company will be able to successfully
complete the development of its IOD System or the technology for its proposed
venture with Dick Clark Ventures.
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Competition
The electronic information distribution market is rapidly evolving and is
competitive. The Company believe that most of its competitors have greater
financial resources and name recognition than the Company. In addition, some of
these competitors, including LodgeNet Entertainment Corp. and Spectravision,
currently offer information products which include some of the services to be
included in the Company's IOD System. Accordingly, these competitors may have an
advantage in competing with the Company since its system is not operational as
yet. In addition, the Company expects to face competition from new entrants into
its markets. Such competition could materially adversely effect the Company's,
business, operating results and financial condition. There can be no assurance
that the Company will be able to compete successfully against current or future
competitors.
The Israeli kiosk market is a relatively small one in which the Company
believes it is a leading competitor. The Company's main competitors in Israel
are Golden Screens and Interactive Information Ltd. Golden Screens has been in
operation for approximately six years specializing primarily in the public and
government sectors and does not service private organizations. Its kiosks offer
fewer features and less updated technological and multimedia design than the
Company's product. Golden Screen's kiosks do not operate in "real time," and lag
behind the Company's kiosks in multimedia, computer technology and applications.
Interactive Information Ltd. has been in operation for approximately two years
and, to date, services only the hotel industry.
A number of companies are active in the field of information kiosks in
North America Management believes that Factura Composites, Inc., is the market
leader in kiosk manufacturing in the United States. Other companies active in
the field include: Quick ATM, 1-Media, Aimtech, EDR Systems, Virtual Shopping
Inc., Rikon Corporation, and HSI. All of these companies have greater financial
resources than the Company. There are also a large number of companies in the
field of touch screens, peripherals and applications software. The Company
believes that it's high standard of product and innovative approach to the
market will allow the Company to compete favorably in the U.S. and Israeli
markets.
Government Regulation
The Company believes that it is not currently subject to any federal
regulations with respect to the sale of kiosks in the United States; however,
the placement of kiosks may be subject to local zoning and other regulations.
The Company's proposed joint venture with Dick Clark Ventures will be subject to
regulation by the SCT of the Government of Mexico and may be subject to federal
regulations with respect to the transmission of data by satellite into the
United States.
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Trademarks and Patents
In January 1995, the Company acquired a pending patent (No. 108935) for its
medical kiosks from CSS Ltd., an affiliated company owned by Mr. Yehuda
Shimshon, for $500,000. This patent is pending both in Israel and the United
States. The Company does not have any registered trademarks.
Conditions in Israel
The Company's principal research and development facilities are located in
Israel, and its operations are therefore directly affected by political,
military and economic conditions in that country and in the Middle East.
Accordingly, the Company's operations could be adversely affected if major
hostilities should occur in the Middle East involving Israel or if trade between
Israel and its present trading partners were interrupted or curtailed. All male
permanent residents of Israel between the ages of 18 and 54 are, unless exempt,
obligated to perform reserve duty in the Israeli Defense Forces, presently
consisting of approximately 30 to 60 days' service annually. Additionally, all
such residents are subject to being called to active duty at any time upon the
out break of hostilities. Many of the Company's officers and employees are
currently obligated to perform annual reserve duty. While the Company has
operated effectively under these requirements since its organization, no
assessment can be made as to the full impact of such requirements on the
Company's business or work force and no prediction can be made as to the effect
on the Company of any expansion of such obligations.
Employees
At December 31, 1996, the Company and its subsidiaries employed 31 persons,
13 in research and development and technical support, 8 in marketing and sales,
and 10 in operations and administration.
Item 2. Description of Property
The Company's executive offices are currently located at 90 Park Avenue,
New York, New York. The Company is scheduled to move its executive offices into
approximately 3,700 square feet of office space at 150 East 58th Street, New
York, New York in mid-April 1997. The lease for such facilities has a term of
five years and two months, with an annual rental of approximately $134,000.
The Company's research and development facility is located in the
industrial zone of Petah Tikva, Israel. The premises, which consist of
approximately 7,600 square feet and five parking bays, are shared with CSS Ltd.
The Company utilizes approximately 3,000 square feet to house its
administrative, marketing and technical departments. The lease provides for
monthly rentals of $6,840 per month of which half of such amount is linked to
changes in the Israeli Consumer Price
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Index ("CPI"). The Company pays its pro-rata share of the lease costs for the
premises. The lease expires on December 31, 1997 and may be renewed for five
additional years.
Item 3. Legal Proceedings.
The Company has been advised that the Securities and Exchange Commission
has entered a formal order of private investigation in connection with the
offer, purchase or sale of securities of the Company. The Company has not been
advised by the Staff of the Commission of the status of the investigation. There
can be no assurance that the Commission will not initiate a proceeding against
the Company and/or certain of its former or present affiliates in connection
with its investigation, which proceeding could adversely affect the Company.
The Company is not a party to any material litigation.
Item 4. Submission of Matters to a Vote of Security Holders.
During the quarter ended December 31, 1996, the Company held it Annual
Meeting of Stockholders. At the meeting held on October 16, 1996, the Company's
stockholders voted:
1. For the election of the following directors to hold office for a term
until their successors are duly elected and qualified at the Company's
next Annual Meeting of Stockholders:
For Withhold
--- --------
Yehuda Shimshon 10,173,564 --
Israel Shimshon 10,173,564 --
Doron Leave 10,173,564 --
Ilan Mintz 10,173,564 --
David Tamir 10,173,564 --
2. For the approval of a plan of merger under which the Company would be
merged into a wholly-owned subsidiary of the Company incorporated in
the State of Delaware:
For Against Abstain
--- ------- -------
9,757,138 1,000 -0-
It is expected that the merger will be effected during the Spring of 1997.
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3. For the approval of the Company's 1996 Stock Option Plan:
For Against Abstain
--- ------- -------
10,167,939 5,625 -0-
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
After completion of its public offering on September 27, 1989, a public
trading market did not develop for the Company's common stock, $0.0001 par value
(the "Common Stock"). Until recently only a limited number of market makers
sporadically offered to purchase and sell shares of the Company's Common Stock.
Accordingly, during significant portions of the listed periods, reliable
quotations for the Common Stock were not available.
1995
----
First Quarter.................. No Bid No Bid
Second Quarter................. No Bid No Bid
Third Quarter.................. No Bid No Bid
Fourth Quarter................. No Bid No Bid
1996
----
First Quarter.................. $1 1/8 $ 7/32
Second Quarter................. 5 3/4 1/2
Third Quarter ................. 5 1/4 2 3/4
Fourth Quarter................. 5 1/2 4 1/16
The Nasdaq Bulletin Board symbol for the Company's Common Stock is CDMI. As
of December 31, 1996, there were approximately 39 holders of record and 300
beneficial owners of the Company's Common Stock.
The Company has not paid and has no present intention of paying cash
dividends on its Common Stock in the foreseeable future.
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Item 6. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following is management's discussion and analysis of certain
significant factors which have affected the Company's financial position and
operating results during the periods included in the accompanying condensed
financial statements.
Background
The Company is a Colorado holding company, incorporated on January 5, 1988
under the name of S.W. Financial Corporation for the purpose of acquiring an
interest in one or more business opportunities in the field of multimedia,
information and communication technology. In keeping with the stated corporate
purpose, the then management of the Company evaluated several business
opportunities and, during the fiscal year ended December 31, 1995, finalized the
Company's first corporate acquisition. The acquisition was effected by means of
an agreement for the exchange of stock and plan of reorganization dated November
21, 1995, (the "Exchange Agreement"), by and among the Company, Casdim
Interactive Systems USA, Inc. ("Casdim USA"), a Nevada corporation, and Mr.
Yehuda Shimshon. Mr. Shimshon acted on behalf of himself and Cedarwood Trading &
Investment Ltd. ("Cedarwood"), the then sole shareholders of Casdim USA.
Pursuant to the terms of the Exchange Agreement, the Company acquired all the
issued and outstanding shares of Casdim USA in exchange for 425,000,000 shares
of the Company. The Exchange Agreement, which became effective on December 11,
1995, was approved at a special meeting of the shareholders of the Company held
on October 24, 1995 at which the shareholders also approved: (i) renaming the
Company Casdim International Systems, Inc.; (ii) the 50:1 stock split of
76,700,000 shares, the then outstanding number of shares of the Company, into
1,534,000 shares; and (iii) the appointment of Mr. Shimshon as President and
Chairman of the Board.
Results of Operations
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995.
Sales decreased to $508,713 during the year ended December 31, 1996 from
$2,011,110 in 1995. The decrease in sales was principally attributable to the
Company's decision to (i) concentrate its resources on entering the North
American market, (ii) its failed efforts to lease kiosks, and (iii) the
determination of one of the Company's major customers to postpone deliveries of
kiosks until its financial condition improves.
Cost of sales decreased to $379,806 in 1996 from $468,353 in 1995,
principally as a result of the Company's lower level of sales. As a result, the
Company's gross profit for 1996 was $128,907 compared to $1,542,757 in 1995. The
Company expects its gross margins to vary in the future depending on the nature
and volume of its revenues.
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Selling, general and administrative expenses increased to $1,244,144 in
1996 from $237,016 in 1995, due primarily to the increased marketing costs
associated with the Company's efforts to penetrate the North American market,
costs associated with the establishment of executive offices in New York City,
increased compensation, legal and accounting costs, and a charge in the second
quarter of 1996 of approximately $164,000 arising from the issuance of stock
options to the Company's former public relations firm. The Company anticipates
that selling, general and administrative expenses will continue to increase in
1997 a result of the planned increases in expenses relating to its IOD System
and the joint venture with Dick Clark Ventures.
In 1996 the Company capitalized approximately $943,000 of product
development costs, principally relating to the IOD System. .
During 1996, the Company had other expenses of $104,397 as compared to
other expenses of $174,617 in 1995. In 1995, the Company had a $93,142 loss from
its investment activity, resulting from unsuccessful investments made in 1995
prior to the acquisition of Casdim USA. In 1996, the Company was able to offset
part of the increased foreign currency translation losses and interest expenses
with interest and dividend income from the investment of the proceeds of its May
1996 private placement. The Company expects interest expenses to increase in
1997.
For the year ended December 31, 1996, the Company had a loss from
operations of $1,219,634 as compared to income from operations of $1,131,124 for
1995. The Company's operating loss in 1996 was due primarily to the increase in
the Company's selling, general and administrative expenses and the decline in
sales.
In 1995, the Company's income tax expense was $ 440,309.
As a result of the foregoing, the Company's net loss was $1,219,634 or $.09
per share for 1996 as compared to net income of $690,815 or $.36 per share for
1995.
Year Ended December 31, 1995 Compared to Year Ended December 31, 1994
Product sales increased to $2,011,110 in 1995 from $188,351 in 1994, when
the Company's Israeli subsidiary, Casdim Israel began its operations. The
increase in sales was principally attributable to the initiation of deliveries
of the Company's kiosks.
Cost of sales increased to $468,353 in 1995 from $51,739 in 1994 as a
result of the Company's increased level of operations. As a result, the
Company's gross profit margin was 76.8% in 1995.
Selling, general and administrative expenses, increased 18% in 1995 to
$237,016, reflecting the Company's increased scope of operations.
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In 1995 the Company had interest expenses of $75,272 as compared to $54,361
in 1994 as a result of Casdim Israel's increased level of borrowing.
As a result of the foregoing, the Company had income before taxes of
$1,131,124 in 1995 as compared to a loss of $116,946 in 1994. The Company had an
income tax expense of $440,309 in 1995 as a result of its earnings. Casdim
Israel's profits were taxed at the regular Israel corporation tax rate of 37% in
1995.
In 1995, the Company had net income of $690,815 or $.36 per share as
compared to a loss of $82,612 or $.07 per share in 1994.
Liquidity and Capital Resources
At December 31, 1996, the Company had $915,527 in cash and $898,151 in
working capital as compared to $26 in cash and $179,432 in working capital at
December 31, 1995. The Company's financial position improved in the 1996 period,
principally as a result of its May 1996 private placement of securities which
resulted in approximately $2,786,765 of net proceeds, including $100,000 from
the exercise of warrants. In January 1997, the Company's working capital
position improved when it received an additional $400,000 in connection with the
exercise of warrants. In addition, the Company's financial position benefitted
from the conversion of approximately $1,000,000 of its Israeli subsidiary's
short-term debt into long-term debt in March 1997.
Among the factors that will affect the Company's working capital in the
future will be (i) the amount and timing of the expenditures required to
complete the development, installation and testing of the IOD System, and (ii)
the timing of a $500,000 capital contribution which the Company has agreed to
make to the joint venture with Dick Clark Ventures. Another factor which will
effect working capital is the collectability of a receivable of approximately
$300,000 from Kupat Holim Leumit, an Israeli health maintenance organization,
which is over 360 days old. The Company is currently negotiating with Kupat
Holim Leumit to recover the account receivable.
Management believes that the Company will require additional financing of
$2 million to $3 million in 1997, mainly to fund the installation and testing of
the IOD System at various Ramada Inn sites. No assurance can be given that
sufficient financing on either an equity or debt basis will be available to the
Company or that it will be available at advantageous terms.
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Item 7. Financial Statements
Index to Financial Statements
Independent Auditors' Report.................................F-1
Financial Statements:
Consolidated Balance Sheets ...........................F-2
Consolidated Statements of Income......................F-4
Consolidated Statements of Stockholders Equity.........F-5
Consolidated Statements of Cash Flows..................F-6
Notes to Financial Statements..........................F-8
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HOCKER, LOVELETT, HARGENS, & YENNIE, P.C.
=========================================
Certified Public Accountants
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
CASDIM INTERNATIONAL SYSTEMS, INC.
We have audited the accompanying consolidated balance sheets of CASDIM
INTERNATIONAL SYSTEMS, INC. (a Colorado corporation) and its subsidiaries as of
December 31, 1996 and 1995, and the related consolidated statements of income,
stockholders' equity and cash flows for the years then ended. These consolidated
statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free of
material misstatements. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and the significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of CASDIM INTERNATIONAL
SYSTEMS, INC. and its subsidiaries as of December 31, 1996 and 1995 and the
results of their operations, stockholders' equity and their cash flows for the
years then ended, in conformity with generally accepted accounting principles.
/s/ Hocker, Lovelett, Hargens & Yennie, P.C.
March 21, 1997
Riverton, Wyoming
F-1
<PAGE>
CASDIM INTERNATIONAL SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
1996 1995
ASSETS ---- ----
CURRENT ASSETS
Cash and cash equivalents $ 915,527 $ 26
Accounts receivable
Trade 438,807 155,783
Other - Note 2 1,236,667 1,202,505
Investments 173,596 --
------- ------
Total 2,764,597 1,358,314
PROPERTY AND EQUIPMENT - NOTE 3
Property and equipment 225,361 111,727
Less accumulated depreciation (36,435) (20,919)
Net 188,926 90,808
OTHER ASSETS
Patent, net - Note 4 400,000 467,659
Start-up and organization
costs, - net - Note 4 48,304 --
Deposits 10,200 --
Product development costs - Note 6 943,164 --
------- -------
1,401,668 467,659
TOTAL $4,355,191 $1,916,781
========== ==========
See accompanying notes to consolidated financial statements
F-2
<PAGE>
CASDIM INTERNATIONAL SYSTEMS, INC
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
1996 1995
LIABILITIES AND STOCKHOLDERS' EQUITY ---- ----
CURRENT LIABILITIES
Accounts payable
Trade $ 52,675 $ 38,763
Other - Note 5 469,355 465,417
Current maturities of debt - Note 10 1,344,416 674,702
-- --------- -------
Total 1,866,446 1,178,882
LONG-TERM DEBT
Accrued severance pay, net - Note 7 25,474 12,986
MINORITY INTEREST IN CONSOLIDATED SUBSIDIARY -- 72,372
------ ------
TOTAL 1,891,920 1,264,240
STOCKHOLDER'S EQUITY
Common stock, $.00001 par value,
500,000,000 shares authorized
13,634,000 shares issued and
outstanding, 285,000 shares
held in treasury stock 985 945
Additional paid in capital 3,145,268 194,480
Less treasury stock (cost) (1,425) (1,425)
Retained earnings (deficit) (681,557) 458,541
-------- -------
Total 2,463,271 652,541
--------- -------
TOTAL $4,355,191 $1,916,781
========== ==========
See accompanying notes to consolidated financial statements
F-3
<PAGE>
CASDIM INTERNATIONAL SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
1996 1995
---- ----
SALES $ 508,713 $2,011,110
COST OF SALES 379,806 468,353
------- -------
GROSS PROFIT 128,907 1,542,757
SALES, ADMINISTRATIVE AND GENERAL EXPENSES 1,244,144 237,016
--------- -------
INCOME (LOSS) FROM OPERATIONS (1,115,237) 1,305,741
OTHER INCOME (EXPENSES)
Interest income 21,309 --
Dividend income 35,673 --
Interest expense (109,519) (75,272)
Investment activity loss -- 93,142
Gain (loss) foreign translation (51,860) (6,203)
------- ------
Total (104,397) (174,617)
-------- --------
INCOME (LOSS) FROM OPERATIONS BEFORE TAXES (1,219,634) 1,131,124
INCOME TAX (EXPENSE) BENEFIT -- (440,309)
------ --------
NET INCOME (LOSS) $(1,219,634) $ 690,815
=========== ==========
NET EARNINGS (LOSS) PER SHARE ON A FULLY
DILUTED BASIS $ (.09) $ .36
=========== ==========
NET EARNINGS (LOSS) PER SHARE $ (.09) $ .36
=========== ==========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 13,349,000 1,899,000
========== =========
See accompanying notes to consolidated financial statements
F-4
<PAGE>
CASDIM INTERNATIONAL SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID IN TREASURY RETAINED
SHARES STOCK STOCK STOCK EARNINGS TOTAL
------ ----- ----- ----- -------- -----
<S> <C> <C> <C> <C> <C> <C>
Balance - 12/31/94
as previously reported 1,134,000 $745 $ 94,680 $(1,425) $(152,738) $ (58,738)
Sale of stock 200 99,800 -- -- 100,000
50 : 1 reverse stock
split 8,500,000
Net income 690,815 690,815
Less minority interest (79,596) (79,536)
--------- --- ------- ------ ------- -------
Balance - 12/31/95 9,634,000 945 194,480 (1,425) 458,541 652,541
Contribution of
consolidated
minority interest 79,536 79,536
Sale of stock 4,000,000 40 2,686,725 2,686,765
Warrants exercised 100,000 100,000
Stock options issued 164,063 164,063
Net income (loss) (1,219,634) (1,219,634)
---------- ---- ---------- ------- --------- ----------
Balance - 12/31/96 13,634,000 $985 $3,145,268 $(1,425) $(681,557) $ 2,463,271
========== ==== ========== ======= ========= ===========
</TABLE>
See accompanying notes to consolidated financial statements
F-5
<PAGE>
CASDIM INTERNATIONAL SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
1996 1995
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $(1,219,634) $ 690,815
Adjustments to reconcile net income
to net cash provided by operating
activities:
depreciation and amortization 86,383 48,802
Changes in operating assets and
liabilities:
(Increase) Decrease In:
Accounts receivable - trade (283,024) 929,570
Accounts receivable - other (26,998) (899,680)
(Decrease) Increase In:
Accounts payable - trade 13,912 1,524
Accounts payable - other 3,938 414,498
Deposits -- (1,234,516)
--------- ----------
Net cash (used) by
operating activities (1,425,423) (48,987)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (113,634) (51,685)
Purchase of patent -- (500,000)
Purchase of investments (173,596) --
Payment for start-up costs (51,512) --
Payment for product development (943,164) --
Payment of security deposit (10,200) --
------- -------
Net cash used in investing
activities (1,292,106) (551,685)
See accompanying notes to consolidated financial statements
F-6
<PAGE>
CASDIM INTERNATIONAL SYSTEMS, INC
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
CASH FLOWS FROM FINANCING ACTIVITIES 1996 1995
---- ----
Proceeds from notes payable 669,714 487,790
Severance pay 12,488 3,420
Proceeds from issuance of stock 2,950,828 100,000
--------- -------
Net cash provided by
financing activities 3,633,030 591,210
--------- -------
INCREASE (DECREASE) IN CASH 915,501 (9,462)
CASH
Beginning of year 26 9,488
---- -----
End of year $ 915,527 $ 26
========== =======
Interest paid $109,519
========
Income Taxes Paid --
========
See accompanying notes to consolidated financial statements
F-7
<PAGE>
CASDIM INTERNATIONAL SYSTEMS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. General
The Company designs and develops interactive kiosks and performs network
integration.
2. Summary of Significant Accounting Policies:
This summary of significant accounting policies of CASDIM INTERNATIONAL
SYSTEMS, INC., (the Company) and its subsidiaries, CASDIM INTERACTIVE
SYSTEMS USA, INC. and CASDIM INTERACTIVE SYSTEMS, LTD., (ISRAEL), is
presented to assist in understanding the Company's financial statements.
The financial statements and notes are representations of the Company's
management, which is responsible for their integrity and objectivity.
a. Principles of consolidation - In 1995, CASDIM INTERNATIONAL SYSTEMS,
INC. issued 8,500,000 shares of stock after a 50:1 reverse stock split
to acquire 100% of CASDIM INTERACTIVE SYSTEMS USA, INC., which owns
100% of CASDIM INTERACTIVE SYSTEMS, LTD., (ISRAEL) ("CISL"). The
business combination has been accounted for using the pooling method
of accounting. The consolidated financial statements include the
accounts of the Company and its subsidiaries.
b. Foreign operations - CASDIM INTERACTIVE SYSTEMS, LTD., (ISRAEL)
maintains its accounts in nominal New Israeli Shekels ("NIS"). Certain
of the dollar amounts in the financial statements may represent the
dollar equivalent of other currencies, including the New Israeli
Shekel ("NIS"), which may not be exchangeable for dollars.
Transactions and balances denominated in dollars are presented at
their dollar amounts. Non-dollar transactions and balances are
remeasured into dollars in accordance with the principles set forth in
the Statement of Financial Accounting Standards ("FAS") No. 52,
"Foreign Currency Translation," of the Financial Accounting Standards
Board of the United States.
F-8
<PAGE>
CASDIM INTERNATIONAL SYSTEMS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Accordingly, items have been remeasured as follows:
Monetary items-at the current exchange rate at each balance sheet
date;
Nonmonetary items-at historical exchange rates;
Income and expense items-at exchange rates current as of the date of
recognition of those items (excluding depreciation and other items
deriving from nonmonetary items);
Exchange gains and losses from aforementioned remeasurement (which are
immaterial for each year) are reflected in the statements of income.
Linkage Basis - Balances which are linked to the Israeli Consumer
Price Index (the "CPI") are presented on the basis of the index at the
balance sheet date, which index is published subsequently. Balances
denominated in, or linked to, currencies other than the dollar are
presented according to the exchange rates prevailing at the balance
sheet date.
The Israeli CPI increase by 10.6% for the year ending December 31,
1996 and 8.15% in the year ending December 31, 1995.
The effects of the inflationary erosion of monetary items and interest
is included in financial income or expenses, as appropriate.
c. Fixed Assets - Fixed assets are stated at cost. Depreciation has been
calculated by the straight-line method over the estimated useful lives
of the assets.
Years
-----
Leasehold improvements 10
Motor vehicles 7
Office furniture and equipment 5-20
(mainly computers and peripheral
equipment)
Leasehold improvements are depreciated using the straightline method
over the period of each lease, not to exceed the estimated useful life
of the improvements.
F-9
<PAGE>
CASDIM INTERNATIONAL SYSTEMS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
d. Cash and Cash Equivalents - For purposes of the statement of cash
flows, the Company considers cash and cash equivalents to consist of
all cash, either on hand or in banks including time deposits, and any
highly liquid debt instruments purchased with a maturity of three
months or less.
e. Bad Debts - Uncollectible accounts receivables are charged directly
against earnings when they are determined to be uncollectible. Use of
this method does not result in a material difference from the
valuation method required by generally accepted accounting principles.
f. Comparative Statements - The comparative statements for 1995 have been
restated as if the individual companies had been combined during the
entire periods.
g. Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
h. Recognition of Income - Income deriving from long term contracts are
recognized upon percentage completion basis. At December 31, 1996 the
Company completed 83% of its $2,074,029 (NIS 6,502,080) contract with
Kupat Holim Leumit. Estimated costs and earnings in excess of billings
at December 31, 1996 amounted to $259,533 (NIS 843,743).
i. Deferred income taxes - Deferred income taxes are provided for
temporary differences between the assets and liabilities, as measured
in the financial statements, and for tax purposes at the tax rate
expected to be in force when these differences reverse, in accordance
with Statement No. 109 of the Financial Accounting Standards Board
("FASB") (Accounting for Income Taxes). Deferred income taxes are not
material to the financial statements.
j. Net Income per Share - Net income per share is computed on the
weighted shares adjusted for the issuance of shares and consolidation.
F-10
<PAGE>
CASDIM INTERNATIONAL SYSTEMS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3. Other Receivables and Prepaid Expenses
1996 1995
---- ----
Prepaid expenses $ 148,323 $ 52,103
Related parties 1,088,344 1,150,402
--------- ---------
$1,236,667 $1,202,505
========== ==========
4. Fixed Assets
Cost 1996 1995
---- ----
Leasehold improvement $ 10,168 $ 2,428
Furniture & equipment 182,719 89,325
Motor vehicles 32,474 19,974
------ ------
225,361 111,727
Accumulated depreciation 36,435 20,919
------ ------
Total $188,926 $ 90,808
========== ========
5. Patent
In January 1995, the Company acquired a pending patent No. 108935 from
CASDIM SOFTWARE SYSTEMS, LTD. for the sum of $500,000. The patent is being
depreciated using the straight-line method over the period of ten years.
6. Product Development Costs
Based on the Company's product development process, technological
feasibility is established upon completion of a working model. Costs
incurred by the Company between completion of the working model and the
point at which the product is ready for general release have been
capitalized. Total costs incurred to December 31, 1996 were $943,164.
Capitalized software costs are amortized by the greater of: (I) ratio of
current gross revenues from sales of the software to the total of current
and anticipated future gross revenues from sales of that software or (ii)
the straight-line method over the remaining estimated useful life of the
product (not greater than three years). The Company assesses the
recoverability of this intangible asset by determining whether the
amortization of the asset over its remaining life can be recovered through
undiscounted future operating cash flows from the specific product.
F-11
<PAGE>
CASDIM INTERNATIONAL SYSTEMS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
7. Accrued Severance Pay
The liability of the Company for severance pay for the employees of its
Israeli subsidiary is calculated on the basis of the latest salary paid to
its employees and the length of time they have worked for the Company.
Pursuant to Israeli law, the liability is covered by a provision in the
Company's balance sheet and amounts deposited with the severance pay funds
and insurance policies. The insurance policies are owned by CISL and have
been entered into by CISL on behalf of its individual employees. The
amounts accumulated with the insurance company are not under CISL's control
or management and are therefore not reflected in the Company's balance
sheet.
8. Capital Stock
On May 3, 1996, the Company completed a private placement of its securities
in which 4,000,000 shares of common stock were issued for $3,000,000,
before expenses of $313,210.
9. Other Payable and Accrued Liabilities
1996 1995
---- ----
Provision for taxes, net $ -- $364,520
Payroll and related amounts 49,751 17,191
Accrued expenses 12,662 8,953
Government authorities 406,942 74,753
------- ------
$469,355 $465,417
======== ========
10. Current Maturities of Debt
1996 1995
---- ----
Note payable bank, due March 31, 1997,
plus accrued interest at 17.5%
collateralized by fixed assets,
securities, notes and negotiable documents $1,344,416 $180,806
Bank overdraft, due December 31, 1996,
plus accrued interest at 20.5% -- 493,896
--------- -------
TOTAL $1,344,416 $674,702
========== ========
F-12
<PAGE>
CASDIM INTERNATIONAL SYSTEMS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
11. Stock Warrants and Stock Options
Stock Compensation Plan
Under the Company's 1996 Stock Option Plan (the "Plan"), the Company may
grant options for up to 500,000 shares of its common stock to its
employees, directors and consultants. No options have been granted to date.
Under the Plan, the exercise price of incentive stock options ("ISOs")may
not be less than 100% (or 110%, if at the time of grant the optionee owns
more than 10% of the voting stock of the Company) of the fair market value
of the shares of common stock at the date of grant. The purchase price of
each share subject to an option, or any portion thereof, which is not
designated as an IS, may not be less than 75% of the fair market of such
shares on the date of grant. The term of each option under the Plan may be
for a period of up to ten years (five years if the recipient is a 10% or
more shareholder).
Under a public relations retainer agreement (the "Agreement") with Sunrise
Financial Group Inc. ("Sunrise"), the Company agreed to issue Sunrise
options to purchase up to 700,000 shares of its common stock as
consideration for its public relations services. Of such options, 460,000
options vested as of April 24, 1996 and options to purchase 10,000 shares
of common stock vest monthly for a 24-month period, subject to the
continued provision of services by Sunrise. Options to purchase 540,000
shares of common stock had vested as of December 31, 1996. Under the
Agreement, the purchase price of each share subject to an option is $1.00.
The term of these options will expire on April 2001. The Company has
accounted for the fair value of the grant of options to Sunrise in
accordance with FASB Statement 123. The compensation cost that has been
charged against income for the options granted to Sunrise was $164,063.
Under a consulting agreement with WEDA Corporation, N.V. ("WEDA"), the
Company agreed to issue WEDA options to purchase up to 100,000 shares of
common stock at $2.25 per share as partial consideration for its consulting
services. Such options vest monthly over a two-year period and will expire
in June 2001.
Warrants
The Company issued warrants exercisable into 1,150,000 shares of common
stock in connection with its May 1996 private placement. The warrants,
which are exercisable at $1.00 per share, have been included in the
computation of fully diluted earnings per share.
F-13
<PAGE>
CASDIM INTERNATIONAL SYSTEMS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
12. Taxes on Income
CISL is subject to the income tax law (inflationary adjustments) pursuant
to which its results of operations for tax purposes are measured in real
terms in accordance with the Israeli CPI. Under the Income Tax Law
(Adjustments for Inflation) 1985, income for tax purposes is measured in
terms of earnings in NIS and adjusted for changes in the CPI. The
theoretical tax expense, assuming all income was taxed at the regular rate
applicable to an Israeli corporation and the actual tax expense is
virtually identical. Any differences are immaterial to the financial
statements taken as a whole.
CASDIM INTERNATIONAL SYSTEMS, INC. has a net operating loss carryforward in
the amount of $616,312 which will begin to expire in the year 2002.
13. Related Party Transactions
In October, 1995, the Company transferred $1,000,000 (NIS 3,000,000) to
CASDIM SOFTWARE SYSTEMS, LTD., of which US $700,000 served as advance
payment on account of the purchase and adaptation of related software
products for the "MEDICAL MULTIMEDIA KIOSK" which is expected to be sold by
December 31, 1998 to Kupat Holim Klalit, the largest H.M.O. in Israel and
US $300,000 was a short-term loan. The principal amount of the loan is
linked to the Israeli CPI. The Company also acquired a patent from the
related party. See details at Note 5.
14. Commitments and Contingent Liabilities
Lease commitment: The Company's Israeli subsidiary leases its premises
under a rental agreement which expires on December 31, 1997. The annual
rental under the lease is Adjusted NIS 225,720 (US $72,000). The rent is
linked to the US dollar.
15. Subsequent Events
In March 1997, the public relations retainer agreement with Sunrise was
terminated (see note 11). Sunrise will retain the option to purchase up to
300,000 shares of the Company's common stock. The Company has entered into
negotiations with Pelican Investments Ltd. for a similar public relations
agreement, agreeing to issue Pelican Investments Ltd. options to purchase
up to 400,000 shares of the Company's common stock.
F-14
<PAGE>
CASDIM INTERNATIONAL SYSTEMS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
In March 1997, CISL was informed by Kupat Holim Leumit, of its continued
postponement of payment of a trade account receivable owed to the Company
in the amount of approximately $300,000. The Company is currently
researching all possible remedies to correct the situation.
In March 1997, CISL entered into an agreement with Bank Hapoalim to convert
approximately $1,000,000 of short-term debt into long-term debt.
F-15
<PAGE>
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
PART III
Item 9. Directors and Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act
The Directors and Executive Officers of the Company are:
Name Position
---- --------
Yehuda Shimshon.............. Chairman of the Board, President &
CEO, and Chief Financial Officer
Ilan Mintz................... Director
Israel Shimshon.............. Director
David Tamir.................. Director
Gary P. Tober................ Secretary
Doron Leave.................. Vice President of Operations and
Director
Yehuda Shimshon, 44, Chairman of the Board, President, CEO, and Chief
Financial Officer of the Company since December 1995, began his career in the
Israeli Defense Forces and rose to the rank of Captain. Upon his discharge from
the Israel Defense Forces in 1977, he began a career as a consultant to
organizations active in international trade throughout Europe and Africa. Mr.
Shimshon became active in the field of computer research, developing and writing
programs which led to the establishment by him of Casdim Software Systems Ltd.
in 1986, an Israeli company which develops clinical laboratory management
systems ("CSS Ltd."), and Casdim Interactive Systems Ltd. in 1994, an Israeli
company and wholly-owned subsidiary of the Company which designs and develops
interactive kiosks and customized databases and performs network integration
("Casdim Israel"). Mr. Shimshon has been the Chief Executive Officer of these
companies since their inception.
Israel Shimshon, 67, a director of the Company since March 1996, has been
principally employed as the managing director of Hagadish Insurance Agency, an
Israeli general insurance agency, since 1953. Israel Shimshon is the father of
Yehuda Shimshon.
-15-
<PAGE>
Doron Leave, 43, a director of the Company since August 1996, has been the
Company's Vice President of Operations since July 1996. From September 1990 to
July 1996, Mr. Leave was employed by Bank Hapoalim Ltd., most recently as Branch
Manager of its Allenby, Tel Aviv branch. Mr. Leave holds a degree in Business
Administration from Tel Aviv University.
Ilan Mintz, 34, a director of the Company since December 1995, has been
principally employed in various executive positions with CSS Ltd. Mr. Mintz
began his employment with CSS Ltd., a company wholly owned by Mr. Shimshon, in
1990 as manager of the Customer Support and Training Division. In June 1993 he
became the director of the Marketing Division of CSS Ltd. and has served as
General Manager since January 1995.
David Tamir, 53, a director of the Company since May 1996, is currently
engaged as an independent consultant. In addition, he is currently the chief
project manager for WEDA Consultants N.V., a project consulting firm, which
provides services to the Company. From May 1992 to December 1995, Mr. Tamir was
president of Powerspectrum Technology, a majority-owned subsidiary of Geotek
Communications, Inc. ("Geotek"), a wireless communications provider. From
January 1996 to May 1996, Mr. Tamir was employed in Israel by Geotek in a
non-executive position. From 1990 until May 1992, Mr. Tamir served as a
representative of the Israeli Armament Development Authority in Washington, D.C.
Mr. Tamir was initially elected to the Company's Board of Directors as the
designee of the investors in the Company's 1996 Private Placement.
Gary P. Tober, 47, Secretary of the Company since December 1995, has been a
member of the law firm of Lane Powell Spears Lubersky of Seattle for over five
years. Mr. Tober practices in the areas of international business law, taxation,
and international investment law.
The Company's Board of Directors has appointed an audit committee
consisting of Messrs. Ilan Mintz and David Tamir.
All Directors of the Company hold office until the next Annual Meeting of
Stockholders and until their successors have been elected and qualified.
Officers serve at the pleasure of the Board of Directors. Mr. Israel Shimshon, a
director of the Company, is the father of Mr. Yehuda Shimshon, the Chairman,
President, and CEO of the Company. All of the executive officers, other than Mr.
Tober, devote their full time to the operations of the Company.
Key Employee
Dr. Adam Livny joined the Company in August 1997 as Director,
Communications Systems. Dr. Livny holds a Ph.D. degree in Electrical Engineering
from Polytechnic University of New York, a M.Sc. degree in Electrical
Engineering from Polytechnic Institute of Brooklyn, and a B.Sc. degree in
Electrical Engineering from the Technion, Israel Institute of Technology. Prior
to joining the Company, he was for over 25 years a senior research engineer with
Rafael, the Israeli governmental authority for warfare systems development.
While affiliated with Rafael, Dr. Livny served as Vice President of Development
of Carcom/Rafael from 1993 to August 1996, where he
-16-
<PAGE>
was responsible for research and development of mobile satellite communications
systems. He was engaged in the development of many advanced communications
systems while employed by Rafael. During the years 1987 through 1990, Dr. Livny
was on leave from Rafael and served as the Chief Scientist of the Israeli
Ministry of Communications.
Section 16(a) Beneficial Ownership Reporting Compliance
The Federal securities laws require directors and executive officers, and
persons who own more than 10% of Casdim's Common Stock to file with the
Securities and Exchange Commission initial reports of ownership and reports of
changes of ownership of any equity securities of the Company. To Casdim's
knowledge, based solely on review of the copies of such reports furnished to it
and representations that no other reports were required, all persons subject to
these reporting requirements filed the required reports on a timely basis in
1996 except: (i) Yehuda Shimshon did not timely file initial filings on Schedule
13-G and Form 3, (ii) Cedarwood Trading & Investments Ltd. did not timely file
an initial filing on Schedule 13-G, (iii) Doron Leave did not timely file an
initial filing on Form 3, (iv) David Tamir did not timely file an initial filing
on Form 3, (v) Ilan Mintz did not timely file an initial filing on Form 3, (vi)
Israel Shimshon did not timely file an initial filing on Form 3, and (vii) Gary
Tober did not timely file an initial filing on Form 3.
-17-
<PAGE>
Item 10. Executive Compensation
The following table sets forth information concerning the total
compensation for the Company's Chief Executive Officer in 1996. During the three
years ended December 31, 1996, no other executive officer received compensation
in excess of $100,000. During the three years ending December 31, 1996, the
Company's Chief Executive Officer did not receive any restricted stock award,
stock appreciation right or payment under any long-term incentive plan.
SUMMARY COMPENSATION TABLE
Long-Term
Annual Compensation
Compensation Securities Underlying
Name and Principal Position Year Salary($) Options(#)
- --------------------------- ---- --------- ----------
Yehuda Shimshon,
President and CEO 1996 $240,000(1) --
President and CEO 1995 -- --
(effective 12/11/95)
1994 -- --
- ---------
(1) The aggregate value of all other perquisites and other personal benefits
furnished to Mr. Shimshon was less than 10% of such officer's salary. This
amount does not include Mr. Shimson's use of an apartment leased by the
Company when he is in New York.
There are currently no employment agreements between the Company and any of
its executive officers. The Company did not pay any Directors fees in 1996.
STOCK OPTIONS
In 1996 the Chief Executive Officer named above in the Summary Compensation
Table was not granted any option, nor did he hold any options or stock
appreciation rights.
-18-
<PAGE>
Item 11. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth as of March 28, 1997, certain information
regarding the Company's Common Stock for each person known by the Company to be
the beneficial owner of more than 5% of the outstanding shares of the Company's
Common Stock, (ii) by each executive officer named in Item 10 hereof, (iii) by
each of the Company's Directors (iv) by all the executive officers and Directors
of the Company as a group:
Amount of Percent
Name and Address(1) Beneficial Ownership of Class
- ------------------- -------------------- --------
Yehuda Shimshon 8,250,000(2) 58.4%
Cedarwood Trading & Investment Ltd. 4,250,000 30.1%
Doron Leave -- --
Israel Shimshon -- --
Ilan Mintz -- --
David Tamir 29,162(3) --
All Executive Officers and Directors
as a group (5 persons) 8,279,162(3) 58.5%
- ---------
(1) The address of Messrs. Israel Shimshon, Yehuda Shimshon, Ilan Mintz, David
Tamir and Doron Leave is 5 Haofan Street, Kiryat-Arie, P.O. Box 3599, Petah
Tikva, Israel 49130. The address for Cedarwood is c/o Bank of Bermuda, 6
Front Street, Hamilton HM 11, Bermuda.
(2) Includes 4,250,000 shares held by Cedarwood, in which entity Mr. Yehuda
Shimshon has a controlling beneficial interest. Accordingly, he is deemed
to be the beneficial owner of such shares.
(3) Includes 29,162 shares of common stock issuable upon the exercise of
warrants held by WEDA Consultants, N.V., a company with which Mr. Tamir is
affiliated.
-19-
<PAGE>
Item 12. Certain Relationships and Related Transactions
In October 1995, Casdim Israel entered into an agreement with CSS Ltd., a
company wholly owned by Yehuda Shimshon. Pursuant to this agreement, Casdim
Israel paid CSS Ltd. $700,000 for services and products to be supplied by CSS
Ltd. to the Company. These products and services included: (i) adaptation of the
Scope(TM) LIS system operating in the 140 laboratories of Kupat Holim Klalit
("Kupat Holim") to work with the medical kiosk; (ii) development and
implementation of a central data base for laboratory test results; (iii)
implementation of the "Laboratory Test Results Central Data Base" to work with
the 140 laboratories and 400 clinics of Kupat Holim; and (iv) communication
software and adaptation of various interfaces between CSS Ltd. and Casdim
Israel's products. The agreement also provided that in the event Kupat Holim or
other companies purchased the above-mentioned products from CSS Ltd., the
proceeds, up to the sum of $700,000 would be repaid to Casdim Israel. To date,
CSS Ltd. has paid Casdim Israel $50,000.
In October 1995, Casdim Israel loaned CSS Ltd. $300,000 at a rate of
interest linked to the Israeli CPI, which loan was repaid in 1996. In January
1995, Casdim Israel purchased a pending patent from CSS Ltd. relating to the
medical multi-media kiosks for the sum of $500,000.
On November 21, 1995 the Company entered into an agreement with Casdim USA
and Mr. Yehuda Shimshon. Mr. Shimshon acted on behalf of himself and Cedarwood,
the then sole shareholders of Casdim USA. Pursuant to the terms of the Exchange
Agreement, the Company acquired all the issued and outstanding shares of Casdim
USA in exchange for 425,000,000 shares of the Company. The Exchange Agreement,
which became effective on December 11, 1995, was approved at a special meeting
of the shareholders of the Company held on October 24, 1995 at which the
shareholders also approved: (i) renaming the Company Casdim International
Systems, Inc.; (ii) the 50:1 stock split of 76,700,000 shares, the then
outstanding number of shares of the Company, into 1,534,000 shares; (iii) the
relocation of the Company's headquarters from Colorado to Nevada; and (iv) the
appointment of Mr. Shimshon as President and Chairman of the Board. As of
December 31, 1996, the Company had 14,134,001 shares of common stock
outstanding, of which 58.5% was owned by Mr. Shimshon and Cedarwood, a company
in which he holds a controlling interest. At the time of the exchange, Mr.
Shimshon and Cedarwood were each 50% shareholders of Casdim USA.
Under a public relations retainer agreement with Sunrise Financial Group
Inc. ("Sunrise"), the Company agreed to issue Sunrise options to purchase up to
700,000 shares of its common stock at a price of $1.00 per share as
consideration for its public relations services. Of such options, 460,000
options vested as of April 24, 1996 and options to purchase 10,000 shares of
common stock were to vest monthly for a 24-month period, subject to the
continued provision of services by Sunrise. In March 1997, the public relations
retainer agreement with Sunrise was terminated. Sunrise will retain the option
to purchase up to 300,000 shares of the Company's common stock.
-20-
<PAGE>
In July 1996 the Company entered into a one year consulting agreement with
WEDA Consultants N.V., a project consulting firm, with which firm Mr. Tamir is
employed as a chief project manager. Under the terms of the consulting
agreement, WEDA receives a monthly retainer of $10,000 and has been granted
options to purchase 100,000 shares of common stock, which vest ratably over two
years, beginning on the first anniversary of the grant. Mr. Tamir was originally
elected to the Board of Directors as the designee of the investors in the
Company's 1996 Private Placement.
Item 13. Exhibits, List and Reports on Form 8-K
(a) Exhibits
*2 Agreement for the Exchange of Stock and Reorganization.
*3.1 Articles of Incorporation as amended on December 6, 1995.
**3.2 By-laws.
*10.1 Software Adaptation Services Agreement dated January 10, 1995
between the Company and CSS Ltd.
*10.2 Short-term Loan Agreement dated February 10, 1995 between the
Company and CSS Ltd.
*10.3 Patent Assignment Agreement dated January 10, 1995 between the
Company and CSS Ltd.
10.4 Alpha/Beta Test Agreement between the Company and Ramada
Franchise Systems, Inc.
*21 Subsidiaries of the Company.
(b) Reports on Form 8-K filed during the last quarter of the period covered by
this report:
The Company's Report on Form 8-K, filed with the Securities and
Exchange Commission on September 16, 1996, is hereby incorporated by
reference.
- ----------------
* Incorporated by reference to the Company's Annual Report on Form
10-KSB for the year ended December 31, 1995.
** Incorporated by reference to the Company's Annual Report on Form 10-K
for the year ended December 31, 1994.
-21-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized on March 30, 1997.
CASDIM INTERNATIONAL SYSTEMS, INC.
/s/Yehuda Shimshon
------------------
Yehuda Shimshon
Chairman of the Board, President, CEO
and Chief Financial Officer
In accordance with the Securities Exchange Act of 1934, this Report has
been signed below on March 30, 1997 by the following persons on behalf of the
Company and in the capacities indicated.
Name Title
/s/Yehuda Shimshon
- ------------------
Yehuda Shimshon Chairman of the Board, President, CEO and Chief
Financial Officer
/s/Doron Leave Director
--------------
Doron Leave
/s/Ilan Mintz
- -------------
Ilan Mintz Director
/s/Israel Shimshon
- ------------------
Israel Shimshon Director
/s/David Tamir
- --------------
David Tamir Director
-22-
<PAGE>
Exhibit No. Description Page No.
* 2 Agreement for the Exchange of Stock and Reorganization.
* 3.1 Articles of Incorporation as amended on December 6, 1995.
* 3.2 By-laws.
* 10.1 Software Adaptation Services Agreement dated January 10,
1995 between the Company and CSS Ltd.
** 10.2 Short-term Loan Agreement dated February 10, 1995 between the
Company and CSS Ltd.
* 10.3 Patent Assignment Agreement dated January 10, 1995 between
the Company and CSS Ltd.
10.4 Alpha/Beta Test Agreement between the Company and Ramada
Franchise Systems, Inc.
* 21 Subsidiaries of the Company.
- -----------
* Incorporated by reference to the Company's Annual Report on Form 10-KSB for
the year ended December 31, 1995.
** Incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 1994.
EXHIBIT 10.4
ALPHA/BETA TEST AGREEMENT
AGREEMENT dated as of March 20, 1997 by and between Casdim International
Systems, Inc., a Colorado corporation with a principal office at 90 Park Avenue,
New York, New York ("Casdim"), and Ramada Franchise Systems, Inc, a Delaware
corporation with an office at 339 Jefferson Road, Parsippany, NJ 07054 ("RFS").
*****
In the consideration of the mutual agreements and covenants herein, the parties
agree as follows:
1. Recitals
Casdim is in the business of developing, manufacturing, marketing and
distributing multi-media, electronic information products. RFS is the franchisor
of the Ramada guest lodging facility system ("Systems"). RFS desires to have
developed for placement, on a test basis, in certain lodging facilities operated
by its franchisees ("Test Facilities") interactive, electronic kiosks ("Kiosks")
and pay-per-use information systems ("PPU's"), with the intention of promoting
the installation of Kiosks and PPU's throughout the System (the "Project").
Casdim is willing to develop and install Kiosks and PPU's in the Test
Facilities.
2. CASDIM's Duties
(a) CASDIM will work with RFS to establish, not later than April 30, 1997,
mutually acceptable specifications for the services and in-room content
offered by the Kiosks and PPU's the "specifications."
(b) CASDIM, at its own cost, shall undertake to develop Kiosks and PPU's with
the specifications.
(c) CASDIM, at its own cost, shall provide all hardware and software necessary
to operate the Kiosks and the PPU, and shall install such number of Kiosks
and PPU units as the parties shall mutually determine is sufficient for a
valid test at the selected Alpha Test Sites. For purposes of the testing
phase, there shall be no requirement that RFS or any franchisee modify any
applicable CRS nor an interface between the CRS and the PMS. The Kiosks and
the PPU shall be installed and operational at the Alpha Test Sites in or
about June, 1997 with the Alpha Test completed no later than July 31, 1997.
(d) If both parties agree that the Alpha Test was successful and meet their
needs, CASDIM, at its own cost, shall provide hardware and software
necessary to operate Kiosks and PPU's, and shall install such number of
Kiosks and PPU units as the parties shall mutually determine is sufficient
for a valid test at the Beta Test Sites. The Kiosks and PPU's shall be
installed and operational at the Beta Test Sites in or about September 1997
with the Beta Test completed no later than March 31, 1998.
-1-
<PAGE>
(e) Casdim agrees to leave the cabling and infrastructure at test hotels in the
same condition as when the project began.
3. RFS' Duties
(a) RFS shall select three alpha test sites and nine beta test sites, subject
to the approval of CASDIM, for installation of Kiosk's and PPU's.
(b) RFS shall act as a facilitator at each test site conducting
pre-installation property approval, television hardware inventory,
providing checklists of services and participating on a project development
team, led by CASDIM.
(c) RFS shall provide to CASDIM all relevant technical and market data and use
its best reasonable efforts to promote the success of the Project.
(D) RFS shall cause the Test Facilities to promote and advertise the Kiosks and
PPU's in the Test Facilities, specifically: tent cards, counter cards on
property, directory coverage, reservation center promotion and promotions
to RBC members.
4. Full Systems Implementation:
If both parties determine that the Kiosks and PPU's installed at the Alpha and
Best Test Sites comply with the Specifications and meet their needs, they shall
use their best reasonable efforts to enter into an agreement for full system
implementation that shall include the following:
(a) CASDIM shall, as an independent contractor, manufacture, install and
maintain Kiosks and PPU's in participating RFS franchised facilities
("Participating Facilities") at no charge to RFS or the Participating
Facility.
(b) RFS shall assist in establishing specifications, provide technical
interface with its system, shall market to the franchised facilities, the
Kiosks and PPU's and sell advertising in connection with Kiosks and PPU's.
RFS shall, directly or indirectly, use reasonable efforts to encourage the
franchised facilities to have Kiosks and PPU's installed and maintained at
their facilities by CASDIM and to maximize revenue from Kiosks and PPU's.
RFS shall provide to CASDIM a target list of qualifying facilities. CASDIM
recognizes and acknowledges that the franchised facilities are individually
owned and operated and that RFS can recommend, but not compel, their
participation in this program.
(c) RFS shall exclusively recommend CASDIM to the franchised facilities for the
installation of electronic kiosks and Pay-Per-Use systems if certain
mutually agreed criteria are satisfied. No other provider of Pay Per Use
information and transactional services shall be recommended or supported by
RFS.
(d) RFS shall specify PMS interfaces to its subsidiaries PMS suppliers to
interface with Kiosks and PPU's as necessary.
(e) RFS shall use its reasonable efforts to encourage its preferred vendors to
advertise in the Kiosks and PPU's. If mutually agreed by the parties,
participating preferred vendors will receive discounts from CASDIM's
standard advertising rates.
-2-
<PAGE>
(f) A commission structure and revenue sharing formula for advertising and
other revenue shall be developed that is mutually acceptable to the
parties.
(g) CASDIM shall install and maintain Kiosks and PPU's in RFS' Participating
Facilities on a priority basis vis-a-vis other lodging providers.
5. Inventions, Proprietary Information and Rights, and Confidentiality.
(a) Inventions and Proprietary Rights. All inventions, know-how, technology,
technical designs, technical data, manufacturing processes, quality control
techniques and tests, operating techniques and methods, engineering
designs, apparatus and ideas of a technical nature which result therefrom
or are embraced therein or relate thereto, whether or not reduced to
writing and whether patentable or unpatentable, improvements thereof or
developments in respect thereto, together with all expertise owned,
possessed by or in respect of which CASDIM has the right to grant licenses
or rights at any time during the term of this Agreement relating to Kiosks
or PPU's ("Technology") and conceived or first reduced to practice, as that
term is used before the U.S. Patent and Trademark Office, in the
development of Kiosks or PPU's, whether prior or subsequent to the date of
this Agreement, shall be the sole and exclusive property of CASDIM, and
CASDIM shall retain any and all rights to file any patent applications
thereon.
(b) Proprietary Information and Confidentiality.
(i) CASDIM and RFS agree that any proprietary information which is
furnished by either party relating to the Project will be maintained
by the receiving party in confidence during the term of this
Agreement, and for five (5) years following termination of this
agreement, to the same extent that the receiving party protects its
own proprietary information. The receiving party shall use the
proprietary information only for the purposes set forth herein and
shall not assign, transfer or disclose it outside of its organization
or System except to its attorneys, accountants, or other consultants
on a need to know basis. The receiving party shall not disclose such
proprietary information to any party without a need to know or to any
party who is not subject of a non-disclosure agreement with the
receiving party.
(ii) During the term of this Agreement, neither party shall be under
any obligation to maintain in confidence any portion of the
received information which:
(1) is now or which hereafter, becomes generally known or
available through no fault of the receiving party;
(2) is known at the time of receiving such information:
(3) is furnished to others by the disclosing party without
restriction upon disclosure; or
(4) is hereafter furnished to the receiving party, by a third
party, as a matter of right and without restriction of
disclosure.
-3-
<PAGE>
(5) is subpoenaed or otherwise demanded by a court of law or
similar tribunal provided that the receiving party provides
timely notification to the disclosing party and makes any
reasonable efforts required by the disclosing party to
protect the confidentiality of such information including,
without limitation, obtaining a protective order for such
information.
(c) Return of Papers Each party shall promptly, whenever required by the other,
deliver all documents, papers, and records which may have been prepared by
or have come into such party's possession in the course of the Project
which contain proprietary information and such party shall not be entitled
to or shall retain any copies thereof.
(d) Fairness The parties hereto agree and acknowledge that the restrictions set
forth in this Section 5 hereof are the result of arm's length bargaining,
are fair and reasonable, and are reasonably required for the protection of
the interests of the parties.
6. The term of this Agreement shall be from the date first set forth above
until the parties have completed their obligations hereunder or December
31, 2001, which ever occurs first.
7. Miscellaneous
(a) Binding Effect This Agreement will inure to the benefit of and shall be
binding upon the parties hereto, their successors and permitted assigns.
(b) Entire Agreement This Agreement contains the entire agreement and
understanding of the parties with respect to the subject matter hereof,
supersedes all prior agreements and understandings with respect thereto and
cannot be modified, amended, waived or terminated, in whole or in part,
except in writing signed by the party to be charged.
(c) Construction While the parties hereto believe that the terms hereof are
fair, reasonable and enforceable in all respects, it is agreed that any
provision of this Agreement which is held to be prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective to the
extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability
in any jurisdiction shall not invalidate or render unenforceable such
provision in any other jurisdiction.
(d) Assignment This Agreement may not be assigned by a party without the prior
written consent of the other and any purported assignment hereof in
violation of this provision shall be null and void.
(e) Governing Law and Venue This Agreement shall be governed by and construed
in accordance with the internal laws of the State of New York without
reference to the conflict of laws provisions thereof.
Each party irrevocably consents to the jurisdiction of the courts of the State
of New York and of any Federal court located in such State in connection with
any action, suit or other proceeding arising out of or relating to this
Agreement or any act taken or omitted hereunder and waives and agrees not to
assert in any such action, suit or other proceeding that it is not personally
subject to the jurisdiction of such courts, that the action, suit or other
proceeding is brought in an inconvenient forum or that the venue of the action,
suit or other proceeding is improper.
-4-
<PAGE>
(f) Independent Contractors The parties are independent contractors and neither
party shall have authority bind the other to any obligation.
(g) Survival The provisions of Sections 5 and this Section 7 shall survive any
termination of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
CASDIM INTERNATIONAL RAMADA FRANCHISE
SYSTEMS, INC. SYSTEMS, INC.
By: /s/Yehuda Shimshon By: /s/W. Scott, Jr.
------------------- ----------------
-5-
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