U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
X Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the quarterly period ended June 30, 1997.
__ Transition report under Section 13 or 15(d) of the Exchange Act for the
transition period from to
Commission file number: 00-21219
CASDIM INTERNATIONAL SYSTEMS, INC.
(Exact Name of Small Business Issuer as Specified in Its Charter)
Delaware 83-0288100
(State of Incorporation) (I.R.S. Employer Identification No.)
150 East 58th Street
New York, New York 10155
(Address of Principal Executive Offices)
(212) 829-1700
Fax: (212) 829-1705
(Issuer's Telephone Number, Including Area Code)
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
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 (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
As of June 30, 1997, the Issuer had 15,334,001 shares of Common Stock, par value
$0.01, outstanding.
Transitional Small Business Disclosure Format (check one): Yes__ No X
<PAGE>
CASDIM INTERNATIONAL SYSTEMS, INC.
INDEX
Page
----
Part I - Financial Information:
Item 1. Financial Statements
Consolidated balance sheets at June 30, 1997 and December 31, 1996.......3
Consolidated statements of income for the three and six months
ended June 30, 1997 and 1996....................................4
Consolidated statements of cash flows for the six months
ended June 30, 1997 and 1996....................................5
Notes to unaudited consolidated financial statements..................6-13
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................14
Part II - Other Information:
Item 4. Submission of Matters to a Vote of Shareholders................18
Item 6. Exhibits and Reports on Form 8-K...............................18
Signatures.................................................................19
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<PAGE>
CASDIM INTERNATIONAL SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
---- ----
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash............................................................ $ 996,230 $ 915,527
Accounts receivable
Trade - Note 8......................................... 309,660 438,807
Related Parties........................................ 830,506 834,144
Other.................................................. 249,081 254,200
Prepaid expenses .............................................. 337,890 148,323
Investments..................................................... 90,000 173,596
------------ ------------
2,813,367 2,764,597
PROPERTY AND EQUIPMENT
Property and equipment.......................................... 271,268 225,361
Less accumulated depreciation................................... ( 73,006) ( 36,435)
------------ -------------
198,262 118,926
OTHER ASSETS
Deposits........................................................ 55,893 10,200
Start-up and organization costs, net............................ 45,096 48,304
Patent, net - Note 3............................................ 375,000 400,000
Product development costs - Note 4.............................. 1,419,056 943,164
------------ ------------
Total..................................................... $4,906,674 $4,355,191
============ ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable
Trade.................................................. $ 188,375 $ 52,675
Other-Note 13.......................................... 430,091 469,355
Current maturities of debt...................................... 200,400 --
Notes payable................................................... 795,318 1,344,416
------------ ----------
1,614,184 1,866,446
LONG-TERM DEBT
Accrued severance pay - Note 5.................................. 25,474 25,474
Long term bank debt - Note 9.................................... 750,150 --
STOCKHOLDERS' EQUITY - Notes
Common stock, $.01 par value, 30,000,000
shares authorized 15,334,001 shares issued and
outstanding, 285,000 shares held as treasury stock............. 169,590 985
Additional paid in capital...................................... 4,873,057 3,145,268
Less treasury stock (cost)...................................... ( 1,425) ( 1,425)
Gain (loss) from foreign currency translation. ................. -- ( 51,860)
Retained earnings (deficit)..................................... (2,524,356) ( 629,697)
------------ -------------
Total shareholders' equity..................... $2,516,866 $ 2,463,271
------------ -----------
Total liabilities and shareholders' equity. $ 4,906,674 $ 4,355,191
============ ============
</TABLE>
See accompanying notes to the consolidated financial statements.
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<PAGE>
CASDIM INTERNATIONAL SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Three Months Six Months Six Months
Ended June 30, Ended June 30, Ended June 30, Ended June 30,
1997 1996 1997 1996
------ ------ ------ -----
<S> <C> <C> <C> <C>
Sales........................................ $24,460 $ 9,027 $31,455 $ 262,034
Cost of sales................................ 32,251 24,243 32,251 56,028
-------- ---------- ------ ----------
Gross profit................................. (7,791) (15,216) (806) 206,006
Selling, general and adminis-
trative expenses.......................... 1,477,051 477,454 1,962,543 591,443
--------- --------- --------- ----------
(Loss) from operations (1,484,842) (492,670) (1,963,349) (385,437)
Other income (expense)
Interest income......................... 11,708 9,211 17,536 9,211
Interest expense........................ (20,173) (16,097) (42,389) (34,807)
Gain (loss) from sale of
investments........................... -- -- 145,402 --
----------- --------- --------- ---------
Total....................... (9,005) (6,886) 120,549 (25,596)
-------- ------- ------- ------
(Loss) from operations
before taxes............................. (1,493,847) (499,556) (1,842,800) (411,033)
Income tax (expense) benefit................. -- 33,185 -- --
----------- ----------- ---------- ----------
Net (loss)................................... $(1,493,847) $(466,371) $(1,842,800) $(411,033)
=========== ========= ============ ==========
Net (loss) per share of
common stock............................. $(.0974) $ (.0394) $ (.1202) $ (.0363)
======== ========= ========= ========
Net (loss) per share of
common stock on a fully
diluted basis............................ $(.0932) $ (.0348) $ (.1149) $ (.0358)
======== ========= ========= ========
Weighted average number of
outstanding shares....................... 14,635,099 13,813,541 14,334,497 12,384,969
========== ========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE>
CASDIM INTERNATIONAL SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
---- ----
(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)............................................ $(1,842,800) $(443,285)
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization........................ 64,779 50,239
Stock option compensation............................ -- 164,063
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable - trade.......................... 129,147 (209,323)
Accounts receivable - other.......................... (180,810) 99,729
(Decrease) increase in:
Accounts payable - trade............................. 135,700 134,859
Accounts payable - other............................. (39,264) 13,882
--------- --------
Net cash provided (used) by
operating activities........................ (1,733,248) (189,836)
---------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payment for product development costs......................... -- (27,500)
Purchase of property and equipment............................ (45,907) (42,170)
Sale of investments -net...................................... 83,596 --
Payment of security deposit................................... (45,693) (10,200)
Payment for product development costs...................... (475,892) --
-------- --------
Net cash used in investing activities...... (483,896) (79,870)
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment on short term debt.................................... 401,452 280,193
Severance pay................................................. -- 22,961
Proceeds from issuance of stock............................... 1,896,395 2,688,079
--------- ---------
Net cash provided (used) by
financing activities........................ 2,297,847 2,991,233
--------- ---------
NET INCREASE IN CASH................................................... 80,703 2,721,527
CASH:
Beginning of period........................................... 915,527 26
-------- ---------
End of period................................................. $ 996,230 $2,721,533
========= ==========
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE>
CASDIM INTERNATIONAL SYSTEMS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying financial information is unaudited, but, in the opinion of
management, reflects all adjustments (which include only normally recurring
adjustments) necessary to present fairly the Company's financial position,
operating results and cash flows for the periods presented. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to the rules and
regulations of the Securities and Exchange Commission. The financial
information should be read in conjunction with the audited financial
statements and notes thereto for the year ended December 31, 1996 included
in the Company's Annual Report on Form 10-KSB filed with the Securities and
Exchange Commission. The results of operations for the three- and six-month
periods ended June 30, 1997 are not necessarily indicative of the results
to be expected for the full year.
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. ("Casdim USA") and CASDIM INTERACTIVE SYSTEMS, LTD.,
(ISRAEL) ("CISL"), 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, the Company issued 8,500,000
shares of stock after a 50:1 reverse stock split to acquire 100% of
the voting and equity shares of Casdim USA, which owns 100% of the
voting and equity shares of 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 - CISL 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 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 ("FASB").
Accordingly, certain items relating to the Company's Israel subsidiary
have been remeasured as follows:
Monetary items-at the current exchange rate at each balance sheet
date;
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<PAGE>
CASDIM INTERNATIONAL SYSTEMS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
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 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 (mainly
computers and peripheral equipment) 5-20
Leasehold improvements are depreciated using the straight-line method
over the period of each lease, not to exceed the estimated useful life
of the improvements.
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.
-7-
<PAGE>
CASDIM INTERNATIONAL SYSTEMS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
f. 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.
3. 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.
4. 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 model the product is ready for general release have been
capitalized. Total costs incurred to June 30, 1997 were $1,419,056. The
costs were principally incurred in the development of the Company's IOD
information on demand project for Ramada Franchise Systems, Inc.
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
anticipated future gross revenue 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.
5. 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-
<PAGE>
CASDIM INTERNATIONAL SYSTEMS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
6. Capital Stock
On May 22, 1997 the Company completed a private placement of its securities
in which 1,200,000 shares of common stock were issued for $1,500,000.
7. Stock Warrants and Stock Options
Stock Compensation Plans
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 ISO, 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 stockholder).
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 were to 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.
In February 1997 the "Agreement" with Sunrise was terminated. The parties
agreed that Sunrise would retain options to purchase up to 300,000 shares
of the Company's common stock.
In April 1997, the Company entered into an agreement with Pelican
Consultants U.S.A., Inc. ("Pelican") to provide financial consulting and
financial relations services to the Company. The Company agreed to issue
Pelican options to purchase up to 200,000 shares of the Company's common
stock at a purchase price of $1.00 per share. Of such options, 100,000
options vested as of April 11, 1997 and options to purchase the remaining
shares will vest ratably over the next 12-month period beginning May 11,
1997, subject to the continued provision of services by Pelican.
The Company has accounted for the fair value of the grant of options to
Sunrise and Pelican in accordance with FASB Statement 123. The compensation
costs that has been charged against income for the options granted to
Sunrise and to Pelican was $164,063.
-9-
<PAGE>
CASDIM INTERNATIONAL SYSTEMS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Warrants
The Company issued warrants exercisable into 1,150,000 shares of common
stock in connection with its May 1996 private placement. The Company issued
additional warrants exercisable into 200,000 shares of common stock in
connection with its May 22, 1997 private placement. All of such warrants,
which are exercisable at $1.00 per share, have been included in the
computation of fully diluted earnings per share. As of June 30, 1997,
500,000 of such warrants have been exercised and there remain 850,000
warrants available to be exercised.
8. Accounts Receivable
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 has also been informed
by Kupat Holim Leumit that a change in senior management is currently being
contemplated. The Company is continuing to evaluate the collectibility of
this account.
9. Long Term Bank Debt
On March 3, 1997, CISL converted $950,550 of short-term debt into long-term
debt. The terms of the refinancing call for payments of principal and
interest at a 7.75% annual interest rate.
The following is a schedule of principal payments:
1997 $ 200,400
1998 200,400
1999 200,400
2000 200,400
2001 148,950
----------
$ 950,550
Current Maturities ( 200,400)
----------
Long Term Debt $ 750,150
==========
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<PAGE>
CASDIM INTERNATIONAL SYSTEMS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
10. Recent Accounting Pronouncement
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128 ("FAS 128") "Earnings Per Share."
This statement is effective for the Company's quarter ending December 31,
1997. The Statement redefines earnings per share under generally accepted
accounting principles. Under the new standard, primary earnings per share
is replaced by basic earnings per share and fully diluted earnings per
share is replaced by diluted earnings per share.
The unaudited pro forma basic and diluted earnings per share for the six
months ended June 30, 1997 and 1996 computed in accordance with FAS 128 are
as follows:
Six Months Six Months
Ended Ended
June 30, June 30,
1997 1996
---- ----
Basic (loss) per share...................... $( .1105) $( .0334)
========= =========
Diluted (loss) per share.................... $( .1095) $( .0317)
========= =========
11. Statement of Cash Flows
Supplemental Information:
-------------------------
Six Six
Months Months
Ended Ended
June 30, June 30,
1997 1996
-------------- ---------
Interest paid $ 42,389 $ 34,807
======== ========
Income taxes paid $ -0- $ -0-
====== =====
-11-
<PAGE>
CASDIM INTERNATIONAL SYSTEMS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
12. Segment Reporting-Foreign Operations
Included in the consolidated financial statements is the following
financial information relating to the company's wholly owned foreign
subsidiary, Casdim Interactive Systems, Ltd. ("CISL").
BALANCE SHEET as of JUNE 30, 1997.
ASSETS
Cash $ 2,805
Accounts receivable - trade 309,660
Accounts receivable - related parties 830,506
Prepaid expenses 337,890
Property and equipment - net 129,502
Patent - net 375,000
-------------
Total $ 1,985,363
===========
LIABILITIES AND SHAREHOLDERS EQUITY
Notes payable $ 995,718
Accounts payable 91,949
Other payables 430,091
Long term debt 750,150
Accrued severance pay - net 25,474
Capital stock 35
Retained earnings (deficit) ( 308,054)
-------------
Total $ 1,985,363
===========
INCOME STATEMENT FOR THE SIX MONTHS ENDED JUNE 30, 1997
Sales $ 31,445
Cost of sales 32,251
--------------
Gross profit ( 806)
Sales, administrative and general expenses 341,187
-------------
Operating (loss) ( 341,993)
Interest expense 42,389
-------------
Net (loss) $ (384,382)
============
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<PAGE>
CASDIM INTERNATIONAL SYSTEMS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
13. Other Payables
Included in other payables are the following:
<TABLE>
<CAPTION>
June 30, 1997 December 31, 1996
------------- -----------------
<S> <C> <C>
Accrued payroll $ 41,152 $ 49,751
Accrued expenses 8,927 12,662
Income taxes payable to the State of Israel 380,012 406,942
------------ ------------
$ 430,091 $ 469,355
=========== ===========
</TABLE>
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<PAGE>
Management's Discussion and Analysis of Financial Condition
and Results of Operations
The discussion and analysis which follows in this Quarterly Report and in
other reports and documents of the Company and oral statements made on behalf of
the Company by its management and others may contain trend analysis and other
forward-looking statements within the meaning of Section 21E of the Securities
Exchange Act of 1934 which reflect the Company's current views with respect to
future events and financial results. These include statements regarding the
Company's earnings, growth and expansion plans, forecasts and similar matters
which are not historical facts. The Company reminds stockholders that
forward-looking statements are merely predictions and therefore are inherently
subject to uncertainties and other factors which could cause the actual future
events or results to differ materially from those described in the forward
looking statements. These uncertainties and other factors include, among other
things, the Company's ability to generate increased sales; competitive factors;
the Company's ability to obtain additional financing; the Company's ability to
complete and subsequently obtain revenues from its new projects (see
"Developments in 1997"); and technological difficulties and resource constraints
encountered in developing new products. The forward-looking statements contained
in this Quarterly Report should be considered in light of these factors.
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.
Developments in 1997
The Company and Dick Clark International Cable Ventures Ltd. ("Dick Clark
Ventures") have agreed to enter into a joint venture, to be known as Technology
Transfer Corporation, 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 has agreed to contribute
$500,000 to the joint venture which will design, install and operate an advanced
communications platform based on the satellite platform. To date, the Company
expended approximately $367,000 in connection with this project. 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 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"). The IOD System incorporates interactive TV,
Internet, video-on-demand, E-mail, and a club member facility. The IOD System is
-14-
<PAGE>
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.
Results of Operations
Quarter Ended June 30, 1997 Compared to Quarter Ended June 30, 1996.
Kiosk and associated sales by the Company's wholly owned Israeli subsidiary
increased to $24,460 during the quarter ended June 30, 1997 from $9,027 in the
comparable 1996 quarter. The Company expects that the revenues of its Israeli
subsidiary will increase to a limited degree during the remainder of 1997 as a
result of its right to install interactive multimedia informational and
transactional kiosks at Ben Gurion Airport and its obtaining exclusive rights
from an Israeli insurance company to sell insurance products through kiosks at
the Ben Gurion Airport. The Company is developing software to allow Israeli
citizens to purchase insurance prior to their departing Israel for trips abroad.
In the second quarter of 1997, the Company's costs of sales increased to
$32,251 from $24,243 in the 1996 second quarter. As a result of its limited
sales , the Company had a negative gross profit for the 1997 second quarter of
$7,791 compared to a negative gross profit of $15,216 in the 1996 second
quarter. The Company expects its gross margins to vary in the future depending
on the nature and volume of its revenues.
Selling, general and administrative expenses increased to $1,477,051 in the
1997 second quarter from $477,454 in the 1996 second quarter, due primarily to
the increased marketing costs associated with the Company's efforts to penetrate
the North American market and costs associated with the maintenance of executive
offices in New York City. 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 the introduction of its IOD System and
the establishment of the joint venture with Dick Clark Ventures.
In the second quarter of 1997 the Company capitalized approximately
$213,000 of product development costs, principally relating to the IOD System.
The Company did not capitalize any such costs in the 1996 period.
During the 1997 second quarter, the Company had other expenses of $9,005 as
compared to other expenses of $6,886 in the 1996 second quarter. In the 1997
second quarter, the Company was able to offset increased interest expenses with
interest income from the investment of the remaining proceeds
-15-
<PAGE>
of its May 1996 and May 1997 private placements. The Company expects that its
net interest expenses will increase during the remainder of 1997.
For the quarter ended June 30, 1997, the Company had a loss from operations
of $1,493,847 as compared to a loss from operations of $499,556 in the 1996
comparable quarter. The Company's operating loss in the 1997 second was due
primarily to the substantial increase in the Company's selling, general and
administrative expenses and its low level of sales. The Company expects to
continue to incur losses during the remainder of 1997, but has begun to
institute a program to curb expenses in order to reduce the level of such loss.
In the quarter ended June 30, 1997 the Company was not required to pay any
income taxes as a result of its operating loss while in the comparable period in
1996, it received a tax benefit of $33,185.
As a result of the foregoing, the Company's net loss was $1,493,847 or
$.0974 per share for the quarter ended June 30, 1997 as compared to a net loss
of $466,371 or $.0394 per share for the quarter ended June 30, 1996.
Six Months Ended June 30, 1997 Compared with Six Months Ended June 30, 1996
Product sales decreased to $31,445 during the six-month period ended June
30, 1997 from $262,034 during the comparable period in 1996. The decrease in
sales was principally attributable to the Company's decision to emphasize the
leasing of kiosks rather than their sale and its inability to generate
substantial revenues from either sales or leasing.
Cost of sales decreased to $32,251 in the 1997 period from $56,028 in the
1996 six-month period, principally as a result of the Company's lower level of
sales. As a result of the foregoing, the Company's gross profit for the
six-month period ended June 30, 1997 was a negative $806 as compared to a gross
profit of $206,006 in the 1996 period.
Selling, general and administrative expenses increased in the 1997
six-month period to $1,962,543 from $591,443 in the 1996 comparable period, due
primarily to the Company's establishment of executive offices in New York City,
increased compensation, legal and accounting costs, and increased marketing
costs associated with the Company's efforts to penetrate the United States
market.
During the six months ended June 30,1997, the Company had other income of
$120,549 as compared to other expenses of $25,596 in the 1996 period. In the
1997 period the Company recorded a gain of $145,400 on the sale of an
investment.
For the six-month period ended June 30, 1997, the Company had an operating
loss of $1,842,800 as compared to an operating loss of $411,033 for the
comparable period in 1996. The increase in the Company's operating loss during
the 1997 period was due primarily to the increase in the Company's selling,
general and administrative expenses and the decline in sales.
As a result of the foregoing, the Company had a net loss of $1,842,800 for
the 1997 six month period as compared to a net loss of $411,033 in the
comparable 1996 period.
-16-
<PAGE>
Liquidity and Capital Resources
At June 30 1997, the Company had $996,230 in cash and $1,199,183 in working
capital as compared to $915,520 in cash and $898,151 in working capital at
December 31, 1996. The Company's financial position was enhanced in 1997 as a
result of its receipt of $400,000 upon the exercise of warrants issued in the
1996 private placement and the completion of a $1.5 million private placement in
the second quarter of 1997. In addition, the Company's financial position
benefitted from the conversion of $955,550 of its Israeli subsidiary's
short-term debt into long-term debt.
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 the payment of remaining amount due on the 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 one year old. The Company has
begun to reduce its costs in order to conserve its financial resources and
develop its current projects. It expects that its monthly expenses in the United
States and Israel will be reduced to approximately $150,000 per month in the
third quarter of 1997. The Company's Israeli subsidiary will concentrate its
efforts on its Ben Gurion Airport project, while in the United States, the
Company will concentrate on completing its alpha site in Miami for its project
with RFS and will seek to obtain contracts for the IOD System from other hotel
chains.
Management believes that the Company will require additional financing of
$1.5 million to $2.5 million by year end to fund the installation and testing of
the IOD System at various Ramada Inn sites and to start the full marketing and
sales activities for the IOD System and to have sufficient working capital for
1998. 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.
-17-
<PAGE>
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Shareholders
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
*2 Agreement for the Exchange of Stock and Reorganization
**3.1 Articles of Incorporation (Delaware)
**3.2 By-laws
***4.1 Form of Warrant Agreement
***4.2 Stock Option Agreement with Sunrise Financial Group Inc.
**4.3 Stock Option Agreement between the Company and Pelican
Consultants U.S.A., Inc.
**4.4 Warrant Agreement dated May 22, 1997 between the Company
and Lydford Ltd.
**4.5 Form of Registration Rights Agreement between the Company and
Brayford Ltd., Lydford Ltd. and Stolin Ltd.
*10.1 Software Adaptation Services Agreement dated January 10, 1995
between the Company and Casdim Software Systems Ltd.
**10.2 Debt Agreement dated March 3, 1997 between Casdim International
Systems, Ltd. and Bank Hapoalim
*10.3 Patent (No. 108935) Agreement dated January 6, 1995 between
Casdim Software Systems Ltd. and C.I.S. Clinical Information
Systems Ltd.
***10.4 Private Placement Purchase Agreement
***10.5 Consulting Agreement dated April 24,1996 with Pelican
Securities & Investments Ltd., Softbreeze Ltd., Montaraz
Limited, Onvoy Holdings Ltd. and Wideglobe Ltd.
****10.6 Alpha/Beta Test Agreement dated March 20, 1997 between the
Company and Ramada Franchise Systems, Inc.
*21 Subsidiaries of the Company
27 Financial Data Schedule
- ------------------
* 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 Registration Statement on Form
SB-2, File No. 333-10287.
*** Incorporated by reference to the Company's Report on Form 10-QSB for the
quarter ended September 30, 1996.
**** Incorporated by reference to the Company's Annual Report on Form 10-KSB for
the year ended December 31, 1996.
-18-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
CASDIM INTERNATIONAL SYSTEMS, INC.
/s/Yehuda Shimshon
------------------
Yehuda Shimshon
Chairman of the Board, President & CEO
/s/Doron Leave
--------------
Doron Leave
Acting Chief Financial Officer
Date: August 15, 1997
-19-
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 996,230
<SECURITIES> 0
<RECEIVABLES> 309,660
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,395,890
<PP&E> 271,268
<DEPRECIATION> 73,006
<TOTAL-ASSETS> 4,906,674
<CURRENT-LIABILITIES> 1,614,184
<BONDS> 0
0
0
<COMMON> 169,590
<OTHER-SE> 4,873,057
<TOTAL-LIABILITY-AND-EQUITY> 4,906,674
<SALES> 31,445
<TOTAL-REVENUES> 31,445
<CGS> 32,251
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,962,543
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 42,389
<INCOME-PRETAX> (1,842,800)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,842,800)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,842,800)
<EPS-PRIMARY> (.120)
<EPS-DILUTED> (.115)
</TABLE>
