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 March 31, 1998.
__ 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
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(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 March 31, 1998, the Issuer had 15,394,001 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............................................3
Consolidated balance sheets at March 31, 1998 and December 31, 1997......3
Consolidated statements of income for the three months
ended March 31, 1998 and 1997...................................5
Consolidated statements of cash flows for the three months
ended March 31, 1998 and 1997...................................6
Notes to unaudited consolidated financial statements.....................7
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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CASDIM INTERNATIONAL SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, 1998 December 31, 1997
(Unaudited) (Audited)
----------- ---------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash.......................................... $209,620 $216,337
Accounts receivable
Officers and employees.................... 249,434 247,696
Investments................................... 93,200 90,000
-------- -------
Total..................................... 552,254 554,033
PROPERTY AND EQUIPMENT - Note 3
Property and equipment........................ 101,564 95,977
Less accumulated depreciation................. (18,920) (15,159)
------- -------
Net........................................ 82,644 80,818
OTHER ASSETS
Deposits....................................... 55,893 55,893
Start-up and organization
costs, net.................................. 44,010 44,870
Product development costs - Note 4............. 1,898,529 1,872,421
--------- ---------
TOTAL $2,633,330 $2,608,035
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE>
CASDIM INTERNATIONAL SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, 1998 December 31, 1997
(Unaudited) (Audited)
----------- ---------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable............................................
Trade.................................................... $ 323,404 $ 249,335
Short-term bank debt........................................ 374,202 --
Current maturities of long-term debt........................ 400,800 574,602
Notes payable - Note 9.................................. 450,000 250,000
------- -------
Total..................................................... 1,548,406 1,073,937
LONG-TERM DEBT
Long-term bank debt - Note 8.................................. 499,650 700,050
---------- ----------
TOTAL 2,048,056 1,773,987
STOCKHOLDER'S EQUITY - Note 5....................................
Common stock, $.01 par value, 30,000,000
shares authorized, 15,394,001 shares issued and
outstanding, 285,000 shares held in treasury
stock................................................... 169,590 169,590
Additional paid in capital....................................... 4,873,057 4,873,057
Less treasury stock (cost)....................................... (1,425) (1,425)
Gain (loss) from foreign currency translation.................... -- (51,860)
Retained earnings (deficit)...................................... (4,455,948) (4,155,315)
---------- -----------
Total shareholders' equity.................................... 585,274 834,047
--------- -----------
Total liabilities and shareholders' equity.................... $2,633,330 $2,608,074
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE>
CASDIM INTERNATIONAL SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
March 31, March 31,
1998 1997
---- ----
<S> <C> <C>
Sales......................................................... $ -- $ 6,985
Cost of sales................................................. -- --
--------- --------
Gross profit.................................................. -- 6,985
Selling, general and administrative expenses.................. 248,773 485,492
--------- ---------
Income (loss) from operations................................. (248,773) (478,507)
Other income (expense)
Interest income -- 5,828
Interest expense -- (21,676)
Investment activity (loss) gain...................... -- 145,402
---------- ---------
Total....................................... -- 129,554
Income (loss) from operations before taxes.................... (248,773) (348,943)
Income tax (expense).......................................... -- --
---------- --------
Net income (loss) $(248,773) $(348,943)
========= =========
Diluted (loss) per share...................................... $(.0162) $(.0247)
======= =======
Basic (loss) per share........................................ $(.0162) $(.0247)
======= =======
Weighted average number of shares outstanding................. 15,394,001 14,134,001
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE>
CASDIM INTERNATIONAL SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
(Unaudited) (Unaudited)
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)................................................ $(248,773) $(348,953)
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization........................... 4,621 34,612
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable - trade............................. -- 12,745
Accounts receivable - other............................. (1,739) 149,429
(Decrease) increase in:
Accounts payable - trade................................ 74,069 277,034
Accounts payable - other................................ -- (236,380)
------- --------
Net cash provided (used) by
operating activities.................................... (171,822) (111,513)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payment for product development costs............................ (26,108) (262,892)
Purchase of property and equipment............................... (8,787) (34,459)
Sale of investments.............................................. -- 173,596
Payment of security deposit...................................... -- (45,693)
-------- -------
Net cash used in investing activities................... (34,895) (169,448)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment on short term debt....................................... -- (102,429)
Severance pay.................................................... -- (117)
Proceeds from stock warrants exercised........................... -- 400,000
Additional short-term borrowing.................................. 200,000 --
------- ------
Net cash provided (used) by
financing activities.................................... 200,000 297,454
------- -------
INCREASE (DECREASE) IN CASH............................................... (6,717) 16,493
CASH:
Beginning of period.............................................. 216,337 915,527
-------- --------
End of period.................................................... $209,620 $932,020
======== ========
Interest paid............................................................. $ -- $ 21,676
====== ========
Income taxes paid......................................................... $ -- $ --
====== =======
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE>
CASDIM INTERNATIONAL SYSTEMS, INC.
NOTES TO THE 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, 1997 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-month period
ended March 31, 1998 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 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
Casdim USA, which owns 100% 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
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<PAGE>
CASDIM INTERNATIONAL SYSTEMS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Standards ("FAS") No. 52, "Foreign Currency Translation," of the
Financial Accounting Standards Board of the United States ("FASB").
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 increased by 7.0% in the year ended December 31, 1997.
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.
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<PAGE>
CASDIM INTERNATIONAL SYSTEMS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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.
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. 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.
g. Recognition of Income - Income deriving from long term contracts are
recognized upon percentage completion basis.
h. 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 FASB (Accounting for Income Taxes).
Deferred income taxes are not material to the financial statements.
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<PAGE>
CASDIM INTERNATIONAL SYSTEMS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
i. Net Income per share - Net income per share is computed on the
weighted shares adjusted for the issuance of shares and consolidation.
3. Fixed Assets
Cost (Unaudited) (Audited)
March 31, December 31,
1998 1997
Leasehold improvement $ 10,168 $ 10,168
Furniture & equipment 58,922 53,335
Motor vehicles 32,474 32,474
------- -------
101,564 95,977
Accumulated depreciation 18,920 15,159
------- -------
Total $82,644 $80,818
======= =======
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 the product is ready for general release have been
capitalized. Total costs incurred to March 31, 1998 were $1,898,529. The
costs were principally incurred in the development of the Company's IOD
information on demand project.
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.
5. 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.
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<PAGE>
CASDIM INTERNATIONAL SYSTEMS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
6. 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 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 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 were to vest monthly for a 24-month period, subject to the
continued provision of services by Sunrise. Under the Agreement, the
purchase price of each share subject to an option is $1.00. Options to
purchase 540,000 shares of Common Stock had vested as of December 31, 1996.
In March 1997, the Agreement was terminated and the parties agreed that
Sunrise would retain options to purchase up to 300,000 shares of the
Company's Common Stock. The options will expire in April 2001.
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 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 have been charged against income for the options granted to
Sunrise and Pelican was $164,063.
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<PAGE>
CASDIM INTERNATIONAL SYSTEMS, INC.
NOTES TO THE 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. As of March 31,
1998, 500,000 of such warrants were exercised and 850,000 warrants remain
available to be exercised. The Company issued additional warrants
exercisable into 200,000 shares of Common Stock in connection with its May
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. In addition, the Company issued warrants exercisable
into 50,000 shares of Common Stock, at an exercise price of $0.50 per
share, in connection with the sale of a convertible note in December 1997
and warrants exercisable into 200,000 shares of Common Stock at an exercise
price equal to 80% of the average of the closing bid and asked price of the
Company's Common Stock as reported by Nasdaq Bulletin Board (and if not
quoted on the Nasdaq Bulletin Board as reported by National Quotation
Bureau) on September 17, 1998.
7. 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 determined this
account to be uncollectible. The Company has included a loss from this
account in the financial statements at December 31, 1997.
8. Long Term Bank Debt
On March 3, 1997, CISL converted $900,450 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:
1998 $ 200,400
1999 200,400
2000 200,400
2001 98,850
---------
$ 900,450
Current Maturities (400,800)
Long-term debt $ 499,650
==========
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<PAGE>
9. Convertible Secured Note
In December 1997 the Company entered into an interim Note financing in the
amount of $250,000. The Note bears interest at the rate of ten percent
(10%) per annum and is due and payable January 5, 1999. At the option of
the Holder, the unpaid principal is convertible into fully paid
nonassessable shares of the Company's Common Stock at a conversion price of
20% below the price per share. The conversion option is available after the
90th day from the date of issuance of the Note in increments of $25,000.
On March 17, 1998, the Company sold $200,000 principal amount of 10%
convertible secured note due on January 8, 1999 (the "March Note"). The
March Note is convertible into shares of Common Stock for six months and
twenty four days beginning June 15, 1998 and ending January 8, 1999, at a
20% discount to the average closing bid price per share of the Common Stock
on the Nasdaq Bulletin Board for the five trading days prior to the
conversion day (the "Market Price"). After the 180th day, the conversion
price is convertible at a 30% discount to the Market Price. In the event
the Market Price will be less than $0.50, the March Note will be
convertible at a 50% discount to the bid price for the Common Stock for the
five trading days before the conversion date.
10. Discontinued Operations
In December 1997, the Company entered into a formal arrangement to
discontinue operations of CISL.
11. Income Taxes
The Company has a net operating loss carry forward in the amount of
$2,673,437 which will begin to expire in the year 2002.
12. Contingencies
An action was initiated against the Company by three investors who have
alleged that they are owed a penalty fee in connection with their
investment in the Company. The investors claimed that the Company failed to
promptly file a registration statement with the Securities and Exchange
Commission with respect to their shares. Such investors have claimed that
they are owed $210,000 by the Company. The Company intends to defend itself
vigorously against the action brought by the investors.
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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 "Recent
Developments"); 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
forward-looking statements contained in this Quarterly Report and made elsewhere
by or on behalf of the Company 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.
Recent Developments
On March 20, 1997, the Company and Ramada Franchise Systems, Inc. ("RFS"),
a wholly-owned subsidiary of HFS Incorporated, entered into an agreement for
"alpha" and beta" testing of Casdim's IOD System. The IOD System incorporates
interactive television, 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 television systems. 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 was completed in March 1998. The Company built a demo
hotel room with the IOD System in its N.Y. offices and is presently
demonstrating the operation of the IOD System to hotel managers and owners. No
assurance can be given that RFS will provide the Company the Internet-content
for the IOD System or
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<PAGE>
that RFS will recommend the installation of the IOD System or that the Company
will be able to raise sufficient funds to install its IOD System within the
Ramada Inn franchise system.
The Company and Dick Clark International Cable Ventures Ltd. ("Dick Clark
Ventures") 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 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
has expended approximately $700,000 in connection with this project. 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 go
forward, or if it commences that it will be able to raise sufficient capital for
the initiation of the proposed business or will be successful in developing the
network.
Results of Operations
Quarter Ended March 31, 1998 Compared to Quarter Ended March 31, 1997.
The Company had no product sales during the quarter ended March 31, 1998 as
compared to $6,985 in the comparable 1997 quarter. The Company did not record
any sales as a result of the discontinuation of operation of the Company's
Israeli subsidiary in the fourth quarter of 1997.
Selling, general and administrative expenses, which principally consist of
general and administrative expenses decreased to $248,773 in the 1998 first
quarter from $485,492 in the 1997 first quarter, due primarily to the Company's
efforts to reduce its operating costs. The Company anticipates that selling,
general and administrative expenses will increase in 1998, a result of the
planned increases in expenses relating to its IOD System.
In the first quarter of 1998, the Company capitalized approximately $26,108
of product development costs, principally relating to the IOD System, as
compared to $262,892 in the first quarter of 1997.
In the 1997 first quarter, the Company was able to offset its increased
interest expenses with interest and dividend income from the investment of the
proceeds of its May 1996 private placement and a $145,402 gain from the sale of
marketable securities. The Company does not
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<PAGE>
expect to invest in marketable securities during the foreseeable future. The
Company expects to incur interest expenses in 1998.
For the quarter ended March 31, 1998, the Company reduced its loss from
operations to $248,773 as compared to a loss from operations of $348,943 for the
1997 comparable quarter as a result of its cost-cutting efforts. The Company
expects to continue to operate at a loss until such time as sales of its IOD
System commence.
As a result of the foregoing, the Company's net loss was $248,773 or $.0162
per share for the quarter ended March 31, 1998 as compared to net loss of
$348,943 or $0.247 per share for the quarter ended March 31, 1997.
Liquidity and Capital Resources
At March 31, 1998, the Company had $209,620 in cash and $254,646 in working
capital as compared to $216,337 in cash and $332,498 in working capital at
December 31, 1997.
To provide working capital the Company sold on March 17, 1998 a $200,000
principal amount 10% convertible secured note due on January 8, 1999 (the "March
Note"). The March Note is convertible into shares of Common Stock for six months
and twenty-four days beginning June 15, 1998 and ending January 8, 1999, at a
20% discount to the average closing bid price per share of the Common Stock on
the Nasdaq Bulletin Board for the five trading days prior to the conversion day
(the "Market Price"). After the 180th day, the conversion price is convertible
at a 30% discount to the Market Price. In the event that the Market Price will
be less than $0.50, the March Note will be convertible at a 50% discount to the
bid price for the Common Stock for the five trading days before the conversion
date. In addition, the Company issued to the investors two-year warrants to
purchase 200,000 shares of Common Stock, at an exercise price equal to 80% of
the average closing bid and asked price of the Company's Common Stock as
reported by the Nasdaq Bulletin Board (and if not quoted on the Nasdaq Bulletin
Board as reported by National Quotation Bureau) on September 17, 1998.
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 the remaining amount due on the capital
contribution which the Company has agreed to make to the joint venture with Dick
Clark Ventures, if such venture ultimately proceeds, for which no assurance can
be given.
Management believes that the Company will require additional financing of
$1.8 million in 1998 to fund the installation of the IOD System at various
Ramada Inn sites. In addition the Company will require $1.2 million for further
development of the IOD System, to start the full marketing and sales activities
for the IOD System and to have sufficient working capital
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<PAGE>
for the remainder of the year. Although the Company is currently investigating
several sources of financing, no assurance can be given that the Company will be
able to raise sufficient financing on either an equity or debt basis to permit
it to continue operations and implement its IOD System.
Other Matters
In June 1997, the Financial Accounting Standards Board released Statement
131, "Disclosures About Segments of an Enterprise and Related Information"
("SFAS 131"). This statement became effective for the Company beginning January
1, 1998 and requires disclosure of certain information about operating segments
and geographic areas of operation. The adoption of SFAS 131 does not require
interim reporting in the year of adoption. The Company is completing its
evaluation of the disclosure requirements of SFAS 131 and will begin such
disclosure in its Form 10-KSB for the year ended December 31, 1998. This
statement does not have any effect on the results of operations or financial
position of the Company.
-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
3.1 Articles of Incorporation as amended on December 6, 1995.(1)
3.2 By-laws.(1)
4.1 Stock Option Agreement with Sunrise Financial Group Inc.(2)
4.2 Stock Option Agreement between the Company and Pelican Consultants U.S.A.,
Inc.(3)
4.3 Warrant Agreement dated May 22, 1997 between the Company and Lydford
Ltd.(3)
4.4 Form of Registration Rights Agreement between the Company and Brayford
Ltd., Lydford Ltd. and Stolin Ltd.(3)
4.5 10% Convertible Secured Note dated December 23, 1997 between the Company
and Frank K. Brosens.(4)
4.6 Warrant Agreement dated December 23, 1997 between the Company and Frank K.
Brosens.(4)
4.7 10% Convertible Secured Note dated March 17, 1998 between the Company and
Frank K. Brosens.(4)
4.8 Form of Warrant Agreement dated March 17, 1998 and Form of Warrant
Certificate.(4)
10.1 Software Adaptation Services Agreement dated January 10, 1995 between the
Company and CSS Ltd.(5)
10.2 Short-term Loan Agreement dated February 10, 1995 between the Company and
CSS Ltd.(1)
10.3 Patent Assignment Agreement dated January 10, 1995 between the Company and
CSS Ltd.(4)
10.4 Alpha/Beta Test Agreement between the Company and Ramada Franchise Systems,
Inc.(6)
27 Financial Data Schedule.
_______________________
(1) Incorporated by reference to the Company's Annual Report on Form 10-KSB for
the year ended December 31, 1995.
(2) Incorporated by reference to the Company's Report on Form 10-QSB for the
quarter ended September 30, 1996.
(3) Incorporated by reference to the Company's Registration Statement on Form
SB-2, File Number 333-10287.
(4) Incorporated by reference to the Company's Annual Report on Form 10-KSB for
the year ended December 31, 1997.
(5) Incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 1994.
(6) 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
Date: May 15, 1998
-19-
<PAGE>
EXHIBIT INDEX
Exhibit
No. Description
--- -----------
3.1 Articles of Incorporation as amended on December 6, 1995.(1)
3.2 By-laws.(1)
4.1 Stock Option Agreement with Sunrise Financial Group Inc.(2)
4.2 Stock Option Agreement between the Company and Pelican Consultants U.S.A.,
Inc.(3)
4.3 Warrant Agreement dated May 22, 1997 between the Company and Lydford
Ltd.(3)
4.4 Form of Registration Rights Agreement between the Company and Brayford
Ltd., Lydford Ltd. and Stolin Ltd.(3)
4.5 10% Convertible Secured Note dated December 23, 1997 between the Company
and Frank K. Brosens.(4)
4.6 Warrant Agreement dated December 23, 1997 between the Company and Frank K.
Brosens.(4)
4.7 10% Convertible Secured Note dated March 17, 1998 between the Company and
Frank K. Brosens.(4)
4.8 Form of Warrant Agreement dated March 17, 1998 and Form of Warrant
Certificate.(4)
10.1 Software Adaptation Services Agreement dated January 10, 1995 between the
Company and CSS Ltd.(5)
10.2 Short-term Loan Agreement dated February 10, 1995 between the Company and
CSS Ltd.(1)
10.3 Patent Assignment Agreement dated January 10, 1995 between the Company and
CSS Ltd.(4)
10.4 Alpha/Beta Test Agreement between the Company and Ramada Franchise Systems,
Inc.(6)
27 Financial Data Schedule.
_______________________
(1) Incorporated by reference to the Company's Annual Report on Form 10-KSB for
the year ended December 31, 1995.
(2) Incorporated by reference to the Company's Report on Form 10-QSB for the
quarter ended September 30, 1996.
(3) Incorporated by reference to the Company's Registration Statement on Form
SB-2, File Number 333-10287.
(4) Incorporated by reference to the Company's Annual Report on Form 10-KSB for
the year ended December 31, 1997.
(5) Incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 1994.
(6) Incorporated by reference to the Company's Annual Report on Form 10-KSB for
the year ended December 31, 1996.
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