Software maker Malam Systems (TASE: MLAM ), member of the Zeevi group, is expected to report a return to profit in the first quarter this year, TheMarker has learned.

Malam lost NIS 7.4 million in the fourth quarter last year, and NIS 17 million in 2001, compared with NIS 7.5 million loss in 2000.

Owner Gad Zeevi is apparently doing his utmost to cut group members' debt, including Malam's. At the end of April, Malam, which trades at a NIS 32 million market cap, acquired its own bonds from institutional investors for NIS 11 million in an off-floor deal.

It transpires from Malam's report that the bonds were issued at 7.9% interest based on a March 1999 prospectus, the interest has been paid once a year since February 2000. The principal is due to be redeemed February 5, 2005.

In an off-floor deal on Monday 2.7% Malam shares were sold for NIS 850,000.

Gad Zeevi's cash crunch is mainly due to his 1999 acquisition of 20% stake in state-owned phone company Bezeq from Cable & Wireless (LSE:CW). Zeevi financed the deal primarily through bank loans, using the Bezeq shares as collateral. However, since the deal was made, Bezeq's share price has significantly deteriorated.

Zeevi began selling assets lately. He sold his holdings in Cimatron (Nasdaq:CIMT) for $9.9 million, and a bloc of shares in Gaon Holdings for $2.8 million. Zeevi also sold 39.2% share capital of Transclal for NIS 25.5 million.

The Zeevi group owns Zeevi Computers(TASE: ZEVC ), which has lost 90% of its value since January. TeleKnowledge constitutes Zeevi Computers' main holding, and is primarily responsible for Zeevi Computers NIS 80 million loss in 2001.