<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended September 30, 1997
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [No Fee Required]
For the transition period from: ____________ to ____________
Commission file number: 0-16569
CAM DATA SYSTEMS, INC.
(Exact name of registrant as specified in its Charter)
DELAWARE 95-3866450
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
17520 NEWHOPE STREET
SUITE 100
FOUNTAIN VALLEY, CALIFORNIA 92708
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (714) 241-9241
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
Title of each class
-------------------
Common Stock $.001 par value
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
(cover page 1 of 2 pages)
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in a definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of voting stock held by non-affiliates of the
Registrant as of December 11, 1997 was approximately $4,000,000. As of December
11, 1997, there were outstanding 2,008,700 shares of Common Stock of the
Registrant, par value $.001 per share.
DOCUMENTS INCORPORATED BY REFERENCE.
<TABLE>
<CAPTION>
<S> <C>
Part II Annual Report to Stockholders for
fiscal year ended September 30, 1997
</TABLE>
(cover page 2 of 2 pages)
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PART I
ITEM 1. BUSINESS
General
THE COMPANY
CAM Data Systems, Inc. (the "Company") was organized under the laws of
the State of Delaware on April 29, 1987. On June 5, 1987, CAM Data Systems,
Inc., a corporation organized on September 20, 1983, under the laws of the State
of California was merged with and into the Company. The Company's principal
business is to design, assemble, market, service, and support point of sale,
order entry, inventory control, and accounting systems for small to medium size
retailers. The Company earns revenues from the sale of its systems and monthly
service fees charged to its customers under service agreements. Sales and
service operations are located in California, Florida and Massachusetts while
the Company's customers are located throughout the United States.
THE SYSTEMS
The Company offers two Turn Key Systems:
1. THE CAM SYSTEM - designed for hardgoods retailers whose inventory is
re-orderable in nature.
2. THE PROFIT$ SYSTEM - designed for Apparel and Shoe retailers whose
inventory is seasonal in nature and color and size oriented.
The Company's systems offer the ability to obtain: (i) automated
pricing of each item; (ii) billing for charge account customers; (iii) printing
of a customer invoice; (iv) tracking of inventory count on an item by item
basis; (v) computation of gross profit, dollars and/or percentage of each item;
and (vi) tracking of sales by clerk and department by hour, day and/or month. In
addition, the Company's systems provide full management reporting including zero
sales reports, inventory ranking, overstock and understock, sales analysis,
inventory valuation (cost, average cost and retail) and other reports. The
systems can also provide accounting functions including accounts receivable,
accounts payable, general ledger, and payroll.
The Company's systems integrate IBM compatible computers, terminal
style or computer cash registers, hand held and table top bar code laser
scanning equipment, terminal or computer work stations, printers, and the
Company's circuit boards and software. The Company is able to adapt its software
to existing IBM compatible computer hardware. Each system is configured to meet
the customer's particular needs and, as a result, the components included in
each system, including the personal computer, printer, cash register and the
Company's circuit boards and software, depend on the needs, the size and the
industry type of the customer.
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The Company's software is derived from software originally designed and
subsequently licensed to (or acquired by) the Company by Retail Solutions Inc.
for the CAM system, and by MicroStrategies Inc. for the Profit$ system. The
Company continues to make modifications and enhancements to the software.
The Company provides an entire system to each customer on a "turn key"
basis, in that the Company provides all of the hardware and the software as well
as the installation of a system in the customer's premises. The CAM system is
capable of linking up to 20 retail outlets per defined region and up to 20
regions. The Profit$ system is capable of linking up to 99 stores. In a multiple
outlet system, the Company typically installs a single computer at each outlet
that, through a modem system, communicates with a central computer at the
customer's main accounting location. The central computer compiles all
information from the other locations for processing and reporting.
INVENTORY MANAGEMENT
The Company believes that inventory control is the most important and
time consuming task facing the management of retail outlets. The systems were
designed by the Company to address the retailer's need for simpler and yet more
accurate means of controlling a large and diverse inventory. All inventory
information, once entered into the system, is updated for each sale that is
transmitted from the cash register to the main computer. The systems are able to
provide the following managerial reports:
1. POPULARITY RANKING. The systems will report on the popularity of
each item in the store by producing a report listing each item of
inventory ranked according to the number of sales of each item. The report
is generated automatically and can produce a list on daily, weekly,
monthly, year-to-date and/or trailing 13 months of sales basis. The
systems will also analyze the popularity data and indicate to the retailer
which particular items of inventory are needed and which items are
overstocked.
2. ZERO SALES REPORT. The systems provide a sales analysis on a monthly
and year-to-date basis for inventory items for which no sales have been
made. The analysis can be reported on a total sales basis or on a
departmental or item level basis.
3. INVENTORY TABULATION AND VALUATION. The systems provide reports
listing all inventory on hand, the valuation of such inventory on a cost
and retail basis, the average cost of each item in inventory, and all items
of inventory on order but not yet received.
4. AUTOMATIC PURCHASING. The systems provide a report listing all items
that should be ordered based upon historical data stored in the system,
including the number of items in inventory, the number on the shelf, the
number on order and the minimum quantities required. The systems can also
automatically provide a purchase order if desired.
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5. PRICING. The systems are capable of producing price stickers in 20
customized label formats, assigning Uniform Purchase Code numbers and
printing bar-codes directly upon the price labels for reading by laser
scanners. In addition, if there is a price change, the systems will
automatically update the pricing information and, if desired, print new
pricing labels.
6. REPORTS. The systems permit the retailer to customize and produce
reports and forms utilizing the data in the system in a format preferred by
the retailer.
ACCOUNTING MANAGEMENT
The CAM system is capable of performing accounting functions through
software available from the Company. The system can maintain accounts
receivable, accounts payable and general ledgers and can maintain and perform
all payroll functions including the printing of payroll checks. The Company
sells M.A.S. 90(R) software and provides training to its customers that want an
integrated accounting and inventory control system.
SERVICE AND SUPPORT
Customer service and support is a critical element in maintaining
customer satisfaction. Each purchaser of a system, for an ongoing fee ranging
from .75% to 1.2% per month of the initial purchase price of the system
purchased, receives service and support from the Company. The service and
support provided by the Company includes:
1. HARDWARE SERVICE. The Company's service representatives will service
the computer hardware included in a system at the customer's location, and
currently contracts with Lucent Technologies, formerly known as AT&T, for
on site service and repair. The representatives are trained to determine
the source of the problem or malfunction in the hardware and, once
determined, replace the defective component. The Company's on-site service
representatives do not attempt to repair defective components. Defective
components, after removal from the system, are either repaired at the
Company's facility or sent to a manufacturer's authorized service center
for repair.
2. SOFTWARE SERVICE AND ENHANCEMENTS. Software service involves either
the replacement or reinstallation of existing software. The Company, while
not performing any customizing of its software for particular customers, is
sensitive to comments from customers concerning the Company's software.
Such comments, together with planned revisions to the software, result in
enhancements and improvements which are provided without additional cost to
all customers on a service contract.
3. TRAINING. In order to assure a customer that he will be able to
properly integrate the Company's system into his business, the Company
provides training on the use and application of the system to each customer
at the Company's in-house training facility during the ninety day warranty
period. Customers located away from a CAM office, receive two on-site
visits for initial installation and training. The amount of training
required depends upon the knowledge and experience of the user plus the
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complexity of the business to which the system is being adapted. The data
input into the system by a retailer is also dependent upon the complexity
of the business plus the functions the user intends the system to perform.
4. PHONE ASSISTANCE. By having phone assistance available seven days a
week, the Company enables a customer to obtain assistance whenever
necessary.
MARKETING
DIRECT SALES
The Company markets its systems primarily through the Company's direct
sales force consisting of sixteen salespersons, all of whom work exclusively for
the Company. The Company's marketing efforts extend nationwide with offices in
the states of California, Florida and Massachusetts. Each salesperson is
assigned a specific geographical territory in which to offer the systems.
Typically, the salesperson will telephone canvas an area, and in some cases make
visits to retailers in the assigned territory. Each salesperson is provided with
a sales kit and demonstration equipment. Each salesperson is trained by the
Company to be able to define the needs of the potential customer, recommend a
system configuration, and provide appropriate price quotes. Upon the execution
of a typical sales contract, the Company is generally able to install an entire
system within four to six weeks. The Company is paid directly by the customer or
by third party leasing companies. Salespersons are compensated on the basis of a
percentage of gross profit to the Company for each system sold.
BROCHURES, TRADE SHOWS, AND ADVERTISING MEDIA
The Company continues to increase awareness of its systems by
advertising in trade journals and other print media targeted at retail
businesses, attending industry specific trade shows, the use of sales
promotional videos, and through direct mail advertising.
ASSEMBLY AND SOURCES OF SUPPLY
The computer hardware which makes up the Company's systems consists
primarily of standard components purchased by the Company from outside
distributors and manufacturers such as Okidata (printers), Symbol Technologies
(hand held laser scanners and portable data terminals), Wyse (Terminals), Ithaca
(40 column printers),and Hayes (modems). For most computer hardware components,
the Company has more than one source of supply.
Certain hardware, such as the Company's proprietary computer circuit
board, was designed by the Company and is manufactured to the Company's
specifications by manufacturers unaffiliated with the Company. The Company does
not have any agreements with the manufacturers of its proprietary circuit boards
but management believes if the current manufacturers were not available,
additional manufacturers could readily provide the required services.
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BACKLOG
The Company purchases component hardware for its systems based upon
system purchase orders and its forecast of demand for its products. Orders from
customers are usually shipped by the Company pursuant to an agreed upon
schedule. However, orders may be canceled or rescheduled by the customer without
penalty. For this reason, management believes backlog information is not
indicative of the Company's future sales or business trends and is subject to
fluctuation. As of December 11, 1997, backlog was approximately $867,000 as
compared to $1,364,000 on December 11, 1996. Backlog is based upon purchase
orders placed with the Company which the Company believes are firm orders.
COMPETITION
The industry in which the Company operates is highly competitive. The
Company competes with suppliers dedicated to one type of business and suppliers
of software that provide functions similar to the Company's software.
The Company competes on the basis of the capabilities and
competitiveness of its systems and the additional information they provide and
functions they perform. The Company believes its systems offer greater
capabilities to the small and medium size retailers than suppliers of other
systems. Included among such capabilities are multi-user capability, ongoing
software enhancement, and a service organization in place to support the
customer after the initial sale.
The Company also competes with vertical market suppliers of automated
retail systems which include hardware and software intended for use by a
particular retail industry segment. Some of these suppliers have a shorter
operating history, less financial resources and overhead expenses, and attempt
to compete with the Company on the basis of lower pricing. This has caused the
Company to discount sales prices in some instances, and this may continue in
future periods.
The ability of the Company to meet competition will depend upon, among
other things, the Company's ability to maintain its marketing effort, increase
the capabilities of its systems through ongoing enhancements and improvements,
contend with sales price discounting, and to obtain financing when, and if,
needed.
PATENTS AND TRADEMARKS
The Company does not hold any patents or trademarks. The Company relies
on a combination of trade secrets, copyright laws and technical measures to
protect its rights to its proprietary software. The software included in a
system is not accessible by customers for purposes of revisions or copying as
the Company does not release the software source code to customers. In addition,
as the Company performs software service at the customer's location, the Company
maintains strict control of its software disks.
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The Company's proprietary circuit board was designed specifically to
link the computer hardware included in the CAM system with the CAM software. The
expertise required to design and build such circuit boards is readily available
to competitors and there can be no assurance that such circuit boards will not
be produced and utilized by such competitors.
SEASONALITY
The Company believes that seasonality has not had a significant effect
on their business.
SOFTWARE DEVELOPMENT
The Company's software has been developed using a modular approach.
Modular designing allows a programmer to incorporate, replace or delete parts of
a computer software program without affecting the operation of the remaining
parts of the program. Accordingly, modular design facilitates the development of
the Company's software and new products enabling the Company's programmers to
incorporate entire sections from existing programs into the designs for such
products. The incorporation of existing software, which has already been fully
tested, into new products, reduces the time and expense that the Company would
otherwise incur in developing and enhancing its products.
The Company spent approximately $1,548,800, $1,219,300, and $979,400 on
software development, including amounts capitalized during the years ended
September 30, 1997, 1996, and 1995, respectively. The Company anticipates that
it will continue to incur software development costs in connection with
enhancements and improvements of its software and the development of new
products. These activities may require an increase in the Company's programming
and technical staff which presently consists of twenty-one programmers and four
quality control and testing personnel.
EMPLOYEES
The Company has one hundred and forty-five full time employees, ten of
whom are employed in finance and administration, twenty-five in programming and
testing, twenty-nine in sales and marketing, and eighty-one in operations,
installation, consulting, and service and support.
None of the Company's employees are represented by a labor union and
the Company believes that it enjoys harmonious relationships with its employees.
ENVIRONMENTAL REGULATIONS
There has been no material effect on the Company from compliance with
environmental regulations.
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ITEM 2. PROPERTIES
In January 1996, the Company purchased 2.4 acres of land in the Wagon
Wheel Industrial Park in Henderson, Nevada, for a total sum of $143,000. The
Company plans to construct an 11,000-square foot building which will house its
development group and the ICS staff. The construction is under way and is
expected to be completed in the Spring of 1997.
The Company currently leases approximately 22,000 square feet of space
in Fountain Valley, California pursuant to a five-year lease expiring January 1,
2002, at an average annual rent of approximately $187,000 a year. This facility
houses the Company's executive and administrative offices, service and support
staff, system integration, and inventory warehouse.
In addition, the Company also leases the following properties: (i)
approximately 800 square feet of office space in Millis, Massachusetts on a
month to month lease of $300 per month; (ii) approximately 600 square feet of
office space in Altamonte Springs, Florida on a month to month lease of $600 per
month; (iii) approximately 11,000 square feet of office space in Henderson,
Nevada, which houses the Company's research and development team and the MAS 90
consulting division on a ten year lease that expires March 31, 2007, at an
average annual rent of $11,000 per month.
ITEM 3. LEGAL PROCEEDINGS
The Company believes that there are no material legal proceedings,
pending or contemplated, to which the Company or any of the Company's properties
is the subject or to which the Company is a party and which are not in the
ordinary course of business. The Company is not aware of any material legal
proceeding pending or threatened, or judgments entered against any director or
executive officer of the company in his capacity as such where the position of
any such director or executive officer is adverse to the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Neither the Board of Directors nor any security holder submitted any
matter during the fourth quarter of the fiscal year covered by this report to a
vote of security holders through the solicitation of proxies or otherwise.
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PART II
PURSUANT TO GENERAL INSTRUCTION G(2), ITEMS, 5, 6, 7 AND 8 HAVE BEEN
OMITTED SINCE THE REQUIRED INFORMATION IS CONTAINED IN THE COMPANY'S 1997 ANNUAL
REPORT TO STOCKHOLDERS PURSUANT TO RULE 14A-3(B), COPIES OF WHICH ARE BEING
FILED AS AN EXHIBIT TO THE FORM 10-K, AND IS HEREBY INCORPORATED BY REFERENCE
HEREIN.
ANNUAL REPORT
FORM 10-K TO STOCKHOLDERS
- --------- --------------------------------
ITEM 5: MARKET FOR REGISTRANT'S PAGE 15: STOCK AND DIVIDEND
COMMON EQUITY AND RELATED DATA.
STOCKHOLDER'S MATTERS.
ITEM 6: SELECTED FINANCIAL DATA . PAGE 16: SELECTED FINANCIAL
DATA.
ITEM 7: MANAGEMENT'S DISCUSSION PAGES 4-5: MANAGEMENT'S
AND ANALYSIS OF DISCUSSION AND
FINANCIAL CONDITION AND ANALYSIS OF
RESULTS OF OPERATIONS FINANCIAL CONDITION
AND RESULTS OF
OPERATIONS
ITEM 8: FINANCIAL STATEMENTS AND SEE BELOW.
SUPPLEMENTARY DATA.
Information for Item 8 is included in the Company's financial
statements as of September 30, 1997 and 1996 and for each of the three years in
the period ended September 30, 1997, and the Company's unaudited quarterly
financial data for the two years ended September 30, 1997, on pages 6 through 14
and page 16, respectively, of the Company's 1997 Annual Report to Stockholders
which is hereby incorporated by reference. The report of the independent
auditors is included on page 15 of the Annual Report to Stockholders.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
NOT APPLICABLE.
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PART III
MANAGEMENT
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
IDENTIFICATION OF EXECUTIVE OFFICERS AND DIRECTORS
As of September 30, 1997, the executive officers and directors of the
Company and their ages are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
- ---- --- -------------------------
<S> <C> <C>
Geoffrey D. Knapp 39 Chief Executive Officer, Chairman
of the Board and Secretary
David A. Frosh 39 President and Director
Paul Caceres, Jr. 37 Chief Financial Officer and
Chief Accounting Officer
Timothy D. Coco 40 Vice President, Customer Service
and Installations
David Fuller 53 Vice President, Research and
Development
Walter W. Straub 54 Director
Dr. Fred M. Haney 56 Director
Corley Phillips 43 Director
</TABLE>
Geoffrey D. Knapp, founder of the Company, has been a director, and an
officer of the Company since its organization in September, 1983. From 1980 to
1983, he was employed by Triad Systems Corporation as a point of sale systems
salesman selling to retail hardware stores. Mr. Knapp received a bachelor's
degree in marketing from the University of Oregon in 1980.
David A. Frosh joined the Company as president in June 1996. Mr. Frosh
has been a member of the board directors since August 1991. From June 1990 to
June 1996, Mr. Frosh was employed as a sales executive for the national accounts
division of Automatic Data Processing (ADP). ADP provides computerized
transaction processing, data communications and information services. From June
1988 to June 1990, Mr. Frosh served as director of marketing for Optima Retail
Systems, a privately held company which manufactured and marketed inventory
control systems for the retail apparel industry. From July 1980 to June 1988,
Mr. Frosh held several marketing and management positions including national
accounts manager for the Los Angeles division of Savin Corporation, a marketer
of office copier
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and facsimile machines. Mr. Frosh received a bachelor's degree in marketing from
Central Michigan University in 1980.
Paul Caceres, Jr. has been the Chief Financial Officer and Chief
Accounting Officer of the Company since September 1987. From 1982 to 1987, Mr.
Caceres was employed by Arthur Young & Company, the predecessor to Ernst & Young
LLP, as an Audit Senior and in 1987, was promoted to Audit Manager. He received
a bachelor's degree in business administration from the University of Southern
California in 1982.
Timothy D. Coco has been the Vice President of Customer Service since
January 1994. From 1990 to 1993, Mr. Coco served as sales manager for Lindy
Office products, a company that sells office supplies, office furniture and
printing services to small and medium size businesses. From 1989 to 1990, Mr.
Coco served as a sales trainer and management consultant for IDK Group Inc., a
company that provides sales training, management consulting, and employee
development related services to the micro computer industry. From 1984 to 1989,
Mr. Coco was the President of his own Company called Quality Automation Systems
(QAS). QAS developed and marketed turn key computerized distribution management,
point of sale, and accounting systems to the office supply industry. Mr. Coco
sold this company in 1989.
David Fuller has been the Vice President of Research and Development
since April 1995. From 1988 to 1995, Mr. Fuller was the sole proprietor of
Retail Software Innovators, a company that provided point of sale software,
programming services, and technical support to small and medium size retailers.
From 1982 to 1988, Mr. Fuller was the Vice President of Research and Development
for Retail Solutions Inc., a company that provided point of sale software,
programming services, and technical support to small and medium size retailers.
Walter W. Straub, has been a director of the Company since May 1989. He
is also currently, and has been since October 1983, President, Chief Executive
and a director of Rainbow Technologies, Inc., a public company engaged in the
business of designing, developing, manufacturing and marketing of proprietary
computer related security products. Mr. Straub received a bachelor's degree in
electrical engineering in 1965 and a master's degree in finance in 1970 from
Drexel University.
Dr. Fred M. Haney joined CAM Data as director in September 1996. Dr.
Haney has been the president of Venture Management Company, Palos Verdes
Estates, California, since 1991. From 1984 to 1991, he was founder and manager
of 3I Ventures, California, a high technology venture capital fund. From 1980 to
1983, he performed senior management functions at TRW, and from 1968 to 1980, he
held management positions at Xerox Corporation and Computer Science Corporation.
Dr. Haney has extensive experience in strategic planning, operations and finance
in the information and computer industry. Dr. Haney holds a doctorate in
computer science from Carnegie-Mellon University.
Corley Phillips joined CAM Data as a director in September 1996. Mr.
Phillips is an independent investor. From 1996 to 1997, Mr. Phillips served as
president, CEO and a director for Telephone Response Technologies, a Roseville,
California-based developer of computer
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technology software. From 1995 to 1996, Mr. Phillips served as vice president of
marketing and product support for State of The Art, an accounting software
company based in Irvine, California. From 1990 to 1994, Mr. Phillips was
president and CEO of Manzanita Software Systems, a developer of Windows-based
accounting software. From 1984 to 1990, Mr. Phillips was president and
co-founder of Grafpoint, a developer of software for computer applications based
in San Jose, California. Mr. Phillips has also held various sales and marketing
positions with Envision Technology and Hewlett-Packard. Mr. Phillips holds both
a bachelor's degree and a master's degree in electrical engineering from
Washington University in St. Louis, Missouri, as well as a master's degree in
business administration from Santa Clara University in Santa Clara, California.
The terms of office of directors expire at the next Annual Meeting of
Shareholders, or at such time as their successors have been duly elected and
qualified.
Directors who are not officers of the Company are entitled to an
expense reimbursement for attending meetings. Officers serve at the discretion
of the Board of Directors.
Except as stated, there are no arrangements or understandings by or
between any director or executive officer and any other person(s), pursuant to
which he or she was or is to be selected as a director or officer, respectively.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than ten percent of
the Company's common stock to file reports of ownership and changes in ownership
with the Securities and Exchange Commission (SEC). Officers, directors and
greater than ten percent shareholders are required by SEC regulations to furnish
the Company with copies of all Section 16(a) forms they file. Management
believes all such individuals were in compliance with Section 16(a) at September
30, 1997, except as noted below. These reports were subsequently filed.
The following table sets forth the individual(s) who met the
requirements of Section 16(a) during the year ended September 30, 1997, and were
filed late:
<TABLE>
<CAPTION>
No. of No. of
No. of Transactions reports
Name Late Reports on Late Reports Not Filed
- ---- ------------ --------------- ---------
<S> <C> <C> <C>
Fred Haney 1 1 --
Corley Phillips 1 1 --
</TABLE>
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CERTAIN SIGNIFICANT EMPLOYEES
The Company does not have any significant employees who are not
officers.
FAMILY RELATIONSHIPS
There are no family relationships by or between any director or officer
of the Company.
ITEM 11. EXECUTIVE COMPENSATION
The following summary compensation table sets forth, as of the date
hereof, information concerning cash compensation, bonuses and deferred
compensation paid by the Company for services rendered to the Company during the
fiscal year ended September 30, 1997, and the prior two fiscal years, to the
Company's Chief Executive Officer and each additional executive officer whose
total compensation exceeded $100,000:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Long Term
Compensation Compensation
Name and ----------------- Other ------------ (2)
Principal (1) Annual Number of All Other
Position Year Salary Bonus Compensation Options Compensation
- -------- ---- ------ ------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Geoffrey Knapp 1997 $200,700 $ -- -- 20,000 $7,500
Chairman of 1996 $194,600 $54,300 -- 0 $7,800
the Board CEO 1995 $164,500 $31,400 -- 0 $7,300
Paul Caceres Jr. 1997 $127,700 $ -- -- 10,000 $4,900
CFO 1996 $123,200 $34,500 -- 0 $7,200
1995 $103,800 $20,000 -- 0 $4,400
David Frosh 1997 $127,500 $ -- -- 0 0
President
Timothy D. Coco 1997 $100,000 $ -- -- 5,000 0
Vice President 1996 $ 92,400 $27,700 -- 0 0
Customer Service 1995 $ 84,000 $16,800 -- 0 0
</TABLE>
- -----------------------
(1) Bonuses paid to the Named executives are pursuant to annual incentive
compensation programs established each year for selected employees of the
Company, including the Company's executive officers. Under this program,
performance goals, relating to such matters as sales growth, gross profit
margin and net income as a percentage of sales and individual efforts were
established each year. Incentive compensation, in the form of cash
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bonuses, was awarded based on the extent to which the Company and the
individual achieved or exceeded the performance goals.
(2) All other compensation consists of interest on employee notes payable to the
Company and the amortization of the notes, that was declared compensation
during the year.
The following table sets forth information concerning grants of stock
options during the fiscal year ended September 30, 1997, to the officers
identified in the Summary Compensation Table:
OPTION GRANTS IN FISCAL YEAR 1997
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
Potential Realizable
(1) Value at Assumed
Number of Annual Rates of
Securities % of Total (2) Stock Price
Underlying Options Exercise Appreciation for
Options Granted to or Base Option Term
Granted Employees Price Expiration -------------------
Name (#) in 1997 ($/Sh) Date 5($) 10($)
- ------------- ---------- ----------- -------- ---------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Geoff Knapp 20,000 5% 3.75 12/16/06 47,200 119,500
Paul Caceres Jr. 10,000 2% 3.75 12/16/06 23,600 59,800
David Frosh 4,400 1% 3.75 12/16/06 10,400 26,300
Timothy D. Coco 5,000 1% 3.75 12/16/06 11,800 29,900
</TABLE>
- --------------------
(1) Options granted in fiscal year 1997 vest over a four-year period.
(2) The exercise price was equal to the market price on the date of grant.
AGGREGATE OPTION EXERCISES AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
Value of
Number of Unexercised
Unexercised In-the-Money
Options Options
Shares at Sept. 30, at Sept. 30,
Acquired 1997 1997
on Value(1) Exercisable/ Exercisable/
Name Exercise Realized Unexercisable Unexercisable
- ---- -------- -------- ------------- -------------
<S> <C> <C> <C> <C>
Geoff Knapp -- -- 60,000/0 $52,600/$0
Paul Caceres Jr. -- -- 45,000/0 $39,400/$0
David Frosh -- -- 15,000/0 $12,200/$0
Timothy D. Coco -- -- 9,400/600 $ 7,000/$500
</TABLE>
- --------------------
(1) Market value of the underlying securities at the exercise date minus the
exercise price of the options.
15
<PAGE> 16
REPORT OF COMPENSATION COMMITTEE
The following report of the Compensation Committee is provided solely
to the shareholders of the Company pursuant to the requirements of Schedule 14A
promulgated under the Securities Exchange Act of 1934, and shall not be deemed
to be "filed" with the Securities and Exchange Commission for the purpose of
establishing statutory liability. The Report shall not be incorporated by
reference in any document previously or subsequently filed with the Securities
and Exchange Commission that incorporates by reference all or any portion of
this document.
TO: THE BOARD OF DIRECTORS
As members of the Compensation Committee, it is our duty to review and
recommend the compensation levels for members of the Company's management,
evaluate the performance of management and administer the Company's various
incentive plans. This Committee has reviewed in detail the Compensation of the
Company's five executive officers. In the opinion of the Committee, the
compensation of the five executive officers of the Company is reasonable in view
of its performance and the respective contributions of such officers to the
Company's performance.
In determining the management compensation, this Committee compares the
compensation paid to management to the level and structure of compensation paid
to management of competing companies. Additionally, the Committee considers the
sales and earnings performance of the Company compared to competing and
similarly situated companies. The Committee also takes into account such
relevant external factors as general economic conditions, geographic market of
work place, stock price performance and stock market prices.
Management compensation is comprised of 75% to 80% of fixed salary, and
20% to 25% variable compensation based on performance factors. Stock options are
granted at the discretion of the Board of Directors, and there is no set minimum
or maximum amount of options that can be issued. Performance factors that
determine management compensation are sales and net income of the Company. These
performance factors were not met in fiscal 1997, and no bonuses were paid..
The committee examines compilations of executive compensation such as
various industry compensation surveys for middle market companies. In 1997, the
compensation for the Chief Executive Officer was comparable to other Chief
Executive Officers of middle market companies in related industries.
Mr. Knapp, a member of the Committee, is also an executive officer of
the Company. However, Mr. Knapp abstained from any considerations with respect
to any decision directly affecting his compensation.
Compensation Committee
Walter Straub, Fred Haney, and Geoffrey D. Knapp
December 1, 1997
16
<PAGE> 17
INCENTIVE STOCK OPTION PLAN
An Incentive Stock Option Plan (the "ISO Plan") in accordance with
Section 422A of the Internal Revenue Code of 1954, as amended (the "Code"), was
adopted by the Board of Directors and approved by the stockholders of the
Company in June 1987. The ISO Plan authorizes the Board of Directors to grant
options from time to time to directors, officers and key employees of the
Company. In April 1990, the total number of shares of the Company's Common Stock
that may be issued or delivered under the ISO Plan net of forfeiture and based
on the present capitalization was increased from 100,000 to 250,000 shares.
Options granted under the ISO Plan must comply with certain provisions
of the Code relating to, among other things, the maximum dollar amount of
options that may be exercised by an optionee in any calendar year, the minimum
exercise price of an option and the persons eligible to be granted options. No
options granted under the ISO Plan will be exercisable for a period exceeding
five years, and the ISO Plan expires in June 1997.
Except as otherwise required by the Code with respect to optionees
owning 10% or more of the Common Stock outstanding at the time of grant, the
exercise price of an option under the ISO Plan must not be less than 100% of the
fair market value of the underlying Common Stock at the time of grant. The fair
market value of a share of Common Stock is to be determined by the Board of
Directors, or by a committee of the Board of Directors, as the case may be, in
good faith based upon the trading market of such shares.
The exercise price of any options granted pursuant to the ISO Plan to
optionees owning more than 10% of the Common Stock outstanding at the time of
grant may not be less than 110% of the fair market value of the underlying
Common Stock at the time of grant.
1993 STOCK OPTION PLAN
In April 1993, the shareholders of the Company approved the Company's
1993 Stock Option Plan (the "1993 Plan") under which non-statutory options may
be granted to key employees and individuals who provide services to the Company,
at a price not less than the fair market value at the date of grant, and expire
ten years from the date of grant. The options are exercisable based on vesting
periods as determined by the Board of Directors. The Plan allows for the
issuance of an aggregate of 900,000 shares of the Company's common stock. The
Plan has a term of ten years. There have been 808,400 options granted under the
1993 Plan as of September 30, 1997.
401-K PLAN
In July 1991, the Company adopted a contributory profit-sharing plan
under Section 401(k) of the Internal Revenue Code, which covers substantially
all employees. Under the plan, eligible employees are able to contribute up to
15% of their compensation. The Company's contributions
17
<PAGE> 18
are at the discretion of the board of directors. The Company contribution for
the fiscal year ended September 30, 1997, totaled $15,000.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of September 30, 1997, certain
information regarding ownership of the Company's Common Stock by (i) each person
that the Company knows is the beneficial owner of more than 5% of the Company's
outstanding Common Stock, (ii) each director and executive officer of the
Company who owns Common Stock and (iii) all directors and officers as a group,
without naming them, showing name and address, amount and nature of shares
beneficially owned and the percentage of the class owned.
<TABLE>
<CAPTION>
Name and Address Amount & Nature Percentage
Title of of Beneficial of Beneficial of
Class Owner Ownership(9) Class(10)
----- -------------------- --------------- ----------
<S> <C> <C> <C>
Common Stock Geoffrey D. Knapp(1) 391,900(2) 17.1%
Common Stock Paul Caceres Jr.(1) 47,000(3) 2.0%
Common Stock Timothy D. Coco(1) 18,500(4) *
Common Stock David Fuller(1) 25,800(5) 1.1%
Common Stock Walter W. Straub(1) 84,400(6) 3.7%
Common Stock David Frosh(1) 91,000(7) 4.0%
Common Stock Corley Phillips(1) 20,500(8) *
Common Stock Fred Haney(1) 12,500(8) *
Common Stock ZPR Investment Mgmt. 535,200 23.3%
Common Stock All Directors and
Officers as a
Group (of 8 persons) 691,600 30.2%
</TABLE>
- ------------------
* Less than 1.0%.
(1) c/o Cam Data Systems, Inc., 17520 Newhope Street, Suite 100, Fountain
Valley, California 92708.
(2) Includes (i) an aggregate of 3,100 shares of Common Stock held in trust for
three daughters of Mr. Geoffrey Knapp over which he has shared voting power
(ii) options to purchase an aggregate of 10,000 shares until the sooner of
October 12, 1997, or twelve months after ceasing to serve as a director at
a price of $2.34 per share.(iii) options to purchase an aggregate of 50,000
shares until October 20, 2003 at a price of $1.93 per share (iv) options to
purchase an aggregate of 20,000 shares until December 16, 2006 at a price
of $3.75 per share.
18
<PAGE> 19
(3) Includes options to purchase (i) an aggregate of 15,000 shares of Common
Stock until October 20, 2003, at a price of $1.75 per share (ii) an
aggregate of 30,000 shares of Common Stock until January 3, 2004 at a price
of $2.13 per share (iii) an aggregate of 2,000 shares until December 16,
2006 at a price of $3.75 per share..
(4) Includes options to purchase (i) an aggregate of 5,000 shares of Common
Stock until April 1, 2003, at a price of $3.38 per share (ii) an aggregate
of 9,400 shares of Common Stock until January 3, 2004, at a price of $2.13
per share (iii) an aggregate of 3,100 shares of Common Stock until June 26,
2006, at a price of $4.75 per share (iv) an aggregate of 1,000 shares of
Common Stock until December 16, 2006, at a price of $3.75 per share.
(5) Includes options to purchase an aggregate of 25,800 shares of Common Stock
until March 13, 2005, at a price of $2.25 per share.
(6) Includes options to purchase (i) an aggregate of 7,500 shares until the
sooner of October 19, 2003, or twelve months after ceasing to serve as a
director at a price of $1.75 per share (ii) an aggregate of 7,500 shares
until the sooner of May 25, 2005, or twelve months after ceasing to serve
as a director at a price of $2.375 per share (iii) an aggregate of 7,500
shares until the sooner of May 9, 2006, or twelve months after ceasing to
serve as a director at a price of $5.50 per share (iv) an aggregate of
4,400 shares until May 8, 2007, at a price of $3.38 per share.
(7) Includes options to purchase (i) an aggregate of 7,500 shares until the
sooner of October 19, 2003, or twelve months after ceasing to serve as a
director at a price of $1.75 per share (ii) an aggregate of 7,500 shares
until the sooner of May 25, 2005, or twelve months after ceasing to serve
as a director at a price of $2.375 per share (iii) an aggregate of 7,500
shares until the sooner of May 9, 2006, or twelve months after ceasing to
serve as a director at a price of $5.50 per share (iv) an aggregate of
41,300 shares until June 10, 2006, at a price of $5.50 per share.
(8) Includes options to purchase (i) an aggregate of 5,000 shares until the
sooner of September 23, 2006, or twelve months after ceasing to serve as a
director at a price of $4.375 per share (ii) an aggregate of 7,500 shares
until the sooner of May 8, 2007, or twelve months after ceasing to serve as
a director at a price of $3.375 per share
(9) For the purposes of the above table and the notes thereto, the Company's
Common Stock shown as "beneficially owned" includes all securities which
pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as
amended, may be deemed to be "beneficially owned" including, without
limitation, all securities which the "beneficial owner" has the right to
acquire within 60 days, as, for example, through the exercise of any
option, warrant or right, the conversion of convertible securities or
pursuant to the power to revoke a trust, discretionary account or similar
arrangement.
(10) The percentage of ownership of the class of voting securities in the above
table has been calculated by dividing (i) the aggregate number of shares of
such class actually owned plus all shares of such class which may be deemed
to be "beneficially owned," by (ii) the number of shares of such
19
<PAGE> 20
class actually outstanding plus the number of shares of such class such
"beneficial owner" may be deemed to "beneficially own" assuming no other
acquisitions of shares of such class through the exercise of any option,
warrant or right by any other person.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the fiscal year ended September 30, 1997, the Company granted
non-qualified options to certain employees and directors to purchase an
aggregate of 369,400 shares of Common Stock of the Company at a price ranging
from $2.62 to $3.75 per share expiring ten years from the date of grant.
20
<PAGE> 21
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. FINANCIAL STATEMENTS
The financial statements required to be filed hereunder are listed on
page 10 hereof. See Part II, Item 8 of this report for information regarding the
incorporation by reference herein of such financial statements.
(a) 2. FINANCIAL STATEMENT SCHEDULES
The following financial statement schedule of CAM Data Systems Inc., is
included on page 26 hereof:
Page
Schedule II - Valuation and Qualifying Accounts 26
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not required
under the related instructions or are inapplicable, and therefore have been
omitted.
(a) 3. OTHER EXHIBITS
3(a) Articles of Incorporation of the Company, as amended (incorporated by
reference to Exhibit 3(a) to the 1988 Annual Report on Form 10-K filed on
January 12, 1989 - File No. 0-16569).
3(b) By-Laws of the Company (incorporated by reference to Exhibit 3(b) to the
S-18 Registration Statement).
10(a) Incentive Stock Option Plan (incorporated by referenced to Exhibit 10(b)
to the S-18 Registration Statement).
10(b) Company's Lease for premises at Fountain Valley, California (incorporated
by reference to Exhibit 10(b) to the 1988 Annual Report on Form 10-K filed
on January 12, 1989 - File No. 0-16569).
10(c) 1993 Stock Option Plan (incorporated by reference to the exhibits on Form
S-8 Registration Statement filed on June 21, 1993).
10(d) Registration Statement (incorporated by reference to the exhibits on Form
S-3 No. 33-57564 Registration Statement filed on June 17, 1993).
10(e) Extension to Company's Lease for premises at Fountain Valley, California
(incorporated by reference to Exhibit 10 (i) to the 1993 Annual Report on
Form 10-K filed on December 27, 1993 - File No. 0-16569).
10(f) Line of Credit Agreement, dated January 9, 1997, with Silicon Valley Bank.
21
<PAGE> 22
13(a) Annual Report to Stockholders for the fiscal year ended September 30,
1997.
23 Consent of Independent Auditors.
27 Financial Data Schedule.
(b) REPORTS ON FORM 8-K
No reports on Form 8-K have been filed during the last quarter of the
year ended September 30, 1997, covered by this report.
22
<PAGE> 23
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 filed on
its behalf by the undersigned, thereunto duly authorized.
CAM DATA SYSTEMS, INC.
By: /s/ GEOFFREY D. KNAPP
---------------------------------
Geoffrey D. Knapp,
Chief Executive Officer
By: /s/ PAUL CACERES, JR.
---------------------------------
Paul Caceres, Jr.,
Chief Financial Officer and
Chief Accounting Officer
Date: December 22, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Position Date
--------- -------- ----
/s/ GEOFFREY D. KNAPP Chief Executive Officer December 22, 1997
- -------------------------- and Chairman of the Board
Geoffrey D. Knapp
/s/ DAVID FROSH President and Director December 22, 1997
- --------------------------
David Frosh
/s/ WALTER W. STRAUB Director December 22, 1997
- --------------------------
Walter W. Straub
Director December 22, 1997
- --------------------------
Dr. Fred M. Haney
Director December 22, 1997
- --------------------------
Corley Phillips
23
<PAGE> 24
CAM DATA SYSTEMS, INC.
INDEX TO
FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES
ITEM 14(a)
<TABLE>
<CAPTION>
Page Reference
Annual Report
to Stockholders Form 10-K
--------------- ---------
<S> <C> <C>
Report of Independent Auditors........................ 15
Consolidated Balance Sheets at
September 30, 1997 and 1996.......................... 6
Consolidated Statements of Income for Years
Ended September 30, 1997, 1996 and 1995.............. 7
Consolidated Statements of Cash Flows for Years
Ended September 30, 1997, 1996 and 1995.............. 8
Consolidated Statements of Stockholders' Equity
for Years Ended September 30, 1997, 1996 and 1995.... 9
Notes to Consolidated Financial Statements............ 10-14
Report of Independent Auditors on Consolidated
Financial Statement Schedule ........................ 25
II. Valuation and Qualifying Accounts
for the Years Ended September 30, 1997,
1996 and 1995..................................... 26
</TABLE>
All other financial statement schedules are omitted as the required information
is inapplicable or the information is presented in the financial statements or
related notes.
24
<PAGE> 25
REPORT OF INDEPENDENT AUDITORS ON FINANCIAL STATEMENT SCHEDULE
The Board of Directors
CAM Data Systems, Inc.
We have audited the consolidated financial statements of CAM Data Systems, Inc.
as of September 30, 1997 and 1996, and for each of the three years in the period
ended September 30, 1997, and have issued our report thereon dated November 14,
1997. Our audits also included the financial statement schedule of CAM Data
Systems, Inc. listed in the accompanying index to the consolidated financial
statements and financial statement schedules (Item 14(a)). This schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion based on our audits. In our opinion, the financial statement schedule
referred to above, when considered in relation to the basic financial statements
taken as a whole, presents fairly in all material respects the information set
forth therein.
ERNST & YOUNG LLP
Orange County, California
November 14, 1997
25
<PAGE> 26
CAM DATA SYSTEMS, INC.
SCHEDULE II-- VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED SEPTEMBER 30, 1997, 1996, AND 1995
<TABLE>
<CAPTION>
DEDUCTIONS/
BALANCE AT ADDITIONS ACCOUNTS WRITTEN
BEGINNING CHARGED TO OFF NET OF BALANCE AT
OF YEAR INCOME RECOVERIES END OF YEAR
------- ------ ---------- -----------
ALLOWANCE FOR DOUBTFUL
ACCOUNTS RECEIVABLE:
<S> <C> <C> <C> <C>
1997: $150,000 $177,700 $167,700 $160,000
1996: $140,000 $175,600 $165,600 $150,000
1995: $120,000 $157,800 $137,800 $140,000
</TABLE>
26
<PAGE> 27
CAM DATA SYSTEMS, INC.
EXHIBIT INDEX TO THE FORM 10-K
FOR THE YEAR ENDED SEPTEMBER 30, 1997
3(a) Articles of Incorporation of the Company, as amended (incorporated by
reference to Exhibit 3(a) to the 1988 Annual Report on Form 10-K filed on
January 12, 1989 - File No. 0-16569).
3(b) By-Laws of the Company (incorporated by reference to Exhibit 3(b) to the
S-18 Registration Statement).
10(a) Incentive Stock Option Plan (incorporated by referenced to Exhibit 10(b)
to the S-18 Registration Statement).
10(b) Company's Lease for premises at Fountain Valley, California (incorporated
by reference to Exhibit 10(b) to the 1988 Annual Report on Form 10-K filed
on January 12, 1989 - File No. 0-16569).
10(c) 1993 Stock Option Plan (incorporated by reference to the exhibits on Form
S-8 Registration Statement filed on June 21, 1993).
10(d) Registration Statement (incorporated by reference to the exhibits on Form
S-3 No. 33-57564 Registration Statement filed on June 17, 1993).
10(e) Extension to Company's Lease for premises at Fountain Valley, California
(incorporated by reference to Exhibit 10 (i) to the 1993 Annual Report on
Form 10-K filed on December 27, 1993 - File No. 0-16569).
10(f) Line of Credit Agreement, dated January 9, 1997, with Silicon Valley Bank.
13(a) Annual Report to Stockholders for the fiscal year ended September 30,
1997.
23 Consent of Independent Auditors.
27 Financial Data Schedule.
<PAGE> 28
CAM DATA SYSTEMS, INC.
EXHIBITS TO FORM 10-K
FOR THE YEAR ENDED SEPTEMBER 30, 1997
<PAGE> 1
10(f) Line of Credit Agreement, dated January 9, 1997, with Silicon Valley Bank
<PAGE> 2
[LOGO] SILICON VALLEY BANK
AMENDMENT TO LOAN AND SECURITY AGREEMENT
BORROWER: CAM DATA SYSTEMS, INC.
ADDRESS: 17520 NEWHOPE STREET, SUITE 100
FOUNTAIN VALLEY, CALIFORNIA 92708
DATE: JANUARY 9, 1997
THIS AMENDMENT TO LOAN AND SECURITY AGREEMENT is entered into between
SILICON VALLEY BANK ("Silicon") and the borrower named above (the "Borrower").
The Parties agree to amend the Loan and Security Agreement between them,
dated June 30, 1992, as amended by that certain Amendment to Loan Agreement
dated July 7, 1993, as amended by that Amendment to Loan Agreement dated June
28, 1994, as amended by that Amendment to Loan Agreement dated July 17, 1995, as
amended by that Amendment to Loan and Security Agreement dated July 18, 1996 (as
so amended and as otherwise amended from time to time, the "Loan Agreement"), as
follows. (Capitalized terms used but not defined in this Amendment, shall have
the meanings set forth in the Loan Agreement.)
1. AMENDED SCHEDULE. The Schedule to Loan and Security Agreement is
amended, effective on the date hereof, to read as set forth on the Amended
Schedule to Loan and Security Agreement attached hereto.
2. FACILITY FEE. Borrower shall concurrently pay to Silicon a facility
fee in the amount of $2,800, which shall be in addition to all interest and all
other fees payable to Silicon and shall be non-refundable.
3. REPRESENTATIONS TRUE. Borrower represents and warrants to Silicon
that all representations and warranties set forth in the Loan Agreement, as
amended hereby, are true and correct. Further, the Borrower hereby represents
and warrants to Silicon that all information provided to Silicon in the
Representations and Warranties form dated July 2, 1996 remains complete and
accurate as of the date hereof and the agreements, representations and
warranties set forth in such form are hereby incorporated into this Agreement as
though set forth herein in full.
4. GENERAL PROVISIONS. This Amendment, the Loan Agreement, any prior
written amendments to the Loan Agreement signed by Silicon and the Borrower, and
the other written documents and agreements between Silicon and the Borrower set
forth in full all of the representations and agreements of the parties with
respect to the subject matter hereof and supersede all prior discussions,
representations, agreements and understandings between the parties with respect
to the subject hereof. Except as herein expressly amended, all of the terms
-1-
<PAGE> 3
and provisions of the Loan Agreement, and all other documents and agreements
between Silicon and the Borrower shall continue in full force and effect and the
same are hereby ratified and confirmed.
BORROWER: SILICON:
CAM DATA SYSTEMS, INC. SILICON VALLEY BANK
BY BY
-------------------------------- -----------------------------
PRESIDENT OR VICE PRESIDENT TITLE
--------------------------
BY
--------------------------------
SECRETARY OR ASS'T SECRETARY
-2-
<PAGE> 4
[LOGO] SILICON VALLEY BANK
AMENDED SCHEDULE TO
LOAN AND SECURITY AGREEMENT
BORROWER: CAM DATA SYSTEMS, INC.
ADDRESS: 17520 NEWHOPE STREET, SUITE 100
FOUNTAIN VALLEY, CALIFORNIA 92708
DATE: JANUARY 9, 1997
CREDIT LIMIT
(Section 1.1):
An amount not to exceed the lesser of: (i) $1,500,000 at any one time
outstanding; or (ii) 75% of the Net Amount of Borrower's accounts, which Silicon
in its discretion deems eligible for borrowing. "Net Amount" of an account means
the gross amount of the account, minus all applicable sales, use, excise and
other similar taxes and minus all discounts, credits and allowances of any
nature granted or claimed; PROVIDED THAT prior to the satisfactory completion of
an audit pursuant to Section 4.5 of the Loan Agreement, Loans hereunder shall in
no event exceed $500,000.
Without limiting the fact that the determination of which accounts are eligible
for borrowing is a matter of Silicon's discretion, the following will not be
deemed eligible for borrowing: accounts outstanding for more than 90 days from
the invoice date, accounts subject to any contingencies, accounts owing from an
account debtor outside the United States (unless pre-approved by Silicon in its
discretion, or backed by a letter of credit satisfactory to Silicon, or FCIA
insured satisfactory to Silicon), accounts owing from one account debtor to the
extent they exceed 25% of the total eligible accounts outstanding, accounts
owing from an affiliate of Borrower, and accounts owing from an account debtor
to whom Borrower is or may be liable for goods purchased from such account
debtor or otherwise. In addition, if more than 50% of the accounts owing from an
account debtor are outstanding more than 90 days from the invoice date or are
otherwise not eligible accounts, then all accounts owing from that account
debtor will be deemed ineligible for borrowing.
LETTERS OF CREDIT SUBLIMIT
Silicon, in its discretion, will from time to time during the term of this
Agreement issue letters of credit for the account of the Borrower ("Letters of
Credit"), in an aggregate amount at any one time outstanding not to exceed
$500,000, upon the request of the Borrower and upon execution and delivery by
the Borrower of Applications for Letters of Credit and such other documentation
as Silicon shall specify (the "Letter of Credit
-3-
<PAGE> 5
Documentation"). Fees for the Letters of Credit shall be as provided in the
Letter of Credit Documentation.
The Credit Limit set forth above and the Loans available under this Agreement at
any time shall be reduced by the face amount of Letters of Credit from time to
time outstanding.
INTEREST RATE (Section 1.2):
A rate equal to the "Prime Rate" in effect from time to time, plus 1.00% per
annum. Interest shall be calculated on the basis of a 360-day year for the
actual number of days elapsed. "Prime Rate" means the rate announced from time
to time by Silicon as its "prime rate;" it is a base rate upon which other rates
charged by Silicon are based, and it is not necessarily the best rate available
at Silicon. The interest rate applicable to the Obligations shall change on each
date there is a change in the Prime Rate.
LOAN ORIGINATION FEE
(Section 1.3):
SEE AMENDMENT TO LOAN AND SECURITY AGREEMENT OF EVEN DATE.
MATURITY DATE
(Section 5.1):
JANUARY 8, 1998
PRIOR NAMES OF BORROWER
(Section 3.2):
SILVER PLUS
TRADE NAMES OF BORROWER
(Section 3.2):
NONE
OTHER LOCATIONS AND ADDRESSES
(Section 3.3):
1643 NEVADA HWY., BOULDER CITY, NV 89005; AND
352 VILLAGE STREET, MILLIS, MA 02054
MATERIAL ADVERSE LITIGATION
(Section 3.10):
NONE
NEGATIVE COVENANTS-EXCEPTIONS
(Section 4.6):
Without Silicon's prior written consent, Borrower may do the following, provided
that, after giving effect thereto, no Event of Default has occurred and no event
has occurred which, with notice or passage of time or both, would constitute an
Event of Default, and provided that the following are done in compliance with
all applicable laws, rules and regulations: (i) repurchase shares of Borrower's
stock pursuant to any employee stock purchase or benefit plan, provided that the
total amount paid by Borrower for such stock does not exceed $100,000 in any
fiscal year.
FINANCIAL COVENANTS
(Section 4.1):
Borrower shall comply with all of the following covenants. Compliance shall be
determined as of the end of each quarter, except as otherwise specifically
provided below:
QUICK ASSET RATIO:
Borrower shall maintain a ratio of "Quick Assets" to current liabilities of not
less than 1.25 to 1.
-4-
<PAGE> 6
TANGIBLE NET WORTH:
Borrower shall maintain a tangible net worth of not less than $2,500,000.
DEBT TO TANGIBLE
NET WORTH RATIO:
Borrower shall maintain a ratio of total liabilities to tangible net worth of
not more than 1.00 to 1.
PROFITABILITY
Borrower shall not incur a loss (after taxes) in any fiscal year, except that in
a single fiscal quarter during each fiscal year Borrower may incur a loss (after
taxes) in an amount not to exceed $200,000.
DEFINITIONS:
"Current assets," and "current liabilities" shall have the meanings ascribed to
them in accordance with generally accepted accounting principles.
"Tangible net worth" means the excess of total assets over total liabilities,
determined in accordance with generally accepted accounting principles,
excluding however all assets which would be classified as intangible assets
under generally accepted accounting principles, including without limitation
goodwill, licenses, patents, trademarks, trade names, copyrights, and
franchises.
"Quick Assets" means cash on hand or on deposit in banks, readily marketable
securities issued by the United States, readily marketable commercial paper
rated "A-1" by Standard & Poor's Corporation (or a similar rating by a similar
rating organization), certificates of deposit and banker's acceptances, and
accounts receivable (net of allowance for doubtful accounts).
SUBORDINATED DEBT:
"Liabilities" for purposes of the foregoing covenants do not include
indebtedness which is subordinated to the indebtedness to Silicon under a
subordination agreement in form specified by Silicon or by language in the
instrument evidencing the indebtedness which is acceptable to Silicon.
DEFERRED REVENUES:
For purposes of the above Quick Asset Ratio, deferred revenues shall not be
counted as current liabilities. For purposes of the above debt to tangible net
worth ratio, deferred revenues shall not be counted in determining total
liabilities but shall be counted in determining tangible net worth for purposes
of such ratio. For all other purposes deferred revenues shall be counted as
liabilities in accordance with generally accepted accounting principles.
OTHER COVENANTS
(Section 4.1):
Borrower shall at all times comply with all of the following additional
covenants:
1. BANKING RELATIONSHIP. Borrower shall at all times maintain its primary
banking relationship with Silicon.
2. BORROWING BASE CERTIFICATE AND LISTING. At all times that any Obligations
remain outstanding, within 20 days after the end of each month, Borrower shall
provide Silicon with a Borrowing Base Certificate in such form as Silicon shall
-5-
<PAGE> 7
specify, and an aged listing of Borrower's accounts receivable and accounts
payable. At all other times, within 30 days after the end of each fiscal
quarter, Borrower shall provide Silicon with a Borrowing Base Certificate in
such form as Silicon shall specify, and an aged listing of Borrower's accounts
receivable. Additionally, prior to any new Loans being advanced, Borrower shall
provide Silicon with a current Borrowing Base Certificate in such form as
Silicon shall specify, and an aged listing of Borrower's accounts receivable and
accounts payable.
3. INDEBTEDNESS. Without limiting any of the foregoing terms or provisions of
this Agreement, Borrower shall not in the future incur indebtedness for borrowed
money, except for (i) indebtedness to Silicon, and (ii) indebtedness incurred in
the future for the purchase price of or lease of equipment in an aggregate
amount not exceeding $100,000 at any time outstanding.
4. COPYRIGHT SECURITY AGREEMENT. Borrower shall continue in full force and
effect the Security Agreement in Copyrighted Works, executed by Borrower in
favor of Silicon. The Borrower shall cause the Security Agreement in Copyrighted
Works to remain in full force and effect while any Obligations remain
outstanding.
5. ACCOUNTS RECEIVABLE AUDITS. No accounts receivable audits as set forth under
Section 4.5 of this Agreement shall be required during periods in which no
Obligations remain outstanding. An accounts receivable audit as set forth under
Section 4.5 of this Agreement shall be conducted and completed, with
satisfactory results, within 30 days after any new Loan is made hereunder.
Additionally, at all times that
-6-
<PAGE> 8
any Obligations remain outstanding, the accounts receivable audits by third
parties retained by Silicon as set forth in Section 4.5 of this Agreement shall
be conducted on a semi-annual basis.
BORROWER:
CAM DATA SYSTEMS, INC.
BY
----------------------------------------
PRESIDENT OR VICE PRESIDENT
BY
----------------------------------------
SECRETARY OR ASS'T SECRETARY
SILICON:
SILICON VALLEY BANK
BY
----------------------------------------
TITLE
-------------------------------------
-7-
<PAGE> 1
13(a) Annual Report to Stockholders for the fiscal year ended
September 30, 1997.
<PAGE> 2
LETTER TO STOCKHOLDERS
THE EFFECTS OF GROWTH AND IMPROVEMENTS
In 1997 we continued with the move to next generation operating environments and
next generation products which we began last year. While revenues grew at 12% to
a record $17.5 million, we saw a significant 6% reduction in our new system
margins. We also bit the bullet and increased our software development
expenditures in an effort to bring new products to market faster and to complete
the transition of "all" of our products entirely to a Windows based environment
at the earliest possible time. We are confident that this will occur in fiscal
1998.
The net result for 1997, although not unexpected, was a disappointing bottom
line of $.08 per share compared to $.39 per share in 1996. While our customers
will be pleased with seeing better values and leading edge products, we realize
we have an obligation to our shareholders to perform at a higher level. As we
take the lessons learned this past year forward and begin to see the real
benefit of our new product offerings next year, we are optimistic that our
earnings picture will improve as our revenues grow. We have significant new
leading edge products which as of this writing, are being introduced to the
market.
ACQUISITION OF ACCESS RETAIL MANAGEMENT
We made two very meaningful, long term focused acquisitions, while maintaining
our cash position at just under $3 million. First, we acquired Access Retail
Management ("Access") in September. Access provides a planning service for
retailers that helps them decide what to buy, when to buy it, what to mark down,
when to mark it down and generally helps them with meeting the goals for their
businesses. Access accomplishes this by gathering information monthly about the
sales and movement of the retailers inventory, plugging this information into a
specially designed software program, and developing a monthly "plan" for the
retailer. While the computer develops a unique plan for each store, each plan is
reviewed by an experienced planner. The retailers cash flow and specific goals
are taken into account and adjustments are made to each plan accordingly. The
service is billed monthly and is very affordable for the small to medium size
retailer.
Other than independent consultants, there is one known competitor with sales in
the $10 million range. With thousands of stores operating on CAM's retail
management systems, the ability to take the data captured by the system and
utilize it with such a powerful planning service appears to be a strong
strategic fit for us. Many of our customers have a substantial need for this
service. The Access division also adds to our concept of providing a "one
source" solution for the needs of the small to medium size retailer.
Furthermore, we believe we have significant strategic advantages as a company,
and in terms of our flexibility with our planning software, over our competitor
in this market.
ACQUISITION OF RETAIL STAR
In August we acquired the product rights to a Windows based point of sale
product called Retail Star from Teamsoft of Irvine, CA. We also hired the
founder and primary developer of the product to continue development of the Star
software to meet our specifications. Before choosing Teamsoft and Star, we did
an exhaustive search of the market looking for leading edge technology in the
point of sale market place. With the exception of Teamsoft, we found very
little. What we found was that it will be a year or two before any competitors
will have a substantive Windows based product focused on our markets.
During our research we found that there were lots of companies talking about new
Windows products, but very few delivering them. Those that were, had products
based on questionable technology strategies, and/or very poor retail
applications. The Star product is a 32 bit, graphical product that can work with
a number of SQL relational databases, including Microsoft's SQL Server. Since
our application is essentially a database application, this is the most
important part of the product. The development environment for Star allows us to
use the latest software development tools from Centura Corp., as well as
Microsoft Visual Basic and C. Centura, which may not be widely recognized but is
a key development environment used by People Soft and was recently chosen by
Intuit for their higher end products.
Retail Star is a true client server product, offering speed and power that no
known competitor at our end of the market can currently come close to matching.
Our first release of the Retail Star product incorporates a totally new look and
feel as well as significant new flexibility and functionality. We truly believe
that the combination of Teamsoft's technology and database expertise with CAM
Data's 14 years of developing retail applications has resulted in arguably the
most
1
<PAGE> 3
formidable product available for a large part of our target market. As Retail
Star continues to be enhanced throughout 1998, we expect it to become the
standard by which all other products are measured. In addition to the strong
technology base and emerging application, Star offers us the ability to more
easily attack international markets should we decide to pursue this.
THE FUTURE
For these acquisitions to be successful for the company, they will require
continued investment. We see no way around this. Until our entire product line
is moved 100% into the Windows world, we are forced to maintain multiple
development efforts. It is our achievable goal to be selling only Windows based
products by the end of 1998. At the same time, we are providing conversion
programs and upgrade paths for our very large customer base so they can make the
transition with us over time. This is no small task, and one that has and will
also require continued investment. In addition, we have the job of training our
entire organization on the new products.
When you consider the investments we are having to make to transition our
product line while continuing to keep our customer base satisfied, you have to
consider the dozens of smaller competitors that face the same challenge without
having anything close to the resources available to CAM Data. Thus, we think
that as a "real" Windows product becomes a condition of sale over the next year,
that many of our competitors who are unable to make this transition properly
will cease to exist. Some that have meaningful customer bases may be candidates
for acquisition. It is hard to imagine an informed retailer buying an older 16
bit, text based, DOS application over Retail Star or our new CAM IV Windows
product scheduled for delivery in fiscal 1998, when the price is comparable.
When you add the strength of our company and services, we think we will raise
the stakes in the POS market for small retailers in 1998. For new competitors in
the market place, it will take them years to build up a significant customer
base to provide recurring revenues and referrals.
To help with meeting the challenges presented by the new operating environments
we are delivering our products in, it was necessary to turn the attention of our
network services group entirely internal. Thus, we have almost no network
service revenue outside the retail market, as we had the prior year. This
further contributed to lower profits. We expect this to continue for the
foreseeable future.
MAS-90 PROGRESS
Our MAS-90 accounting and distribution software group (ICS acquisition) was a
shining success in 1997. Revenues rose approximately 75% from $750k to $1,300k
for the comparable period, and we achieved record profitability for this
division. Early indications are that this success will continue. Brian Chausmer,
the founder of ICS and the general manager of this division did an outstanding
job this past year.
COMMITMENT TO SERVICE
Our service department experienced an up and down year. The challenges of
multiple new operating environments, record sales and more complex products had
our 40 service person department of dedicated individuals often working through
lunch and putting in extra time to keep up. At peak times our call queue
sometimes backed up to less than desirable levels causing some degree of
customer frustration from time to time. Call back times for non-emergency calls
which generally average 30 minutes, sometimes fell to a few hours. We have again
focused on ways to improve this, but much of it is a learning curve as we make
the transition to new products. We are adding staff commensurate with the growth
in our customer base and service revenue. We fell somewhat behind the hiring
curve in 1997 through promotions and normal turn over. We remain fanatically
committed to customer service. We maintain a "do whatever it takes" attitude and
we expect to improve in 1998 and beyond.
INTERNAL CHANGES
This past year the doctor became the patient as we implemented a complete change
over of our internal accounting, distribution and manufacturing software to
MAS-90. We went live on October 1st on the new system, which is proceeding
according to plan. However, this was another area we made a significant
investment in to improve our business which contributed to lower earnings. This
project took months of planning and a massive retraining of our staff to allow
us to make a complete change over for our new fiscal year. We hired outside
consultants and MAS-90 programmers with manufacturing expertise to help us
tailor our new system to meet our needs.
In past reports I have talked about not having lost a
2
<PAGE> 4
successful sales person for several years. This year we lost two top reps to
entrepreneurial ventures. On the flip side we gained a couple and had other
sales reps pick up the pace. We look to strengthen the sales force in 1998 with
a couple of key hires. Productivity remains very high.
FACILITY ENHANCEMENTS
In January, as the sole tenant of our Fountain Valley facility, we expanded into
the remainder of our office building to accommodate our growth. At the same time
we gave the facility a face lift after 10 years. We agreed to a new five year
lease on favorable terms and feel we now have enough space to meet our short
term needs.
In April, we successfully opened our new 11,000 square foot R&D facility in
Henderson Nevada. This facility is also home to our MAS-90 accounting group.
Thirty five employees currently work out of this new office. At both of the
above mentioned facilities we added professional, 24 seat classrooms which will
allow us to focus more on centralized training for our customers.
LONG TERM OUTLOOK
Finally, with our new products and strong infrastructure we have put ourselves
in a position to succeed. Management and our board of directors is doing
everything we can think of to improve "long term" shareholder value. We have
discovered no magic bullets or easy answers. We continue to proceed with our
focused, long term plans for improving and growing our business with the belief
that once we make the "complete" transition to new products that we will see new
growth opportunities and improved internal efficiency over time. We believe in
the strategies we are pursuing and ask all of our shareholders for their
continued support as we continue to work towards achieving the goals we have
set, which at the top of the list is substantially improving shareholder value.
Best Regards,
Geoff Knapp
[GRAPH]
SALES FIGURES FOR THE PAST SEVEN YEARS
IN MILLIONS
<TABLE>
<CAPTION>
1991 1992 1993 1994 1995 1996 1997
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
$5.32 $9.05 $11.92 $13.22 $14.67 $15.67 $17.48
</TABLE>
3
<PAGE> 5
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
FISCAL 1997 COMPARED WITH FISCAL 1996
NET REVENUES for the fiscal year ended September 30, 1997, increased 12% to
$17,479,500 consisting of a 9% increase in system revenues, and a 24% increase
in service revenues compared to the year ended September 30, 1996. The increase
in system revenues was attributed to an increase in the demand for the Company's
products in 1997. The increase in service revenues was attributed to the full
year impact of the ICS subsidiary in fiscal 1997 compared to the inclusion of
six months of revenue in 1996, and an increase in the installed customer base
for CAM and Profit$ systems and a price increase in the service rates.
GROSS MARGIN on system revenues decreased to 45% for the year ended September
30, 1997, compared to 51% for the year ended September 30, 1996. Gross margin
for service revenues was 48% for the year ended September 30, 1997, compared to
50% for the year ended September 30, 1996. The margin decrease in system
revenues was a result of a higher mix of hardware sales versus software sales,
which yield a lower gross margin than software sales. The decrease in gross
margin for service revenues is related to the increase in customer service
personnel.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES expressed as a percentage of net
revenues remained constant at 36% for the year ended September 30, 1997 and
1996. Selling, general and administrative expenses for the year ended September
30, 1997, increased 12% to $6,316,600 from the year ended September 30, 1996.
The increase was mainly attributed to higher payroll costs for sales and
administrative personnel in fiscal 1997, combined with increases in marketing,
travel and telephone expenses, offset by the revaluation of some accrued
liabilities. There was also higher payroll expenses related to the inclusion of
the ICS division, acquired in April 1996.
RESEARCH AND DEVELOPMENT EXPENSE increased 22% to $1,488,800 for year ended
September 30, 1997, from $1,219,300 for fiscal 1996. The increase for fiscal
1997 was attributed to increases in payroll expenses related to the addition of
R & D personnel for the continued enhancement of the Company's products, and the
development of new products.
THE EFFECTIVE INCOME TAX RATE was 31% for the years ended September 30, 1997 and
1996.
RESULTS OF OPERATIONS
FISCAL 1996 COMPARED WITH FISCAL 1995
NET REVENUES for the fiscal year ended September 30, 1996, increased 6% to
$15,669,500, consisting of a 5% increase in system revenues and a 12% increase
in service revenues from the year ended September 30, 1995. The increase in
system revenues was primarily a result of the introduction of the new CAM III
product and the overall increased demand for the Company's products. The
increase in service revenues was attributed to an increase in the installed
customer base for our CAM and Profit$ products.
GROSS MARGIN for system revenues remained constant at 51% in fiscal 1995 and
1996. There were no significant price increases in fiscal 1996. The gross margin
for service revenues was 50% in fiscal 1996 compared to 36% in fiscal 1995. The
margin increase related to service revenue was largely due to the sale of the
Silver Plus division in September 1995, in which direct labor and amortization
costs resulted in higher cost of sales in 1995.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES expressed as a percentage of net
revenues was 36% for fiscal 1996 compared to 38% for fiscal 1995. Selling,
general, and administrative expenses for fiscal 1996 were $5,620,700 compared to
$5,597,400 in fiscal 1995. The decrease in expenditures, expressed as a
percentage of total revenues, was due to improved operating efficiencies.
RESEARCH AND DEVELOPMENT EXPENSE increased 26% to $1,219,300 in fiscal 1996 from
$967,100 in fiscal 1995. This increase was related to the development of the new
CAM III product, continued enhancement of the CAM and Profit$ software products,
and the research and development of new software products.
THE EFFECTIVE INCOME TAX RATE was 31% for fiscal 1996, compared to 32% for
fiscal 1995.
4
<PAGE> 6
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents totaled $2,916,300 at September 30,
1997, compared to $3,338,200 on September 30, 1996. The Company generated
$292,500 from operations in fiscal 1997 compared to $1,096,400 in fiscal 1996.
The Company expended $814,400 in fiscal 1997 compared to the expenditures of
$823,100 in fiscal 1996 for the purchase of land in Nevada, fixed assets, and
for an acquisition. In June 1997, the Company renewed its line of credit with a
commercial bank, which expires in January 1998, for borrowings up to $1,500,000
with interest at the Bank's prime rate plus 1%. Borrowings under the line of
credit are secured by the assets of the Company. As of September 30, 1997, the
Company had no amounts outstanding under the line.
The Company has no significant commitments for expenditures other than the lease
of its corporate and sales offices.
Management believes the Company's existing working capital coupled with funds
generated from the Company's operations will be sufficient to fund its presently
anticipated working capital requirements for the foreseeable future.
Inflation has had no significant impact on the Company's operations.
YEAR 2000
As the year 2000 approaches, an issue impacting all companies has emerged
regarding how existing application software programs and operating systems can
accommodate this date value. In brief, many existing application software
products in the marketplace were designed to only accommodate a two digit date
position which represents the year (e.g., "95" is stored on the system and
represents the year 1995). As a result, the year 1999 (i.e., "99") could be the
maximum date value systems will be able to accurately process. Management is in
the process of working with its software vendors to assure that the Company is
prepared for the year 2000. Management does not anticipate that the Company will
incur operating expenses or be required to invest heavily in computer system
improvements to be year 2000 compliant.
5
<PAGE> 7
STATEMENT OF CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
September 30,
--------------------------
1997 1996
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 2,916,300 $ 3,338,200
Accounts receivable, net of an allowance for
doubtful accounts of
$160,000 in 1997 ($150,000 in 1996) 2,354,500 2,024,600
Inventories 523,000 438,500
Prepaid expenses 256,200 95,400
Deferred income taxes 123,000 150,000
----------- -----------
Total current assets 6,173,000 6,046,700
Property and equipment, net 788,600 571,900
Intangible assets, net 597,300 500,100
Note receivable from officer/stockholder,
due upon demand, with interest at prime rate 12,300 14,300
Other assets 36,900 24,800
----------- -----------
Total assets $ 7,608,100 $ 7,157,800
=========== ===========
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,140,100 $ 650,400
Accrued compensation and related expenses 466,000 640,000
Income taxes payable -- 136,200
Customer deposits and deferred service revenue 420,300 295,600
Accrued installation costs 100,000 111,000
Other accrued liabilities 197,700 327,600
----------- -----------
Total current liabilities 2,324,100 2,160,800
Stockholders' equity:
Common stock, $.001 par value, 5,000,000
shares authorized, 2,008,700 shares
issued and outstanding in 1997 (1,964,200 shares in 1996) 2,000 2,000
Paid-in capital in excess of par value 3,944,800 3,844,800
Notes receivable for purchase of common stock (30,900) (40,900)
Retained earnings 1,368,100 1,191,100
----------- -----------
Total stockholders' equity 5,284,000 4,997,000
----------- -----------
Total liabilities and stockholders' equity $ 7,608,100 $ 7,157,800
=========== ===========
</TABLE>
See accompanying notes.
6
<PAGE> 8
STATEMENT OF CONSOLIDATED INCOME
<TABLE>
<CAPTION>
Years Ended
September 30,
--------------------------------------------
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
REVENUES
Net system revenues $ 13,768,200 $ 12,665,600 $ 12,043,300
Net service revenues 3,711,300 3,003,900 2,690,500
------------ ------------ ------------
Total net revenues 17,479,500 15,669,500 14,733,800
------------ ------------ ------------
COSTS AND EXPENSES
Cost of system revenues 7,614,400 6,239,200 5,914,200
Cost of service revenues 1,926,500 1,507,000 1,730,000
------------ ------------ ------------
Total cost of revenues 9,540,900 7,746,200 7,644,200
Selling, general and administrative expenses 6,316,600 5,620,700 5,597,400
Research and development expense 1,488,800 1,219,300 967,100
Interest income (123,700) (127,200) (78,000)
------------ ------------ ------------
Total costs and expenses 17,222,600 14,459,000 14,130,700
------------ ------------ ------------
Income before taxes 256,900 1,210,500 603,100
Provision for income taxes 79,900 370,500 190,000
------------ ------------ ------------
Net income $ 177,000 $ 840,000 $ 413,100
============ ============ ============
Primary net income per share $ .08 $ .39 $ .21
============ ============ ============
Fully diluted net income per share $ .08 $ .39 $ .20
============ ============ ============
Shares used in computing primary net income per share 2,126,800 2,130,900 1,999,200
============ ============ ============
Shares used in computing fully diluted net income per share 2,173,900 2,173,500 2,107,600
============ ============ ============
</TABLE>
See accompanying notes.
7
<PAGE> 9
STATEMENT OF CONSOLIDATED CASH FLOWS
<TABLE>
<CAPTION>
Years Ended
September 30,
-----------------------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Operating activities:
Net income $ 177,000 $ 840,000 $ 413,100
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation and amortization 492,300 462,100 563,400
Provision for doubtful accounts 167,700 165,600 157,800
Decrease in notes receivable/other assets 20,200 20,700 14,500
Deferred income taxes 27,000 (100,000) (50,000)
Net change in operating assets and liabilities (591,700) (292,000) 257,800
----------- ----------- -----------
Cash provided by operating activities 292,500 1,096,400 1,356,600
----------- ----------- -----------
Investing activities:
Purchase of property and equipment (1,450,600) (427,500) (208,200)
Business acquisitions and other investments (270,000) (395,600) (12,300)
Sale of property and building 906,200 -- --
Sale of Silver Plus division -- -- 254,700
----------- ----------- -----------
Cash provided by (used in) investing activities (814,400) (823,100) 34,200
----------- ----------- -----------
Financing activities:
Proceeds from exercise of stock options and warrants 100,000 49,200 10,000
----------- ----------- -----------
Cash provided by financing activities 100,000 49,200 10,000
----------- ----------- -----------
Net (decrease) increase in cash and cash equivalents (421,900) 322,500 1,400,800
Cash and cash equivalents at beginning of year 3,338,200 3,015,700 1,614,900
=========== =========== ===========
Cash and cash equivalents at end of year $ 2,916,300 $ 3,338,200 $ 3,015,700
=========== =========== ===========
</TABLE>
See accompanying notes.
8
<PAGE> 10
STATEMENT OF CONSOLIDATED STOCKHOLDERS' EQUITY
YEARS ENDED SEPTEMBER 30, 1997, 1996, AND 1995
<TABLE>
<CAPTION>
NOTES RETAINED
COMMON STOCK PAID-IN CAPITAL RECEIVED FOR EARNINGS
------------------------- IN EXCESS OF PAR PURCHASE OF (ACCUMULATED
SHARES AMOUNT VALUE COMMON STOCK DEFICIT) TOTAL
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance at September 30, 1994 1,911,000 $ 1,900 $ 3,785,700 $ (72,800) $ (62,000) $ 3,652,800
Issuance of common stock
upon exercise of stock options 20,000 -- 10,000 -- -- 10,000
Notes receivable write-off -- -- -- 11,900 -- 11,900
Net income -- -- -- -- 413,100 413,100
----------- ----------- ----------- ----------- ----------- -----------
Balance at September 30, 1995 1,931,000 1,900 3,795,700 (60,900) 351,100 4,087,800
Issuance of common stock
upon exercise of stock options 33,200 100 49,100 -- -- 49,200
Notes receivable write-off -- -- -- 20,000 -- 20,000
Net income -- -- -- -- 840,000 840,000
----------- ----------- ----------- ----------- ----------- -----------
Balance at September 30, 1996 1,964,200 2,000 3,844,800 (40,900) 1,191,100 4,997,000
----------- ----------- ----------- ----------- ----------- -----------
Issuance of common stock
upon exercise of stock options 44,500 -- 100,000 -- -- 100,000
----------- ----------- ----------- ----------- ----------- -----------
Notes receivable write-off -- -- -- 10,000 -- 10,000
Net income -- -- -- -- 177,000 177,000
=========== =========== =========== =========== =========== ===========
Balance at September 30, 1997 2,008,700 $ 2,000 $ 3,944,800 $ (30,900) $ 1,368,100 $ 5,284,000
=========== =========== =========== =========== =========== ===========
</TABLE>
See accompanying notes.
9
<PAGE> 11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION, BUSINESS, AND PRESENTATION
The Company's principal business is to design, assemble, market, service, and
support point of sale, order entry, inventory control, and accounting systems
for small to medium size retailers. The Company earns revenues from the sale of
its systems and monthly service fees charged to its customers under service
agreements. Sales, service, research, and development are located in California
and Nevada, while the Company's customers are located throughout the United
States.
The consolidated financial statements include the accounts of the Company and
its subsidiary. All intercompany accounts and transactions have been eliminated.
CASH EQUIVALENTS
Cash equivalents represent highly liquid investments with original maturities of
three months or less.
CONCENTRATIONS OF CREDIT RISK
The Company sells its products primarily to small to medium size retailers.
Credit is extended based on an evaluation of the customer's financial condition
and collateral is generally not required. Credit losses have traditionally been
minimal and such losses have been within management's expectations.
INVENTORIES
Inventories are stated at the lower of cost determined on a first-in, first-out
basis, or net realizable value, and are composed of electronic point of sale
hardware and computer equipment used in the sale and service of the Company's
products.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost and is
composed of the following:
<TABLE>
<CAPTION>
September 30,
1997 1996
---------- ----------
<S> <C> <C>
Land $ -- $ 143,400
Computer equipment and furniture 1,470,400 1,071,700
Automobiles 64,000 64,000
Demonstration and loaner equipment 296,500 257,100
---------- ----------
1,830,900 1,536,200
Less accumulated depreciation 1,042,300 964,300
========== ==========
$ 788,600 $ 571,900
========== ==========
</TABLE>
Depreciation is provided on the straight-line method over the estimated useful
lives (primarily three to five years) of the respective assets.
USE OF ESTIMATES
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
REVENUE RECOGNITION POLICY
In accordance with Statement of Position 91-1 (Software Revenue Recognition)
systems revenue is recognized when the hardware and software are shipped to the
customer. Service revenue for phone, software, and hardware support is
recognized ratably over the period of the service contract.
PER SHARE INFORMATION
Net income per share is based on the weighted average number of common and
common equivalent shares outstanding.
In February 1997, the Financial Accounting Standards Board issued Statement No.
128, Earnings per Share, which is required to be adopted on December 31, 1997.
At that time, the Company will be required to change the method currently used
to compute earnings per share and to restate all prior periods. Under the new
requirements for calculating basic earnings per share, the dilutive effect of
stock options will be excluded. The impact of Statement No. 128 is not expected
to be material.
10
<PAGE> 12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
ADVERTISING
The Company expenses the production costs of advertising as incurred.
Advertising expenses for the years ended September 30, 1997, 1996 and 1995 were
$282,200, $328,200, and $225,300, respectively.
STATEMENTS OF CASH FLOWS
Net changes in operating assets and liabilities as shown in the statements of
cash flows are as follows:
<TABLE>
<CAPTION>
Years Ended September 30,
------------------------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Decrease (increase) in:
Accounts receivable $(497,600) $(373,100) $ (82,500)
Inventories (84,500) (4,700) (123,400)
Prepaid expenses (160,800) (18,800) 6,800
Other assets (12,100) (2,900) (6,100)
Increase (decrease) in:
Accounts payable 489,700 35,200 (175,900)
Accrued compensation (174,000) 46,000 240,000
Income taxes payable (136,200) (65,100) 180,200
Customer deposits 124,700 143,800 (31,200)
Accrued installation costs (11,000) 1,000 3,000
Other accrued liabilities (129,900) (53,400) 246,900
--------- --------- ---------
Net changes in operating
assets and liabilities $(591,700) $(292,000) $ 257,800
========= ========= =========
</TABLE>
STOCK OPTION PLANS
In October 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation
(SFAS 123). As permitted by SFAS 123, the Company intends to continue to account
for employee stock options under previous accounting standards, and has made pro
forma disclosures as required by SFAS 123.
2. INTANGIBLE ASSETS
The Company capitalizes costs incurred to develop new marketable software and
enhance the Company's existing systems software. Costs incurred in creating the
software are charged to expense when incurred as research and development until
technological feasibility has been established through the development of a
detailed program design. Once technological feasibility has been established,
software production costs are capitalized and reported at the lower of amortized
cost or net realizable value.
License agreement, capitalized software, and goodwill are amortized on the
straight-line method over estimated useful lives ranging from three to eight
years. The assets are stated at cost and consist of the following:
<TABLE>
<CAPTION>
September 30,
------------------------
1997 1996
---------- ----------
<S> <C> <C>
Capitalized software costs $1,445,200 $1,175,200
License agreement 200,000 200,000
Goodwill 400,300 400,300
---------- ----------
2,045,500 1,775,500
Less accumulated amortization 1,448,200 1,275,400
========== ==========
$ 597,300 $ 500,100
========== ==========
</TABLE>
Amortization of capitalized license agreement and software costs charged to cost
of sales for the years ended September 30, 1997, 1996 and 1995, were $122,800,
$145,200, and $283,000 respectively.
In August 1997, the Company acquired a Windows based point of sale software
product for $180,000 cash, and additional consideration consisting of royalties
to be paid based on future revenues. The cost of this software has been included
as capitalized software in fiscal 1997.
3. LINE OF CREDIT
In January 1997, the Company renewed its line of credit with a commercial bank
for borrowings up to the lesser of $1,500,000 or 75% of the Company's eligible
accounts receivable with interest at the Bank's prime rate plus 1%. Borrowings
under the line of credit are secured by the assets of the Company. Under the
terms of the credit agreement, the Company is restricted from certain
transactions and is required to maintain certain financial ratios. As of
September 30, 1997, the Company was in compliance with its debt covenants. The
line of credit expires in January 1998. As of September 30, 1997, the Company
had no amounts outstanding under the line, and there was no interest paid during
fiscal 1997, 1996 or 1995.
11
<PAGE> 13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
4. TAXES BASED ON INCOME
The Company utilizes the liability method of accounting for income taxes where
by deferred taxes are determined based on differences between the financial
statement and tax bases of assets and liabilities using enacted tax rates.
At September 30, 1997, the Company has net operating loss carry forwards of
approximately $12,000 for federal income tax purposes which begin to expire in
fiscal year 2011. The Company also has federal and state R&D credit carry
forwards of approximately $56,000 and $22,000, respectively, which expire in
2012.
The provision (benefit) for taxes based on income consists of the following:
<TABLE>
<CAPTION>
Years Ended September 30,
-----------------------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Current:
Federal $ 51,900 $ 422,500 $ 220,000
State 1,000 48,000 20,000
--------- --------- ---------
52,900 470,500 240,000
Deferred:
Federal 3,000 (132,000) (50,000)
State 24,000 32,000 --
--------- --------- ---------
27,000 (100,000) (50,000)
========= ========= =========
Total provision $ 79,900 $ 370,500 $ 190,000
========= ========= =========
</TABLE>
A reconciliation of taxes computed at the statutory federal income tax rate to
income tax expense is as follows:
<TABLE>
<CAPTION>
Years Ended September 30,
-----------------------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Income tax at
statutory rate $ 87,300 $ 411,600 $ 205,000
Increases (decreases)
in taxes resulting from:
Increase (decrease) in
valuation allowance -- (94,000) 126,000
Utilization of general
business credits (62,600) (28,700) (125,900)
State income taxes,
net of federal benefit 8,000 52,800 13,200
Other, net 47,200 28,800 (28,300)
========= ========= =========
$ 79,900 $ 370,500 $ 190,000
========= ========= =========
</TABLE>
Deferred income taxes are recorded to reflect the tax consequences on future
years of differences between the tax bases of assets and liabilities and their
bases for financial reporting purposes. Temporary differences and net operating
loss carry forwards which give rise to deferred tax assets and liabilities are
as follows:
<TABLE>
<CAPTION>
September 30,
-----------------------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Deferred tax assets:
Accruals not currently
deductible for tax $ 166,000 $ 184,000 $ 189,000
Book depreciation in excess
of tax depreciation 50,000 96,000 53,000
General business
credit carry forwards -- 20,000 68,000
AMT credit
carry forward 78,000 12,000 12,000
R&D expenditures
capitalized for tax 8,000 9,000 11,000
Net operating loss
carry forwards 12,000 -- --
--------- --------- ---------
Total deferred tax assets 314,000 321,000 333,000
Valuation allowance
for deferred tax assets (166,000) (166,000) (260,000)
--------- --------- ---------
148,000 155,000 73,000
--------- --------- ---------
Deferred tax liabilities:
Software costs capitalized
for book purposes (25,000) (5,000) (23,000)
========= ========= =========
Net deferred tax assets $ 123,000 $ 150,000 $ 50,000
========= ========= =========
</TABLE>
Income taxes paid were $366,300, $530,900, and $24,400 during the years ended
September 30, 1997, 1996 and 1995, respectively.
12
<PAGE> 14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
5. COMMITMENTS AND CONTINGENCIES
The Company is committed at September 30, 1997 under various operating leases
for office facilities and equipment through June 2007. Minimum payments due
under these leases, including amounts due to a related party as discussed below,
are as follows:
<TABLE>
<CAPTION>
Year ending
September 30,
----------------
<S> <C> <C>
1998 $ 318,700
1999 318,700
2000 318,700
2001 318,700
2002 178,700
Thereafter $ 594,000
=======================
$ 2,047,500
=======================
</TABLE>
Total rent expense for the years ended September 30, 1997, 1996 and 1995 was
$335,400, $278,800, and $305,300, respectively.
In June 1997, the Company completed the building of the R&D facility in
Henderson, Nevada. The land and building was sold to an officer of the Company
at book value and no gain or loss was recognized from this transaction. The
Company entered into a lease agreement with the officer to lease the building
for a term of ten years, at the current fair market value rates. The total
commitment under this lease term is 1.3 million dollars. Rent expense incurred
under this lease for the year ended September 30, 1997 totaled $44,000.
The Company is currently involved in litigation arising in the normal course of
business. Management believes that such litigation will have no material effect
on the Company's financial position or results of operations.
6. STOCK OPTIONS
The Company has elected to follow Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25) and related Interpretations
in accounting for its employee stock options because, as discussed below, the
alternative fair value accounting provided for under SFAS No. 123 requires the
use of option valuation models that were not developed for use in valuing
employee stock options. Under APB 25, because the exercise price of the
Company's employee stock options equals the market price of the underlying stock
on the date of grant, no compensation expense is recognized.
In June 1987, the Board of Directors approved an Incentive Stock Plan (the "ISO
Plan") whereby eligible employees may be granted incentive stock options to
purchase the Company's common stock at a price not less than the fair market
value at the date of grant. The options are exercisable no earlier than one year
from the date of grant and thereafter in installments as may be determined by
the Board of Directors, and expire five years from the date of grant. The Plan
has a term of ten years. In April 1990, the shareholders of the Company agreed
to increase to 250,000, the number of shares of common stock available for grant
under the ISO Plan. There are currently no shares available for future grant
under the ISO Plan.
In April 1993, the shareholders of the Company approved the Company's 1993 Stock
Option Plan (the "1993 Plan") under which nonstatutory options may be granted to
key employees and individuals who provide services to the Company, at a price
not less than the fair market value at the date of grant, and expire ten years
from the date of grant. The options are exercisable based on vesting periods as
determined by the Board of Directors. The Plan allows for the issuance of an
aggregate of 900,000 shares of the Company's common stock. The Plan has a term
of ten years. There have been 808,400 options granted under the 1993 Plan as of
September 30, 1997.
13
<PAGE> 15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
A summary of stock option activity follows:
<TABLE>
<CAPTION>
Weighted Weighted
Average Average
ISO Non-ISO Exercise for Value
Shares Shares Price of Options
-------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Outstanding at
September 30, 1994 5,000 354,000 $ 1.91
Granted -- 65,000 $ 2.28 $.97
Exercised (5,000) (15,000) $ .50
-------- -------- -------- ----
Outstanding at
September 30, 1995 -- 404,000 $ 2.04
Granted -- 157,500 $ 5.16 $1.82
Exercised -- (33,200) $ 1.48
Expired -- (35,000) $ 1.75
-------- -------- -------- -----
Outstanding at
September 30, 1996 -- 493,300 $ 3.09
Granted -- 419,400 $ 3.47 $1.13
Exercised -- (36,600) $ 2.05
Expired -- (65,500) $ 3.68
-------- -------- -------- -----
Outstanding at
September 30, 1997 -- 810,600 $ 3.29
======== ======== ======== =====
</TABLE>
The following table summarizes information about stock options outstanding at
September 30, 1997:
<TABLE>
<CAPTION>
Weighted Average
Remaining Weighted
Number Contractual Average
OUTSTANDING: Outstanding Life Exercise Price
----------- ----------------- ---------------
Range of Exercise Prices
<S> <C> <C> <C>
$1.625 to $3.00 445,300 7.72 $2.36
$3.375 to $5.50 365,300 8.97 $4.42
======= ==== =====
</TABLE>
<TABLE>
<CAPTION>
Weighted
Number Average
EXERCISABLE: Exercisable Exercise Price
------------ ----------------
Range of Exercise Prices
<S> <C> <C>
$1.625 to $3.00 279,500 $2.10
$3.375 to $5.50 152,100 $4.44
======= =====
</TABLE>
The weighted-average remaining contractual life of stock options outstanding at
September 30, 1997 and 1996 was 8.94 years and 7.48 years, respectively.
Pro forma information regarding net income and earnings per share is required by
SFAS 123, which also requires that the information be determined as if the
Company has accounted for its employee stock options granted subsequent to
September 30, 1995 under the fair value method of that Statement. The fair value
for these options was estimated at the date of grant using a Black-Scholes
option pricing model with the following weighted average assumptions for 1997
and 1996; risk free interest rate of 6.0%; no dividend yield; a volatility
factor of the expected market price of the Company's common stock of .281, and a
weighted-average life of each option of five years.
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the option's vesting period. The Company's pro
forma information follows:
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Pro forma net income $83,000 $794,000
Pro forma earnings per share $.04 $.37
</TABLE>
Because SFAS 123 is applicable only to options granted subsequent to September
30, 1995, its pro forma effect will not be fully reflected until 1999. The
results above are not likely to be representative of the effects of applying
SFAS 123 on reported net income or loss for future years as these amounts
reflect the expense for only one or two years vesting.
7. BENEFIT PLAN
The Company sponsors a 401 (k) Plan for all eligible employees. The Company may
provide a matching contribution at the discretion of the Company's Board of
Directors. The Company's contribution charged to operations during fiscal 1997,
1996 and 1995 pursuant to the plan totaled $15,000, $42,000, and $34,000,
respectively.
14
<PAGE> 16
REPORT OF INDEPENDENT AUDITORS
Board of Directors
CAM Data Systems, Inc.
We have audited the accompanying consolidated balance sheets of CAM Data
Systems, Inc. as of September 30, 1997 and 1996, and the related consolidated
statements of income, stockholders' equity and cash flows for each of the three
years in the period ended September 30, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. 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 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 financial statements referred to above present fairly, in
all material respects, the consolidated financial position of CAM Data Systems,
Inc. at September 30, 1997 and 1996, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
September 30, 1997, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Orange County, California
November 14, 1997
STOCK AND DIVIDEND DATA
The common stock of CAM Data Systems, Inc., is traded on the over-the-counter
market under the NASDAQ symbol CADA. Quarterly market price information shown
below represents the high and low bid prices. The OTC quotations shown reflect
inter-dealer prices, without retail markup, markdown, or commission and may not
represent actual transactions.
<TABLE>
<CAPTION>
Fiscal Year Ended September 30, 1997
Quarter Ended: High Low
- -------------------------------------------
<S> <C> <C>
December 31 $ 4 7/16 $ 3 3/4
March 31 4 5/8 3 3/4
June 30 4 1/2 3
September 30 3 1/2 2 3/8
</TABLE>
<TABLE>
<CAPTION>
Fiscal Year Ended September 30, 1996
Quarter Ended: High Low
- -----------------------------------------------
<S> <C> <C>
December 31 $ 4 1/8 $ 3 1/8
March 31 5 3 1/2
June 30 6 4 3/8
September 30 5 1/2 4 3/8
</TABLE>
As of December 10, 1997, there were approximately 75 holders of record of the
Company's common stock. The Company believes there are in excess of 500
beneficial owners of the Company's common stock.
The Company does not anticipate paying dividends in the foreseeable future. The
Company has not paid dividends in the past and the payment of dividends in the
future is at the discretion of the Board of Directors, subject to any
limitations imposed by the laws of the State of Delaware.
15
<PAGE> 17
SELECTED QUARTERLY FINANCIAL DATA
(Unaudited)
<TABLE>
<CAPTION>
1997 Fiscal Quarter Ended
--------------------------------------
In thousands, except per-share data. Dec 31 Mar 31 June 30 Sept 30
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net system and service revenues $ 4,779 $ 3,597 $ 4,419 $ 4,685
Gross profit 2,270 1,645 1,942 2,082
Income (loss) before taxes 267 (68) 14 44
Net income (loss) 187 (48) 10 28
Primary earnings (loss) per share .09 (.02) -- .01
Fully diluted earnings (loss) per share .09 (.02) -- .01
======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
1996 Fiscal Quarter Ended
--------------------------------------
Dec 31 Mar 31 June 30 Sept 30
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net system and service revenues $ 3,329 $ 3,412 $ 4,714 $ 4,215
Gross profit 1,711 1,770 2,351 2,091
Income before taxes 265 272 473 201
Net income 162 166 288 224
Primary earnings per share .08 .08 .13 .10
Fully diluted earnings per share .08 .08 .13 .10
======= ======= ======= =======
</TABLE>
SELECTED FINANCIAL DATA
FOR THE FIVE YEARS ENDED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
In thousands, except per-share data. 1997 1996 1995 1994 1993
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net system and service revenues $17,480 $15,669 $14,734 $13,218 $11,922
Income before taxes 257 1,210 603 300 787
Net income 177 840 413 265 700
Primary earnings per share .08 .39 .21 .14 .37
Fully diluted earnings per share .08 .39 .20 .13 .36
Total assets 7,608 7,158 6,141 5,202 4,698
Working capital 3,849 3,886 3,340 2,352 1,857
Long-term debt -- -- -- -- --
======= ======= ======= ======= =======
</TABLE>
16
<PAGE> 18
COMPANY INFORMATION
BOARD OF DIRECTORS
Geoffrey D. Knapp
Chairman and Chief Executive Officer
CAM Data Systems, Inc.
David Frosh
President
CAM Data Systems, Inc.
Walter Straub
President
Rainbow Technologies
Corley Phillips
Investor
Fred Haney
President
Venture Management Company
OFFICERS
Geoffrey D. Knapp
Chief Executive Officer
David Frosh
President
Paul Caceres Jr.
Chief Financial Officer
Timothy D. Coco
Vice President, Customer Service
David Fuller
Vice President, Research and Development
CORPORATE OFFICE
17520 Newhope Street
Fountain Valley, CA 92708
(714) 241-9241
Facsimile: (714) 241-9893
Internet address: http://www.camdata.com
REGISTRAR AND TRANSFER AGENT
American Stock Transfer Company
40 Wall Street
New York, NY 10005
INDEPENDENT AUDITORS
Ernst & Young LLP
18400 Von Karman Avenue
Irvine, CA 92612
SECURITIES COUNSEL
Phillips & Haddan
4675 MacArthur Court #710
Newport Beach, CA 92660
GENERAL COUNSEL
Lundell & Spadafore
1065 Asbury Street
San Jose, CA 95126
FORM 10-K
A copy of the Company's annual report on Form 10-K, (without exhibits), as filed
with the Securities and Exchange Commission, will be furnished to any
stockholder free of charge upon written request to the Company's Corporate
Finance Department.
<PAGE> 1
23 Consent of Independent Auditors.
<PAGE> 2
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report
(Form 10-K) of CAM Data Systems, Inc. of our report dated November 14, 1997,
included in the 1997 Annual Report to Stockholders of CAM Data Systems, Inc.
We also consent to the incorporation by reference in the Registration
Statement (Form S-8) pertaining to the 1993 Stock Option Plan of CAM Data
Systems, Inc. and in the Registration Statement (Form S-3 No. 33-57564) of CAM
Data Systems, Inc. and in the related Prospectuses of our reports dated November
14, 1997, with respect to the consolidated financial statements and schedule of
CAM Data Systems, Inc. incorporated by reference and included in this Annual
Report (Form 10-K) for the year ended September 30, 1997, respectively.
ERNST & YOUNG LLP
Orange County, California
December 24, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> SEP-30-1997
<CASH> 2,916,300
<SECURITIES> 0
<RECEIVABLES> 2,514,500
<ALLOWANCES> 160,000
<INVENTORY> 523,000
<CURRENT-ASSETS> 6,173,000
<PP&E> 1,830,900
<DEPRECIATION> 1,042,300
<TOTAL-ASSETS> 7,608,100
<CURRENT-LIABILITIES> 2,324,100
<BONDS> 0
0
0
<COMMON> 2,000
<OTHER-SE> 5,282,000
<TOTAL-LIABILITY-AND-EQUITY> 7,608,100
<SALES> 17,479,500
<TOTAL-REVENUES> 17,479,500
<CGS> 9,540,900
<TOTAL-COSTS> 9,540,900
<OTHER-EXPENSES> 7,681,700
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 256,900
<INCOME-TAX> 79,900
<INCOME-CONTINUING> 177,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 177,000
<EPS-PRIMARY> .08
<EPS-DILUTED> .08
</TABLE>
