<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(X) Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended JUNE 30, 1998
OR
( ) Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
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 (IRS Employer
of incorporation or organization) Identification No.)
17520 NEWHOPE STREET 92708
FOUNTAIN VALLEY, CALIFORNIA
(Address of principal (Zip code)
executive offices)
(714) 241-9241
(Registrant's telephone number including area code)
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 ___
As of June 30, 1998, there were 2,089,500 shares of common stock outstanding.
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1
<PAGE> 2
CAM DATA SYSTEMS, INC.
INDEX
PART I Financial Information
<TABLE>
<CAPTION>
Item 1 Condensed Financial Statements Page Number
<S> <C>
o Condensed Balance Sheet at June 30, 1998 and 3
September 30, 1997
o Condensed Statement of Operations for the three
months ended June 30, 1998 and 1997 4
o Condensed Statement of Income for the nine
months ended June 30, 1998 and 1997 5
o Condensed Statement of Cash Flows for the
nine months ended June 30, 1998 and 1997 6
o Notes to Condensed Financial Statements 7-8
Item 2 Management's Discussion and Analysis of Financial Condition and 9-10
Results of Operations
PART II Other Information 11
o Signature Page 12
</TABLE>
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<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CAM DATA SYSTEMS, INC.
CONDENSED BALANCE SHEET
<TABLE>
<CAPTION>
(UNAUDITED)
JUNE 30 SEPTEMBER 30
1998 1997
---- ----
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $2,362,700 $2,916,300
Accounts receivable, net 2,832,600 2,354,500
Inventories 554,500 523,000
Prepaid expenses 120,100 256,200
Deferred income taxes 123,000 123,000
---------- ----------
Total current assets 5,992,900 6,173,000
Property and equipment, net 845,400 788,600
Intangible assets, net 963,300 597,300
Note receivable from officer 10,300 12,300
Other assets 53,300 36,900
---------- ----------
Total assets $7,865,200 $7,608,100
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 971,400 $1,140,100
Accrued compensation and related
expenses 515,000 466,000
Customer deposits and deferred service
revenue 489,400 420,300
Accrued installation costs 150,000 100,000
Other accrued liabilities 229,400 197,700
---------- ----------
Total current liabilities 2,355,200 2,324,100
Stockholders' equity:
Common stock, $.001 par value,
5,000,000 shares authorized,
2,089,500 shares issued and
outstanding (2,008,700 at Sept. 30,
1997) 2,100 2,000
Paid-in capital 4,144,700 3,944,800
Less notes receivable for purchase of
common stock (24,900) (30,900)
Retained earnings 1,388,100 1,368,100
---------- ----------
Total stockholders' equity 5,510,000 5,284,000
---------- ----------
Total liabilities and stockholders'
equity $7,865,200 $7,608,100
---------- ----------
</TABLE>
See notes to financial statements
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<PAGE> 4
CAM DATA SYSTEMS, INC.
CONDENSED STATEMENT OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------
JUNE 30 JUNE 30
1998 1997
---- ----
<S> <C> <C>
REVENUES
Net system revenues $3,987,100 $3,500,300
Net service revenues 940,800 918,300
---------- ----------
Total net revenues 4,927,900 4,418,600
COSTS AND EXPENSES
Costs of system revenues 2,302,300 2,003,500
Costs of service revenues 470,800 473,700
---------- ----------
Total costs of revenues 2,773,100 2,477,200
Selling, general and administrative
expenses 1,614,700 1,562,500
Research and development expense 317,300 391,200
Interest income (27,200) (25,800)
---------- ----------
Total costs and expenses 4,677,900 4,405,100
---------- ----------
Income before provision for income
taxes 250,000 13,500
Provision for income taxes
-- 4,000
---------- ----------
NET INCOME $ 250,000 $ 9,500
---------- ----------
Basic net income per share $ .12 $ --
-------- -------
Diluted net income per share $ .12 $ --
-------- -------
Shares used in computing basic
net income per share 2,089,500 1,993,700
Shares used in computing
diluted net income per share 2,143,600 2,125,200
</TABLE>
See notes to financial statements
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<PAGE> 5
CAM DATA SYSTEMS, INC.
CONDENSED STATEMENT OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-----------------
JUNE 30 JUNE 30
1998 1997
---- ----
<S> <C> <C>
REVENUES
Net system revenues $10,757,100 $10,052,700
Net service revenues 2,781,500 2,742,200
----------- -----------
Total net revenues 13,538,600 12,794,900
COSTS AND EXPENSES
Costs of system revenues 6,309,800 5,534,700
Costs of service revenues 1,452,600 1,404,100
----------- -----------
Total costs of revenues 7,762,400 6,938,800
Selling, general and administrative
expenses 4,982,900 4,622,200
Research and development expense 857,600 1,111,600
Interest income (84,300) (90,200)
----------- -----------
Total costs and expenses 13,518,600 12,582,400
----------- -----------
Income before provision for income
taxes 20,000 212,500
Provision for income taxes -- 64,000
----------- -----------
NET INCOME $ 20,000 $ 148,500
----------- -----------
Basic net income per share $ .01 $ .07
------ -----
Diluted net income per share $ .01 $ .07
------ -----
Shares used in computing basic
net income per share 2,089,500 1,986,300
Shares used in computing
diluted net income per share 2,135,800 2,144,300
</TABLE>
See notes to financial statements
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<PAGE> 6
CAM DATA SYSTEMS, INC.
CONDENSED STATEMENT OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-----------------
JUNE 30 JUNE 30
1998 1997
---- ----
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 20,000 $ 148,500
Adjustments to reconcile net income
(loss) to net cash (used in) provided by
operations:
Depreciation and amortization 368,000 347,300
Provision for doubtful accounts 15,000 10,000
Other 8,000 9,000
Net changes in operating assets and
liabilities (373,000) (503,400)
---------- -----------
Net cash provided by operations 38,000 11,400
---------- -----------
Investing activities:
Purchase of property, plant and equipment (352,600) (1,267,600)
Sale of property and building -- 906,200
Capitalized software (239,000) (30,000)
---------- -----------
Cash used in investing activities (591,600) (391,400)
Financing activities:
Proceeds from exercise of stock options -- 68,100
---------- -----------
Net decrease in cash and cash equivalents (553,600) (311,900)
Cash and cash equivalents at beginning
of period 2,916,300 3,338,200
---------- -----------
Cash and cash equivalents at end of
period $2,362,700 $ 3,026,300
---------- -----------
</TABLE>
See notes to financial statements
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CAM DATA SYSTEMS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
1. PRESENTATION OF CONDENSED FINANCIAL STATEMENTS
The accompanying financial statements of the Company for the three and nine
months ended June 30, 1998 and 1997 are unaudited, but include all adjustments
(consisting only of normal recurring adjustments) which the Company considers
necessary for a fair presentation of its financial position, results of
operations and cash flows for such periods. Certain information and notes
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted. The interim
financial statements should be read in conjunction with the financial statements
and related notes included in the Company's Annual Report on form 10-K for the
fiscal year ended September 30, 1997. The interim financial information
contained herein is not necessarily indicative of the results to be expected for
any other interim period or for the full fiscal year ending September 30, 1998.
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.
STATEMENT OF CASH FLOWS
Net changes in operating assets and liabilities as shown in the condensed
statement of cash flows are as follows:
NINE MONTHS ENDED
-----------------
JUNE 30 JUNE 30
1998 1997
---- ----
(Increase) decrease in:
Accounts receivable $(493,100) $(238,500)
Inventories (31,500) 27,400
Prepaid expenses and other assets 120,500 (162,200)
Increase (decrease) in:
Accounts payable (168,700) 220,900
Accrued compensation and related expenses 49,000 (227,000)
Accrued installation costs 50,000 (1,000)
Customer deposits 69,100 168,400
Accrued liabilities 31,700 (291,400)
--------- ---------
Net changes in operating assets and
liabilities $(373,000) $(503,400)
--------- ---------
Income taxes paid during the nine months ended June 30, 1998 and 1997 were $500
and $209,000,respectively. There was no interest expense paid in the first nine
months of 1998 or 1997.
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<PAGE> 8
CAM DATA SYSTEMS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
1. PRESENTATION OF CONDENSED FINANCIAL STATEMENTS (CONTINUED)
NET INCOME PER SHARE
The company has adopted Statement of Financial Accounting Standards No. 128,
"Earnings per Share", which replaces the presentation of "primary" earnings per
share with "basic" earnings per share and the presentation of "fully diluted"
earnings per share with "diluted" earnings per share. All previously reported
earnings per share amounts have been restated based on the provisions of the new
standard. Basic earnings per share are based upon the weighted average number of
common shares outstanding. Diluted earnings per share amounts are based upon the
weighted average number of common shares and common equivalent shares for each
period presented. Common equivalent shares include stock options assuming
conversion under the treasury stock method. The computation of basic and diluted
earnings per share for the three and nine month periods ended June 30, 1998 and
June 30, 1997 are as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------
JUNE 30 JUNE 30
1998 1997
---- ----
<S> <C> <C>
NUMERATOR:
Net income, numerator for basic and diluted
net income per share $ 250,000 $ 9,500
---------- ----------
DENOMINATOR:
Weighted-average shares outstanding 2,089,500 1,993,700
---------- ----------
Denominator for basic net income per share -
weighted-average shares 2,089,500 1,993,700
Effect of dilutive securities:
Stock options 54,100 131,500
---------- ----------
Denominator for diluted net income per
share - weighted-average shares and assumed
conversions 2,143,600 2,125,200
---------- ----------
Basic net income per share $ .12 $ --
------- ------
Diluted net income per share $ .12 $ --
------- ------
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-----------------
JUNE 30 JUNE 30
1998 1997
---- ----
<S> <C> <C>
NUMERATOR:
Net income, numerator for basic and diluted
net income per share $ 20,000 $ 148,500
---------- ----------
DENOMINATOR:
Weighted-average shares outstanding 2,089,500 1,986,300
---------- ----------
Denominator for basic net income per share -
weighted-average shares 2,089,500 1,986,300
Effect of dilutive securities:
Stock options 46,300 158,000
---------- ----------
Denominator for diluted net income per
share - weighted-average shares and assumed
conversions 2,135,800 2,144,300
---------- ----------
Basic net income per share $ .01 $ .07
------- ------
Diluted net income per share $ .01 $ .07
------- ------
</TABLE>
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
CAM DATA SYSTEMS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1998, AS COMPARED TO
THREE MONTHS ENDED JUNE 30, 1997
RESULTS OF OPERATIONS
NET REVENUES for the three months ended June 30, 1998, increased 12% to
$4,927,900 consisting of a 14% increase in system revenues, and a 2% increase in
service revenues compared to the three months ended June 30, 1997. The increase
in system revenues was due to an increase in hardware sales to existing
customers. Service revenues were flat during the quarter.
GROSS MARGIN for the three months ended June 30, 1998 and 1997 was 44%. Gross
margin on system revenues decreased to 42% for the three months ended June 30,
1998, compared to 43% for the three months ended June 30, 1997. Gross margin for
service revenue was 50% for the three months ended June 30, 1998, compared to
48% for the three months ended June 30, 1997. The decrease in gross margin for
system revenues was a result of higher installation costs due to increases in
labor and travel expenses. The increase in gross margin for service revenue is
related to open positions on the technical support staff.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES expressed as a percentage of net
revenues for the three month period ended June 30, 1998, decreased to 33%,
compared to 35% for the three month period ended June 30, 1997. Selling, general
and administrative expenses for the three months ended June 30, 1998, increased
3% to $1,614,700 from the three months ended June 30, 1997. The decrease in
selling, general, and administrative expenses as a percentage of sales is due to
the higher sales volume in relation to the expenses. The increase in the dollar
amount of selling, general, and administrative expenses was mainly attributed to
higher sales commissions due to a higher sales volume.
RESEARCH AND DEVELOPMENT EXPENSE decreased 19% to $317,300 for the three month
period ended June 30, 1998, from $391,200 for the same period in 1997. The
decrease for the period was attributed to the increase in the rate of software
capitalization in 1998 relative to the development of new software products.
INCOME TAXES, there was no income tax expense booked for the three months ended
June 30, 1998, due to the relatively small year to date net income results. The
effective tax rate was 30% for the three months ended June 30, 1997.
NINE MONTHS ENDED JUNE 30, 1998, AS COMPARED TO
NINE MONTHS ENDED JUNE 30, 1997
NET REVENUES for the nine months ended June 30, 1998, increased 6% to
$13,538,600 consisting of a 7% increase in system revenues, and a 1% increase in
service revenues compared to the nine months ended June 30, 1997. The increase
in system revenues was due to a 23 % increase in sales to existing customers for
the period. Service revenues were flat during the period.
GROSS MARGIN for the nine months ended June 30, 1998, was 43%, compared to 46%
for the nine months ended June 30, 1997. Gross margin on system revenues
decreased to 41%, for the nine months
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9
<PAGE> 10
ended June 30, 1998, compared to 45% for the nine months ended June 30, 1997.
Gross margin for service revenue was 48% for the nine months ended June 30,
1998, compared to 49% for the nine months ended June 30, 1997. The decrease in
gross margin for system revenues was a result of a higher installation costs due
to increases in labor and travel expenses, combined with an increase in hardware
sales which produce lower gross margins than software sales. The decrease in
gross margin for service revenue is related to the increase in labor costs.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES expressed as a percentage of net
revenues increased for the nine month period ended June 30, 1998 to 37%,
compared to 36% for the nine month period ended June 30, 1997. Selling, general
and administrative expenses for the nine months ended June 30, 1998, increased
8% to $4,982,900 from the nine months ended June 30, 1997. The increase in the
dollar amount of selling, general, and administrative expenses as a percent of
revenue was mainly attributed to higher commissions due to a higher sales
volume, combined with higher payroll expenses, offset by the capitalization of
software costs.
RESEARCH AND DEVELOPMENT EXPENSE decreased 23% to $857,600 for the nine month
period ended June 30, 1998, from $1,111,600 for the same period in 1997. The
decrease for the period was attributed to the increase in the rate of software
capitalization in 1998 relative to the development of new software products.
INCOME TAXES, there was no income tax expense for the nine months ended June 30,
1998. The effective tax rate was 30% for the nine months ended March 31, 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents totaled $2,362,700 on June 30, 1998,
compared to $2,916,300 on September 30, 1997. The Company generated $38,000 from
operations, expended $352,600 for fixed assets, and $239,000 for capitalized
software development during the nine months ended June 30, 1998, compared to the
generation of $11,400 for operations, and the utilization of $1,267,600 for the
purchase of fixed assets and the construction of a building in Nevada, offset by
the sale of the property and building for $906,200, and $30,000 for capitalized
software development for the nine months ended June 30, 1997.
The Company has no significant commitments for expenditures.
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 next twelve months.
Inflation has had no significant impact on the Company's operations.
This Item II section contains certain forward looking statements regarding the
Company, its business, liquidity, prospects and results of operations that are
subject to certain risks and uncertainties posed by many factors and events that
could cause the Company's actual business, liquidity, prospects and results of
operations to differ materially from those that may be anticipated by such
forward looking statements. All statements contained herein that are not
historical facts, including but not limited to, statements regarding anticipated
future revenue and expense levels, and capital requirements, and the Company's
ability to generate cash from operations, are forward looking statements based
on current expectations. No assurances can be given that events or results
mentioned in any such forward looking statements will in fact occur. Readers are
cautioned not to place undue reliance on any forward looking statements, which
speak only as of the date of this report. The Company undertakes no obligation
to revise any forward looking statements in order to reflect events or
circumstances that may subsequently arise. Readers are urged to carefully review
and consider the various disclosures made by the Company in this report and in
the Company's other reports filed with the Securities and Exchange Commission.
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<PAGE> 11
CAM DATA SYSTEMS, INC.
PART II - OTHER INFORMATION
Items 1 - 3 Not Applicable
Item 4 Submission of Matters to a Vote of Security Holders
On May 7, 1998, the Company held its annual meeting of shareholders. The
following items were voted upon at the annual meeting with the results of the
voting:
1. The re-election of five persons to serve on the Company's Board of Directors.
The term shall be until the next meeting of shareholders in 1999.
VOTES
-----
For Against Abstain
Geoffrey D. Knapp 1,892,075 -- --
Walter Straub 1,895,660 -- --
David Frosh 1,895,660 -- --
Corley Phillips 1,895,660 -- --
Fred Haney 1,895,660 -- --
2. The confirmation of Ernst & Young as the independent auditors of the Company.
VOTES
-----
For Against Abstain
1,1911,160 4,350 --
3. The amendment of the Company's 1993 Stock Option Plan to increase from
900,000 to 1,200,000 the number of shares of the Company's Common Stock for
which options may be granted to directors, officers and employees of, and
consultants to, the Company.
VOTES
-----
For Against Abstain
1,233,533 142,840 4,800
Item 5 Not Applicable
Item 6 Exhibits and Reports on Form 8-K
(A) Exhibits: Exhibit 27 Financial Data Schedule
(B) Reports on
Form 8-K None
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<PAGE> 12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CAM DATA SYSTEMS, INC. (Registrant)
Date: August 12, 1998 By /S/ Paul Caceres Jr.
--------------- --------------------
Paul Caceres Jr.
Chief Financial and
Accounting Officer
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12
<PAGE> 13
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> JUN-30-1998
<CASH> 2,362,700
<SECURITIES> 0
<RECEIVABLES> 3,007,600
<ALLOWANCES> 175,000
<INVENTORY> 554,500
<CURRENT-ASSETS> 5,992,900
<PP&E> 1,942,100
<DEPRECIATION> 1,096,700
<TOTAL-ASSETS> 7,865,200
<CURRENT-LIABILITIES> 2,355,200
<BONDS> 0
0
0
<COMMON> 2,100
<OTHER-SE> 5,507,900
<TOTAL-LIABILITY-AND-EQUITY> 7,865,200
<SALES> 13,538,600
<TOTAL-REVENUES> 13,538,600
<CGS> 7,762,400
<TOTAL-COSTS> 7,762,400
<OTHER-EXPENSES> 5,756,200
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 20,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 20,000
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
