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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, 1998
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 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, 1998 was approximately $5,700,000. As of December
11, 1998, there were outstanding 2,139,000 shares of Common Stock of the
Registrant, par value $.001 per share.
DOCUMENTS INCORPORATED BY REFERENCE.
Part II Annual Report to Stockholders for
fiscal year ended September 30, 1998
(cover page 2 of 2 pages)
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PART I
ITEM 1. BUSINESS
General
Except for the historical information contained herein, this Annual
Report on Form 10-K contains forward looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from those
discussed in this report. Factors that could cause or contribute to such
differences include, but are not limited to, those discussed in this section as
well as the section entitled "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations."
THE COMPANY
CAM Data Systems, Inc. (the "Company") was organized under the laws of the
State of Delaware on April 29, 1987. On June 5, 1987, CAM Data Systems, Inc., a
corporation organized on September 20, 1983, under the laws of the State of
California was merged with and into the Company. The Company's principal
business is to design, assemble, market, service, and support point of sale,
order entry, inventory control, and accounting systems for small to medium size
retailers. The Company earns revenues from the sale of its systems and monthly
service fees charged to its customers under service agreements. Sales and
service operations are located in California, Nevada, Colorado, Georgia, Florida
and Massachusetts while the Company's customers are located throughout the
United States.
THE SYSTEMS
The Company offers three Turn Key Systems:
1. THE CAM SYSTEM - designed for hardgoods retailers whose inventory is
re-orderable in nature.
2. THE PROFIT$ SYSTEM - designed for apparel and shoe retailers whose
inventory is seasonal in nature and color and size oriented.
3. THE RETAIL STAR SYSTEM - a Windows-based system designed to incorporate
multiple functions of both the CAM and Profit$ systems.
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
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accounting functions including accounts receivable, accounts payable, and
general ledger.
The Company's systems integrate Intel-based personal computers, computer
point of sale stations, hand held and table top bar code laser scanners,
terminal or computer work stations, printers, and the Company's software. The
Company is able to adapt its software to existing Intel-based personal computer.
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, point of sale station and the Company's software, depend on the needs,
the size and the industry type of the customer.
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, by MicroStrategies Inc. for the Profit$ system, and Teamsoft
Inc. for the Retail Star 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. All three systems
are capable of handling multiple stores for a given customer. In a
multiple-store system the Company typically installs a computer network. The
server computer at each store communicates with the server computer at the
customer's main office. The main server 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 stores. 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 point of sale station 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
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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.
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 Company sells M.A.S. 90(R) software and
provides training to its customers. The Company's software interfaces with the
M.A.S. 90(R) software.
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 Wang Global 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. 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 significant 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. INSTALLATION AND TRAINING. In order to assure customers that they will be
able to properly integrate the Company's system into their business, the
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Company offers on-site installation and training on the use and application of
the system to each customer. The training can take place at the Company's
in-house training facility or at the customer location The amount of training
required depends upon the knowledge and experience of the user plus the
complexity of the business to which the system is being adapted.
4. TECHNICAL SUPPORT. By having technical phone support 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, Nevada, Oregon, Colorado, Georgia, Minnesota, Florida
and Massachusetts. Each salesperson is assigned a specific geographical
territory and is responsible for following up on sales leads in that 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 provides appropriate
price quotes. Upon the execution of a typical sales contract, the Company is
generally able to install an entire system within four to eight 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 markets its systems by advertising in trade journals and other
print media targeted at retail businesses, attending industry specific trade
shows, using sales promotional videos, and 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 include products such as Intel-based personal computers,
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.
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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, 1998, backlog was approximately $1,760,000 as
compared to $867,000 on December 11, 1997. 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. 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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SEASONALITY
The Company believes that seasonality has not had a significant effect on
its 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 $1,460,000, $1,548,800, and $1,219,300 on
software development, including amounts capitalized during the years ended
September 30, 1998, 1997, and 1996, 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 eighteen programmers and four
quality control and testing personnel.
EMPLOYEES
The Company has one hundred and sixty-one full time employees, ten of whom
are employed in finance and administration, twenty-four in programming and
testing, thirty-two in sales and marketing, and eighty-five 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.
ITEM 2. PROPERTIES
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. 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 11,000 square feet of office space in Henderson, Nevada,
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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 $132,000;.(ii) approximately 800 square feet of office
space in Minneapolis, Minnesota, at an average annual rent of $6,000.
ITEM 3. LEGAL PROCEEDINGS
Because of the nature of its business, the Company is from time to time
threatened or involved in legal actions. The Company does not believe any of the
legal actions now pending against it will result in a material adverse effect on
the Company and, further, does not consider that any such proceedings fall
outside ordinary, routine litigation incidental to the business of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report.
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 1998 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.
<TABLE>
<CAPTION>
ANNUAL REPORT
FORM 10-K TO STOCKHOLDERS
--------- ---------------
<S> <C>
ITEM 5: MARKET FOR REGISTRANT'S PAGE 14: STOCK AND DIVIDEND
COMMON EQUITY AND RELATED DATA.
STOCKHOLDER'S MATTERS.
ITEM 6: SELECTED FINANCIAL DATA. PAGE 15: SELECTED FINANCIAL
DATA.
ITEM 7: MANAGEMENT'S DISCUSSION PAGES 3-4: 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.
</TABLE>
Information for Item 8 is included in the Company's financial statements as
of September 30, 1998 and 1997 and for each of the three years in the period
ended September 30, 1998, and the Company's unaudited
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quarterly financial data for the two years ended September 30, 1998 and 1997, on
pages 5 through 13 and page 15, respectively, of the Company's 1998 Annual
Report to Stockholders which is hereby incorporated by reference. The report of
the independent auditors is included on page 14 of the Annual Report to
Stockholders.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
NOT APPLICABLE.
PART III
MANAGEMENT
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
As of September 30, 1998, 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 40 Chief Executive Officer, Chairman
of the Board and Secretary
David A. Frosh 40 President and Director
Paul Caceres, Jr. 38 Chief Financial Officer and
Chief Accounting Officer
Timothy D. Coco 41 Vice President, Customer Service
and Installations
Walter W. Straub 55 Director
Dr. Fred M. Haney 57 Director
Corley Phillips 44 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
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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 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.
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 director for Telephone Response Technologies, a Roseville,
California-based developer of computer technology software. From 1995 to 1996,
Mr. Phillips served as vice president of marketing and
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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. Based solely on a
review of the copies of such reports furnished to the Company, the Company
believes all Section 16(a) filing requirements applicable to all such persons
were complied with during the fiscal year covered by this report.
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 table sets forth, information concerning compensation paid by the
Company for services rendered to the Company during the fiscal year ended
September 30, 1998, and the prior two fiscal years, to the Company's Chief
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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
Chairman of 1998 $209,200 $ -- -- 0 $8,100
the Board 1997 $200,700 $ -- -- 20,000 $7,500
CEO 1996 $194,600 $54,300 -- 0 $7,800
Paul Caceres Jr.
CFO 1998 $131,700 $ -- -- 0 $4,700
1997 $127,700 $ -- -- 10,000 $4,900
1996 $123,200 $34,500 -- 0 $7,200
David Frosh
President 1998 $128,800 $ -- -- 0 0
1997 $127,500 $ -- -- 0 0
Timothy D. Coco
Vice Pres. 1998 $107,700 $ -- -- 0 0
Customer 1997 $100,000 $ -- -- 5,000 0
Service 1996 $ 92,400 $27,700 -- 0 0
</TABLE>
(1) Bonuses paid to the Named Executives officers 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 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.
STOCK OPTIONS GRANTED AND EXERCISED DURING 1998
There were no options granted to any of the named Executive Officers in fiscal
year 1998; therefore, no table of options granted is presented.
The following table sets forth certain information concerning options
exercised by the Named Executive Officers during the fiscal year covered by this
report, and outstanding options at the end of such year held by the Named
Executive Officers.
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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 1998 1998
on Value(1) Exercisable/ Exercisable/
Name Exercise Realized Unexercisable Unexercisable
- ---- -------- -------- ------------- -------------
<S> <C> <C> <C> <C>
Geoff Knapp -- -- 60,000/ 0 $ 86,500/$ 0
Paul Caceres Jr. -- -- 45,000/ 0 $ 64,800/$ 0
David Frosh -- -- 48,700/35,700 $ 48,500/$33,600
Timothy D. Coco -- -- 15,000/ 0 $ 13,500/$ 0
</TABLE>
(1) Market value of the underlying securities at the exercise date minus the
exercise price of the options.
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 four 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
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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, net income of the Company, and
individual performance.
The committee examines compilations of executive compensation such as
various industry compensation surveys for middle market companies. In 1998, 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, 1998
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 1,200,000 shares of the Company's common stock. The
Plan has a term of ten years. There have been 835,100 options granted under the
1993 Plan as of September 30, 1998.
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 are at the discretion of the
board of directors. The Company contribution for the fiscal year ended September
30, 1998, totaled $15,000.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of September 30, 1998, 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.
15
<PAGE> 16
<TABLE>
<CAPTION>
Shares Beneficially Owned
Name and Address Amount & Nature Percentage
Title of of Beneficial of Beneficial of
Class Owner Ownership (8) Class (8)
----- ----- ------------- ---------
<S> <C> <C> <C>
Common Stock Geoffrey D. Knapp(1) 396,900(2) 16.36%
Common Stock Paul Caceres Jr. (1) 49,500(3) 2.04%
Common Stock Timothy D. Coco (1) 22,800(4) *
Common Stock Walter W. Straub(1) 94,400(5) 3.89%
Common Stock David Frosh (1) 79,000(6) 3.26%
Common Stock Corley Phillips (1) 30,500(7) 1.26%
Common Stock Fred Haney (1) 22,500(7) *
Common Stock ZPR Investment Mgmt. 547,600 22.57%
Common Stock All Directors and
Officers as a
Group (of 7 persons) 695,600 28.67%
</TABLE>
* Less than 1.0%.
(1) The address of each beneficial owner is in care of 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, 2002, 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 9,000 shares until December 16, 2006, at a price of $3.75 per
share.
(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 4,500 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
10,000 shares of Common Stock until January 3, 2004, at a price of $2.13 per
share (iii) an aggregate of 5,600 shares of Common Stock until June 26, 2006, at
a price of $4.75 per share (iv) an aggregate of 2,200 shares of Common Stock
until December 16, 2006, at a price of $3.75 per share.
(5) 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
16
<PAGE> 17
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 $2.38 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 $2.50 per share (iv) 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 $3.38 per share (v) an aggregate of 4,400 shares until May 8, 2007, at a
price of $3.38 per share (vi) an aggregate of 10,000 shares until May 7, 2008,
at a price of $2.75 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 $2.38 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 29,300 shares until June 10,
2006, at a price of $2.50 per share (v) 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 5,000 shares until the
sooner of September 23, 2006, or twelve months after ceasing to serve as a
director at a price of $2.50 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 $3.38 per share (iii) an aggregate of 10,000 shares until the
sooner of May 7, 2008, or twelve months after ceasing to serve as a director at
a price of $2.75 per share.
(8) Shares Beneficially Owned. Beneficial ownership is determined in accordance
with the rules of the Securities and Exchange Commission. In computing the
number of shares beneficially owned by a person and the percentage ownership of
that person, shares of Common Stock subject to options or warrants held by that
person that are currently exercisable, or will become exercisable within 60 days
from the date hereof, are deemed outstanding. Such shares, however, are not
deemed outstanding for purposes of computing the percentage ownership of any
other person.
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 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, 1998, the Company granted
non-qualified options to certain employees and directors to purchase an
aggregate of 106,500 shares of Common Stock of the Company at a price ranging
from $2.50 to $2.88 per share expiring ten years from the date of grant.
17
<PAGE> 18
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 9 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 hereof:
<TABLE>
<CAPTION>
Page
<S> <C>
Schedule II - Valuation and Qualifying Accounts 23
</TABLE>
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 filed July 13, 1987 - File No. 33-15821-LA).
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).
18
<PAGE> 19
10(f) Employment Agreement, and Change in Control Agreements for Geoffrey D.
Knapp, dated January 1, 1996, (incorporated by reference to Exhibits 10
(h) and (i) to the Form 10-Q for the period ended March 31, 1996, filed
on May 7, 1996).
10(g) Employment Agreement, and Change in Control Agreements for Paul Caceres
Jr., dated January 1, 1996, (incorporated by reference to Exhibits 10 (j)
and (k) to the Form 10-Q for the period ended March 31, 1996, filed on
May 7, 1996).
10(h) Line of Credit Agreement, dated January 9, 1998, with Silicon Valley
Bank.
10(i) Amendment to 1993 Stock Option Plan (incorporated by reference to the
exhibits on Form S-8 Registration Statement filed on June 26, 1998).
13(a) Annual Report to Stockholders for the fiscal year ended September 30,
1998.
23 Consent of Independent Auditors.
27 Financial Data Schedule for the Period Ended September 30, 1998
(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, 1998, covered by this report.
19
<PAGE> 20
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 21, 1998
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.
<TABLE>
<S> <C> <C>
/s/ Geoffrey D. Knapp Chief Executive December 21, 1998
- --------------------- Officer and Chairman
Geoffrey D. Knapp of the Board
/s/ David Frosh President and December 21, 1998
- --------------- Director
David Frosh
/s/ Walter W. Straub Director December 21, 1998
- --------------------
Walter W. Straub
Director December 21, 1998
- ---------------------
Dr. Fred M. Haney
Director December 21, 1998
- ---------------------
Corley Phillips
</TABLE>
20
<PAGE> 21
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............... 14
Balance Sheets at
September 30, 1998 and 1997................. 5
Statements of Income for Years
Ended September 30, 1998, 1997 and 1996..... 6
Statements of Cash Flows for Years
Ended September 30, 1998, 1997 and 1996..... 7
Statements of Stockholders' Equity
for Years Ended September 30, 1998,
1997 and 1996............................... 8
Notes to Financial Statements................ 9-13
Report of Independent Auditors on
Financial Statement Schedule ............... 22
II. Valuation and Qualifying Accounts
for the Years Ended
September 30, 1998, 1997 and 1996.... 23
</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.
21
<PAGE> 22
REPORT OF INDEPENDENT AUDITORS ON FINANCIAL STATEMENT SCHEDULE
The Board of Directors
CAM Data Systems, Inc.
We have audited the financial statements of CAM Data Systems, Inc. as of
September 30, 1998 and 1997, and for each of the three years in the period ended
September 30, 1998, and have issued our report thereon dated November 6, 1998.
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 6, 1998
22
<PAGE> 23
CAM DATA SYSTEMS, INC.
SCHEDULE II-- VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED SEPTEMBER 30, 1998, 1997, AND 1996
<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>
1998: $160,000 $203,400 $128,400 $235,000
1997: $150,000 $177,700 $167,700 $160,000
1996: $140,000 $175,600 $165,600 $150,000
</TABLE>
23
<PAGE> 24
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ------- -----------
<S> <C>
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 filed July 13, 1987 - File No. 33-
15821-LA).
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).
</TABLE>
<PAGE> 25
<TABLE>
<S> <C>
10(f) Employment Agreement, and Change in Control Agreements for Geoffrey D.
Knapp, dated January 1, 1996, (incorporated by reference to Exhibits
10 (h) and (i) to the Form 10-Q for the period ended March 31, 1996,
filed on May 7, 1996).
10(g) Employment Agreement, and Change in Control Agreements for Paul
Caceres Jr., dated January 1, 1996, (incorporated by reference to
Exhibits 10 (j) and (k) to the Form 10-Q for the period ended March
31, 1996, filed on May 7, 1996).
10(h) Line of Credit Agreement, dated January 9, 1998, with Silicon Valley
Bank.
10(i) Amendment to 1993 Stock Option Plan (incorporated by reference to the
exhibits on Form S-8 Registration Statement filed on June 26, 1998).
13(a) Annual Report to Stockholders for the fiscal year ended September 30,
1998.
23 Consent of Independent Auditors.
27 Financial Data Schedule for the Period Ended September 30, 1998
</TABLE>
<PAGE> 1
- --------------------------------------------------------------------------------
EXHIBIT 10(h)
[GRAPHIC OMITTED] 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, 1998
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
amended by that Amendment to Loan Agreement dated January 9, 1997 (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
-1-
<PAGE> 2
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 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> 3
[GRAPHIC OMITTED] 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, 1998
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> 4
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, 1999
PRIOR NAMES OF BORROWER
(Section 3.2): SILVER PLUS
TRADE NAMES OF BORROWER
(Section 3.2): NONE
OTHER LOCATIONS AND ADDRESSES
(Section 3.3): 1202 HIGH TECH CIRCLE., HENDERSON, NV 89015; 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> 5
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> 6
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> 7
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
EXHIBIT 13(a)
Geoffrey D. Knapp
Founder and
Chief Executive Officer
LETTER TO STOCKHOLDERS
CONTINUED GROWTH IN 1998
In 1998 we completed our 15th year in business and our 11th year as a publicly
traded company. We began 1998 with a continued commitment to invest in new
products and new technologies that our customers and prospective customers were
beginning to demand in growing numbers. As a result of our investment and
changing product mix, we expected 1998 to be a challenging year to maintain
profitability. So while our profit was nothing to write home about, I am
extremely happy to report our 7th consecutive profitable year and, more
importantly, the last six months of the year were very strong, making up for
small losses in the first two quarters.
1998 also marked the 8th consecutive year of revenue growth. There has only been
one year (1990) in the company's history that we did not achieve annual revenue
gains. During the last 6 months of fiscal 1998 our sales exceeded $10 million
and profit was $.19 cents per share. We accomplished this while carrying a
record backlog into fiscal 1999. We also saw sequential revenue increases in
each quarter of fiscal 1998 which we have not seen in past years due to seasonal
factors.
We maintained a strong balance sheet during the year. Our cash position was $2.8
million, representing $1.31 per share. We have no long term debt and we had no
borrowings under our credit line.
DEVELOPMENT AND MARKETING OF "RETAIL STAR"
We began delivering our latest Windows based software called "Retail Star"
towards the end of the year. The reception of this product in the market place
has greatly exceeded our expectations. We are in process of hiring and training
personnel to deal with service, installation and training of this new product.
At the same time we have the challenge of continuing with our existing products
whose demand has also held steady. Thus, we continue to invest in infrastructure
to support our new product. We expect sales of Retail Star to surpass new system
sales of our existing products some time in 1999.
Retail Star has attracted a far greater number, and proportion, of larger
customers than we have experienced in the past. One of our goals for the company
has been to gradually move up market with our products while maintaining our
traditional focus on the small to medium size retailer. We felt Retail Star
would provide the greatest opportunity to date to accomplish this and early
results would suggest this is the case. We feel we fit nicely into the midrange
space of the retail market, at the lower end of the target market of competitors
such as JDA, PeopleSoft, SAP, Richter, Baan and STS, but above the large number
of fragmented competitors at the lower end of the market. I feel we have product
and resource advantages at the low end of the market and a price and flexibility
advantage as we move up market.
Having said all of this, we face all of the challenges you would expect in
developing and deploying a large scale, commercial software product that
utilizes new technologies. We have been careful to set realistic goals and
commit resources rationally. We have been aggressive while being fiscally
responsible. I think Retail Star gives us a big reason to be excited and
optimistic about 1999 and beyond. It is the most exciting project I have been
involved in during my 19 years in the business. As of this writing we have
shipped the software to approximately 50 customers.
CAM III - SQLBASE SOFTWARE, Y2K COMPLIANT
In October, we completed the programming for converting our CAM III system to a
true 32 bit environment and an SQL database. The actual database is SQLBase from
Centura Software Corporation which is the same very powerful database utilized
by our new Retail Star product. At the same time we added the capability to turn
this text based product into a completely graphical product. We are currently
testing the work we have done and getting our latest release ready to be
delivered in this new environment. We expect to release the text based, 32 bit
version with SQLBase in the first half of next year and a graphical version
towards the end of the year. The hard technical work on this project has been
accomplished and we are putting on the finishing touches. This project has huge
ramifications for the company as it allows us to leverage 15 years worth of work
and to give our largest group of customers a very elegant upgrade path to the
Windows world and all its benefits.
The CAM III software was designed to be year 2000 compliant from the very
beginning, so we have not had to make modifications to the software. Our CAM III
customers only have to worry about older computers which are not Y2K compliant.
1
<PAGE> 2
LETTER TO STOCKHOLDERS
In 1998, we received the largest single order in the company's history for more
than 200 stores from a large specialty retailer. This was for our CAM III
product. We expect to complete the vast majority of the contract in fiscal 1999,
beginning in December. No revenue was recognized for this contract in 1998.
PROFIT$ UPGRADES
Our Profit$ software for soft goods retailers held its own in 1998. We did
significant upgrade business to the customer base and added some of our most
meaningful enhancements to the software in the last few years. Our 3.0 version
is a true 32 bit product (text based) that is Y2K compliant. We have begun
upgrading our customer base from older versions to bring them up to this
standard.
ACCESS RETAIL MANAGEMENT CONSULTING SERVICE
Our Access retail consulting and planning business grew nicely during the year
with our monthly billings growing by 128% over the same period last year. Our
customer base grew by 86% and we increased the size our Access sales force.
Access has turned out to be an excellent compliment to our software products for
our customers. The consulting service is proving to be extremely valuable to our
customers and as a result, our retention rate for customers on this month to
month service is nearly 100%. The Access division achieved profitability in the
3rd quarter and we expect this to continue for the foreseeable future.
MAS-90
Our Accounting Services group (ICS acquisition from 1996) also achieved record
revenues and was profitable for the year. This was primarily based on local
business in the Las Vegas area where we have approximately 200 customers. We
have not been successful selling distribution solutions on a national basis even
though we receive a large number of leads each year through our marketing
efforts from our other products for retailers. Going forward, we plan to share
these leads with Sage (MAS-90) resellers throughout the U.S. so that they may
follow-up on them locally. We have discontinued our efforts to market
distribution solutions based on this, but will continue to concentrate our focus
in our local area. This should not effect the results of the company in any
meaningful way as the business never developed.
PLANS IN THE MARKETPLACE
Our sales force achieved new levels of productivity in 1998, which continue to
substantially exceed those of our competitors. It is my plan to expand the sales
force by approximately 20% in 1999, if we can find appropriate candidates in key
geographic areas where we have a need.
We have tried to do a better job communicating with our shareholders, customers
and employees through improving the information available on our website. Our
website contains all of our financial information, customer newsletters, a
letter from me regarding plans and strategies, product brochures and includes
general information regarding the company, our products, and our services. I
encourage you to visit the site (www.camdata.com) if you are interested in
learning more about the company.
I remain frustrated by the fact that we have not been able to gain more of a
following for the securities of the company. This has resulted in a low
valuation for the company and limited liquidity for our shareholders. Our modest
revenue growth and erratic earnings over the last few years, combined with a low
number of total shares in the market place, are the reasons that I believe we
are where we are. The low share price limits our ability to consider strategic
acquisitions and to raise additional capital. Over time, it also minimizes the
value of stock options in the minds of our employees. We MUST break out of this
cycle. Marked financial results is what it will take. With exciting new products
that allow us to move up market while maintaining our traditional target
markets, we have a chance to achieve this in 1999 and certainly beyond.
I would like to thank our customers and employees who have continued to be
supportive as we evolve as a company and take on new challenges, all of which
are necessary for us to grow and prosper. To our shareholders, I assure you that
we are working as hard as we can and doing everything we can think of to
increase the value of the company without undue risk. We believe in the plans
and strategies we have created and I am optimistic that we will see results in
1999 that prove that we are on the right track.
Best Regards,
/s/ GEOFF KNAPP
- ---------------------
Geoff Knapp
Chairman & CEO
2
<PAGE> 3
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
RESULTS OF OPERATIONS
FISCAL 1998 COMPARED WITH FISCAL 1997
NET REVENUES for the fiscal year ended September 30, 1998, increased 7% to
$18,781,400 consisting of a 4% increase in system revenues, and a 20% increase
in service revenues compared to the year ended September 30, 1997. The increase
in system revenues was attributed to an increase in hardware sales in 1998. The
increase in service revenues was attributed to an increase in the consulting
services revenue in fiscal 1998.
GROSS MARGIN on system revenues decreased to 42% for the year ended September
30, 1998, compared to 45% for the year ended September 30, 1997. Gross margin
for service revenue was 47% for the year ended September 30, 1998, compared to
48% for the year ended September 30, 1997. The margin decrease in system
revenues was a result of lower margins on hardware sales related to a more
competitive market for computer hardware. The decrease in gross margin for
service revenue is related to higher labor costs for retail consultants.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES expressed as a percentage of net
revenues remained constant at 36% for the year ended September 30, 1998 and
1997. Selling, general and administrative expenses for the year ended September
30, 1998, increased 7% to $6,746,700 from the year ended September 30, 1997. The
increase was attributed to higher commissions expense in fiscal 1998, combined
with increases in depreciation and amortization expense.
RESEARCH AND DEVELOPMENT EXPENSE decreased 21% to $1,173,500 for year ended
September 30, 1998, from $1,488,800 for fiscal 1997. The decrease for fiscal
1998 was attributed to the capitalization of software costs related to the
development of new software products, including the new Retail Star software
product.
THE EFFECTIVE INCOME TAX RATE was 31% for the years ended September 30, 1998 and
1997.
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 for 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.
3
<PAGE> 4
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents totaled $2,812,400 at September 30,
1998, compared to $2,916,300 on September 30, 1997. The Company generated
$518,700 from operations in fiscal 1998 compared to $292,500 in fiscal 1997. The
Company expended $735,100 in fiscal 1998 compared to the expenditures of
$814,400 in fiscal 1997 for the purchase of land in Nevada, fixed assets, and
for an acquisition. In June 1998, the Company renewed its line of credit with a
commercial bank, which expires in January 1999, 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, 1998, 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
We have developed a plan to modify our information technology to recognize the
year 2000 and have begun converting our critical data processing systems. We
currently expect the project to be substantially complete by early 1999 and to
cost between fifteen thousand and twenty-five thousand. This estimate includes
internal costs, but excludes the costs to upgrade and replace systems in the
normal course of business. We do not expect this project to have a significant
effect on operations. As of September 30, 1998, approximately $11,000 has been
expended on this project. We will continue to implement systems with strategic
value though some projects may be delayed due to resource constraints.
4
<PAGE> 5
BALANCE SHEET STATEMENT
<TABLE>
<CAPTION>
September 30,
-------------------------------
1998 1997
-------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 2,812,400 $ 2,916,300
Accounts receivable, net of an allowance for doubtful accounts of
$235,000 in 1998 ($160,000 in 1997) 3,008,600 2,354,500
Inventories 622,300 523,000
Prepaid expenses 65,600 256,200
-------------------------------
Total current assets 6,508,900 6,050,000
Property and equipment, net 828,100 788,600
Intangible assets, net 984,300 597,300
Other assets 180,300 172,200
-------------------------------
Total assets $ 8,501,600 $ 7,608,100
===============================
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,190,000 $ 1,140,100
Accrued compensation and related expenses 565,000 466,000
Income taxes payable 74,400 --
Customer deposits and deferred service revenue 524,300 420,300
Accrued installation costs 135,000 100,000
Other accrued liabilities 216,400 197,700
-------------------------------
Total current liabilities 2,705,100 2,324,100
Commitments & Contingencies
Stockholders' equity:
Common stock, $.001 par value, 5,000,000 shares authorized, 2,139,000 shares
issued and outstanding in 1998 (2,008,700 shares in 1997) 2,100 2,000
Paid-in capital in excess of par value 4,282,200 3,944,800
Notes receivable for purchase of common stock (22,900) (30,900)
Retained earnings 1,535,100 1,368,100
===============================
Total stockholders' equity 5,796,500 5,284,000
-------------------------------
Total liabilities and stockholders' equity $ 8,501,600 $ 7,608,100
===============================
</TABLE>
See accompanying notes.
5
<PAGE> 6
STATEMENT OF INCOME
<TABLE>
<CAPTION>
Years Ended
September 30,
------------------------------------------------------
1998 1997 1996
------------------------------------------------------
<S> <C> <C> <C>
REVENUES
Net system revenues $ 14,334,400 $ 13,768,200 $ 12,665,600
Net service revenues 4,447,000 3,711,300 3,003,900
------------------------------------------------------
Total net revenues 18,781,400 17,479,500 15,669,500
------------------------------------------------------
COSTS AND EXPENSES
Cost of system revenues 8,377,700 7,614,400 6,239,200
Cost of service revenues 2,355,800 1,926,500 1,507,000
------------------------------------------------------
Total cost of revenues 10,733,500 9,540,900 7,746,200
Selling, general and administrative expenses 6,746,700 6,316,600 5,620,700
Research and development expense 1,173,500 1,488,800 1,219,300
Interest income (113,700) (123,700) (127,200)
------------------------------------------------------
Total costs and expenses 18,540,000 17,222,600 14,459,000
------------------------------------------------------
Income before taxes 241,400 256,900 1,210,500
Provision for income taxes 74,400 79,900 370,500
------------------------------------------------------
Net income $ 167,000 $ 177,000 $ 840,000
======================================================
Basic net income per share $ .08 $ .09 $ .43
======================================================
Diluted net income per share $ .08 $ .08 $ .39
======================================================
Shares used in computing basic net income per share 2,091,600 1,989,700 1,946,800
======================================================
Shares used in computing diluted net income per share 2,159,600 2,154,900 2,165,700
======================================================
</TABLE>
See accompanying notes.
6
<PAGE> 7
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended
September 30,
---------------------------------------------------
1998 1997 1996
---------------------------------------------------
<S> <C> <C> <C>
Operating activities:
Net income $ 167,000 $ 177,000 $ 840,000
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 507,800 492,300 462,100
Provision for doubtful accounts 75,000 167,700 165,600
Decrease in notes receivable/other assets 8,000 20,200 20,700
Deferred income taxes (7,000) 27,000 (100,000)
Net change in operating assets and liabilities (232,100) (591,700) (292,000)
---------------------------------------------------
Cash provided by operating activities 518,700 292,500 1,096,400
---------------------------------------------------
Investing activities:
Purchase of property and equipment (448,100) (1,450,600) (427,500)
Capitalized software (287,000) -- --
Business acquisitions and other investments -- (270,000) (395,600)
Sale of property and building -- 906,200 --
---------------------------------------------------
Cash used in investing activities (735,100) (814,400) (823,100)
---------------------------------------------------
Financing activities:
Proceeds from exercise of stock options and warrants 112,500 100,000 49,200
---------------------------------------------------
Cash provided by financing activities 112,500 100,000 49,200
---------------------------------------------------
Net (decrease) increase in cash and cash equivalents (103,900) (421,900) 322,500
Cash and cash equivalents at beginning of year 2,916,300 3,338,200 3,015,700
---------------------------------------------------
Cash and cash equivalents at end of year $ 2,812,400 $ 2,916,300 $ 3,338,200
===================================================
</TABLE>
See accompanying notes.
7
<PAGE> 8
STATEMENT OF STOCKHOLDERS' EQUITY
YEARS ENDED SEPTEMBER 30, 1998, 1997, AND 1996
<TABLE>
<CAPTION>
Notes
Paid-in receivable for Retained
Common Stock capital in purchase of earnings
------------------------- excess of par common (accumulated
Shares Amount value stock deficit) Total
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
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
Issuance of common stock
upon exercise of stock options 130,300 100 337,400 -- -- 337,500
Notes receivable write-off -- -- -- 8,000 -- 8,000
Net income -- -- -- -- 167,000 167,000
==============================================================================================
Balance at September 30, 1998 2,139,000 $ 2,100 $4,282,200 $ (22,900) $1,535,100 $5,796,500
==============================================================================================
</TABLE>
See accompanying notes.
8
<PAGE> 9
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
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.
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,
1998 1997
----------------------------
<S> <C> <C>
Computer equipment and furniture $1,482,500 $1,470,400
Automobiles 64,000 64,000
Demonstration and loaner equipment 321,300 296,500
----------------------------
1,867,800 1,830,900
Less accumulated depreciation 1,039,700 1,042,300
----------------------------
$ 828,100 $ 788,600
============================
</TABLE>
Depreciation is provided on the straight-line method over the estimated useful
lives (primarily three to five years) of the respective assets.
LONG-LIVED ASSETS
Effective January 1, 1996, the Company adopted FASB Statement No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of", which requires impairment losses to be recorded on long-lived
assets used in operation when indicators of impairment are present. Management
believes that no impairment of long-lived assets existed as of September 30,
1998.
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 October 1997, the AICPA issued Statement of Position (SOP) 97-2, "Software
Revenue Recognition," which supersedes SOP 91-1. The Company has adopted SOP
97-2 for software transactions entered into after July 1, 1998. The Company's
management anticipates that the adoption of SOP 97-2 will not have a material
impact on the Company's results of operation. The Company recognizes systems
revenue 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.
The company has adopted FASB Statement 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.
9
<PAGE> 10
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
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 years ended September 30, 1998, 1997, and 1996 are as follows:
<TABLE>
<CAPTION>
Years Ended September 30,
----------------------------------------------
1998 1997 1996
----------------------------------------------
<S> <C> <C> <C>
NUMERATOR:
Net income, numerator
for basic & diluted net
income per share $ 167,000 $ 177,000 $ 840,000
----------------------------------------------
DENOMINATOR:
Weighted-average shares
outstanding 2,091,600 1,989,700 1,946,800
----------------------------------------------
Denominator for basic net
income per share -
weighted-average shares 2,091,600 1,989,700 1,946,800
Effect of dilutive securities:
Stock options 68,000 165,200 218,900
----------------------------------------------
Denominator for diluted
net income per share-
weighted-average shares
and assumed conversions 2,159,600 2,154,900 2,165,700
----------------------------------------------
Basic net income per share $ .08 $ .09 $ .43
==============================================
Diluted net income per share $ .08 $ .08 $ .39
==============================================
</TABLE>
ADVERTISING
The Company expenses the production costs of advertising as incurred.
Advertising expenses for the years ended September 30, 1998, 1997, and 1996 were
$321,200, $282,200, and $328,200, respectively.
RESEARCH AND DEVELOPMENT EXPENDITURES
Research and development expenditures are expensed in the period incurred.
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,
---------------------------------------------
1998 1997 1996
---------------------------------------------
<S> <C> <C> <C>
Decrease (increase) in:
Accounts receivable $(729,100) $(497,600) $(373,100)
Inventories (99,300) (84,500) (4,700)
Prepaid expenses 190,600 (160,800) (18,800)
Other assets 24,700 (12,100) (2,900)
Increase (decrease) in:
Accounts payable 49,900 489,700 35,200
Accrued compensation 99,000 (174,000) 46,000
Income taxes payable 74,400 (136,200) (65,100)
Customer deposits 104,000 124,700 143,800
Accrued installation costs 35,000 (11,000) 1,000
Other accrued liabilities 18,700 (129,900) (53,400)
---------------------------------------------
Net changes in operating
assets and liabilities $(232,100) $(591,700) $(292,000)
=============================================
</TABLE>
STOCK OPTION PLANS
In October 1995, the FASB issued statement 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.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the FASB issued Statement No. 130, Reporting Comprehensive Income,
which establishes standards for the reporting and display of comprehensive
income and its components in financial statements. Comprehensive income
generally represents all changes in stockholder's equity except those resulting
from investments by distributions to stockholders. Statement No. 130 is
effective for fiscal years beginning after December 15, 1997 and requires
restatement of earlier periods presented. Adoption of the statement is not
expected to have a material effect on the Company's financial statements.
RECLASSIFICATIONS
Certain reclassifications have been made to the fiscal 1996 and 1997 financial
statements to conform with the fiscal 1998 presentation.
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
10
<PAGE> 11
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
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,
1998 1997
----------------------------
<S> <C> <C>
Capitalized software costs $1,195,400 $1,445,200
License agreement -- 200,000
Goodwill 600,300 400,300
----------------------------
1,795,700 2,045,500
Less accumulated amortization 811,400 1,448,200
----------------------------
$ 984,300 $ 597,300
============================
</TABLE>
During the fiscal year ended September 30, 1998, the Company wrote-off fully
amortized capitalized software costs of $536,800 related to the Profit$ product
line and $200,000 of fully amortized license agreement costs related to the CAM
product line. The Company also capitalized $287,000 in software costs related to
the CAM and Star products.
Amortization of capitalized software costs charged to cost of sales and expense
for the years ended September 30, 1998, 1997 and 1996, were $100,000, $122,800,
and $145,200 respectively.
3. LINE OF CREDIT
In January 1998, 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, 1998, the Company was in compliance with its debt covenants. The
line of credit expires in January 1999. As of September 30, 1998, the Company
had no amounts outstanding under the line, and there was no interest paid during
fiscal 1998, 1997 or 1996.
4. TAXES BASED ON INCOME
The Company utilizes the liability method of accounting for income taxes whereby
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, 1998, the Company has federal and state R & D credit
carryforwards of approximately $74,000 and $22,000, respectively, which expire
in various years through 2013.
The provision (benefit) for taxes based on income consists of the following:
<TABLE>
<CAPTION>
Years Ended September 30,
--------------------------------
1998 1997 1996
--------------------------------
<S> <C> <C> <C>
Current:
Federal $ 45,300 $ 51,900 $ 422,500
State 23,100 1,000 48,000
--------------------------------
68,400 52,900 470,500
Deferred:
Federal 1,000 3,000 (132,000)
State 5,000 24,000 32,000
--------------------------------
6,000 27,000 (100,000)
================================
Total provision 74,400 $ 79,900 $ 370,500
================================
</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,
------------------------------------------
1998 1997 1996
------------------------------------------
<S> <C> <C> <C>
Income tax at statutory rate 82,100 $ 87,300 $ 411,600
Increases (decreases)
In taxes resulting from:
Increase (decrease) in
valuation allowance -- -- (94,000)
Utilization of general
business credits (40,900) (62,600) (28,700)
State income taxes, net
of federal benefit 18,800 8,000 52,800
Other, net 14,400 47,200 28,800
------------------------------------------
74,400 $ 79,900 $ 370,500
==========================================
</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
11
<PAGE> 12
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
financial reporting purposes. Temporary differences and net operating loss
carryforwards which give rise to deferred tax assets and liabilities are as
follows:
<TABLE>
<CAPTION>
September 30,
---------------------------------------------
1998 1997 1996
---------------------------------------------
<S> <C> <C> <C>
Deferred tax assets:
Accruals not currently
deductible for tax $ 191,000 $ 166,000 $ 184,000
Book depreciation in excess
of tax depreciation 33,000 50,000 96,000
General business
credit carryforwards 96,000 78,000 20,000
AMT credit
carry forward -- -- 12,000
R & D expenditures
capitalized for tax 8,000 8,000 9,000
Net operating loss
carryforwards -- 12,000 --
---------------------------------------------
Total deferred tax assets 328,000 314,000 321,000
Valuation allowance
for deferred tax assets (166,000) (166,000) (166,000)
---------------------------------------------
162,000 148,000 155,000
Deferred tax liabilities:
Software costs capitalized
for book purposes (45,000) (25,000) (5,000)
---------------------------------------------
Net deferred tax assets $ 117,000 $ 123,000 $ 150,000
=============================================
</TABLE>
Income taxes paid were $2,700, $366,300, and $530,900 during the years ended
September 30, 1998, 1997 and 1996, respectively.
5. COMMITMENTS AND CONTINGENCIES
The Company is committed at September 30, 1998 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>
1999 $ 318,700
2000 318,700
2001 318,700
2002 178,700
2003 132,000
Thereafter 462,000
-------------------------------
$1,728,800
===============================
</TABLE>
Total rent expense for the years ended September 30, 1998, 1997 and 1996 was
$389,000, $335,400, and $278,800, respectively.
In June 1997, the Company entered into a lease agreement with an officer of the
Company to lease a 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. Rent
expense incurred under this lease for the years ended September 30, 1998 and
1997 totaled $132,000 and $44,000, respectively.
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 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 1,200,000 shares of the Company's common stock. The Plan has a term
of ten years. There have been 835,100 options granted under the 1993 Plan as of
September 30, 1998.
12
<PAGE> 13
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
A summary of stock option activity follows:
<TABLE>
<CAPTION>
Weighted Weighted
Average Average
Non-ISO Exercise for Value
Shares Price of Options
--------------------------------
<S> <C> <C> <C>
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
Granted 106,500 $2.70 $1.00
Exercised (50,000) $2.25
Expired (52,000) $4.79
--------------------------------
Outstanding at
September 30, 1998 815,100 $2.89
=================================
</TABLE>
The following table summarizes information about stock options outstanding at
September 30, 1998:
<TABLE>
<CAPTION>
Weighted Average
Remaining Weighted
Number Contractual Average
OUTSTANDING: Outstanding Life Exercise Price
---------------------------------------------
<S> <C> <C> <C>
Range of Exercise Prices
$1.75 to $3.00 580,300 7.43 $2.46
$3.375 to $5.50 234,800 8.04 $3.96
==============================================
</TABLE>
<TABLE>
<CAPTION>
Weighted
Number Average
EXERCISABLE: Exercisable Exercise Price
------------------------------
<S> <C> <C>
Range of Exercise Prices
$1.75 to $3.00 377,600 $2.33
$3.375 to $5.50 135,600 $3.93
===============================
</TABLE>
The weighted-average remaining contractual life of stock options outstanding at
September 30, 1998 and 1997 was 7.61 years and 8.94 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 1998
and 1997; 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>
1998 1997
---------------------
<S> <C> <C>
Pro forma net income $40,000 $83,000
Pro forma earnings per share $ .02 $ .04
</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 1998,
1997 and 1996 pursuant to the plan totaled $15,000, $15,000, and $42,000,
respectively.
13
<PAGE> 14
REPORT OF INDEPENDENT AUDITORS
Board of Directors
CAM Data Systems, Inc.
We have audited the accompanying balance sheets of CAM Data Systems, Inc. as of
September 30, 1998 and 1997, and the related statements of income, stockholders'
equity and cash flows for each of the three years in the period ended September
30, 1998. 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, 1998 and 1997, and the results of its operations and its
cash flows for each of the three years in the period ended September 30, 1998,
in conformity with generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
- -----------------------------------
Orange County, California
November 6, 1998
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.
Fiscal Year Ended September 30, 1998
<TABLE>
<CAPTION>
Quarter Ended: High Low
- --------------------------------------------------
<S> <C> <C>
December 31 $ 3 1/16 $ 2 3/8
March 31 3 2 3/16
June 30 3 2 3/8
September 30 3 3/4 2 3/8
</TABLE>
Fiscal Year Ended September 30, 1997
<TABLE>
<CAPTION>
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>
As of December 10, 1998, 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.
14
<PAGE> 15
SELECTED QUARTERLY FINANCIAL DATA
(Unaudited)
<TABLE>
<CAPTION>
1998 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 $ 4,208 $ 4,403 $ 4,928 $ 5,242
Gross profit 1,753 1,869 2,155 2,271
Income (loss) before taxes (112) (118) 250 221
Net income (loss) (112) (118) 250 147
Basic earnings (loss) per share (.05) (.06) .12 .07
Diluted earnings (loss) per share (.05) (.06) .12 .07
======================================================
</TABLE>
<TABLE>
<CAPTION>
1997 Fiscal Quarter Ended
------------------------------------------------------
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 before taxes 267 (68) 14 44
Net income 187 (48) 10 28
Basic earnings per share .09 (.02) -- .01
Diluted earnings per share .09 (.02) -- .01
======================================================
</TABLE>
SELECTED FINANCIAL DATA
FOR THE FIVE YEARS ENDED SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
In thousands, except per-share data. 1998 1997 1996 1995 1994
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net system and service revenues $18,781 $17,480 $15,669 $14,734 $13,218
Income before taxes 241 257 1,210 603 300
Net income 167 177 840 413 265
Basic earnings per share .08 .09 .43 .21 .14
Diluted earnings per share .08 .08 .39 .20 .13
Total assets 8,502 7,608 7,158 6,141 5,202
Working capital 3,804 3,726 3,886 3,340 2,352
Long-term debt -- -- -- -- --
====================================================================
</TABLE>
15
<PAGE> 16
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
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
Haddan & Zepfel LLP
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.
16
<PAGE> 1
EXHIBIT 23
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 6, 1998, included
in the 1998 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 6, 1998, 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, 1998,
respectively.
/s/ ERNST & YOUNG LLP
Orange County, California
December 21, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> SEP-30-1998
<CASH> 2,812,400
<SECURITIES> 0
<RECEIVABLES> 3,243,600
<ALLOWANCES> 235,000
<INVENTORY> 622,300
<CURRENT-ASSETS> 6,508,900
<PP&E> 1,867,800
<DEPRECIATION> 1,039,700
<TOTAL-ASSETS> 8,501,600
<CURRENT-LIABILITIES> 2,705,100
<BONDS> 0
0
0
<COMMON> 2,100
<OTHER-SE> 5,794,400
<TOTAL-LIABILITY-AND-EQUITY> 8,501,600
<SALES> 18,781,400
<TOTAL-REVENUES> 18,781,400
<CGS> 10,733,500
<TOTAL-COSTS> 10,733,500
<OTHER-EXPENSES> 7,806,500
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 241,400
<INCOME-TAX> 74,400
<INCOME-CONTINUING> 167,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 167,000
<EPS-PRIMARY> .08
<EPS-DILUTED> .08
</TABLE>
