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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended June 30, 1999
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _____________ to ________________
Commission file number 0-16569
CAM DATA SYSTEMS, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its Charter)
DELAWARE 95-3866450
- --------------------------------- --------------------
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
17520 Newhope Street
Fountain Valley, California 92708
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip code)
(714) 241-9241
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(Registrant's telephone number including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
As of June 30, 1999 there were 2,170,000 shares of common stock outstanding.
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CAM DATA SYSTEMS, INC.
INDEX
PART I Financial Information
Item 1 Condensed Financial Statements: Page Number
-----------
o Condensed Balance Sheet at June 30, 1999 and 3
September 30, 1998
o Condensed Statement of Income for three
months ended June 30, 1999 and 1998 4
o Condensed Statement of Income for nine
months ended June 30, 1999 and 1998 5
o Condensed Statement of Cash Flows for
nine months ended June 30, 1999 and 1998 6
o Notes to Condensed Financial Statements 7-8
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 9-11
PART II Other Information 12
o Signature Page 13
2
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CAM DATA SYSTEMS, INC.
CONDENSED BALANCE SHEET
(all figures in thousands)
ASSETS
<TABLE>
<CAPTION>
JUNE 30 SEPTEMBER 30
1999 1998
----------- ------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 4,081 $ 2,812
Accounts receivable, net 3,514 3,009
Inventories 810 622
Prepaid expenses 74 66
-------- --------
Total current assets 8,479 6,509
Property and equipment, net 954 828
Intangible assets, net 1,103 984
Other assets 158 181
-------- --------
Total assets $ 10,694 $ 8,502
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,590 $ 1,190
Accrued compensation and related expenses 948 565
Customer deposits and deferred service revenue 927 524
Accrued installation costs 145 135
Other accrued liabilities 446 291
-------- --------
Total current liabilities 4,056 2,705
Stockholders' equity:
Common stock, $.001 par value, 5,000,000 shares
authorized, 2,170,000 shares issued and
outstanding 2 2
Paid-in capital 4,380 4,283
Less notes receivable for purchase of common stock (17) (23)
Retained earnings 2,273 1,535
-------- --------
Total stockholders' equity 6,638 5,797
-------- --------
Total liabilities and stockholders' equity $ 10,694 $ 8,502
======== ========
</TABLE>
See notes to financial statements
3
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CAM DATA SYSTEMS, INC.
CONDENSED STATEMENT OF INCOME
(all figures in thousands except per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------
JUNE 30 JUNE 30
1999 1998
------- -------
(Unaudited)
<S> <C> <C>
REVENUES
Net system revenues $ 6,606 $ 3,809
Net service revenues 1,173 1,119
------- -------
Total net revenues 7,779 4,928
COSTS AND EXPENSES
Costs of system revenues 3,576 2,184
Costs of service revenues 639 589
------- -------
Total costs of revenues 4,215 2,773
Selling, general and administrative expenses 2,600 1,615
Research and development expense 279 317
Interest income (32) (27)
------- -------
Total costs and expenses 7,062 4,678
------- -------
Income before provision for income taxes 717 250
Provision for income taxes 285 --
------- -------
NET INCOME $ 432 $ 250
------- -------
Basic net income per share $ .20 $ .12
------- -------
Diluted net income per share $ .17 $ .12
------- -------
Shares used in computing basic
net income per share 2,157 2,090
Shares used in computing
diluted net income per share 2,522 2,144
</TABLE>
See notes to financial statements
4
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CAM DATA SYSTEMS, INC.
CONDENSED STATEMENT OF INCOME
(all figures in thousands except per share data)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-------------------------
JUNE 30 JUNE 30
1999 1998
-------- --------
(Unaudited)
<S> <C> <C>
REVENUES
Net system revenues $ 16,203 $ 10,303
Net service revenues 3,499 3,236
-------- --------
Total net revenues 19,702 13,539
COSTS AND EXPENSES
Costs of system revenues 9,451 6,002
Costs of service revenues 1,774 1,760
-------- --------
Total costs of revenues 11,225 7,762
Selling, general and administrative expenses 6,548 4,983
Research and development expense 787 858
Interest income (86) (84)
-------- --------
Total costs and expenses 18,474 13,519
-------- --------
Income before provision for income taxes 1,228 20
Provision for income taxes 490 --
-------- --------
NET INCOME $ 738 $ 20
-------- --------
Basic net income per share $ .34 $ .01
-------- --------
Diluted net income per share $ .30 $ .01
-------- --------
Shares used in computing basic
net income per share 2,147 2,090
Shares used in computing
diluted net income per share 2,415 2,136
</TABLE>
See notes to financial statements
5
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CAM DATA SYSTEMS, INC.
CONDENSED STATEMENT OF CASH FLOWS
(all figures in thousands)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-----------------------
JUNE 30 JUNE 30
1999 1998
------- -------
(Unaudited)
<S> <C> <C>
Operating activities:
Net income $ 738 $ 20
Adjustments to reconcile net income to net cash
provided by operations:
Depreciation and amortization 544 368
Provision for doubtful accounts 75 15
Other 6 8
Net changes in operating assets and liabilities 608 (373)
------- -------
Net cash provided by operations 1,971 38
------- -------
Investing activities:
Purchase of property, plant and equipment (503) (353)
Capitalized software (296) (239)
------- -------
Cash used in investing activities (799) (592)
Financing activities:
Proceeds from exercise of stock options 97 --
------- -------
Net increase (decrease) in cash and cash
equivalents 1,269 (554)
Cash and cash equivalents at beginning of period 2,812 2,916
------- -------
Cash and cash equivalents at end of period $ 4,081 $ 2,362
======= =======
</TABLE>
See notes to financial statements
6
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CAM DATA SYSTEMS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. BUSINESS DESCRIPTION
CAM Data Systems, Inc. provides total commerce solutions for small to medium
size, traditional as well as web retailers that are based on the company's open
architecture software products for managing inventory, point of sale, sales
transaction processing and accounting. In addition to software, these solutions
often include hardware, installation, training, service and consulting provided
by the company.
PRESENTATION OF CONDENSED FINANCIAL STATEMENTS
The accompanying financial statements of the Company for the three and nine
months ended June 30, 1999 and 1998 are unaudited; in the opinion of management,
all adjustments necessary for a fair presentation of such financial statements
have been included. Such adjustments consisted only of normal recurring items.
Interim results are not necessarily indicative of results for a full year. The
condensed financial statements and notes are presented as permitted by Form
10-Q, and therefore should be read in the conjunction with the Company's annual
report on Form 10-K for the year ended September 30, 1998.
INVENTORIES
Inventories are stated at the lower of cost determined on a first-in, first out
basis, or net realizable value, and are composed of electronic point of sale
hardware and computer equipment used in the sale and service of the Company's
products.
STATEMENTS OF CASH FLOWS
Net changes in operating assets and liabilities as shown in the condensed
statement of cash flows are as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
------------------------
JUNE 30 JUNE 30
1999 1998
--------- -------
(all figures in thousands)
<S> <C> <C>
(Increase) decrease in:
Accounts receivable $(580) $(493)
Inventories (188) (32)
Prepaid expenses and other assets 25 121
Increase (decrease) in:
Accounts payable 400 (169)
Accrued compensation and related expenses 383 49
Accrued installation costs 10 50
Customer deposits and deferred revenue 403 69
Accrued liabilities 155 32
----- -----
Net changes in operating assets and liabilities $ 608 $(373)
===== =====
</TABLE>
Income taxes paid during the nine months ended June 30, 1999 and 1998 were
$400,000 and $3,000, respectively. There was no interest expense paid in the
first nine months of 1999 or 1998.
7
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CAM DATA SYSTEMS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
NET INCOME PER SHARE
In 1997, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 128, Earnings per Share. Statement 128 replaced the
previously reported primary and fully diluted earnings per share with basic and
diluted earnings per share. Unlike primary earnings per share, basic earnings
per share excludes any dilutive effects of options, warrants, and convertible
securities. Diluted earnings per share is very similar to the previously
reported fully diluted earnings per share. All earnings per share amounts for
all periods have been presented, and where necessary, restated to conform to the
Statement 128 requirements. The computation of basic and diluted earnings per
share for the three and nine month periods ended June 30, 1999 and June 30, 1998
are as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------
JUNE 30 JUNE 30
1999 1998
------ ------
(all figures in thousands
except per share data)
<S> <C> <C>
NUMERATOR:
Net income numerator for basic and diluted
net income per share $ 432 $ 250
------ ------
DENOMINATOR:
Weighted-average shares outstanding 2,157 2,090
------ ------
Denominator for basic net income per share -
weighted-average shares 2,157 2,090
Effect of dilutive securities:
Stock options 365 54
------ ------
Denominator for diluted net income per share -
weighted-average shares and assumed conversions 2,522 2,144
------ ------
Basic net income per share $ .20 $ .12
------ ------
Diluted net income per share $ .17 $ .12
====== ======
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
----------------------
JUNE 30 JUNE 30
1999 1998
------ ------
<S> <C> <C>
NUMERATOR:
Net income, numerator for basic and diluted
net income per share $ 738 $ 20
------ ------
DENOMINATOR:
Weighted-average shares outstanding 2,147 2,090
------ ------
Denominator for basic net income per share -
weighted-average shares 2,147 2,090
------
Effect of dilutive securities:
Stock options 268 46
------ ------
Denominator for diluted net income per share -
weighted-average shares and assumed conversions 2,415 2,136
------ ------
Basic net income per share $ .34 $ .01
------ ------
Diluted net income per share $ .30 $ .01
====== ======
</TABLE>
8
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
CAM DATA SYSTEMS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Three Months Ended June 30, 1999, as Compared to
Three Months Ended June 30, 1998
RESULTS OF OPERATIONS
NET REVENUES for the three months ended June 30, 1999, increased 58% to $7.8
million, consisting of a 73% increase in system revenues, and a 5% increase in
service revenues compared to the three months ended June 30, 1998. The increase
in system revenues was due to an increase in sales to existing customers.
Service revenues increased due to higher consulting services in 1999.
GROSS MARGIN for the three months ended June 30, 1999, was 46%, compared to 44%
for the three months ended June 30, 1998. Gross margin on system revenues
increased to 46% for the three months ended June 30, 1999, compared to 43% for
the three months ended June 30, 1998. Gross margin for service revenue was 46%
for the three months ended June 30, 1999, compared to 47% for the three months
ended June 30, 1998. The margin increase in system revenues was a result of a
higher ratio of software sales and revenue for installation services compared to
hardware sales, this sales mix yielded a higher gross margin. The decrease in
gross margin for service revenue is related to an increase in labor costs due to
the staffing of open positions for technical support personnel.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES expressed as a percentage of net
revenues for the three month period ended June 30, 1999 and 1998, was 33%.
Selling, general and administrative expenses for the three months ended June 30,
1999, increased 61% to $2.6 million, from the three months ended June 30, 1998.
The increase was related to increases in bad debt expense, payroll expense, and
commission expense related to higher sales volume.
RESEARCH AND DEVELOPMENT EXPENSE decreased 12% to $279,000 for the three month
period ended June 30, 1999, from $317,000 for the same period in 1998. The
decrease for the period was attributed to a higher capitalization rate in
research and development expenses in 1999.
INCOME TAXES, the effective tax rate was 40% for the three months ended June 30,
1999. There was no income tax expense booked for the three months ended June 30,
1998, due to the loss incurred during the first six months of fiscal 1998.
NINE MONTHS ENDED JUNE 30, 1999, AS COMPARED TO
NINE MONTHS ENDED JUNE 30, 1998
RESULTS OF OPERATIONS
NET REVENUES for the nine months ended June 30, 1999, increased 46% to $19.7
million, consisting of a 57% increase in system revenues, and an 8% increase in
service revenues compared to the nine months ended June 30, 1998. The increase
in system revenues was due to an increase in sales to existing customers.
Service revenues increased due to higher consulting services in 1999.
GROSS MARGIN. for the nine months ended June 30, 1999 and 1998 was 43%. Gross
margin on system revenues remained constant at 42% for the nine months ended
June 30, 1999 and 1998. Gross margin for service revenue was 49% for the nine
months ended June 30, 1999, compared to 46% for the nine months
9
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ended June 30, 1998. The gross margin on system revenues remained constant. The
increase in gross margin for service revenue is related to the decrease in labor
costs due to unstaffed positions for technical support personnel during 1999.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES expressed as a percentage of net
revenues decreased for the nine month period ended June 30, 1999 was 33%
compared to 37% for the nine months ended June 30, 1998. Selling, general and
administrative expenses for the nine months ended June 30, 1999, increased 31%
to $6.5 million, from the nine months ended June 30, 1998. The increase was
related to increases in bad debt expense, payroll expense, telephone expense,
and commission expense related to higher sales volume.
RESEARCH AND DEVELOPMENT EXPENSE decreased 8% to $787,000 for the nine month
period ended June 30, 1999, from $858,000 for the same period in 1998. The
decrease for the period was attributed to a higher capitalization rate in
research and development expenses in 1999.
INCOME TAXES, the effective tax rate was 40% for the nine months ended June 30,
1999. There was no income tax expense booked for the first nine months ended
June 30, 1998, due to the Company being at close to a breakeven profit level.
LIQUIDITY AND CAPITAL RESOURCES The Company's cash and cash equivalents totaled
$4.1 million on June 30, 1999, compared to $2.8 million on September 30, 1998.
The Company generated $2 million from operations, expended $800,000 for fixed
assets and capitalized software development during the nine months ended June
30, 1999, compared to a breakeven cash flow from operations, and expended
$600,000 for fixed assets and capitalized software development during the nine
months ended June 30, 1998.
The Company has no significant commitments for expenditures. Management believes
the Company's existing working capital, coupled with funds generated from the
Company's operations, will be sufficient to fund its presently anticipated
working capital requirements for the foreseeable future.
Inflation has had no significant impact on the Company's operations.
YEAR 2000 ISSUE
We have developed a plan to modify our information technology to recognize the
year 2000 and we are converting our critical data processing systems. We
currently expect the project to be substantially complete by late fall and to
cost between twenty-five and fifty thousand dollars. 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 June 30, 1999, approximately $30,000 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.
The Company has relationships with various third parties on whom it relies to
provide goods and services. These include suppliers and vendors. As part of its
determination of Year 2000 readiness, the Company has identified material
relationships with third party vendors, and is in the process of assessing the
status of their compliance through the use of inquiries and review of hardware
and software documentation. Due to the broad diversification of these vendors,
the risk associated with potential business interruption as a result of year
2000 non-compliance by one or more vendors is not considered significant.
It is anticipated that the steps the Company has taken and is continuing to take
to deal with the year 2000 issue will reduce the risk of significant business
interruptions, but there is no assurance that this outcome will be achieved.
Failure to detect and correct all internal instances of non-compliance or the
inability of third parties to achieve timely compliance could result in the
interruption of normal business operations which could, depending on its
duration, have an adverse effect on the Company.
10
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This Item II section contains certain forward looking statements regarding the
Company, its business, liquidity, prospects and results of operations that are
subject to certain risks and uncertainties posed by many factors and events that
could cause the Company's actual business, liquidity, prospects and results of
operations to differ materially from those that may be anticipated by such
forward looking statements. All statements contained herein that are not
historical facts, including but not limited to, statements regarding anticipated
future revenue and expense levels, and capital requirements, and the Company's
ability to generate cash from operations, are forward looking statements based
on current expectations. No assurances can be given that events or results
mentioned in any such forward looking statements will in fact occur. Readers are
cautioned not to place undue reliance on any forward looking statements, which
speak only as of the date of this report. The Company undertakes no obligation
to revise any forward looking statements in order to reflect events or
circumstances that may subsequently arise. Readers are urged to carefully review
and consider the various disclosures made by the Company in this report and in
the Company's other reports filed with the Securities and Exchange Commission.
11
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CAM DATA SYSTEMS, INC.
PART II - OTHER INFORMATION
Items 1 -- 3 Not Applicable
Item 4 Submission of Matters to a Vote of Security Holders
On May 6 1999, the Company held its annual meeting of shareholders. The
following items were voted upon at the annual meeting with the results of the
voting:
1. The re-election of six persons to serve on the Company's Board of Directors.
The term shall be until the next meeting of shareholders in 2000.
<TABLE>
<CAPTION>
VOTES
----------------------------------------------
For Against Abstain
--------- ------- -------
<S> <C> <C> <C>
Geoffrey D. Knapp 1,502,800 -- --
Walter Straub 1,502,800 -- --
David Frosh 1,502,800 -- --
Corley Phillips 1,502,800 -- --
Fredrick Haney 1,502,800 -- --
Scott Broomfield 1,502,800 -- --
</TABLE>
2. The confirmation of Ernst & Young as the independent auditors of the Company.
<TABLE>
<CAPTION>
VOTES
----------------------------------------------
For Against Abstain
--------- ------- -------
<S> <C> <C> <C>
1,891,500 650 100
</TABLE>
Items 5 Not Applicable
Item 6 Exhibits and Reports on Form 8-K
(A) Exhibits: Exhibit 27 -- Financial Data Schedule
(B) Reports on Form 8-K -- None
12
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CAM DATA SYSTEMS, INC.
(Registrant)
Date: August 9, 1999 By /s/ PAUL CACERES JR.
-----------------------------------
Paul Caceres Jr.
Chief Financial and
Accounting Officer
13
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EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> JUN-30-1999
<CASH> 4,081
<SECURITIES> 0
<RECEIVABLES> 3,824
<ALLOWANCES> 310
<INVENTORY> 810
<CURRENT-ASSETS> 8,479
<PP&E> 2,339
<DEPRECIATION> 1,385
<TOTAL-ASSETS> 10,694
<CURRENT-LIABILITIES> 4,056
<BONDS> 0
0
0
<COMMON> 2
<OTHER-SE> 6,636
<TOTAL-LIABILITY-AND-EQUITY> 10,694
<SALES> 19,702
<TOTAL-REVENUES> 19,702
<CGS> 11,225
<TOTAL-COSTS> 11,225
<OTHER-EXPENSES> 7,249
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,228
<INCOME-TAX> 490
<INCOME-CONTINUING> 738
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 738
<EPS-BASIC> .34
<EPS-DILUTED> .30
</TABLE>
