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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 DECEMBER 31, 1998
OR
( ) Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from ____________ to ____________
Commission file number 0-16569
CAM DATA SYSTEMS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 95-3866450
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
17520 NEWHOPE STREET 92708
FOUNTAIN VALLEY, CALIFORNIA
(Address of principal (Zip code)
executive offices)
(714) 241-9241
(Registrant's telephone number including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
As of December 31, 1998 there were 2,139,000 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 December 31, 1998 and
September 30, 1998 3
o Condensed Statement of Statement of Income (Loss) for
three months ended December 31, 1998 and 1997 4
o Condensed Statement of Cash Flows for
three months ended December 31, 1998 and 1997 5
o Notes to Condensed Financial Statements 6-7
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations 8-9
PART II Other Information 10
o Signature Page 11
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CAM DATA SYSTEMS, INC.
CONDENSED BALANCE SHEET
(all figures in thousands)
<TABLE>
<CAPTION>
DECEMBER 31 SEPTEMBER 30
1998 1998
----------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 2,959 $ 2,812
Accounts receivable, net 3,391 3,009
Inventories 835 622
Prepaid expenses 81 66
------- -------
Total current assets 7,266 6,509
Property and equipment, net 915 828
Intangible assets, net 973 984
Other assets 164 181
------- -------
Total assets $ 9,318 $ 8,502
------- -------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,388 $ 1,190
Accrued compensation and related expenses 588 565
Customer deposits and deferred service revenue 674 524
Accrued installation costs 185 135
Other accrued liabilities 528 291
------- -------
Total current liabilities 3,363 2,705
Stockholders' equity:
Common stock, $.001 par value, 5,000,000
shares authorized, 2,139,000 shares issued
and outstanding 2 2
Paid-in capital 4,283 4,283
Less notes receivable for purchase of common
stock (21) (23)
Retained earnings 1,691 1,535
------- -------
Total stockholders' equity 5,955 5,797
------- -------
Total liabilities and stockholders' equity $ 9,318 $ 8,502
------- -------
</TABLE>
See notes to financial statements
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CAM DATA SYSTEMS, INC.
CONDENSED STATEMENT OF INCOME (LOSS)
(all figures in thousands except per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------
DECEMBER 31 DECEMBER 31
1998 1997
----------- -----------
(UNAUDITED)
<S> <C> <C>
REVENUES
Net system revenues $ 4,650 $ 3,310
Net service revenues 967 898
------- -------
Total net revenues 5,617 4,208
COSTS AND EXPENSES
Costs of system revenues 2,840 1,960
Costs of service revenues 452 495
------- -------
Total costs of revenues 3,292 2,455
Selling, general and administrative expenses 1,847 1,603
Research and development expense 245 292
Interest income (27) (30)
------- -------
Total costs and expenses 5,357 4,320
------- -------
Income (loss) before provision for taxes 260 (112)
Provision for income taxes 104 --
------- -------
NET INCOME (LOSS) $ 156 $ (112)
------- -------
Basic net income (loss) per share $ .07 $ (.05)
------- -------
Diluted net income (loss) per share $ .07 $ (.05)
------- -------
Shares used in computing basic
net income (loss) per share 2,139 2,089
Shares used in computing
diluted net income (loss) per share 2,289 2,089
</TABLE>
See notes to financial statements
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CAM DATA SYSTEMS, INC.
CONDENSED STATEMENT OF CASH FLOWS
(all figures in thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------
DECEMBER 31 DECEMBER 31
1998 1997
----------- -----------
(UNAUDITED)
<S> <C> <C>
Operating activities:
Net income (loss) $ 156 $ (112)
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operations:
Depreciation and amortization 163 117
Provision for doubtful accounts -- 30
Other 2 3
Net changes in operating assets and liabilities 67 (262)
------- -------
Net cash provided by (used in) operations 388 (224)
------- -------
Investing activities:
Purchase of property, plant and equipment (197) (134)
Capitalized software (44) (81)
------- -------
Cash used in investing activities (241) (215)
------- -------
Net increase (decrease) in cash and cash
equivalents 147 (439)
Cash and cash equivalents at beginning of period 2,812 2,916
------- -------
Cash and cash equivalents at end of period $ 2,959 $ 2,477
------- -------
</TABLE>
See notes to financial statements
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CAM DATA SYSTEMS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. PRESENTATION OF CONDENSED FINANCIAL STATEMENTS
The balance sheet as of December 31, 1998, and the related statements of
operations and cash flows for the three months ended December 31, 1998 and 1997,
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>
THREE MONTHS ENDED
---------------------------
DECEMBER 31 DECEMBER 31
1998 1997
----------- -----------
(all figures in thousands)
<S> <C> <C>
(Increase) decrease in:
Accounts receivable $(382) $ 320
Inventories (213) 28
Prepaid expenses and other assets 4 (52)
Increase (decrease) in:
Accounts payable 198 (501)
Accrued compensation and related expenses 23 13
Accrued installation costs 50 --
Customer deposits 150 (48)
Accrued liabilities 237 (22)
----- -----
Net changes in operating assets and liabilities $ 67 $(262)
----- -----
</TABLE>
Income taxes paid during the three months ended December 31, 1998 was $100,000.
There were no income taxes paid during the three months ended December 31, 1997.
There was no interest expense paid in the first three months of 1998 or 1997.
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CAM DATA SYSTEMS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NET INCOME (LOSS) 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.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------------
DECEMBER 31 DECEMBER 31
1998 1997
----------- -----------
(all figures in thousands
except per share data)
<S> <C> <C>
NUMERATOR:
Net income (loss), numerator for basic and diluted
net income (loss) per share $ 156 $ (112)
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DENOMINATOR:
Weighted-average shares outstanding 2,139 2,008
Contingent shares to be issued in January 1998 -- 81
------- -------
Denominator for basic net income (loss) per share -
weighted-average shares 2,139 2,089
-------
Effect of dilutive securities:
Stock options 150 --
------- -------
Denominator for diluted net income (loss) per share -
weighted-average shares and assumed conversions 2,289 2,089
------- -------
Basic net income (loss) per share $ .07 $ (.05)
------- -------
Diluted net income (loss) per share $ .07 $ (.05)
------- -------
</TABLE>
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
CAM DATA SYSTEMS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THREE MONTHS ENDED DECEMBER 31, 1998, AS COMPARED TO
THREE MONTHS ENDED DECEMBER 31, 1997
RESULTS OF OPERATIONS
NET REVENUES for the three months ended December 31, 1998, increased 33% to
$5,617,000 consisting of a 40% increase in system revenues, and a 8% increase in
service revenues compared to the three months ended December 31, 1997. The
increase in system revenues was a result of an increase in sales to existing
customers for the quarter. The increase in service revenues was attributed to an
increase in the number of customers on a service contract.
GROSS MARGIN for the three months ended December 31, 1998, was 41%, compared to
42% for the three months ended December 31, 1997. Gross margin on system
revenues decreased to 39%, for the three months ended December 31, 1998,
compared to 41% for the three months ended December 31, 1997. Gross margin for
service revenue was 53% for the three months ended December 31, 1998, compared
to 45% for the three months ended December 31, 1997. The margin decrease in
system revenues was a result of a higher mix of hardware sales versus software
sales, and higher sales to existing customers, which yield a lower gross margin.
The increase in gross margin for service revenue is related to the decrease in
labor costs due to open positions for customer service personnel. This trend
will stabilize once the positions are filled.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES expressed as a percentage of net
revenues decreased for the three month period ended December 31, 1998, to 33%,
compared to 38% for the three month period ended December 31, 1997. The decrease
is mainly related the large increase in revenue without a significant increase
in expenses. Selling, general and administrative expenses for the three months
ended December 31, 1998, increased 15% to $1,847,000 from the three months ended
December 31, 1997. The increase was related to increases in bad debt expense,
commission expense, payroll expense, and telephone expense.
RESEARCH AND DEVELOPMENT EXPENSE decreased 16% to $245,000 for the three month
period ended December 31, 1998, from $292,000 for the same period in the prior
year. The decrease for the period was attributed to lower payroll expense
related to open positions for R & D personnel.
INCOME TAXES, the effective tax rate was 40% for the three months ended December
31, 1998. There were no taxes booked for the three month period ended December
31, 1997, due to the loss for the quarter.
LIQUIDITY AND CAPITAL RESOURCES The Company's cash and cash equivalents totaled
$2,959,000 on December 31, 1998, compared to $2,812,000 on September 30, 1998.
The Company generated $388,000 from operations, and expended $241,000 for fixed
assets and the capitalization of software, compared to the utilization of
$224,000 from operations, and the utilization of $215,000 for the purchase of
fixed assets and capitalized software for the three months ended December 31,
1997.
The Company has no significant commitments for expenditures.
Management believes the Company's existing working capital, coupled with funds
generated from the Company's operations, will be sufficient to fund its
presently anticipated working capital requirements for the foreseeable future.
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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 mid 1999 and to
cost between fifteen and twenty-five 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 December 31, 1998, approximately $15,000 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.
This Item II section contains certain forward looking statements regarding the
Company, its business, liquidity, prospects and results of operations that are
subject to certain risks and uncertainties posed by many factors and events that
could cause the Company's actual business, liquidity, prospects and results of
operations to differ materially from those that may be anticipated by such
forward looking statements. All statements contained herein that are not
historical facts, including but not limited to, statements regarding anticipated
future revenue and expense levels, and capital requirements, and the Company's
ability to generate cash from operations, are forward looking statements based
on current expectations. No assurances can be given that events or results
mentioned in any such forward looking statements will in fact occur. Readers are
cautioned not to place undue reliance on any forward looking statements, which
speak only as of the date of this report. The Company undertakes no obligation
to revise any forward looking statements in order to reflect events or
circumstances that may subsequently arise. Readers are urged to carefully review
and consider the various disclosures made by the Company in this report and in
the Company's other reports filed with the Securities and Exchange Commission.
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CAM DATA SYSTEMS, INC.
PART II - OTHER INFORMATION
Items 1 - 5 Not Applicable
Item 6 Exhibits and Reports on Form 8-K
(A) Exhibits: Exhibit 27 Financial Data Schedule
(B) Reports on Form 8-K None
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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: February 10, 1999 By /s/ Paul Caceres Jr.
----------------- --------------------
Paul Caceres Jr.
Chief Financial and
Accounting Officer
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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> 3-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 2,959
<SECURITIES> 0
<RECEIVABLES> 3,626
<ALLOWANCES> 235
<INVENTORY> 835
<CURRENT-ASSETS> 7,266
<PP&E> 2,063
<DEPRECIATION> 1,148
<TOTAL-ASSETS> 9,318
<CURRENT-LIABILITIES> 3,363
<BONDS> 0
0
0
<COMMON> 2
<OTHER-SE> 5,953
<TOTAL-LIABILITY-AND-EQUITY> 9,318
<SALES> 5,617
<TOTAL-REVENUES> 5,617
<CGS> 3,292
<TOTAL-COSTS> 3,292
<OTHER-EXPENSES> 2,065
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 260
<INCOME-TAX> 104
<INCOME-CONTINUING> 156
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 156
<EPS-PRIMARY> .07
<EPS-DILUTED> .07
</TABLE>
