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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, 1999
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
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 [ ]
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 8, 1999 was approximately $56,682,000. As of December
8, 1999, there were outstanding 2,412,000 shares of Common Stock of the
Registrant, par value $.001 per share.
DOCUMENTS INCORPORATED BY REFERENCE.
Part II Annual Report to Stockholders for
fiscal year ended September 30, 1999
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PART I
ITEM 1. BUSINESS
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GENERAL
Except for the historical information contained herein, this Annual Report on
Form 10-K contains forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from those
discussed in this report. Factors that could cause or contribute to such
differences include, but are not limited to, those discussed in this section as
well as the section entitled "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations."
THE COMPANY
CAM Data Systems, Inc. (the "Company") was organized under the laws of the State
of Delaware on April 29, 1987. Previous to this date, CAM Data Systems, Inc. was
a California corporation organized on September 20, 1983, and was subsequently
merged into the Delaware corporation on June 5, 1987. The Company's principal
business is to provide total commerce solutions for small to medium size,
traditional as well as web retailers. These solutions are based on the Company's
open architecture software products for managing inventory, point of sale, sales
transaction processing and accounting. In addition to software, these solutions
often include hardware, installation, training, service and consulting provided
by the Company. Sales, service, research, and development are located in
California and Nevada, while the Company's customers are located throughout the
United States.
THE SYSTEMS
The Company offers three Turn Key Systems:
(1) THE CAM SYSTEM - designed for hard goods retailers whose inventory is
re-orderable in nature.
(2) THE PROFIT$ SYSTEM - designed for apparel and shoe retailers whose
inventory is seasonable 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 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 barcode 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
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Profit$ system, and by 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 on 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
for 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 of daily, weekly,
monthly, year-to-date and/or trailing 13 months of sales basis. The
systems will also analyze the popularity data and indicate to the
retailer which particular items of inventory are needed and which
items are overstocked.
(2) ZERO SALES REPORT. The systems provide a sales analysis on a monthly
and year-to-date basis for inventory items for which no sales have
been made. The analysis can be reported on a total sales basis or on a
departmental or item level basis.
(3) INVENTORY TABULATION AND VALUATION. The systems provide reports
listing all inventory on hand, the valuation of such inventory on a
cost and retail basis, the average cost of each item in inventory, and
all items of inventory on order but not yet received.
(4) AUTOMATIC PURCHASING. The systems provide a report listing all items
that should be ordered based upon historical data stored in the
system, including the number of items in inventory, the number on the
shelf, the number on order and the minimum quantities required. The
systems can also automatically provide a purchase order if desired.
(5) PRICING. The systems are capable of producing price stickers in 20
customized label formats, assigning Uniform Purchase Code numbers and
printing barcodes 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 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) accounting software.
SERVICE AND SUPPORT
Customer service and support is a critical element in maintaining customer
satisfaction. For a monthly fee, each purchaser of a system receives service and
support from the Company. The service and support provided by the Company
includes:
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(1) HARDWARE SERVICE. The Company offers hardware service to its customers
on a time and material billing basis. The Company's service
representatives are trained to determine the source of the problem or
malfunction in the hardware and, once determined, replace the
defective component. Defective components are either repaired at the
Company's facility or sent to a manufacturer's authorized service
center for repair.
(2) TECHNICAL PHONE SUPPORT AND SOFTWARE ENHANCEMENTS. The Company
provides technical support by troubleshooting the customer's systems
problems via the telephone and via modem. The Company, while not
performing any significant customizing of its software for particular
customers, is receptive to comments from customers concerning the
Company's software. Such comments, together with planned enhancements
to the software, result in 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 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 implemented. The Company also
offers training to its customers via the telephone.
MARKETING
DIRECT SALES
The Company markets its systems primarily through the Company's direct sales
force consisting of twenty-eight salespersons and sales associates, all of whom
work exclusively for the Company. The Company's marketing efforts extend
nationwide with offices in the states of California, Nevada, Oregon, Washington,
Colorado, Georgia, Minnesota, Florida, Missouri, 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 provide appropriate price quotes. Upon the execution
of a typical sales contract, the Company is generally able to install an entire
system within four to eight weeks. The Company is paid directly by the customer
or by third-party leasing companies. Compensation for salespeople is based on a
percentage of gross profit for each system sold.
BROCHURES, TRADE SHOWS, AND ADVERTISING MEDIA
The Company markets its systems by advertising in trade journals, the World Wide
Web, and other print media targeted at retail businesses, by attending industry
specific trade shows, by using sales promotional videos, and by direct mail
advertising.
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
includes 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.
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
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to an agreed upon schedule. However, orders may be canceled or rescheduled by
the customer with a minimal penalty. For this reason, management believes such
backlog information is not indicative of the Company's future sales or business
trends and is subject to fluctuation. As of November 29, 1999, backlog was
approximately $1,682,000 as compared to $1,760,000 on December 11, 1998. 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 features of its
systems. We believe the introduction of the Windows-based Retail Star software
product gives the Company a competitive advantage because most of the Company's
competitors are still selling DOS-based software products. The Company considers
its systems to have greater capabilities to the small and medium size retailers
than suppliers of other systems. Included among such capabilities are 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 compete with the Company on the
basis of lower pricing.
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, and
to obtain financing when, and if, needed.
PATENTS AND TRADEMARKS
The Company has four pending trademarks: Retail Star, Retail Ice, Retail
America, and I.Star. 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.
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 $1,606,000, $1,460,000, and $1,548,800 on
software development, including amounts capitalized during the years ended
September 30, 1999, 1998, and 1997, respectively. The Company anticipates that
it will continue to incur software development costs in connection with
enhancements and improvements of its software and the development of new
products. These activities may require an increase in the Company's programming
and technical staff, which presently consists of twenty-three programmers and
quality control and testing personnel.
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EMPLOYEES
As of September 30, 1999, the Company had 182 full time employees, including 16
employed in finance and administration, 23 in programming and testing, 35 in
sales and marketing, 27 in installation, 44 in service and support, and 37 in
operations and consulting.
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
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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 $188,000. 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, 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
$136,000; (ii) and various immaterial month-to-month leases for sales offices
throughout the country.
ITEM 3. LEGAL PROCEEDINGS
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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 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
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No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report.
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PART II
PURSUANT TO GENERAL INSTRUCTION G (2), ITEMS 5, 6, 7, AND 8 HAVE BEEN OMITTED
SINCE THE REQUIRED INFORMATION IS CONTAINED IN THE COMPANY'S 1999 ANNUAL REPORT
TO STOCKHOLDERS PURSUANT TO RULE 14A-3(b), WHICH IS INCORPORATED HEREIN BY
REFERENCE BELOW.
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FORM 10-K ANNUAL REPORT TO STOCKHOLDERS
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<S> <C>
ITEM 5: MARKET FOR REGISTRANT'S PAGE 18: STOCK AND DIVIDEND DATA
COMMON EQUITY AND RELATED
STOCKHOLDER'S MATTERS
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ITEM 6: SELECTED FINANCIAL DATA PAGE 19: SELECTED FINANCIAL DATA SEE
NOTE (A) BELOW
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ITEM 7: MANAGEMENT'S DISCUSSION PAGES 6-7: MANAGEMENT'S DISCUSSION AND
AND ANALYSIS OF FINANCIAL ANALYSIS OF FINANCIAL CONDITION AND
CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS
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ITEM 8: FINANCIAL STATEMENTS AND SEE BELOW
SUPPLEMENTARY DATA
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Note (A) The selected financial data incorporated herein by reference to the
Company's 1999 Annual Report to Stockholders as of September 30, 1999 and 1998
and for each of the years in the three-year period ended September 30, 1999,
have been derived from the Company's audited financial statements included
elsewhere in this report. The selected financial data for the years ended
September 30, 1997 and 1996 have been derived from audited financial statements
of the Company not included herein. The data is qualified in its entirety by
reference to, and should be read in conjunction with, the Company's financial
statements and related notes, and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included elsewhere in this
report.
Information for Item 8 is included in the Company's financial statements as of
September 30, 1999 and 1998, and for each of the years in the three-year period
ended September 30, 1999, and the Company's unaudited quarterly financial data
for the two years ended September 30, 1999 and 1998, on pages 8 through 17 and
page 19, respectively, of the Company's 1999 Annual Report to Stockholders which
is hereby incorporated by reference. The report of the independent auditors is
included on page 18 of the Annual Report to Stockholders.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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INTEREST RATE RISK
At September 30, 1999 and 1998, the Company's cash equivalents and short-term
investments included approximately $5,049,000 and $2,812,000, respectively.
Since the Company typically does not purchase fixed-income securities, its cash
equivalents are not subject to significant interest rate risk. The Company
places substantially all of its interest bearing investments with major
financial institutions and by policy limits the amount of credit exposure to any
one financial institution. Additionally, the Company does not hold or issue
financial instruments for trading, profit or speculative purposes.
EQUITY PRICE RISK
The Company does not invest in available-for-sale equity securities, and is not
subject to significant equity price risk.
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FOREIGN EXCHANGE RATE RISK
The Company does not operate internationally and, therefore, is not subject to
market risk from changes in foreign exchange rates.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
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Not applicable.
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PART III
MANAGEMENT
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
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As of September 30, 1999, the executive officers and directors of the Company
and their ages are as follows:
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NAME AGE POSITION WITH THE COMPANY
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<S> <C> <C>
Geoffrey D. Knapp 41 Chief Executive Officer, Chairman
of the Board, and Secretary
David A. Frosh 41 President and Director
Paul Caceres, Jr. 39 Chief Financial Officer and Chief
Accounting Officer
Walter W. Straub 56 Director
Dr. Fred M. Haney 58 Director
Corley Phillips 45 Director
Scott Broomfield 42 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. 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 of directors since August 1991. From June 1990 to June
1996, Mr. Frosh was employed as sales executive for the national accounts
division of Automatic Data Processing "ADP". ADP provides computerized
transaction processing, data communications and information services. From June
1988 to June 1990, Mr. Frosh served as Director of Marketing for Optima Retail
Systems, a privately held company, which manufactured and marketed inventory
control systems for the retail apparel industry. Mr. Frosh received a bachelor's
degree in marketing from Central Michigan University in 1980 and a master's
degree in business administration from Claremont Graduate School in 1999.
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.
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
Director or 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 the Company 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. 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.
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Corley Phillips joined the Company as 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 product support for State
of The Art, an accounting software company based in Irvine, California. From
1990 to 1994, Mr. Phillips served 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.
Scott Broomfield joined the Company as Director in March 1999. Mr. Broomfield
has been, since 1997, Chief Executive and a Director of Centura Software, Inc.,
a public company engaged in the business of providing a suite of products usable
by application developers to build and deploy component based distributed
business applications. From February 1993 to December 1997, Mr. Broomfield was a
principal with the firm of Hickey & Hill Incorporated "Hicky & Hill". In this
capacity, Mr. Broomfield assisted companies with executive management, strategy,
operational and financial consulting, business planning and business
development. Prior to joining Hicky & Hill, Mr. Broomfield held senior
management positions at Trilogy Systems, Inc., and Digital Equipment
Corporation. Mr. Broomfield has a bachelor's degree in psychology from Azusa
Pacific University and master's degree in business administration from Santa
Clara University.
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 and officer of the
Company.
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ITEM 11. EXECUTIVE COMPENSATION
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The following table sets forth information concerning compensation paid by the
Company for services rendered to the Company during fiscal year ended September
30, 1999, and the prior two fiscal years, to the Company's Chief Executive
Officer and each additional executive officer whose total compensation exceeded
$100,000:
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SUMMARY COMPENSATION TABLE
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ANNUAL COMPENSATION LONG-TERM
COMPENSATION
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AWARDS
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SECURITIES
UNDERLYING (2)
NAME AND PRINCIPAL (1) OTHER ANNUAL OPTIONS/ ALL OTHER
POSITION YEAR SALARY BONUS COMPENSATION SARS (#) COMPENSATION
- ------------------ ---- -------- -------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Geoffrey Knapp 1999 $222,500 $140,400 -- 0 $ 8,800
Chairman of the 1998 $209,200 $ -- -- 0 $ 8,100
Board and CEO 1997 $200,700 $ -- -- 20,000 $ 7,500
David Frosh 1999 $133,900 $109,200 -- 0 $ --
President 1998 $128,800 $ -- -- 0 $ --
1997 $127,500 $ -- -- 0 $
Paul Caceres Jr 1999 $136,800 $ 62,400 -- 0 $ 4,500
CFO and CAO 1998 $131,700 $ -- -- 0 $ 4,700
1997 $127,700 $ -- -- 10,000 $ 4,900
</TABLE>
(1) Bonuses paid to the Named Executive 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 1999
There were no options granted to any of the Named Executive Officers in fiscal
year 1999; 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
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VALUE OF UNEXERCISED
SHARES NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS AT
ACQUIRED ON VALUE (1) OPTIONS AT SEPT. 30, 1999 SEPT. 30, 1999
NAME EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Geoff Knapp -- -- 74,000/6,000 $595,400/$39,800
David Frosh -- -- 55,900/36,000 $420,400/$283,500
Paul Caceres -- -- 52,000/3,000 $423,300/$19,900
</TABLE>
(1) Market value of the underlying securities at the exercise date minus
the exercise price of the options.
REPORT OF COMPENSATION COMMITTEE
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 three
executive officers. In the opinion of the Committee, the compensation of the
three 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 60% to 70% of fixed salary, and 30% to
40% variable compensation based on performance factors. Stock options are
granted at the discretion of the Board of Directors, and there is no set minimum
or maximum amount of options that can be issued. Performance factors that
determine management compensation are sales, 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 1999, 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, 1999
11
<PAGE> 13
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 1,017,000 options granted under the 1993 Plan as
of September 30, 1999.
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, 1999, totaled $55,000.
STOCK PRICE PERFORMANCE GRAPH
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
NASDAQ STOCK MARKET 100 138 164 225 229 372
NASDAQ RETAIL TRADE STOCKS 100 110 132 151 130 158
CAM DATA SYSTEMS STOCK 100 363 463 288 344 1038
</TABLE>
12
<PAGE> 14
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- --------------------------------------------------------------------------------
The following table sets forth as of September 30, 1999, 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.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
SHARES BENEFICIALLY OWNED
- -------------------------------------------------------------------------------------------
NAME AND ADDRESS OF AMOUNT & NATURE OF PERCENTAGE OF
TITLE OF CLASS BENEFICIAL OWNER BENEFICIAL OWNER (9) CLASS (10)
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stock Geoffrey D. Knapp (1) 444,100 (2) 17.66%
Common Stock Paul Caceres Jr. (1) 52,000 (3) 2.07%
Common Stock Walter W. Straub (1) 101,900 (4) 4.05%
Common Stock David Frosh (1) 55,900 (5) 2.22%
Common Stock Corley Phillips (1) 41,500 (6) 1.65%
Common Stock Fred Haney (1) 30,000 (7) 1.19%
Common Stock Scott Broomfield (1) 7,900 (8) 0.44%
Common Stock All Directors and
Officers as a Group (of 7
persons) (1) 733,300 29.16%
</TABLE>
(1) The address of each beneficial owner is in care of CAM Data Systems,
Inc., 17520 Newhope Street, 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 the sooner of
October 20, 2003 at a price of $1.93 per share (iv) options to
purchase an aggregate of 14,000 shares until the sooner of 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 the sooner of October 20, 2003, at a price of $1.75
per share (ii) an aggregate of 30,000 shares of Common Stock until the
sooner of January 3, 2004, at a price of $2.13 per share (iii) an
aggregate of 7,000 shares until the sooner of December 16, 2006, at a
price of $3.75 per share.
(4) 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 $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 the sooner
of May 8, 2007, or twelve months after ceasing to serve as a director
at a price of $3.38 per share (vi) 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 (vii) an aggregate of 7,500
shares until the sooner of May 6, 2009, or twelve months after ceasing
to serve at a director at a price of $5.38 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 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 29,500
13
<PAGE> 15
shares until the sooner of June 10, 2006, at a price of $2.50 per
share (v) an aggregate of 4,400 shares until the sooner of May 8,
2007, at a price of $3.38 per share.
(6) 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 (iv) an aggregate of 7,500 shares until the sooner of May 6,
2009, or twelve months after ceasing to serve at a director at a price
of $5.38 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 (iv) an aggregate of 7,500 shares until the sooner of May 6,
2009, or twelve months after ceasing to serve at a director at a price
of $5.38 per share.
(8) Includes options to purchase (i) an aggregate of 7,500 shares until
the sooner of May 6, 2009, or twelve months after ceasing to serve at
a director at a price of $5.38 per share (ii) an aggregate of 360
shares until the sooner of April 22, 2009, or twelve months after
ceasing to serve as a director at a price of $5.25 per share.
(9) 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.
(10) The percentage of ownership of the class of voting securities in the
above table has been calculated by dividing (i) the aggregate number
of shares of such class actually owned plus all shares of such class
which may be deemed to be "beneficially owned," by (ii) the number of
shares of such 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, 1999, the Company granted
non-qualified options to certain employees and directors to purchase an
aggregate of 185,400 shares of Common Stock of the Company at a price ranging
from $3.13 to $5.38 per share expiring ten years from the date of grant.
14
<PAGE> 16
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS OF FORM 8-K
- -------------------------------------------------------------------------------
(a) 1. FINANCIAL STATEMENTS
The financial statements required to be filed hereunder are listed on page 6
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 the page hereof indicated below:
<TABLE>
<CAPTION>
Page
Schedule II - Valuation and Qualifying Accounts 20
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.
<S> <C> <C>
(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 - SEC 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 - SEC File No.
33-15821-LA).
10(a) Incentive Stock Option Plan (incorporated by referenced to Exhibit
10(b) to the S-18 Registration Statement filed July 15, 1997 - SEC
File No. 33-15821LA).
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 - SEC 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) Individual Option Agreements (incorporated by reference to the
exhibits on Form S-3 SEC File 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 -SEC File No.
0-16569).
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).
</TABLE>
15
<PAGE> 17
<TABLE>
<S> <C>
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) Amendment to Line of Credit Agreement, dated February 8, 1999, 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,
1999.
23 Consent of Independent Auditors.
27 Financial Data Schedule for the Period Ended September 30, 1999.
(b) REPORTS ON FORM 8-K
</TABLE>
No reports on Form 8-K have been filed during the last quarter of the year ended
September 30, 1999, covered by this report.
16
<PAGE> 18
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 10, 1999
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 10, 1999
- -----------------------
Geoffrey D. Knapp Officer and Chairman
of the Board
/s/ David Frosh President and December 10, 1999
- ----------------------- Director
David Frosh
/s/ Walter W. Straub Director December 10, 1999
- -----------------------
Walter W. Straub
/s/ Corley Phillips Director December 10, 1999
- -----------------------
Corley Phillips
Director
- -----------------------
Scott Broomfield
Director
- -----------------------
Dr. Fred M. Haney
</TABLE>
17
<PAGE> 19
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 18
Balance Sheets at
September 30, 1999 and 1998 8
Statements of Income for Years
Ended September 30, 1999, 1998 and 1997 9
Statements of Cash Flows for Years
Ended September 30, 1999, 1998 and 1997 10
Statements of Stockholders' Equity
for Years Ended September 30, 1999,
1998 and 1997 11
Notes to Financial Statements 12-17
Report of Independent Auditors on
Financial Statement Schedule 19
II. Valuation and Qualifying Accounts
for the Years Ended
September 30, 1999, 1998 and 1997 20
</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.
18
<PAGE> 20
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, 1999 and 1998, and for each of the three years in the period ended
September 30, 1999, and have issued our report thereon dated November 5, 1999.
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 5, 1999
19
<PAGE> 21
CAM DATA SYSTEMS, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED SEPTEMBER 30, 1999, 1998, AND 1997
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
DEDUCTIONS/ACCOUNTS
BALANCE AT ADDITIONS WRITTEN OFF NET OF BALANCE AT END
BEGINNING CHARGED TO RECOVERIES OF YEAR
OF YEAR INCOME
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Allowance for Doubtful Accounts Receivable
1999 $235,000 $490,000 $345,000 $380,000
1998 $160,000 $203,400 $128,400 $235,000
1997 $150,000 $177,700 $167,700 $160,000
</TABLE>
20
<PAGE> 22
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description Page
- ------ ----------- ----
<S> <C> <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 - SEC 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 - SEC File No. 33-15821-LA).
10(a) Incentive Stock Option Plan (incorporated by referenced to Exhibit 10(b)
to the S-18 Registration Statement filed July 15, 1997 - SEC File No.
33-15821LA).
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 - SEC 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) Individual Option Agreements (incorporated by reference to the exhibits on
Form S-3 SEC File 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 -SEC File No.
0-16569).
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) Amendment to Line of Credit Agreement, dated February 8, 1999, 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,
1999.
23 Consent of Independent Auditors.
27 Financial Data Schedule for the Period Ended September 30, 1999.
</TABLE>
<PAGE> 1
EXHIBIT 10(4)
LOAN MODIFICATION AGREEMENT
This Loan Modification Agreement is entered into as of February 8, 1999, by
and between CAM Data Systems, Inc. ("Borrower") and Silicon Valley Bank
("Silicon").
1. DESCRIPTION OF EXISTING INDEBTEDNESS: Among other indebtedness which may be
owing by Borrower to Silicon, Borrower is indebted to Silicon pursuant to, among
other documents, a Loan and Security Agreement, dated June 30, 1992 (together
with all Schedules thereto) as amended from time to time (the "Loan Agreement").
The Loan Agreement provided for, among other things, a Credit Limit in the
original principal amount of Two Hundred Fifty Thousand and 00/100 Dollars
($250,000.00). The Loan Agreement has been amended pursuant to, among other
documents, an Amended Schedule to Loan and Security Agreement, dated January 9,
1999 (the "Amended Schedule"), pursuant to which, among other things, the Credit
Limit was increased to Two Million and 00/100 Dollars ($2,000,000.00). Defined
terms used but not otherwise defined herein shall have the same meanings as in
the Loan Agreement.
Hereinafter, all indebtedness owing by Borrower to Silicon shall be referred to
as the "Indebtedness."
2. DESCRIPTION OF COLLATERAL AND GUARANTIES. Repayment of the Indebtedness is
secured by the Collateral as described in the Loan Agreement. Additionally,
repayment of the Indebtedness is secured by a Security Agreement in Copyrighted
Works, dated January 17, 1997.
Hereinafter, the above-described security documents and guaranties, together
with all other documents securing repayment of the Indebtedness shall be
referred to as the "Security Documents". Hereinafter, the Security Documents,
together with all other documents evidencing or securing the Indebtedness shall
be referred to as the "Existing Loan Documents".
3. DESCRIPTION OF CHANGE IN TERMS.
A. Modification(s) to Amended Schedule to Loan Agreement.
1. The second paragraph under the Section entitled
"Letters of Credit Sublimit" is hereby amended to
read as follows:
The Account Loans set forth above at any time shall
be reduced by the face amount of Letters of Credit
from time to time outstanding.
2. The following Section is hereby incorporated into the
Amended Schedule:
Cash Management Sublimit. Borrower may use up to
$250,000.00 for Silicon's Cash Management Services,
which may include merchant services, direct deposit
of payroll (up to $100,000.00), business credit card,
and check cashing services identified in the Cash
Management Services Agreement (the "Cash Management
Services"). All amounts Silicon pays for any Cash
Management Services will be treated as Accounts
Loans.
The Credit Limit set forth above and the Loans
available under this Agreement shall be reduced by
the Cash Management Sublimit.
4. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended wherever
necessary to reflect the changes described above.
5. NO DEFENSES OF BORROWER. Borrower (and each guarantor and pledgor signing
below) agrees that, as of the date hereof, it has no defenses against the
obligations to pay any amounts under the Indebtedness.
<PAGE> 2
6. CONTINUING VALIDITY. Borrower (and each guarantor and pledgor signing below)
understands and agrees that in modifying the existing Indebtedness, Silicon is
relying upon Borrower's representations, warranties, and agreements, as set
forth in the Existing Loan Documents. Except as expressly modified pursuant to
this Loan Modification Agreement, the terms of the Existing Loan Documents
remain unchanged and in full force and effect. Silicon's agreement to
modifications to the existing Indebtedness pursuant to this Loan Modification
Agreement in no way shall obligate Silicon to make any future modifications to
the Indebtedness. Nothing in this Loan Modification Agreement shall constitute a
satisfaction of the Indebtedness. It is the intention of Silicon and Borrower to
retain as liable parties all makers and endorsers of Existing Loan Documents,
unless the party is expressly released by Silicon in writing. No maker,
endorser, or guarantor will be released by virtue of this Loan Modification
Agreement. The terms of this paragraph apply not only to this Loan Modification
Agreement, but also to all subsequent loan modification agreements.
This Loan Modification Agreement is executed as of the date first
written above.
BORROWER: SILICON:
CAM DATA SYSTEMS, INC. SILICON VALLEY BANK
By:______________________________ By:_________________________________
Name:____________________________ Name:_______________________________
Title:___________________________ Title:______________________________
<PAGE> 1
EXHIBIT 13(A)
[PICTURE]
LETTER TO SHAREHOLDERS Geoffrey D. Knapp
Founder and
Chief Executive Officer
- --------------------------------------------------------------------------------
Dear Shareholders,
A letter to shareholders in the annual report is often viewed as a "look back"
at the year and explanation of results with a few forward looking observations.
This past year was built on an entire new strategic plan for the company and on
forward looking plans, most of which have come to fruition, while not actually
impacting this past years results directly. Thus, while our financial results
were by far our best ever, the most significant things we accomplished may not
show up to the top and bottom line for a few more quarters. I think it is
important to understand our plans, our vision of the Internet as it relates to
the small retailer, and where we are going, probably more than it is our past
results. We have a chance to be the dominant player in providing e-commerce
solutions for small retailers, yet our excellent results have been derived from
our traditional markets, which we shall not lose focus on. In fact, it is 17
years of focusing on those traditional markets that give us the inside track on
our most meaningful opportunities today.
THE HIGH POINTS - LOOKING BACK
By almost all measures we had a great year. Sales were up 48% to $27.7 million
from $18.7 million. Fully diluted earnings rose to $.59 from $.08 per share, and
we improved our cash position to $5 million vs. $2.8 million. By far we had our
best profit margins ever, and our stock price was up 500% from $3 to $18 (as of
December 1, 1999). Also worthy of note is that our average days outstanding for
accounts receivable dropped to 45 days which is terrific in our market segment
and is a reflection of a well run company and a solid customer base. Finally,
the kind of year we can write home about, or at least look forward to writing
the annual shareholder letter! We exceeded our own expectations and those of the
market. It wasn't luck. We started the year with a promising outlook based on
the positioning of our new products in the market place and solid new plans and
strategies for creating a more exciting growth company than we have ever known.
We set out to take advantage of new and emerging opportunities in the market
place and we did so with an eye on repositioning our company and increasing our
profit potential as we grew.
OUR MISSION
Our mission: "To be the market leader in providing business automation software,
system & service solutions for small to medium size, traditional and web based
retailers." With the emergence of Internet retailing and the need for our
smaller retail customers to participate we began focusing on what is a huge hole
in the market for robust Internet retailing solutions that are simple, complete
and affordable. We began focusing early on an end-to-end solution that included,
not only web retailing but the entire back office inventory management, point of
sale and sales order processing functions (i.STAR). In addition we focused on a
solution that would give the retailer the ability to manage their web storefront
entirely from their back office system without the need for expensive web
masters or consultants. As we looked at combining the functions of traditional
retailing and web retailing into one seamless system, we also came up with a
strategy and product (Retail ICE) to expand our customer base more rapidly and
seed the market for our coming Internet storefront solutions and existing
retailing software solutions.
INTERNET RETAILING FOR OUR CUSTOMERS - THE VISION
We have a message for small retailers that we plan to deliver in educational
seminars on the Internet and E-commerce throughout the U.S., beginning in
January. This message is that you (the small retailer) won't likely get rich off
Internet retailing soon. However, you must defend your customer base against
on-line retailers and along the way, you can expand your business and eventually
begin to profit from the net. We feel that the small retailers have one big
advantage, and only one, over any large pure Internet retailer in their local
market and is simply that they are "local". We believe that the small retailers
must view developing an on-line shopping presence as initially a "defensive"
strategy to retain and expand their local customer base. They must view it as
part of their customer service and marketing budget. They must view it as an
image builder, and if nothing else, they must view it as something they must do
to survive long term in the new world of Internet retailing. To do this, they
need to offer a robust on-line shopping experience to their customers that
leverages their local presence. This includes: Allowing customers to place
on-line orders that can be ready for pick up within hours at any retail
location; Offering same day delivery of orders placed on-line; Access to the
entire store's inventory for availability and pricing as well as showing regular
specials; Gift registry that can be shared between the brick and mortar
locations and on-line users; and maybe the biggest is the ability to allow
on-line customers to return an item purchased via the web site
1
<PAGE> 2
LETTER TO SHAREHOLDERS CONT.
against the original receipt at any brick and mortar location. The capability
for the small retailer to accomplish these things did not previously exist due
to the exorbitant costs and level of complexity for the small retailer. We
believe we have filled this giant gap in the market for our customers with our
new i.STAR product which we will be delivering in fiscal year 2000.
When we look at the winners and losers in retailing it turns out the traditional
retailer seems to have the edge in on-line retailing. The pure web retailing
companies can't seem to figure out how to make a profit and establish their
brand, while traditional retailers already know retailing and already have a
brand. What these larger brick and mortar retailers have lacked is web savvy,
but they are starting to catch on. After all, the Internet is just a new channel
for doing business not a new market. While the small retailers do not have a
national brand, they do have a brand image with their local market and customer
base. What they need now are the tools to successfully launch robust e-commerce
sites that work with their back office business systems in one seamless solution
that is affordable and manageable. That is where we come in. As a side note, it
is interesting to see that Amazon.com continues to rack up huge losses on more
than $1 billion in sales while Barnes and Noble not only continues to be
profitable but has seen those profits grow over the past two years. Many
believed that Amazon.com would flatten Barnes & Noble which has not happened
because Barnes and Noble responded with their own respectable on-line service
while continuing to meet the needs of their customers with their physical
locations as well as their on-line service. They started out knowing how to make
money in the book business, which has proven to be a big advantage. We think
this same advantage exists for small retailers in their local markets. And if
along the way they should begin to expand their business outside their local
area through on-line commerce, then that is the icing. The key for the small
retailer is that the cost to play must be reasonable and the technology solution
simple.
LOOKING AT OUR BUSINESS DIFFERENTLY
As we looked ahead to the opportunities that our new products and market
initiatives would create we started to view our business differently. While we
continued to provide "one source" retailing solutions to traditional retailers,
we saw all sorts of new opportunities created by our coming e-commerce software,
software seeding strategy and related potential partnerships with major players
in the industry. We didn't view ourselves as a pure e-commerce ("dot com")
company and we no longer viewed ourselves as we had in the past. We felt that
the term "Commerce Solutions" fit what we were becoming as it applied equally to
traditional and web retailers as well as encompassing all the new services,
partnerships and corresponding revenue opportunities. This simple, but important
distinction in the way we viewed ourselves has helped us reinvent our company.
We liked it enough that we decided to change our name to CAM Commerce Solutions,
pending shareholder approval.
FACTORS BEHIND THE GROWTH
Ironically, while energizing the company and creating very significant new
opportunities for us, all of this new strategic direction had little direct
impact on sales and earnings for the year ended September 30, 1999. The biggest
factors driving our financial success were new Windows software products that we
started developing more than two years ago, and steady upgrades from our
customer base, some of which were Y2K driven. We also had a single large sale of
approximately $1.7 Million, most of which we delivered in fiscal 1999. The
demand for our new Retail STAR software grew significantly over the course of
the year as well.
INCREASED PROFIT MARGINS
In the 4th quarter we achieved a pre-tax profit margin of over 13%, which met
one of our significant goals of raising the level of profitability for the
company. What we proved in the 4th quarter was that as the top line increases,
we can achieve solid profit margins. While due to seasonal factors surrounding
the holiday season in the December and March quarters, we do not expect to
repeat the success of the 4th quarter in these two upcoming quarters, we think
the sky is the limit once i.STAR becomes a product we can successfully deliver
and deploy at a rapid rate and the alliances discussed below begin to take
shape.
UPGRADED PRODUCT LINE
During the year we upgraded our entire line of software products to Windows
products. Our Retail STAR product gained maturity over the course of the year
and in May 1999 we launched our free single user, single store Windows software
for the smallest retailers called Retail ICE (Inventory Control Expert) in an
effort to seed the market for Retail STAR and i.STAR. As of this writing we have
delivered more than 1,200 copies of the software so far and as discussed below,
have big plans for dramati-
2
<PAGE> 3
LETTER TO SHAREHOLDERS CONT.
cally speeding up the deployment of this product and gaining market share more
rapidly. By nearly all accounts the product has been a big success so far with
excellent feedback from initial users and very favorable reviews in the press.
The only negative factor has been that it has proven more costly than we hoped
to get the word out about Retail ICE to the hard to reach small retailer. The
product has opened up important new doors for us in the form of strategic
alliances and referral opportunities. We have a great new release of Retail ICE
and Retail STAR in test right now that we plan to deliver in fiscal 2000. The
enhancements and new software options in the latest release of both products
should significantly expand the size of our target markets, including pure web
and other non-traditional retailers.
PRODUCT DEVELOPMENT ALLIANCES
When we looked 18 months ago at the daunting task of creating the new products
we needed to become the dominant player in Internet retailing for the small
retailer, we knew we couldn't do it on our own and still meet our time to market
requirements. It was at this time that we began looking at strategic alliance
opportunities and how to leverage the development capabilities and resources of
other companies. The key alliance we formed was with Centura Software of Redwood
Shores, CA. As we became aware of coming new products from Centura for
developing web applications (net.db) from their SQL Database and secure new
database versions of SQLBase (SQLBase SafeGarde), we realized that with a few
changes Centura had the tools we needed to build the web side of the Internet
storefront software we envisioned. We also knew that nobody knew their tools and
database better than they did, so we entered into a development agreement with
Centura to develop our new i.STAR software for us according to our
specifications, while we remained responsible for all of the development to
support i.STAR within Retail STAR (back office). As part of the alliance Centura
has made key changes to their technology for the purpose of building i.STAR. By
incorporating this new technology in our product at a very early stage we feel
that if nothing else, we have a big time to market advantage over our
competition. This will not be an easy product to duplicate. An important aspect
of the development alliance is that we retain ownership of the i.STAR product.
So far our alliance with Centura looks like one of our best decisions.
We also knew we needed sophisticated Windows accounting software and sales
order processing software for Retail STAR that would operate from the same
database and be seamlessly integrated with our product. Early in 1999, we formed
an alliance with a company called Cubig Software that had invested 3 years in
developing fantastic new accounting and sales order processing software that
they did not have the resources to market. Cubig ported their product to the
Retail STAR database and we integrated it with our product. We are continuing
with this development alliance to add additional software applications and
enhancements to our software based on the Cubig product line.
The result of the Centura and Cubig development alliances is that CAM will be
the first company to provide a "Total" and complete traditional and web
retailing system with fully integrated accounting that does not rely on third
parties. We have taken "one source", "one stop" shopping for the automation
needs of the traditional and web retailer to a new level. It is important to
point out that since "simple and affordable" are key ingredients to technology
solutions for the small retailer, we feel the "one source" approach makes the
most sense for our market.
CO-BRANDING & CO-MARKETING ALLIANCES
I alluded at the beginning of this letter to new opportunities created by
significant new alliances. One such opportunity that we announced in November of
1999 is our alliance with Concentric Networks, a premier Internet player, to
provide co-location hosting for our i.STAR sites in a shared revenue model.
Concentric will also participate in co-marketing of the i.STAR product by
sharing in sponsoring educational seminars on e-commerce and the Internet for
small retailers all over the country with CAM. Concentric will be helping to
market the product in other ways as well. With over a $1 billion market
capitalization and a thoroughly professional organization, the endorsement from
Concentric through their alliance with us is very meaningful in many ways. You
can view the 11/29/99 press release on this on our web site.
We are close to putting the finishing touches on other key strategic alliances
with major industry players to greatly enhance our time to market and resources
available in marketing and promoting our exciting new products. The response we
have received to our new products and strategies has been incredibly positive
from nearly all of the potential partners we have approached. You should be
hearing more about some of these soon.
3
<PAGE> 4
LETTER TO SHAREHOLDERS CONT.
SALES FORCE GROWTH
I have often talked about the outstanding CAM sales force. They had an
unbelievable year, shattering all previous records for productivity. While I
have personally overseen the sales effort for the company since the beginning, I
can no longer manage this effort directly and as a result we very recently hired
a Vice President of Sales named Barry Newman. This is a position we have wanted
to fill for the last couple of years but could not find the right person.
Barry's goal is to grow sales and the sales force next year, while maintaining
and enhancing our high level of excellence. Barry is uniquely suited for this
position based on his exceptional career at ScanSource in building their Western
U.S. sales effort from nothing to $80 million over the past 5 years. ScanSource
is the dominant player in providing point of sale hardware to the reseller
channel and directly to larger accounts. As a result, Barry has significant
first-hand experience with our market and all of the players. Bringing in high
level talent like Barry Newman is in my opinion, another sign of our growth as a
company and the base, which we need to build to go to the next level.
SHAREHOLDER VALUE & LIQUIDITY
One of our big goals when we started the year was improving the value of the
company and shareholder liquidity. The primary vehicle was by reinventing the
company through the strategic plans already discussed. At the same time we knew
we needed to communicate our plans and strategies better with our shareholders
and the market. We hired an investor relations firm last February that we are
very happy with and have regularly used a public relations firm for the first
time. We (management) dedicated more time to getting out on the road and telling
our story to Wall Street. We beefed up our web site with more information and a
completely revamped look and feel and I began putting a "CEO Letter" on our web
site that I have been changing about every 8 weeks. I have also tried to make
myself completely accessible to any shareholder with a question. The cumulative
results have been very gratifying. The stock price is way up, more accurately
(in my opinion) reflecting our results and opportunities than in the past.
Trading volume has also increased, meeting the goal of providing much greater
shareholder liquidity. We plan to continue these efforts indefinitely as we now
realize this is an on-going process that needs to be maintained and enhanced
over time.
NASDAQ LISTING
One goal we have not met is attracting analysts to our stock. While we have
received great interest from analysts from some very respectable firms, the
major stumbling block always seems to be the small market capitalization of the
company, small market float and to a lesser degree, not being listed as a
"National Market System" company on NASDAQ. The analysts may want to recommend
us, but due to one or more of these factors, are prohibited by their firm's
rules from doing so. In response we have recently applied to NASDAQ for a
National Market System listing and believe we now meet all of the financial and
other requirements based on 1999 audited results. Thus, we expect to gain this
listing status soon.
Y2K EFFECT?
When we look forward to 2000 and the after effects of Y2K we have some
uncertainty as to what we will see in the short term. We are cautiously
optimistic that there will be more new system sales after Y2K than before as a
result of many vendors whose systems will not make it into the year Y2K
compliant, and due to many retailers who patched older systems just to get
through the holidays with plans for getting a new system this next year. At the
same time we know that we derived at least $4 million in lower margin hardware
upgrade sales and services from our Profit$ customer base that will not be
repeated in 2000. It is our goal to replace this business with new sales that
carry higher profit margins in 2000. We are also introducing our CAM-32 Windows
upgrade for our CAM III product in the fiscal year 2000, which is our largest
installed customer base. This should provide additional upgrade business in the
latter half of next year and beyond. This same opportunity exists with our
Retail STAR product as an upgrade path for our Profit$ system customer base. We
also know that 98% of all small retailers will open their doors on January 2(nd)
with a DOS system, UNIX system, or no system at all. And our competitors will
not offer fully integrated Internet retailing as we will be offering with i.STAR
and Retail STAR in fiscal 2000. This, we believe, presents us with a big
replacement market for systems on a go forward basis. We think we are positioned
better than any other supplier in the market with our products, strategies and
partnerships to take advantage of this.
4
<PAGE> 5
LETTER TO SHAREHOLDERS CONT.
IN CLOSING
Along with this past year's success we know that after delivering great results
the market does not "high five" you for long, and that expectations grow with
success. We are working hard to deliver on these expectations. It should be
noted that while we have big opportunities, we are still a small company and
subject to quarterly fluctuations in revenues and earnings. We also have
decisions to make about when and how much to invest in our opportunities,
knowing that short-term earnings can be affected. As always we will continue to
take a rational approach to managing these opportunities although we feel
somewhat emboldened to be more aggressive with some of our plans based on our
unique position in the market at this point in time and the resulting advantages
we feel we enjoy.
The year 2000 is one in which we hope to put our stake in the ground as a
serious entrant to be the dominant player in providing Internet retailing
solutions for small retailers. It is also a year in which we hope to leverage
existing and new partnerships with meaningful players in the industry that will
drive new revenue and profit opportunities. All of these things should have the
effect of strengthening opportunities in our traditional markets as well. As
always our primary long term goal is to enhance shareholder and stakeholder
value. Stay tuned as the best is hopefully still to come.
Best Regards,
Geoff Knapp
Chairman & CEO
5
<PAGE> 6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (ALL FIGURES IN THOUSANDS)
RESULTS OF OPERATIONS
FISCAL 1999 COMPARED WITH FISCAL 1998
Net revenues for the fiscal year ended September 30, 1999 increased 48% to
$27,747 consisting of a 61% increase in system revenues, and a 5% increase in
service revenues compared to the year ended September 30, 1998. The increase in
system revenues was attributed to an increase in sales to existing customers.
Service revenues increased due to an increase in consulting services.
Gross margin. Gross margin on system revenues increased to 44% for the year
ended September 30, 1999 compared to 42% for the year ended September 30, 1998.
Gross margin for service revenue was 47% for the years ended September 30, 1999,
and 1998. The margin increase in system revenues was a result of better margin
on hardware sales, due to less sales discounting, and billings to customers for
installation travel expenses. These travel expenses were absorbed by the Company
in fiscal 1998.
Selling, general and administrative expenses expressed as a percentage of net
revenues decreased to 33% for the year ended September 30, 1999, as compared to
36% for the year ended September 30, 1998. Selling, general and administrative
expenses for the year ended September 30, 1999, increased 35% to $9,086 from
$6,747 in the year ended September 30, 1998. The increase was attributed to
higher commissions expense, payroll expense, and bad debt expense in fiscal
1999.
Research and development expense decreased 8% to $1,075 for year ended September
30, 1999, from $1,173 for fiscal 1998. The decrease for fiscal 1999 was
attributed to the capitalization of $532 in software costs related to the
development of new software products, including the Star, I.Star, and Retail ICE
software products.
Income Taxes, the effective tax rate was 35% for the year ended September 30,
1999, as compared to 31% in 1998.
RESULTS OF OPERATIONS
FISCAL 1998 COMPARED WITH FISCAL 1997
Net revenues for the fiscal year ended September 30, 1998, increased 7% to
$18,781 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 $6,747 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 for year ended
September 30, 1998, from $1,489 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.
6
<PAGE> 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (ALL FIGURES IN THOUSANDS)
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents totaled $5,049 at September 30, 1999,
compared to $2,812 on September 30, 1998. The Company generated $3,236 from
operations in fiscal 1999 compared to $519 in fiscal 1998. The Company expended
$1,302 in fiscal 1999 compared to the expenditures of $735 in fiscal 1998 for
the purchase of fixed assets and capitalized software. In January 1999, the
Company renewed its line of credit with a commercial bank, which expires in
January 2000, for borrowings up to $2,000 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, 1999, 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. We have completed the conversion of our critical data processing
systems. The cost of this conversion was approximately thirty thousand dollars.
This figure excludes the costs to upgrade and replace systems in the normal
course of business.
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.
7
<PAGE> 8
BALANCE SHEET STATEMENT (IN THOUSANDS)
<TABLE>
<CAPTION>
September 30,
---------------------
1999 1998
---------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 5,049 $ 2,812
Accounts receivable, net of an allowance for doubtful accounts of
$380 in 1999 ($235 in 1998) 3,439 3,009
Inventories 763 622
Prepaid expenses 73 66
---------------------
Total current assets 9,324 6,509
Property and equipment, net 1,060 828
Intangible assets, net 1,297 984
Other assets 218 181
---------------------
Total assets $ 11,899 $ 8,502
=====================
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,644 $ 1,190
Accrued compensation and related expenses 1,110 565
Income taxes payable 219 74
Customer deposits and deferred service revenue 899 524
Other accrued liabilities 439 352
---------------------
Total current liabilities 4,311 2,705
Commitments & Contigencies (note 5)
Stockholders' equity:
Common stock, $.001 par value, 5,000 shares authorized, 2,213 shares
issued and outstanding in 1999 (2,139 shares in 1998) 2 2
Paid-in capital in excess of par value 4,586 4,283
Notes receivable for purchase of common stock (15) (23)
Retained earnings 3,015 1,535
---------------------
Total stockholders' equity 7,588 5,797
---------------------
Total liabilities and stockholders' equity $ 11,899 $ 8,502
=====================
</TABLE>
See accompanying notes.
8
<PAGE> 9
STATEMENT OF INCOME (IN THOUSANDS, EXCEPT PER SHARE DATA)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Years Ended
September 30,
----------------------------------
1999 1998 1997
----------------------------------
<S> <C> <C> <C>
REVENUES
Net system revenues $ 23,078 $ 14,334 $ 13,768
Net service revenues 4,669 4,447 3,712
----------------------------------
Total net revenues 27,747 18,781 17,480
----------------------------------
COSTS AND EXPENSES
Cost of system revenues 12,967 8,378 7,614
Cost of service revenues 2,455 2,356 1,927
----------------------------------
Total cost of revenues 15,422 10,734 9,541
Selling, general and administrative expenses 9,086 6,747 6,317
Research and development expense 1,075 1,173 1,489
Interest income (126) (114) (124)
----------------------------------
Total costs and expenses 25,457 18,540 17,223
----------------------------------
Income before taxes 2,290 241 257
Provision for income taxes 810 74 80
----------------------------------
Net income $ 1,480 $ 167 $ 177
==================================
Basic net income per share $ .69 $ .08 $ .09
==================================
Diluted net income per share $ .59 $ .08 $ .08
==================================
Shares used in computing basic net income per share 2,157 2,092 1,990
==================================
Shares used in computing diluted net income per share 2,519 2,160 2,155
==================================
</TABLE>
See accompanying notes.
9
<PAGE> 10
STATEMENT OF CASH FLOWS (IN THOUSANDS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Years Ended
September 30,
-------------------------------
1999 1998 1997
-------------------------------
<S> <C> <C> <C>
Operating activities:
Net income $ 1,480 $ 167 $ 177
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 735 508 492
Provision for doubtful accounts 145 75 168
Decrease in notes receivable/other assets 8 8 20
Net change in operating assets and liabilities 868 (239) (565)
-------------------------------
Cash provided by operating activities 3,236 519 292
-------------------------------
Investing activities:
Purchase of property and equipment (770) (448) (1,450)
Capitalized software (532) (287) --
Business acquisitions and other investments -- -- (270)
Sale of property and building -- -- 906
-------------------------------
Cash used in investing activities (1,302) (735) (814)
-------------------------------
Financing activities:
Proceeds from exercise of stock options 303 112 100
-------------------------------
Cash provided by financing activities 303 112 100
-------------------------------
Net increase (decrease) in cash and cash equivalents 2,237 (104) (422)
Cash and cash equivalents at beginning of year 2,812 2,916 3,338
-------------------------------
Cash and cash equivalents at end of year $ 5,049 $ 2,812 $ 2,916
===============================
</TABLE>
See accompanying notes.
10
<PAGE> 11
STATEMENT OF STOCKHOLDERS' EQUITY
YEARS ENDED SEPTEMBER 30, 1999, 1998, AND 1997 (IN THOUSANDS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Paid-in Notes
Common Stock capital in receivable for
------------------ excess of purchase of Retained
Shares Amount par value common stock earnings Total
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at September 30, 1996 1,964 $ 2 $3,845 $ (41) $1,191 $4,997
Issuance of common stock
upon exercise of stock options 45 -- 100 -- -- 100
Notes receivable write-off -- -- -- 10 -- 10
Net income -- -- -- -- 177 177
---------------------------------------------------------------------
Balance at September 30, 1997 2,009 2 3,945 (31) 1,368 5,284
Issuance of common stock
upon exercise of stock options 130 -- 338 -- -- 338
Notes receivable write-off -- -- -- 8 -- 8
Net income -- -- -- -- 167 167
---------------------------------------------------------------------
Balance at September 30, 1998 2,139 2 4,283 (23) 1,535 5,797
Issuance of common stock
upon exercise of stock options 74 -- 303 -- -- 303
Notes receivable write-off -- -- -- 8 -- 8
Net income -- -- -- -- 1,480 1,480
---------------------------------------------------------------------
Balance at September 30, 1999 2,213 $ 2 $4,586 $ (15) $3,015 $7,588
=====================================================================
</TABLE>
See accompanying notes.
11
<PAGE> 12
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 (IN THOUSANDS)
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION, BUSINESS, AND PRESENTATION
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. 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.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist principally of cash and cash
equivalents, accounts receivable and accounts payable. The Company believes all
of the financial instrument's recorded values approximate current values.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost and is composed of the following:
<TABLE>
<CAPTION>
September 30,
1999 1998
--------------------
<S> <C> <C>
Computer equipment and furniture $1,834 $1,483
Automobiles 64 64
Demonstration and loaner equipment 394 321
--------------------
2,292 1,868
Less accumulated depreciation 1,232 1,040
--------------------
$1,060 $ 828
====================
</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 operations when indicators of impairment are present.
Management believes that no impairment of long-lived assets existed as of
September 30, 1999.
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 adoption of
SOP 97-2 did 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.
12
<PAGE> 13
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 (IN THOUSANDS, EXCEPT PER SHARE DATA)
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.
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, 1999, 1998, and 1997 are as follows:
<TABLE>
<CAPTION>
Years Ended September 30,
-------------------------------
1999 1998 1997
-------------------------------
<S> <C> <C> <C>
Numerator:
Net income, numerator
for basic & diluted net
income pre share $ 1,480 $ 167 $ 177
-------------------------------
Denominator:
Weighted-average shares
outstanding 2,157 2,092 1,990
-------------------------------
Denominator for basic net
income per share -
weighted-average shares 2,157 2,092 1,990
Effect of dilutive securities:
Stock options 362 68 165
-------------------------------
Denominator for diluted
net income per share -
weighted-average shares
and assumed conversions 2,519 2,160 2,155
-------------------------------
Basic net income per share $ .69 $ .08 $ .09
===============================
Diluted net income per share $ .59 $ .08 $ .08
===============================
</TABLE>
ADVERTISING
The Company expenses the production costs of advertising as incurred.
Advertising expenses for the years ended September 30, 1999, 1998, and 1997 were
$326, $321, and $282, 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,
--------------------------------
1999 1998 1997
--------------------------------
<S> <C> <C> <C>
Decrease (increase) in:
Accounts receivable $ (575) $ (729) $ (498)
Inventories (141) (99) (85)
Prepaid expenses (7) 190 (161)
Other assets (15) 18 15
Increase (decrease) in:
Accounts payable 454 50 490
Accrued compensation 545 99 (174)
Income taxes payable 145 74 (136)
Customer deposits 375 104 125
Other accrued liabilities 87 54 (141)
--------------------------------
Net changes in operating
assets and liabilities $ 868 $ (239) $ (565)
================================
</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
Effective October 1, 1998, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 130, Reporting Comprehensive Income, which
establishes standards for reporting and displaying comprehensive income and its
components in the financial statements. For the years ended September 30, 1999,
1998 and 1997, the Company did not have any components of comprehensive income
as defined by Statement No. 130.
13
<PAGE> 14
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 (IN THOUSANDS)
Effective October 1, 1998, the Company adopted Statement of Financial Accounting
Standards No. 131, Disclosures about Segmets of an Enterprise and Related
Information, which establishes standards for the way that public business
enterprises report selected financial information about operating segments in
annual and interim financial statements and significant foreign operations.
Because the Company operates in one business segment and has no significant
foreign operations, no additional reporting is required under Statement No. 131.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities. The Company expects to adopt the new Statement effective
June 15, 2000. The Statement will require the Company to recognize all
derivatives on the balance sheet at fair value. The Company does not anticipate
that the adoption of this statement will have a significant impact on its
results of operations or financial position.
RECLASSIFICATIONS
Certain reclassifications have been made to the fiscal 1997 and 1998 financial
statements to conform with the fiscal 1999 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 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,
1999 1998
------------------
<S> <C> <C>
Capitalized software costs $1,727 $1,195
Goodwill 600 600
------------------
2,327 1,795
Less accumulated amortization 1,030 811
------------------
$1,297 $ 984
==================
</TABLE>
During the current year, the Company capitalized $532 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, 1999, 1998 and 1997, were $131, $100, and
$123, respectively.
3. LINE OF CREDIT
In January 1999, the Company renewed its line of credit with a commercial bank
for borrowings up to the lesser of $2,000 or 80% 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, 1999, the Company was in compliance with its debt covenants. The
line of credit expires in January 2000. As of September 30, 1999, the Company
had no amounts outstanding under the line, and there was no interest paid during
fiscal 1999, 1998 or 1997.
14
<PAGE> 15
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 (IN THOUSANDS)
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. The
provision for taxes based on income consists of the following:
<TABLE>
<CAPTION>
Years Ended September 30,
----------------------------
1999 1998 1997
----------------------------
<S> <C> <C> <C>
Current:
Federal $ 708 $ 45 52
State 164 23 1
----------------------------
872 68 53
Deferred:
Federal (92) 1 3
State 30 5 24
----------------------------
(62) 6 27
----------------------------
Total provision $ 810 $ 74 $ 80
============================
</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,
-----------------------------
1999 1998 1997
-----------------------------
<S> <C> <C> <C>
Income tax at statutory rate $ 779 $ 82 $ 87
Increases (decreases)
in taxes resulting from:
decrease in
valuation allowance (166) -- --
Utilization of general
business credits (32) (41) (62)
State income taxes,
net of federal benefit 128 19 8
Other, net 101 14 47
-----------------------------
$ 810 $ 74 $ 80
=============================
</TABLE>
Deferred income taxes are recorded to reflect the tax consequences on future
years of differences between the tax bases of assets and liabilities and their
bases for financial reporting purposes. Temporary differences and net operating
loss carryforwards which give rise to deferred tax assets and liabilities are as
follows:
<TABLE>
<CAPTION>
September 30,
-----------------------------
1999 1998 1997
-----------------------------
<S> <C> <C> <C>
Deferred tax assets:
Accruals not currently
deductible for tax $ 226 $ 191 $ 166
Book depreciation in excess
of tax depreciation (6) 33 50
General business
credit carryforwards -- 96 78
R & D expenditures
capitalized for tax -- 8 8
Net operating loss
carryforwards -- -- 12
-----------------------------
Total deferred tax assets 220 328 314
Valuation allowance
for deferred tax assets -- (166) (166)
-----------------------------
220 162 148
Deferred tax liabilities:
Software costs capitalized
for book purposes (41) (45) (25)
-----------------------------
Net deferred tax assets $ 179 $ 117 $ 123
=============================
</TABLE>
Income taxes paid were $768, $3, and $366 during the years ended September 30,
1999, 1998 and 1997, respectively.
The Company has removed its valuation allowance on its deferred tax assets at
September 30, 1999, based upon management's estimate that it is more likely than
not, that the Company will realize its entire net deferred tax asset at
September 30, 1999. This amount has been included in "Other Assets" in the
balance sheet for 1999 and 1998.
15
<PAGE> 16
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 (IN THOUSANDS, EXCEPT PER SHARE DATA)
5. COMMITMENTS AND CONTINGENCIES
The Company is committed at September 30, 1999 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>
2000 $ 334
2001 342
2002 195
2003 149
2004 152
Thereafter 479
---------------------------
$1,651
===========================
</TABLE>
Total rent expense for the years ended September 30, 1999, 1998 and 1997 was
$444, $389, and $335, 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, 1999, 1998
and 1997 totaled $136, $132 and $44, 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 shares of the Company's common stock. The Plan has a term of
ten years. There have been 1,017 options granted under the 1993 Plan as of
September 30, 1999. The company has 1,067 shares reserved for issuance related
to the plan.
A summary of stock option activity follows:
<TABLE>
<CAPTION>
Weighted Weighted
Average Average
Non-ISO Exercise Fair Value
Shares Price of Options
---------------------------------------
<S> <C> <C> <C>
Outstanding at
September 30, 1996 493 $3.09
Granted 420 $3.47 $1.13
Exercised (37) $2.05
Expired (65) $3.68
---------------------------------------
Outstanding at
September 30, 1997 811 $3.29
Granted 106 $2.70 $1.00
Exercised (50) $2.25
Expired (52) $4.79
---------------------------------------
Outstanding at
September 30, 1998 815 $2.89
Granted 185 $4.58 $1.54
Exercised (73) $3.85
Expired (33) $3.52
Outstanding at
---------------------------------------
September 30, 1999 894 $3.14
======================================
</TABLE>
The following table summarizes information about stock options outstanding at
September 30, 1999:
<TABLE>
<CAPTION>
Weighted Average
Remaining Weighted
Number Contractual Average
Outstanding Life Exercise Price
-----------------------------------------
<S> <C> <C> <C>
OUTSTANDING:
Range of Exercise Prices
$1.75 to $3.00 547 6.43 $2.46
$3.13 to $5.50 347 8.24 $4.21
=========================================
</TABLE>
<TABLE>
<CAPTION>
Weighted
Number Average
Exercisable Exercise Price
-------------------------------
EXERCISABLE:
Range of Exercise Prices
<S> <C> <C> <C>
$1.75 to $3.00 447 $2.43
$3.13 to $5.50 213 $4.30
================================
</TABLE>
16
<PAGE> 17
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 (IN THOUSANDS, EXCEPT PER SHARE DATA)
The weighted-average remaining contractual life of stock options outstanding at
September 30, 1999 and 1998 was 7.3 years and 7.6 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 1999
and 1998; 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 .337, 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
amortized to expense over the option's vesting period. The Company's pro forma
information follows:
<TABLE>
<CAPTION>
1999 1998
------------------
<S> <C> <C>
Pro forma net income $1,280 $ 40
Pro forma earnings per share $ .51 $.02
</TABLE>
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 1999,
1998 and 1997 pursuant to the plan totaled $55, $15, and $15, respectively.
17
<PAGE> 18
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, 1999 and 1998, and the related statements of income, stockholders'
equity and cash flows for each of the three years in the period ended Septem-
ber 30, 1999. 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 financial position of CAM Data Systems, Inc. at
September 30, 1999 and 1998, and the results of its operations and its cash
flows for each of the three years in the period ended September 30, 1999, in
conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Orange County, California
November 5, 1999
STOCK AND DIVIDEND DATA
The common stock of CAM Data Systems, Inc., is traded on the over-the-counter
market under the NASDAQ symbol CADA. Quarterly market price information shown
below represents the high and low bid prices. The OTC quotations shown reflect
inter-dealer prices, without retail markup, markdown, or commission and may not
represent actual transactions.
<TABLE>
<CAPTION>
Fiscal Year Ended September 30, 1999
Quarter Ended: High Low
- --------------------------------------------------------
<S> <C> <C>
December 31 $3.563 $3.094
March 31 5.625 3.125
June 30 6.75 4.75
September 30 10.75 5.25
</TABLE>
<TABLE>
<CAPTION>
Fiscal Year Ended September 30, 1998
Quarter Ended: High Low
- --------------------------------------------------------
<S> <C> <C>
December 31 $ 3.062 $ 2.375
March 31 3 2.187
June 30 3 2.375
September 30 3.75 2.375
</TABLE>
As of December 10, 1999, there were approximately 200 holders of record of the
Company's common stock. The Company believes there are in excess of 600
beneficial owners of the Company's common stock.
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. The Company does not
anticipate paying dividends in the foreseeable future.
18
<PAGE> 19
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 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 $5,617 $6,306 $7,779 $8,045
Gross profit 2,325 2,587 3,564 3,849
Income before taxes 260 252 717 1,061
Net income 156 151 432 741
Basic earnings per share .07 .07 .20 .34
Diluted earnings per share .07 .06 .17 .28
======================================
</TABLE>
<TABLE>
<CAPTION>
1998 Fiscal Quarter Ended
--------------------------------------
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>
SELECTED FINANCIAL DATA
- -------------------------------------------------------------------------------
FOR THE FIVE YEARS ENDED SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
In thousands, except per-share data. 1999 1998 1997 1996 1995
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net system and service revenues $27,747 $ 18,781 $17,480 $15,669 $14,734
Income before taxes 2,290 241 257 1,210 603
Net income 1,480 167 177 840 413
Basic earnings per share .69 .08 .09 .43 .21
Diluted earnings per share .59 .08 .08 .39 .20
Total assets 11,899 8,502 7,608 7,158 6,141
Working capital 5,013 3,804 3,726 3,886 3,340
Long-term debt -- -- -- -- --
==================================================================
</TABLE>
19
<PAGE> 20
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
Scott Broomfield
President
Centura Software
OFFICERS
- --------
Geoffrey D. Knapp
Chief Executive Officer
David Frosh
President
Paul Caceres Jr.
Chief Financial Officer
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.
20
<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 5, 1999, included in the
1999 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 5, 1999, with
respect to the 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, 1999, respectively.
ERNST & YOUNG LLP
Orange County, California
December 8, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-1-1998
<PERIOD-END> SEP-30-1999
<CASH> 5,049
<SECURITIES> 0
<RECEIVABLES> 3,819
<ALLOWANCES> 380
<INVENTORY> 763
<CURRENT-ASSETS> 9,324
<PP&E> 2,292
<DEPRECIATION> 1,232
<TOTAL-ASSETS> 11,899
<CURRENT-LIABILITIES> 4,311
<BONDS> 0
0
0
<COMMON> 2
<OTHER-SE> 7,586
<TOTAL-LIABILITY-AND-EQUITY> 11,899
<SALES> 27,747
<TOTAL-REVENUES> 27,747
<CGS> 15,422
<TOTAL-COSTS> 15,422
<OTHER-EXPENSES> 10,035
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,290
<INCOME-TAX> 810
<INCOME-CONTINUING> 1,480
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,480
<EPS-BASIC> .69
<EPS-DILUTED> .59
</TABLE>
