<PAGE> 1
EXHIBIT 13(a)
Geoffrey D. Knapp
Founder and [PHOTO]
Chief Executive Officer
LETTER TO SHAREHOLDERS
--------------------------------------------------------------------------------
Dear Shareholder,
This past fiscal year did not meet our expectations in terms of top line and
bottom line financial performance, nor did it meet those of our investors.
Needless to say, we are not happy about falling short of our financial goals.
After analyzing the past year, the management team is confident we understand
the reasons, and will be addressing them and making any and all necessary
changes to ensure we improve our performance going forward. However, the year
was also one in which we made major progress in many areas of our strategic plan
and the market factors that affected us, also affected our competition. This has
created some interesting and unexpected opportunities. There is a great deal to
be positive about, perhaps even more than last year, as we came off our best
ever performance. Financially, we don't like what we see when we look back over
last year. Strategically, we love what we see and it is now our job as
management to turn our strategic advantages and opportunities into improved top
and bottom line results. Our market position is much stronger than it was a year
ago, even if that is not evident in the numbers.
In looking back we underestimated the benefit we received from the Y2K phenomena
in 1999. At the same time, we, along with the majority of the market, did not
anticipate the slow down in 2000. This slow down was a result of the abnormal
purchasing patterns created by the need for retailers to upgrade or purchase new
systems in 1999 in order to be Y2k compliant. To a certain degree, we misread
the market and that was certainly our mistake. In 1999, with the markets
seemingly strong, a strategic plan in place and several investors pushing us not
to be too conservative, we felt very good about investing more and taking
greater risks to grow the company. As silly as it seems now, it wasn't long ago
that profit didn't seem to matter to too many people as long as you could take
advantage of the changing dynamics of the market. We knew that profits did
matter, but we thought we could accomplish both. We thought we could be more
aggressive in pursuing the best opportunities this company has ever seen, and at
the same time still make a profit, albeit a small one. This was the message we
conveyed to investors. We were wrong, the unexpected drop in sales kept us from
earning the profit we had anticipated.
We did our best to pinpoint the time and costs involved to develop the key
products that are the basis for many of our new strategic plans. But for the
most part, they took longer and cost more than we expected. Again, as
management, this was our job to get this right and we fell short. However, I am
pleased to tell you at this point, that we are where we need to be and are
finally beginning to roll out these new products.
We can summarize our three main strategic initiatives for the past year as
follows:
- To become a total infrastructure provider for the automation needs of the
small retailer/business for brick and mortar as well as e-business.
- To "Monetize" our customer base through recurring revenue based initiatives
that leverage our own products, as well as, the best software and service
offerings of 3rd parties who want access to our customers.
- To Rapidly expand our customer base.
Total Infrastructure Provider
It is our feeling that the idea of "best of breed" when it comes to automation
solutions for the small businessperson is more often than not unmanageable. It
has been our goal to provide a single source, total solution that is truly
integrated for the following functions:
- Traditional POS, Inventory management for Brick and Mortar.
- E-commerce with our I.STAR Internet Storefront software
- Full Windows Accounting Suite (A/R, A/P, G/L, Bank Rec.)
- Credit Card (Payment) Processing
- e-commerce web site hosting for our retail automation customers.
- Store planning - consulting services
(The items in bold/italic above are the products and services we did not offer
when the year began.)
I. STAR Internet Store Front
We had announced our i.STAR Internet store front product during the year as a
fully integrated retailing and web storefront system. We launched our first
site. As we looked at bringing additional new customers up, we discovered
problems with the flexibility of the design provided to us by a 3rd party
vendor. We made the tough decision to internally rewrite this portion we had
already purchased. The result was we delayed our i.STAR offering several months.
The great news is that the product is now many times better and offers
substantial performance and design flexibility improvements. We have once again
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LETTER TO SHAREHOLDERS CONT.
--------------------------------------------------------------------------------
begun to implement i.STAR sites. This product is truly unique and it is our goal
in this coming year to rise above the noise and prove this to the market. We can
only do this by showcasing customers and this is going to take several months.
We currently have 20 additional companies signed up to bring up new i.STAR
sites, most of whom plan to implement after the busy holiday season. This has
been a slow starter for us for a number of reasons, but there is no question in
our minds that our solution is totally unique at its price point and is exactly
what the market needs. Our challenge is to be heard and understood.
STAR Windows Accounting Series
We started a year ago July the process of integrating a fantastic new Windows
accounting package into our Retail STAR and Retail ICE software packages that we
ultimately purchased from Cubig, Ltd. It has taken us nearly 18 months to fully
integrate this entire accounting package but we are very close to releasing the
final modules. Every business needs accounting software and none of our
competition has anything like what we will be offering. There are many
limitations to a third party accounting software, which is what our competitors
offer. Our STAR accounting is not just another accounting package, it is very
easy to use and very powerful at the same time. And most importantly, it is a
seamless part of the entire business system. This accounting package potentially
opens up an entire new market and new sales channel for us, which should become
more evident next year. We expect to have the complete offering available by the
end of this calendar year.
X-charge
We announced an alliance with NDC corp. this past year to provide integrated
payment (Credit card) processing for our customers. This alliance required the
development of sophisticated software by both companies that would allow CAM
customers to process credit cards through their system in a very fast,
efficient, secure and integrated manner. X-Charge (eXpress Charge) is the
resulting product. This agreement allowed CAM to profit from the credit card
processing fees earned by NDC, while still providing the retailer equal or
better rates in most cases. We recently completed the development of this
software and began selling it in the market place. Early results show good
market acceptance and we have high hopes that over time we can create a highly
profitable annuity for the company. After the first of the year, a joint
marketing effort will be put into place, arming NDC's direct sales force of 150
salespeople with CAM software to be offered with the X-Charge program. We hope
to be able to share more on the results of this project as the year progresses.
e-Commerce Hosting
In conjunction with the re-release of our i.STAR product, we began offering web
site hosting for our customers. Initially, we had planned to use Concentric as
our hosting partner, but our customers proved to be price sensitive in this area
and it became necessary to offer a lower cost alternative. We created a hosting
facility at our Nevada offices that allows us to provide this service at a lower
cost, while still offering the company an excellent profit opportunity. The
success of this project is dependent on the success of the i.STAR.
Traditional POS, Inventory Management
When the year began we offered complete retail management systems called Retail
STAR, Retail ICE (single user, single store version of Retail STAR), CAM-32 and
Profit$. During the year we created and delivered important new versions of each
product. Through an acquisition of Mahwah, NJ based MicroBiz corp, we acquired
the MicroBiz suite of retail automation packages along with 6,000 new customers.
We also acquired Genesis Software in Illinois that added 600 specialty paint and
decorating customers in late October. CAM can claim the most complete offering
of retail automation solutions and the largest customer base of any company
serving our target markets.
Monetizing the Customer Base
We continue to work on additional new alliances whose outcome will be products
and services that are fully integrated with our customers business systems and
which will make our customers more profitable and offer them competitive
advantages in the market place. We are very careful to look for and select those
opportunities that solve core business problems for our customers and our
alliance partner. These deals take a great deal of resources to be effectively
implemented so they must offer our customers a strong value proposition and a
clear profit picture for us if they are to be successful. We don't believe in
doing a deal just to have something to talk about. We hope to have more to
report on in this area over the next several months.
Rapidly Expanding our Customer Base
The larger our customer base, the better opportunities we have for key
partnerships, and the more we stand to earn as a result. The same is true of new
products and services developed internally for our customer base. During the
year we made great progress in meeting this goal as we more than doubled the
size of our customer base to over 10,000 retailers with many more store
locations, not including the Retail ICE customers.
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LETTER TO SHAREHOLDERS CONT.
--------------------------------------------------------------------------------
Retail ICE
Retail ICE (Inventory Control Expert) is our seeding strategy announced in mid
1998 to help meet the goal of rapidly expanding our customer base. Retail ICE is
a single user, single store only software. By giving this software away for free
to the smallest retailers we hope to benefit as they grow and to gain market
share. Since we determined we were not making money at this end of the market,
we felt the risk was worth the reward in offering this software for free. The
results, while not as strong as we might have hoped, have been rewarding and
continue to show increased benefits in many ways. Some of these ways are only
beginning to come to fruition. In any event, we have delivered more than 3,000
copies of the software to retailers and we are seeing an increasing number of
upgrades. The feedback from the customers has been overwhelmingly positive. This
is a strategy we plan to get more aggressive with over the next year, as we
attempt to increase the adoption rate of the Retail ICE software and continue
our efforts to expand our customer base more rapidly.
Acquisitions
While CAM does not have a stated strategy based on acquisitions, we do have a
stated strategy of rapidly increasing our customer base. During the year several
opportunities presented themselves to us to acquire competitors that offered us
the chance to meet our goal of adding customers quickly. Two such opportunities
made sense for us; therefore, we purchased MicroBiz and Genesis Software. Each
offered additional key strategic advantages for us.
One of the resulting factors of the unexpectedly poor market conditions this
past year has been the number of competitors looking to exit from the business
or form survival partnerships. We have also seen competitors just close their
doors. Our core industry appears to have entered into a phase of consolidation.
We are evaluating additional opportunities in this area and we will continue to
look for those deals that offer us a strong return on investment while helping
us meet our strategic goals. Any acquisition would have to be expected to
generate profits for us on a short term as well as long term basis.
Financial Position
During the year we raised $8 million in a private equity placement. Our cash
position at the end of the year was in excess of $10 million or $3.46 per share.
The company remains debt free. We are the strongest company in our business and
we are in a position financially to carry out our strategic plans. As always, we
will take a rational approach to growing the business that fits the size of our
company and our resources. Prior to losing money this past year, we had made
money for nine consecutive years. I personally hate losses and they are
unacceptable to the management team at CAM. At the same time, we are balancing
the need for continued investment in the best opportunities we have ever had
with the bottom line. We are not ready to cut back on development spending or
marketing, although we have trimmed some costs on the operations side. In fact,
we plan to expand our marketing activities in the coming year.
Outlook
We can't control the overall market conditions but my personal opinion is that
the market will begin to improve around March of next year. Our new products and
partnerships should also begin to kick in next year, and we do expect this to
begin to push results in a positive direction for us. In order for our business
to be exciting and profitable, we need to begin to see positive results from our
new products and partnerships. If we don't see this happen by later next year,
we will be forced to ask ourselves some tough questions as to why. For now, we
feel we are absolutely going in the right direction and we need to give
ourselves this next year for the careful plans we have laid out to begin to
work.
I know the roller coaster ride in the stock price has been a painful one for
many investors. Personally, it bothers me every day that the stock price is
trading at current levels after where we were earlier in the year and last year.
The CAM management team is driven to succeed and we continue to be focused on
making that happen. Nothing is more important than shareholder value, but the
only long term way I know to succeed is to execute our business plan and produce
increasingly positive results, which is where our current focus lies.
Best Regards,
Geoff Knapp
Chairman & CEO
CAM Commerce Solutions
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (ALL FIGURES IN THOUSANDS)
--------------------------------------------------------------------------------
RESULTS OF OPERATIONS
FISCAL 2000 COMPARED WITH FISCAL 1999
NET REVENUES for the year ended September 30, 2000 decreased 23% to $21,311,
consisting of a 28% decrease in system revenues, and a 1% decrease in service
revenues compared to the year ended September 30, 1999. The decrease in system
revenues was due to a relatively soft demand for the Company's products in
comparison to the large amount of computer hardware upgrades that were sold in
fiscal 1999 to prepare for the "Year 2000". This decrease was partially offset
by an increase in sales of the Company's Retail Star product. Service revenues
decreased due to a small portion of the Company's customer base canceling
service after the "Year 2000" and the closure of one of the Company's hardware
service divisions.
GROSS MARGIN on system revenues for the fiscal year ended September 30, 2000 was
consistent at 44% with the fiscal year ended September 30, 1999. Gross margin
for service revenue for the year ended September 30, 2000 was 45% as compared to
gross margin of 47% for the year ended September 30, 1999. The decrease in gross
margin for service revenue is related to the increase in labor costs due to the
expansion of the Retail Star technical support department to support the
increased customer base of Retail Star.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES expressed as a percentage of net
revenues increased to 43% for the year ended September 30, 2000 as compared to
33% for the year ended September 30, 1999. Selling, general and administrative
expenses for the year ended September 30, 2000 totaled $9,149 as compared to
$9,086 for the year ended September 30, 1999. The increase was related to
increases in marketing expense, travel expenses in conjunction with increased
trade show expense and payroll expense.
RESEARCH AND DEVELOPMENT EXPENSE increased 62% to $1,744 for the year ended
September 30, 2000, from $1,075 for the same period in 1999. The increase was
attributed to an increase in research and development expenses related to Retail
Star and the development of new products, including the hiring of additional
programmers related to the acquisition of the Cubig accounting software product.
INCOME TAXES, the estimated tax benefit rate for the year ended September 30,
2000 is 34% as compared to the effective tax rate of 35% for the year ended
September 30, 1999.
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 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.
THE EFFECTIVE TAX RATE was 35% for the year ended September 30, 1999 as compared
to 31% in 1998.
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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 $10,444 on September 30, 2000
compared to $5,049 on September 30, 1999. The Company used $483 in operations in
fiscal 2000 as compared to generating $3,236 in fiscal 1999. The Company
expended $729 in fiscal 2000 compared to expenditures of $1,302 in fiscal 1999
for the purchase of fixed assets and capitalized software. The Company spent
$1,800 for the acquisition of MicroBiz Corporation and received $8,407 in
proceeds from an equity private placement and the exercise of stock options in
fiscal 2000.
In January 2000, the Company renewed its line of credit with a commercial bank,
which expires January 2001, 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, 2000 the Company had no amounts
outstanding under the line.
The Company has no significant commitments for expenditures. Management believes
the Company's existing working capital, coupled with funds generated from the
Company's operations will be sufficient to fund its presently anticipated
working capital requirements for the foreseeable future.
Inflation has had no significant impact on the Company's operations.
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CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT PER SHARE DATA)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
September 30,
-----------------------
2000 1999
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 10,444 $ 5,049
Accounts receivable, net of an allowance for doubtful accounts of
$310 in 2000 and $380 in 1999 1,782 3,439
Inventories 696 763
Other current assets 893 73
-------- --------
Total current assets 13,815 9,324
Property and equipment, net 922 1,060
Intangible assets, net 3,262 1,297
Other assets 297 218
-------- --------
Total assets $ 18,296 $ 11,899
======== ========
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 644 $ 1,644
Accrued compensation and related expenses 477 1,110
Income taxes payable -- 219
Customer deposits and deferred service revenue 854 899
Other accrued liabilities 373 439
-------- --------
Total current liabilities 2,348 4,311
Deferred income taxes 91 --
Commitments and contigencies (note 5)
Stockholders' equity:
Common stock, $.001 par value, 12,000 shares authorized, 3,012 shares
issued and outstanding in 2000 and 2,213 shares in 1999 3 2
Paid-in capital in excess of par value 13,592 4,586
Notes receivable for purchase of common stock (7) (15)
Retained earnings 2,269 3,015
-------- --------
Total stockholders' equity 15,857 7,588
-------- --------
Total liabilities and stockholders' equity $ 18,296 $ 11,899
======== ========
</TABLE>
See accompanying notes.
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STATEMENT OF CONSOLIDATED OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE DATA)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Years Ended September 30,
--------------------------------------
2000 1999 1998
--------------------------------------
<S> <C> <C> <C>
REVENUES
Net system revenues $ 16,706 $ 23,078 $ 14,334
Net service revenues 4,605 4,669 4,447
--------------------------------------
Total net revenues 21,311 27,747 18,781
--------------------------------------
COSTS AND EXPENSES
Cost of system revenues 9,425 12,967 8,378
Cost of service revenues 2,528 2,455 2,356
--------------------------------------
Total cost of revenues 11,953 15,422 10,734
Selling, general and administrative expenses 9,149 9,086 6,747
Research and development expenses 1,744 1,075 1,173
Interest income (400) (126) (114)
--------------------------------------
Total costs and expenses 22,446 25,457 18,540
--------------------------------------
Income (loss) before taxes (1,135) 2,290 241
Provision (benefit) for income taxes (389) 810 74
--------------------------------------
Net income (loss) $ (746) $ 1,480 $ 167
======================================
Basic net income (loss) per share $ (.28) $ .69 $ .08
======================================
Diluted net income (loss) per share $ (.28) $ .59 $ .08
======================================
Shares used in computing basic net income (loss) per share 2,644 2,157 2,092
======================================
Shares used in computing diluted net income (loss) per share 2,644 2,519 2,160
======================================
</TABLE>
See accompanying notes.
7
<PAGE> 8
STATEMENT OF CONSOLIDATED CASH FLOWS (IN THOUSANDS)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Years Ended September 30,
--------------------------------------
2000 1999 1998
--------------------------------------
<S> <C> <C> <C>
Operating activities:
Net income (loss) $ (746) $ 1,480 $ 167
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities:
Depreciation and amortization 929 735 508
Provision for doubtful accounts (70) 145 75
Decrease in notes receivable/other assets -- 8 8
Net change in operating assets and liabilities (596) 868 (239)
--------------------------------------
Cash provided by (used in) operating activities (483) 3,236 519
--------------------------------------
Investing activities:
Purchase of property and equipment (438) (770) (448)
Capitalized software (291) (532) (287)
Business acquisition (1,800) -- --
--------------------------------------
Cash used in investing activities (2,529) (1,302) (735)
--------------------------------------
Financing activities:
Proceeds from equity private placement 7,579 -- --
Proceeds from exercise of stock options 828 303 112
--------------------------------------
Cash provided by financing activities 8,407 303 112
--------------------------------------
Net increase (decrease) in cash and cash equivalents 5,395 2,237 (104)
Cash and cash equivalents at beginning of year 5,049 2,812 2,916
--------------------------------------
Cash and cash equivalents at end of year $ 10,444 $ 5,049 $ 2,812
======================================
</TABLE>
See accompanying notes.
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STATEMENT OF CONSOLIDATED STOCKHOLDERS' EQUITY
YEARS ENDED SEPTEMBER 30, 2000, 1999, AND 1998 (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, 1997 2,009 $ 2 $ 3,945 $(31) $ 1,368 $ 5,284
Issuance of common stock
upon exercise of stock options 50 -- 112 -- -- 112
Issuance of common stock
for acquisition 80 -- 226 -- -- 226
Notes receivable write-off -- -- -- 8 -- 8
Net and comprehensive 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 and comprehensive income -- -- -- -- 1,480 1,480
-----------------------------------------------------------------------------
Balance at September 30, 1999 2,213 2 4,586 (15) 3,015 7,588
Issuance of common stock
upon exercise of stock options 269 -- 828 -- -- 828
Issuance of units
for private placement 500 1 7,578 -- -- 7,579
Issuance of common stock for
software and licensing rights 30 -- 600 -- -- 600
Notes receivable write-off -- -- -- 8 -- 8
Net and comprehensive
income (loss) -- -- -- -- (746) (746)
=============================================================================
Balance at September 30, 2000 3,012 $ 3 $ 13,592 $ (7) $ 2,269 $ 15,857
=============================================================================
</TABLE>
See accompanying notes.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 (IN THOUSANDS, EXCEPT PER SHARE DATA)
--------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION, BUSINESS, AND PRESENTATION CAM Commerce Solutions Inc., (the
Company), (formerly known as CAM Data Systems, Inc.) provides total commerce
solutions for small to medium size, traditional and 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. The accompanying financial
statements consolidate the accounts of the Company and its wholly-owned
subsidiary. All significant intercompany balances and transactions have been
eliminated.
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 instruments' 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,
2000 1999
---------------------
<S> <C> <C>
Computer equipment and furniture $2,066 $1,834
Automobiles 64 64
Demonstration and loaner equipment 223 394
---------------------
2,353 2,292
Less accumulated depreciation 1,431 1,232
---------------------
$ 922 $1,060
=====================
</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
Statement of Financial Accounting Standards No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of
(SFAS 121), 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, 2000.
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
Revenue from product sales is recognized at the time of shipment, net of
allowances for estimated future returns, if any. Remaining obligations at the
time of shipment for installation and warranty are accrued concurrently with the
revenue recognized. Service revenue is recognized in the period the service is
performed.
In December 1999, The Securities and Exchange Commission released Staff
Accounting Bulletin No. 101, Revenue Recognition in Financial Statements, (SAB
101). This bulletin summarizes certain views of the SEC staff on applying
generally accepted accounting principles to revenue recognition in financial
statements and states that revenue is realized or realizable and earned only
when all of the following criteria are met: persuasive evidence of an
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 (IN THOUSANDS, EXCEPT PER SHARE DATA)
--------------------------------------------------------------------------------
arrangement exists; delivery has occurred or services have been rendered; the
seller's price to the buyer is fixed or determinable; and collectibility is
reasonably assured.
In meeting the criterion that delivery has occurred or services have been
rendered, the SEC staff indicates that customer acceptance must be obtained
before revenue recognition is appropriate in situations where customer
acceptance is a contract requirement. This applies without consideration of the
significance or cost of any post-shipment services that must be performed to
obtain such customer acceptance.
The Company will adopt the revenue recognition accounting specified by SAB 101
no later than the fourth quarter of fiscal 2001. Management is currently
evaluating the impact of applying SAB 101 and the effect is not expected to be
material.
PER SHARE INFORMATION
Net income per share is based on the weighted average number of common and
common equivalent shares outstanding. 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.
Common equivalent shares are excluded from diluted earnings per share if their
effect is anti-dilutive.
The computation of basic and diluted earnings per share for the three years
ended September 30, 2000, 1999, and 1998 are as follows:
<TABLE>
<CAPTION>
Years Ended September 30,
---------------------------------
2000 1999 1998
---------------------------------
<S> <C> <C> <C>
NUMERATOR:
Net income (loss)
for basic and diluted
net income (loss) per share $ (746) $1,480 $ 167
---------------------------------
DENOMINATOR:
Weighted-average shares
outstanding 2,644 2,157 2,092
---------------------------------
Denominator for basic net
income (loss) per share -
weighted-average shares 2,644 2,157 2,092
Effect of dilutive securities:
Stock options -- 362 68
---------------------------------
Denominator for diluted
net income (loss) per share -
weighted-average shares
and assumed conversions 2,644 2,519 2,160
---------------------------------
Basic net income
(loss) per share $ (.28) $ .69 $ .08
=================================
Diluted net income
(loss) per share $ (.28) $ .59 $ .08
=================================
</TABLE>
ADVERTISING
The Company expenses the production costs of advertising as incurred.
Advertising expenses for the years ended September 30, 2000, 1999, and 1998 were
$773, $326 and $321, respectively.
RESEARCH AND DEVELOPMENT EXPENDITURES
Research and development expenditures are expensed in the period incurred.
11
<PAGE> 12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 (IN THOUSANDS, EXCEPT PER SHARE DATA)
--------------------------------------------------------------------------------
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,
-------------------------------------
2000 1999 1998
-------------------------------------
<S> <C> <C> <C>
Decrease (increase) in:
Accounts receivable $ 1,727 $ (575) $ (729)
Inventories 67 (141) (99)
Other current assets (820) (7) 190
Other assets 302 (15) 18
Increase (decrease) in:
Accounts payable (1,000) 454 50
Accrued compensation (633) 545 99
Income taxes (128) 145 74
Customer deposits (45) 375 104
Other accrued liabilities (66) 87 54
-------------------------------------
Net changes in operating
assets and liabilities $ (596) $ 868 $ (239)
=====================================
</TABLE>
STOCK OPTION PLANS
Statement of Financial Accounting Standard No. 123, Accounting for Stock-Based
Compensation (SFAS 123), the Company intends to continue to account for employee
stock options under Accounting Principles Board Opinion No. 25, Accounting for
Stock Issued to Employees (APB 25), and has made pro forma disclosures as
required by SFAS 123.
SEGMENTS
Statement of Financial Accounting Standards No. 131, Disclosures about Segments
of an Enterprise and Related Information (SFAS 131), established 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 SFAS 131.
RECLASSIFICATIONS
Certain reclassifications have been made to the fiscal 1998 and 1999 financial
statements to conform with the fiscal 2000 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 agreements, capitalized software, and goodwill are amortized on the
straight-line method over estimated useful lives ranging from three to eight
years. Amortization of capitalized software costs commence when the products are
available for general release to customers.
Intangible assets are stated at cost and consist of the following:
<TABLE>
<CAPTION>
September 30,
2000 1999
--------------------
<S> <C> <C>
Capitalized software costs $2,617 $1,727
Goodwill 2,037 600
--------------------
4,654 2,327
Less accumulated amortization 1,392 1,030
--------------------
$3,262 $1,297
====================
</TABLE>
During the current year, the Company capitalized $824 in software costs related
to the CAM and Star products.
Amortization of capitalized software costs and goodwill, charged to cost of
sales and expense for the years ended September 30, 2000, 1999 and 1998, were
$362, $131, and $100, respectively.
In August 2000, the Company acquired MicroBiz Corporation (MicroBiz) of Mahwah,
New Jersey. The acquisition has been accounted for using the purchase method of
accounting. The total amount of cash paid was $1,800. In addition to the initial
consideration, there is contingent consideration of $200 that is based on review
of MicroBiz customer lists. Any additional consideration will be recorded as
goodwill. MicroBiz is a leading provider of Windows based point of sale and
inventory management systems for single store retailers. The Company spent
$1,800 for the outstanding stock of MicroBiz, of which, $1,436 was capitalized
as goodwill. This goodwill amount is being amortized over a five-year period.
Results of operations for MicroBiz are included in the Company's consolidated
results of operations beginning on August 4, 2000.
12
<PAGE> 13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 (IN THOUSANDS, EXCEPT PER SHARE DATA)
--------------------------------------------------------------------------------
3. LINE OF CREDIT
In January 2000, 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, 2000, the Company was in compliance with its debt covenants. The
line of credit expires in January 2001. As of September 30, 2000, the Company
had no amounts outstanding under the line, and there was no interest paid during
fiscal 2000, 1999 or 1998.
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,
-------------------------------
2000 1999 1998
-------------------------------
<S> <C> <C> <C>
Current:
Federal $(684) $ 708 $ 45
State 25 164 23
-------------------------------
(659) 872 68
Deferred:
Federal 279 (92) 1
State (9) 30 5
-------------------------------
270 (62) 6
-------------------------------
Total provision (benefit) $(389) $ 810 $ 74
===============================
</TABLE>
A reconciliation of taxes computed at the statutory federal income tax rate to
income tax expense (benefit) is as follows:
<TABLE>
<CAPTION>
Years Ended September 30,
-------------------------------
2000 1999 1998
-------------------------------
<S> <C> <C> <C>
Income tax at statutory rate $(386) $ 779 $ 82
Increases (decreases)
in taxes resulting from:
Decrease in
valuation allowance (3) (166) --
Utilization of general
business credits (89) (32) (41)
State income taxes,
net of federal benefit 10 128 19
Other, net 79 101 14
-------------------------------
$(389) $ 810 $ 74
===============================
</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,
-------------------------------------
2000 1999 1998
-------------------------------------
<S> <C> <C> <C>
Deferred tax assets:
Accruals not currently
deductible for tax $ 244 $ 226 $ 191
Book depreciation in excess
of tax depreciation 24 (6) 33
General business
credit carryforwards 112 -- 96
R & D expenditures
capitalized for tax -- -- 8
Net operating loss
carryforwards 1,642 -- --
-------------------------------------
Total deferred tax assets 2,022 220 328
Valuation allowance
for deferred tax assets (1,584) -- (166)
-------------------------------------
438 220 162
Deferred tax liabilities:
Software costs capitalized
for book purposes (529) (41) (45)
-------------------------------------
Net deferred tax assets $ (91) $ 179 $ 117
=====================================
</TABLE>
Income taxes paid were $426, $768, and $3 during the years ended September 30,
2000, 1999 and 1998, respectively.
At September 30, 2000, the Company had approximately $2.0 million of deferred
tax assets, $1.6 million of which relate to net operating loss carryforwards.
The Company has provided a valuation allowance against a portion of those
deferred tax assets due to uncertainties surrounding their realization. At
September 30, 2000, federal and state net operating loss carryforwards were $4.1
million and $3.0 million, respectively. These net operating loss carryforwards
expire in years 2005 through 2020.
13
<PAGE> 14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 (IN THOUSANDS, EXCEPT PER SHARE DATA)
--------------------------------------------------------------------------------
5. COMMITMENTS AND CONTINGENCIES
The Company is committed at September 30, 2000 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>
Years ending September 30,
--------------------------
<S> <C>
2001 $ 339
2002 193
2003 146
2004 149
2005 152
Thereafter 479
--------------------------
$1,458
==========================
</TABLE>
Total rent expense for the years ended September 30, 2000, 1999 and 1998 was
$437, $444, and $389, 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 original commitment under this lease term was $1.3
million. Rent expense incurred under this lease for the years ended September
30, 2000, 1999 and 1998 totaled $136, $136 and $132, 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 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 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 stockholders 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 1,174 options granted under the 1993 Plan as of
September 30, 2000. The company has 799 shares reserved for issuance related to
the plan.
In April 2000, the Company's Board of Directors approved the Company's 2000
Stock Option Plan (the "2000 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 500 shares of the Company's common stock. The term
of the plan is unlimited in duration. There have been 154 options granted under
the plan as of September 30, 2000. The Company has 500 shares reserved for
issuance.
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, 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 (74) $ 3.85
Expired (32) $ 3.52
------ ------ ------
Outstanding at
September 30, 1999 894 $ 3.14
Granted 356 $ 8.40 $ 3.15
Exercised (269) $ 3.07
Expired (45) $17.76
------ ------ ------
Outstanding at
September 30, 2000 936 $ 4.45
====== ====== ======
</TABLE>
14
<PAGE> 15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 (IN THOUSANDS, EXCEPT PER SHARE DATA)
--------------------------------------------------------------------------------
The following table summarizes information about stock options outstanding at
September 30, 2000:
<TABLE>
<CAPTION>
Weighted Average
Remaining Weighted
Number Contractual Average
Outstanding: Outstanding Life Exercise Price
-------------------------------------------
<S> <C> <C> <C>
Range of Exercise Prices
$1.75 to $3.00 359 5.7 $ 2.47
$3.13 to $6.38 525 8.5 $ 4.78
$9.19 to $15.00 52 9.0 $14.78
===========================================
</TABLE>
<TABLE>
<CAPTION>
Weighted
Number Average
Exercisable: Exercisable Exercise Price
----------------------------
<S> <C> <C>
Range of Exercise Prices
$1.75 to $3.00 299 $ 2.45
$3.13 to $6.38 223 $ 4.34
$9.19 to $15.00 21 $14.87
----------------------------
Total: 543 $ 3.71
============================
</TABLE>
The weighted-average remaining contractual life of stock options outstanding at
September 30, 2000, 1999 and 1998 was 7.5 years, 7.3 years and 7.6,
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 2000,
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 .577, .337
and .281; and a weighted-average life of each option of five years.
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the options
are amortized to expense over the option's vesting period. The Company's pro
forma information follows:
<TABLE>
<CAPTION>
2000 1999 1998
----------------------------------------------
<S> <C> <C> <C>
Pro forma earnings (loss) $ (1,011) $ 1,280 $ 40
Pro forma basic earnings
(loss) per share $ (.38) $ .59 $ .02
Pro forma diluted earnings
(loss) per share $ (.38) $ .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
and 1998 pursuant to the plan totaled $55, and $15, respectively. There was no
contribution made in fiscal 2000.
8. EQUITY PRIVATE PLACEMENT
In March 2000, the Company closed an $8 million equity private placement with a
group of institutional investors. The units sold in the private placement were
sold at a price of $16 per unit, with registration rights that called for the
shares to be registered within 90 days of the closing. Each unit was comprised
of 1 share of common stock and a warrant to purchase .7 of one share. The
agreement on pricing for the private equity placement was based on a 60-day
trailing average of the closing price of the Company's stock less 15% or $16 per
share, whichever was greater at the time of the close. After expenses, net
proceeds to the Company were approximately $7.6 million. The Company received $4
million in funding upon the close and an additional $4 million after the shares
were registered with the Securities and Exchange Commission. Under the
agreement, each purchaser of ten shares of common stock in the private placement
also received "warrants" to purchase an additional seven shares. At September
30, 2000 there are warrants outstanding that total 175,000 shares exercisable at
$24.94 per share, and 175,000 shares exercisable at $8.44 per share. The
warrants have a 5 year life and expire September 2005. The proceeds will be used
for general working capital requirements and to expand the Company's market
share.
15
<PAGE> 16
REPORT OF INDEPENDENT AUDITORS
--------------------------------------------------------------------------------
Board of Directors
CAM Commerce Solutions, Inc.
We have audited the accompanying consolidated balance sheets of CAM Commerce
Solutions, Inc. as of September 30, 2000 and 1999, and the related consolidated
statements of operations, stockholders' equity, and cash flows for each of the
three years in the period ended September 30, 2000. 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 auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of CAM Commerce
Solutions, Inc. at September 30, 2000 and 1999, and the consolidated results of
its operations and its cash flows for each of the three years in the period
ended September 30, 2000; in conformity with accounting principles generally
accepted in the United States.
/s/ ERNST & YOUNG
Orange County, California
November 10, 2000
STOCK AND DIVIDEND DATA
--------------------------------------------------------------------------------
"The common stock of CAM Commerce Solutions, Inc., is traded on the Nasdaq
National Market under the Nasdaq symbol CADA. Prior to February 18, 2000, the
common stock was traded over the counter on the Nasdaq SmallCap Market. The
quarterly market price information shown below represents the high and low sales
prices for the periods and the high and low bid quotations for the periods. High
and low bid quotations reflect inter-dealer prices, without retail mark up,
markdown or commission and may not represent actual transactions."
Fiscal Year Ended September 30, 2000
<TABLE>
<CAPTION>
Quarter Ended: High Low
--------------------------------------------
<S> <C> <C>
December 31 $27.50 $ 8.25
March 31 28.875 13.00
June 30 17.00 4.938
September 30 7.875 4.625
</TABLE>
Fiscal Year Ended September 30, 1999
<TABLE>
<CAPTION>
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>
As of December 10, 2000, there were approximately 200 holders of record of the
Company's common stock. The Company believes there are in excess of 800
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.
16
<PAGE> 17
SELECTED QUARTERLY CONSOLIDATED FINANCIAL DATA (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
2000 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 $ 6,639 $ 5,290 $ 4,961 $ 4,421
Gross profit 3,082 2,412 2,097 1,767
Income (loss) before taxes 339 (272) (257) (945)
Net income (loss) 220 (175) (201) (590)
Basic earnings (loss) per share .10 (.07) (.07) (.20)
Diluted earnings (loss) per share .08 (.07) (.07) (.20)
=========================================================
</TABLE>
<TABLE>
<CAPTION>
1999 Fiscal Quarter Ended
---------------------------------------------------------
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>
SELECTED CONSOLIDATED FINANCIAL DATA
FOR THE FIVE YEARS ENDED SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
In thousands, except per-share data. 2000 1999 1998 1997 1996
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net system and service revenues $ 21,311 $ 27,747 $ 18,781 $ 17,480 $ 15,669
Income (loss) before taxes (1,135) 2,290 241 257 1,210
Net income (loss) (746) 1,480 167 177 840
Basic earnings (loss) per share (.28) .69 .08 .09 .43
Diluted earnings (loss) per share (.28) .59 .08 .08 .39
Total assets 18,296 11,899 8,502 7,608 7,158
Working capital 11,467 5,013 3,804 3,726 3,886
Long-term debt -- -- -- -- --
Stockholders' Equity 15,857 7,588 5,797 5,284 4,997
Shares used in earnings (loss) per share:
Basic: 2,644 2,157 2,092 1,990 1,947
Diluted: 2,644 2,519 2,160 2,155 2,166
======== ======== ======== ======== ========
</TABLE>
17
<PAGE> 18
COMPANY INFORMATION
--------------------------------------------------------------------------------
BOARD OF DIRECTORS
Geoffrey D. Knapp
Chairman and Chief Executive Officer
CAM Commerce Solutions
David Frosh
President
CAM Commerce Solutions
Walter Straub
President
Rainbow Technologies
Corley Phillips
Investor
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.camcommerce.com
REGISTRAR AND TRANSFER AGENT
American Stock Transfer Company
59 Maiden Lane
New York, NY 10007
INDEPENDENT AUDITORS
Ernst & Young LLP
18111 Von Karman Avenue Suite 1000
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.
18
