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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
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FORM 10-KSB
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[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, 2000
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 1-12312
CAMINOSOFT CORP
(Name of small business issuer in its charter)
CALIFORNIA 95-3880130
(State of incorporation) (I.R.S. Employer Identification No.)
600 HAMPSHIRE ROAD, SUITE 105, WESTLAKE VILLAGE, CALIFORNIA 91361
(Address of principal executive offices)
Issuer's telephone number: (818) 707-2000
Check mark indicates whether the issuer (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 [ ]
Check mark indicates that the issuer has filed all documents and reports
required to be filed by Section 12, 13 or 15(d) of the Exchange Act after
distribution of securities under a plan confirmed by a court.
YES [X] NO [ ]
Check mark indicates that the disclosure of delinquent filers pursuant to
Item 405 of Regulation S-B 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-KSB or any
amendment to this Form 10-KSB. [X]
Issuer's revenues for its most recent fiscal year were $1,532,842, which
included $1,189,421 of discontinued operations.
The aggregate market value of the voting stock held by non-affiliates of
the registrant as of December 15, 2000 was approximately $15,000,000.
Number of shares outstanding of each of the issuer's classes of common
stock, as of December 15, 2000: 8,184,556 shares of common stock, no par value.
The following documents are incorporated by reference into this report:
None.
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FORWARD-LOOKING STATEMENTS
In addition to historical information, this Annual Report contains
forward-looking statements. The forward-looking statements contained herein are
subject to certain risks and uncertainties that could cause actual results to
differ materially from those reflected in the forward-looking statements.
Factors that might cause such a difference include, but are not limited to,
those discussed in the section entitled "Management's Discussion and Analysis
and Plan of Operation." Readers are cautioned not to place undue reliance on
these forward-looking statements, which reflect management's analysis only as of
the date hereof. CaminoSoft Corp undertakes no obligation to publicly revise
these forward-looking statements to reflect events or circumstances that arise
after the date hereof. Readers should carefully review the risks described in
other documents the Company files from time to time with the Securities and
Exchange Commission, including the Quarterly Reports on Form 10-QSB and any
Current Reports on Form 8-K.
Item 1. DESCRIPTION OF BUSINESS.
OVERVIEW
The Company was organized in 1983 as Interscience Computer Services, Inc.
to be a third-party provider of maintenance services for computer hardware and
related peripheral equipment. On April 17, 2000, the Company changed its name to
CaminoSoft Corp. Unless otherwise specified herein, all references to the
"Company" shall mean CaminoSoft Corp. The Company's principal executive offices
are located at 600 Hampshire Road, #105, Westlake Village, California 91361.
On March 6, 1997, the Company filed for protection under Chapter 11 of the
U.S. Bankruptcy Code. The bankruptcy filing was caused by several factors. The
Company made four acquisitions, and the cash flows of the Company were not
sufficient to pay the operating expenses and the substantial debt assumed as
part of the acquisitions. In addition, the Company was incurring substantial
legal expense from six lawsuits which were then pending against the Company. The
Company's First Amended Plan of Reorganization (the "Plan") was confirmed on
April 20, 1998. On December 16, 1998, the Bankruptcy Court issued a final decree
formally closing the bankruptcy proceedings.
The Company's principal product prior to this fiscal year was a liquid
fusing agent (the "Fusing Agent") used by the Model 2200 Siemens Printer. The
Company distributed the Fusing Agent directly to its end user clients and other
operators of the Model 2200 Siemens Printer. The Company also sold the Fusing
Agent to NCR Corporation, OCE Printing Systems, Inc. and The Bradshaw Group. In
January 2000 the fusing agent business was sold to The Bradshaw Group for
$550,000.
Prior to January 1, 2000, the Company was involved with several disputes
with OCE Printing Systems, USA Inc. and OCE GmbH ("OCE"), including (a) a patent
interference proceeding relating to the Company's fusing agent patent, (b) a
lawsuit brought by OCE and a former employee of the Company contesting the
Company's ownership of the fusing agent patent, and ( c) certain antitrust
claims by the Company against OCE. On December 29, 1999, the Company entered
into a settlement agreement with OCE. The settlement included (a) a payment by
OCE to the Company of $950,000, (b) an agreement by OCE not to challenge the
fusing agent patent, and ( c) a mutual release of all claims which either party
has against the other. This settlement did not release the Company's claims
against Siemens Corp. (See Legal Proceedings).
On September 17, 1999, the Company acquired certain assets from Camino
Software Systems, Inc. ("Camino") for 468,000 shares of the Company's common
stock and the assumption of $315,172 of certain Camino liabilities. The Company
had reviewed over 65 companies as possible acquisition candidates prior to the
acquisition of the Camino Assets. The Camino Assets consisted of the name,
Camino Software Systems, Inc., the data storage management software, certain
business contracts
<PAGE> 3
and intangible personal property. Camino had developed the powerful Highway
Server hierarchical storage management ("HSM") software.
As of September 30, 2000 and 1999, the Company had 16 and 8 employees
respectively.
On April 17, 2000 at its annual meeting of shareholders, the Company's
shareholders approved (a) changing the name of the Company to CaminoSoft Corp.,
(b) an increase in the authorized shares of common stock from 10,000,000 to
100,000,000, and (c) the 2000 Employee Stock Option Plan.
The Company's present business is the development and sale of storage
migration software and hardware based on the Camino Assets as described below.
CAMINO - PRODUCT DESCRIPTION
Camino's HSM software provides a unique solution for addressing the
increasing need for sophisticated management of data. Designed to meet the data
storage management requirements for local area networks (LAN), wide area
networks (WAN), and intranet environments, the HSM software offers its users the
ability to efficiently manage available storage within a multi-server
environment where mass storage devices are used to increase storage capacity. As
more and more companies move away from mid and main frame computers to networked
systems to meet their computing requirements, the need for more sophisticated
software to emulate the flexibility and power of mid and main frames has become
more acute. With the exponential growth of information, data storage
requirements have also grown exponentially. The result has been that network
managers are having to deal with the re-occurring "out of disk space" problem on
their company's network. Though hardware cost for storage continues to come
down, the cost of managing the data being stored has not. Human intervention is
still required on the part of network managers to determine which data files on
the system need to be "on-line", "near-line", or are used sufficiently
infrequently to be relegated to "off-line" storage.
Developed in conjunction with Novell's NetWare 4.X, now upgraded to 5.x,
the Highway Server software is able to work in a multi-server and multi-platform
environment, enabling the user to better utilize the storage capacity available
throughout the network. Based upon user defined parameters, the software will
automatically migrate minimally used files to designated storage devices, hard
drives, RAID, magnetic optical, tape, or any other type of mass storage device.
This migration is seamless and transparent to the user. As the server's file
system begins to fill up, the HSM software automatically transfers or migrates
old, seldom accessed files to user defined medium to make room for newer, more
frequently accessed files. The directory entry is modified which enables the
system to quickly locate and retrieve the file when needed. The user is unaware
that the file has been migrated and no longer resident at the original site.
Generally, this migration is desired to free up space in the more expensive
storage medium, moving the data to less expensive medium, such as removable
optical drives. The uniqueness of the program is that it enables the user to
designate under what conditions the files should be migrated and where the files
should be migrated, i.e., all financial files to one location, correspondence
files to another, etc. In the case of mass storage devices using removable
optical medium, this is particularly important. Whereas other HSM programs
manage multi-disk hardware as one large repository, scattering data throughout
the system, the HSM software enables the user to designate what data goes to
which disk, thus enabling related data to be organized and stored on a specific
disk rather than be scattered throughout the storage device. A disk can then be
removed to off-line storage and more easily indexed, making retrieval
considerably more efficient. The HSM software can accommodate virtually
unlimited volumes of information. Efficient management of data has and will
continue to be one of the foremost problems associated with the "information
age". The Company believes the HSM software represents the most efficient
solution to data management in the networked environment.
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In November 2000, the Company introduced the "T-REX", a storage migration
appliance that is built around the Company's software. The Company also upgraded
its software to be compatible with Novell 5.x and introduced a managed server
compatible with NT and Windows 2000.
MARKET
Expenditures related to information storage this year will approach $35
billion. Over the next 2 years, they are expected to grow by 40+%. Of the $35
billion, $24.5 billion will be spent on labor to manage the storage files.
CaminoSoft HSM software significantly reduces labor costs. The advent of
multi-server environments, where there are often 50 to 100 plus servers and
hundreds of users, has created the need for increasingly sophisticated software
to manage the gigabytes and terabytes of data. Network-attached storage (NAS)
and storage area networking (SAN) solutions are becoming the answer for dealing
with this explosion of data to be stored for the networked environment. These
systems allow multiple servers to share a common storage system. This accounts
for the high growth rate seen in optical disk drives, libraries, disk arrays,
and other types of removable disk storage devices in the last few years. The
Company has expanded its product line to include both hardware and software and
the Company's products will operate across NT, Windows 2000 and Novell
platforms.
COMPETITION
Although there are several other HSM products in existence, management
believes the Company's products provide a systematic managed solution to the
relentlessly increasing data storage problem at a substantially reduced
management cost. Competition comes from other storage solutions such as SAN
networks, NAS solutions, the purchase of additional storage capacity or finding
alternative ways to delay the purchase of a definitive solution.
The storage industry has many major competitors with resources greater than
that of the Company. There can be no assurance that the major suppliers in the
storage market will not develop new products that provide the same or better
management solutions. The amount of files and records to be stored and accounted
for are being created at such an accelerated pace that keeping files accessible
and retrievable will continue to be a major problem. The Company believes the
management saving features of the Company's system will continue to be its major
advantage.
STRATEGY
The Company's products provide a systematic managed solution to the
relentlessly increasing data storage problem at a substantially reduced
management cost. The Company introduced in November 2000, T-Rex, a revolutionary
data management appliance that provides an integrated storage management
solution that will hold from 500GB to 12 terabytes of data in RAID storage.
T-Rex utilizes smart data migration technology to create unlimited virtual
storage by combining a RAID 5 fast cache file system with integrated removable
storage devices, data mirroring and redundancy for transparent, high
availability data access. Managed servers are available for NT and Windows 2000
and for Linux in the first quarter of 2001. Versions for UNIX and Solaris will
follow in 2001. The Company's strategy is to offer both software and hardware
compatible with all platforms and all data storage systems.
The Company plans to market its products using its own sales force and
through the OEM sales forces of the manufacturers of the components used in the
Company's products and Value Added Reseller ("VAR") network. The Company
exhibits at all regional shows and conducts seminars in various cities during
the year. The Company has sales offices in Los Angeles, Chicago, Dallas and New
York.
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Item 2. DESCRIPTION OF PROPERTY
As of December 1, 2000, the Company leases one office facility in Westlake
Village, California for the Company's executive offices pursuant to a lease
extension expiring January 31, 2003, at a rental rate of $8,476 per month.
Item 3. LEGAL PROCEEDINGS
The Company has settled all disputes with OCE Printing Systems, USA Inc.
and OCE Gmbh. Under the settlement, the Company retains all rights to its Fusing
Agent patent, and all lawsuits pending between the Company and OCE have been
dismissed. The Company has received $950,000 from OCE and both sides have
released all claims against each other, including the antitrust claims
referenced to in the next paragraph.
The Company was a plaintiff in a class action suit against Siemens Nixdorf
Printing Systems, OCE Printing Systems and NCR Corporation. While the Company
withdrew as a named plaintiff in 1997, the Company retained the right to
participate alleging anti-trust violations as a class member. Since that time
the Company has settled with NCR Corporation and, as indicated, OCE Printing
Systems, USA Inc. and OCE GmbH. The Company retains all rights against Siemens
Corporation for any acts of Siemens prior to April 1, 1996, which affected the
Company. The Company filed suit against Siemens Corp. in May 2000.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the security holders during the
fourth quarter of the fiscal year covered by this report.
Item 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Common Stock is currently traded in the OTC Electronic Bulletin Board
under the symbol "CMSF". The following table sets forth the high and low sales
prices for the Common Stock during the two most recent fiscal years. During the
period October 1, 1998 through March 31, 2000, the ticker symbol was "IEIC",
and, in April of 2000, the symbol was changed to "CMSF". The prices reflect
inter-dealer prices without retail mark-ups, mark-downs or commission and may
not represent actual transactions.
<TABLE>
<CAPTION>
Symbol "IEIC" Common Stock Sales Prices
Year Ended September 30, 1999 High Low
----------------------------- ------------ ------------
<S> <C> <C>
October 1, 1998 - December 31, 1998 $ 0.50 $ 0.28
January 1, 1999 - March 31, 1999 $ 0.91 $ 0.44
April 1, 1999 - June 30, 1999 $ 0.63 $ 0.38
July 1, 1999 - September 30, 1999 $ 0.88 $ 0.41
Year Ended September 30,2000
----------------------------
October 1, 1999 - December 31, 1999 $ 1.25 $ 0.56
January 1, 2000 - March 31, 2000 $ 9.31 $ 1.25
END Symbol "IEIC"
</TABLE>
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<TABLE>
<S> <C> <C>
Symbol "CMSF"
April 1, 2000 - June 30, 2000 $ 7.63 $ 2.88
July 1, 2000 - September 30, 2000 $ 4.25 $ 2.81
October 1, 2000 - November 30, 2000 $ 4.25 $ 3.00
</TABLE>
To date, the Company has not declared or paid any cash dividends with
respect to its Common Stock, and the current policy of the Board of Directors is
to retain earnings, if any, to provide for the growth of the Company.
Consequently, no cash dividends are expected to be paid on the Common Stock in
the foreseeable future.
Recent Sales of Unregistered Securities
During the fiscal year ended September 30, 1998, the Company issued
warrants to purchase an aggregate of 700,000 shares of common stock at an
exercise price of $1.00 per share. 500,000 of the warrants were issued to
Renaissance Capital Group, the Company's largest shareholder, in consideration
for financial support and conversion of preferred stock during the Company's
reorganization. 200,000 warrants were issued to two former outside directors,
one current director on the Company's board of directors and two members of the
Company's reorganization legal team. The expiration dates for all of the
warrants is August 12, 2001. In May 2000, 50,000 of the warrants were exercised
by a former director of the Company.
During the fiscal year ended September 30, 1999, the Company issued
warrants to purchase an aggregate of 37,500 shares of common stock to three
newly hired executives with the Company. The exercise price for all of these
warrants is $.50 per share. The expiration date for these warrants is September
17, 2002.
During the fiscal year ended September 30, 2000, the Company issued
warrants to purchase an aggregate of 195,000 shares to four individuals in
consideration for their participation on the Company's Advisory Board. The
exercise price is $3.56 per share with a one year vesting period. The warrants
expire on August 28, 2004.
During the fiscal year ended September 30, 2000, the Company issued
warrants to purchase an aggregate of 50,000 shares in consideration for
financial public relations services. The exercise price is $3.56 per share, with
a one year vesting period. The warrants expire on August 28, 2004.
During the fiscal year ended September 30, 2000, the Company received a
commitment from Renaissance US Growth and Income Trust PLC to purchase 500,000
shares of common stock for $1,500,000. The Company received the full $1,500,000
on November 30, 2000.
All issuances of the Company's Common Stock described above were pursuant
to Section 4(2) of the Securities Act of 1933, as amended.
Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION
The following discussion and analysis should be read in conjunction with
the financial statements and notes thereto appearing elsewhere in this Annual
Report.
OVERVIEW
The Company was organized in 1983 to be a third-party provider of
maintenance services for computer hardware and related peripheral equipment. On
March 6, 1997, the Company filed for protection under Chapter 11 of the U.S.
Bankruptcy Code. The bankruptcy filing was caused by several factors. The
Company had made four acquisitions, and the cash flow of the Company was not
sufficient to pay the
<PAGE> 7
operating expenses and the substantial debt assumed as part of the acquisitions.
In addition, the Company was incurring substantial legal expense from lawsuits
which were then pending against the Company. On April 20, 1998, the Bankruptcy
Court confirmed the Company's Plan of Reorganization. Distributions to
creditors, as required under the Plan, have been made and, on December 16, 1998,
the Bankruptcy Court issued a final decree formally closing the bankruptcy
proceedings.
The Company's principal consumable product prior to this fiscal year was a
liquid fusing agent (the "Fusing Agent") used by the Model 2200 Siemens Printer.
The Company distributed the Fusing Agent directly to its end user clients and
other operators of the Model 2200 Siemens Printer. The Company also sold the
Fusing Agent to NCR Corporation, OCE Printing Systems, Inc. and The Bradshaw
Group. During the 2000 Fiscal Year, the fusing agent business was sold for
$550,000 to The Bradshaw Group.
On September 17, 1999, the Company acquired certain assets of Camino
Software Systems, Inc. The Camino Assets consisted of the name, the data storage
management software, certain business contracts and intangible personal
property. The Company's products currently provide a systematic managed solution
to the relentlessly increasing data storage problem at a substantially reduced
management cost. In November 2000, the Company introduced T-Rex, a data
management appliance that provides an integrated storage management solution
that will hold from 500GB to 12 terabytes of data in RAID storage. T-Rex
utilizes smart data migration technology to create unlimited virtual storage by
combining a RAID 5 fast cache file system with integrated removable storage
devices, data mirroring and redundancy for transparent, high availability data
access. Managed servers are available for Novell, NT and Windows 2000 and will
be available for LINUX in the first quarter of 2001. Versions for UNIX and
SOLARIS will follow in 2001. The Company's strategy is to offer both software
and hardware compatible with all platforms and all data storage systems. The
Company plans to market using its own sales force and through the OEM sales
forces of the manufacturers of the components used in the Company's products.
The Company exhibits at all regional shows and conducts seminars in various
cities during the year. The Company has Sales offices in Los Angeles, Chicago,
Dallas and New York. The Company is also developing an international VAR network
for distribution of its products.
RISK FACTORS
We have a limited operating history.
We have been in business since 1983 and have been a publicly traded company
since September 1993. In September 1999, we acquired the assets of Camino
Software Systems, Inc., which resulted in our entering into a new line of
business. All of our prior business divisions (high speed printer sales and
service and consumable sales) have been sold or discontinued. Although we
currently have some revenues from the acquired assets, we are starting a new
business in a highly technical and competitive market, with new risks for
investors and shareholders. Our products have not yet been accepted in the
marketplace.
Our future operating results are unpredictable.
With the acquisition of the software products of Camino Software Systems,
Inc. and the sale and discontinuance of our historical business, our operating
results will depend on the enhancement of our existing products and the ability
to market and sell the products. Any future success that we may achieve will
depend upon many factors including factors which may be beyond our control or
which cannot be predicted at this time. Uncertainties and factors which could
cause actual results or events to differ materially from those set forth or
implied include:
o Inability to acquire new customers
o Inability to complete successful implementation of our software
applications in a manner that is scalable
o Inability to offer new services that complement our existing offerings
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o Inability to increase awareness of our brand
To address these risks, we must, among other things, implement and successfully
execute our business strategy, continue to develop and upgrade our technology,
provide superior customer service, respond to competitive developments, and
attract, retain and motivate qualified personnel. There can be no assurance that
we will be successful in addressing such risks or that our business strategy
will be successful , and the failure to do so could have a material adverse
effect on our business, prospects, financial condition and results of
operations.
Need for additional financing.
Our Company will require additional financing in order to expand our
business. Our working capital requirements in the foreseeable future will depend
on a variety of factors including our ability to implement our sales and
marketing plan. There can be no assurance that we will be able to successfully
negotiate or obtain additional financing. Our ability to obtain additional
capital will be dependent on market conditions, the national economy and other
factors outside our control. If adequate funds are not available or are not
available at acceptable terms, our ability to finance our expansion, develop or
enhance services or products or respond to competitive pressures would be
significantly limited. The failure to secure necessary financing will have a
material adverse effect on our business, prospects, financial condition and
results of operations.
If we are unable to adapt our products to rapidly changing technology, our
reputation and our ability to grow our revenues could be harmed.
The markets we serve are characterized by rapidly changing technology,
evolving industry standards, emerging competition and the frequent introduction
of new software. There is no assurance that we will be able to enhance existing
or develop new products that meet changing customer needs in a timely and
cost-effective manner. Prolonged delays resulting from our efforts to adapt to
rapid technological change, even if ultimately successful, could harm our
reputation within our industry and our ability to grow our revenues.
We face significant competition from other providers of computer software.
The markets for our computer software are characterized by intense
competition and an increasing number of new market entrants who have developed
or are developing potentially competitive products. Further, the cost barriers
to these markets are relatively low, which means our competitors range from
small companies with limited resources to large, more established companies.
Some competitors, regardless of size, have substantially greater financial,
technical, marketing, distribution, personnel and other resources. For example,
current and future competitors with greater financial resources than us may be
able to undertake more extensive marketing campaigns and adopt more aggressive
pricing policies. It is possible that we may not have the resources to withstand
these and other competitive forces.
Our earnings growth is dependent upon acceptance of our products and our ability
to increase demand for data storage and management software products.
Our ability to generate profits depends primarily upon market acceptance of
our data storage and management software products. Our products may not be able
to be successfully marketed or achieve customer acceptance, and we may be unable
to increase demand for our product. Our strategy to increase our customer base
includes investment in programs designed to heighten consumer awareness of our
product and services.
If we do not successfully develop new products that keep pace with technology,
our competitive position will be weakened.
<PAGE> 9
The market for our products is new and emerging, and is characterized by
rapid technological advances, changing customer needs and evolving industry
standards. Accordingly, our ability to realize our expectations will depend on
our:
- Ability to timely develop new software products that keep pace with
developments in technology;
- Ability to meet evolving customer requirements which are often
difficult to predict; and
- Success at enhancing our current product offerings and delivering
those products through appropriate distribution channels.
We may not be successful in developing and marketing, on a timely and
cost-effective basis, enhancements to our software products or new products
which respond to technological advances and satisfy increasingly sophisticated
customer needs. If we fail to introduce new products, or if new industry
standards emerge that we do not anticipate or adapt to, our software products
could be rendered obsolete and our competitive position will be weakened.
Our business will suffer if our software development is delayed.
Any failure to release new products and upgrades on time may result in:
- customer dissatisfaction;
- cancellation of orders;
- negative publicity;
- loss of revenue; or
- slower market acceptance.
We operate in a developing market with increasing participants.
The market for computer software is rapidly evolving and is characterized
by an increasing number of market entrants who have introduced or developed
products and services. It is possible that a single supplier may dominate one or
more market segments. Additionally, there may be insufficient market acceptance
of our products because the market for computer software changes rapidly.
We rely on key management personnel.
Our performance is substantially dependent on the continued services and
the performance of our senior management and other key personnel. Our
performance also depends on our ability to retain and motivate our other
officers and key employees. The loss of the services of any of our executive
officers or other key employees could have a material adverse effect on our
business, prospects, financial condition and results of operations. Our future
success also depends on our ability to identify, attract, hire, train, retain
and motivate other highly skilled technical, managerial and marketing personnel.
Competition for such personnel is intense, and there can be no assurance that we
can attract and retain the necessary technical, managerial and marketing
personnel could have a material adverse effect on our business, prospects,
financial condition and results of operations.
Our business substantially depends upon the continued growth of the data storage
and management software market.
Our future revenue and profits, if any, substantially depend upon the
continued growth and development of the data storage and management software
market.
We could incur substantial costs defending our intellectual property from claims
of infringement.
<PAGE> 10
The software industry is characterized by frequent litigation regarding
copyright, patent, trademark and other intellectual property rights. We may be
subject to future litigation based on claims that our own intellectual property
rights are invalid. We expect that software product developers will increasingly
be subject to infringement claims as the number of products and competitors in
our industry segment grows and the functionality of products overlaps. Claims of
infringement could require us to re-engineer or rename our products or seek to
obtain licenses from third parties in order to continue offering our products.
These claims could also result in significant expense to us and the diversion of
our management and technical resources, even if we ultimately prevail. Licensing
or royalty agreements, if required, may not be available on terms acceptable to
us or at all.
RESULTS OF OPERATIONS
FISCAL YEARS ENDED SEPTEMBER 30, 2000 AND SEPTEMBER 30, 1999
As indicated, during the 2000 fiscal year, the Company sold its fusing
agent business and commenced an entirely new business. Accordingly, comparisons
between fiscal years with respect to business operations are not meaningful and
are not presented herein.
During the fiscal year the Company began a sales marketing program for the
Highway Server software. The program included trade shows, magazine advertising
and regional and local seminars in conjunction with marketing partners. The
Company plans also called for expansion of the sales force and technical force.
The Company has opened regional sales offices in New York, Chicago and Dallas
while adding additional sales and sales support people in the Western Region
where the corporate offices are located. Revenues for sales of the software for
the current fiscal year was approximately $343,000. Cost of sales of software
for the current year was approximately $13,000, with a gross profit of
approximately $330,000 or 96%.
Selling and administrative expenses for the current year were approximately
$2,090,000. During the year the Company added 8 new employees and moved its
corporate headquarters to a new larger facility in Westlake Village, California.
Additional expenses included advertising in multiple storage and operating
system publications. Additional technical and marketing consultants have also
been added during the current fiscal year to help in the expansion of the sales
and marketing development program and help increase the current product line.
The Company plans to continue its expansion into the 2001 fiscal year.
Depreciation and amortization expense for the fiscal year of $76,835
included depreciation for additions to technical equipment, furniture and
fixtures and the first years amortization of the software acquired from Camino
Software Systems, which was approximately $71,700 or 93% of the total expense.
Research and development expense for the current year was approximately
$190,000, which is also part of the ongoing plan to expand the product line,
while adding features and upgrades to the original software products. The
Company plans to continue the research and development program at an increased
rate during the coming year.
Other income during the year consisted of proceeds from a legal settlement
with the Company's insurance carriers of approximately $132,000, interest income
of approximately $87,000 and small amount for the billing of freight charges to
customers.
Fiscal year 2000 included a gain from discontinued operations of $322,003
as compared to a gain of approximately $253,000 in fiscal year 1999. The current
year gain consisted of revenue and expenses related to the sales of consumables
and the sale of the fusing agent business, costs incurred for liquidation of
parts and equipment and closure of the Los Angeles warehouse, proceeds from the
OCE settlement and associated legal and other expenses. The Company also sold
the fusing agent business, which included exclusive rights to the fusing agent
patent. The chemical the patent is based on has a limited life as a result of
the small ozone depleting potential of the product. Therefore manufacturing of
the chemical will be prohibited as of December 31, 2002. As a result of the
limited life of the product and the sale of the business including exclusive
rights to the patent, the remaining asset of $414,951 was written off. Also
included was the write off of deferred tax assets of $250,000.
<PAGE> 11
LIQUIDITY AND CAPITAL RESOURCES
During fiscal year 2000, the Company's cash position increased by
approximately $1,750,000, from $464,000 on September 30, 1999 to $2,219,000 on
September 30, 2000. The principal balance due to Sanwa Bank as of September 30,
1999 was approximately $85,000, which was paid in the first quarter of the
current fiscal year. In September 1999, the Company obtained an unsecured
$500,000 loan from Renaissance Capital Growth and Income Fund III at 8% per
anum. The Company paid the loan balance in January 2000. In February 2000,
Renaissance Capital Growth and Income Fund III exercised a warrant for 250,000
shares of common stock at a price of $.50 per share. In March 2000, the Company
completed a private placement of 1,635,000 shares of common stock for
$3,270,000. The funds are being used to support the Company's expanded business
plan. In May 2000 an ex-director of the Company exercised warrants to purchase
50,000 shares of the Company's common stock at $1.00 per share and in September
2000 an ex-employee exercised options to purchase 5,000 shares of the Company's
common stock at $.56 per share. The Company is currently in the process of
completing another private placement of up to 1,000,000 shares of common stock
at $3.00 per share. As of the date of this filing the Company has received
$1,500,000 for 500,000 shares of the available private placement from
Renaissance Capital and Growth Fund PLC.
On September 17, 1999, the Company acquired the assets of Camino Software
Systems, Inc. and its principal software product the "Highway Server". At the
start of the current year the Company outlined goals for the year which
included: 1) to strengthen the balance sheet; 2) to expand the management team;
3) to improve and develop its product line to meet the accelerating demands of
the digital storage market.
Including the receipt of the $1.5 million related to the September 2000,
sales of common stock, the Company's net worth has increased by a factor of over
7 times to its current amount of over $4 million. Book value per common share
has increased approximately 5 times and the Company has increased its cash
position by approximately $1,750,000.
BACKLOG
The Company's total backlog for software products as of September 30, 2000
was approximately $50,000. Backlog consists of the total amount of orders for
products that remain to be filled. The backlog was realized during the
three-month period ending December 31, 2000.
Item 7. FINANCIAL STATEMENTS
The following is a list of financial statements filed herewith:
Balance Sheets as of September 30, 2000 and September 30, 1999
Statements of Operations for the years ended September 30, 2000 and 1999
Statements of Shareholder's Equity for the years ended September 30, 2000
and 1999
Statements of Cash Flows for the years ended September 30, 2000 and 1999
Notes to Financial Statements
<PAGE> 12
Item 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There were no changes in accountants or disagreements during the fiscal
year covered by this report.
Item 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
As of December 15, 2000, the directors and executive officers of the
Company are as follows:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Norman Baker 60 Director
Robert Pearson 65 Director
Steven Spector 54 Director
Walter Kornbluh 69 President, Chief Executive
Officer and Chairman of the
Board
Stephen Crosson 41 Chief Operating Officer,
Secretary and Treasurer
Barry Lederman 52 Vice President of Marketing
Neil Murvin 49 Vice President of Technology
Arthur Ekroos 59 President
</TABLE>
Norman Baker, Mr. Baker a U.K. national, joined the Company in January 1994
as Managing Director of Interscience Computer Corporation-PLC. Mr. Baker has for
the past fifteen years been a director and associate of N.B. Direct Mail Ltd., a
U.K. domiciled direct marketing, research and mailing operation. Mr. Baker was
elected to the Company's board in March 1995.
Robert Pearson, Mr. Pearson who became a director in 1997 has been
associated with Renaissance Capital Group ("RCG") since April of 1994. RCG is
the Investment advisor of the largest shareholders of the Company. Presently,
Mr. Pearson serves as a Senior Vice President and Director of Corporate Finance
of RCG. He served as Executive Vice President of the Thomas Group from May 1990
to March 1994. For 25 years, Mr. Pearson held various senior management
positions at Texas Instruments, including Vice President of Finance from October
1983 to June 1985. Mr. Pearson holds directorships in the following companies:
Poore Brothers, Inc., which manufactures and distributes snack food products,
Advanced Power Technology, Inc., which manufactures semiconductor power
switching devices, and Dexterity, Inc., which markets medical devices.
Steven Spector, Mr. Spector became a director in February 2000. Since 1971,
Mr. Spector has practiced finance, banking and corporate reorganization law,
most recently as a partner in the Los Angeles Office of McDermott, Will & Emery.
In addition to practicing law, Mr. Spector is a partner in the investment group
of LBS Investments, LLC, and a trustee of The Joseph B. Gould Charitable
Foundation. Mr. Spector has lectured and taught extensively in his legal
specialties of finance, banking and corporate reorganization.
Walter Kornbluh, Mr. Kornbluh joined the Company in May 1997 and became a
director in April 1998. Mr. Kornbluh is a licensed Certified Public Accountant
in the States of California and New York. For the past 10 years he has been the
President and majority owner of Workout Specialist Inc., a firm that
<PAGE> 13
specializes in assisting companies with financial problems. He spent 17 years as
President of Marathon Office Supply, Inc., a public company whose stock was
listed on the American Stock Exchange.
Stephen Crosson, Mr. Crosson first joined the Company in March 1985 and was
manager of accounting, government contracts and logistics. In September of 1989,
Mr. Crosson became a financial analysis officer with First Interstate Bank of
California. In March 1992, Mr. Crosson joined the Company again as Director of
Operations, and in April 1995, he became Vice President of Operations. In
January 1997 Mr. Crosson became Secretary of the Corporation and in April of
1998 he became Treasurer.
Barry Lederman, Mr. Lederman joined the Company as Vice President of
Marketing in September 1999 as part of the acquisition of Camino. In 1978 Mr.
Lederman co-founded CharterHouse Software Corporation, a California based
developer of PC and LAN based accounting software. Prior to founding
CharterHouse, he was Director of Technical Services for the Bekins Van Lines
Company. He is a graduate of CCNY School of Engineering where he received a BS
in 1970 and a MS in 1973 in computer science. He was a Senior Computer Systems
Scientist on the NASA sponsored Landsat project while at CCNY.
Neil Murvin, Mr. Murvin joined the Company as Vice President of Technology
in September 1999 as part of the acquisition of Camino. He is responsible for
all software design and development for the Company. He was co-founder of
CharterHouse Software Corporation in 1978. Prior to founding CharterHouse, he
was the director of systems and programming for the Bekins Van Lines Company and
has been a manager of application programming for Price Pfister. A graduate of
UC Irvine, he received a BS in Computer Science in 1973.
Arthur Ekroos, Mr. Ekroos joined the Company in September 2000. He has over
20 years of executive experience in the data communications industry. For the
past 2 years, he has been the Vice President of Business Development, Sales and
Marketing for Abacus America, Inc. Prior to that he served as President of RF
Industries and Vice President of Equipment Corp.
DIRECTOR COMPENSATION
Directors do not receive any annual compensation. Outside directors receive
$1,000 each for each meeting attended and reimbursement for out-of-pocket
expenses for attending meetings. Mr. Pearson has waived the meeting fees.
Item 10. EXECUTIVE COMPENSATION
The following table sets forth the compensation paid by the Company for its
fiscal years ended September 30, 2000, and September 30, 1999 to its Chief
Executive Officer (the "Named Executive Officer") and Chief Financial Officer.
No other executive officer received compensation which exceeded $100,000 for the
fiscal year ended September 30, 2000.
ANNUAL COMPENSATION
<TABLE>
<CAPTION>
FISCAL YEAR ALL
NAME AND ENDED OTHER
PRINCIPAL POSITION SEPTEMBER 30, SALARY BONUS COMPENSATION
------------------ ------------ ------ ------ -------------
<S> <C> <C> <C> <C>
Walter Kornbluh, 2000 $150,000(1) -- $90,000(2)
Chief Executive 1999 $150,000(1) -- --
Officer and Chairman 1998 $150,000 -- --
of the Board
Stephen Crosson, 2000 $120,000 -- $60,000(2)
Vice President, Secretary 1999 $120,000 -- --
and Treasurer 1998 $ 97,083 -- --
</TABLE>
(1) Does not include fees paid to a consulting firm owned by Mr. Kornbluh. See
"Certain Relationships and Related Party Transactions."
(2) Consists of the dollar value for 45,000 shares of common stock issued to
Mr. Kornbluh and 30,000 shares of common stock issued to Mr. Crosson, as
part of the March 2000, private placement.
<PAGE> 14
OPTION GRANTS IN 2000
The following table sets forth certain information regarding option grants
to the named executive officer during the fiscal year ended September 30, 2000.
<TABLE>
<CAPTION>
Number of Percentage of
Securities Total Options Average
Underlying Granted to Exercise
Options Employees Price Expiration
NAME Granted(1) In 2000 Per Share Date
---- ----------- --------- --------- ----------
<S> <C> <C> <C> <C>
Walter Kornbluh................. 92,000 6.68% $0.56 12/08/2009
Walter Kornbluh................. 180,000 13.08% $3.87 02/25/2010
Walter Kornbluh................. 90,000 6.54% $5.00 02/25/2010
Walter Kornbluh................. 90,000 6.54% $6.50 02/25/2010
Walter Kornbluh................. 90,000 6.54% $7.50 02/25/2010
</TABLE>
(1) Options were granted under the year 2000 Employee Stock Option Plan and are
exercisable for common stock of CaminoSoft Corp.
OPTION EXERCISES AND FISCAL YEAR-END VALUES
<TABLE>
<CAPTION>
Number of Securities Value of
Underlying Unexercised Unexercised in the Money
Shares Options at Year-End Options at Year-End
Acquired Value --------------------------- ---------------------------
Name On Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Walter Kornbluh -- -- 92,000 -- $330,813 --
</TABLE>
There were no options exercised by the named executive officer during
fiscal year 2000.
Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of December 15, 2000 by (I) each
person who is known by the Company to own beneficially more than 5% of the
Company's outstanding Common Stock; (ii) each of the Company's directors; (iii)
the named Executive Officer; and (iv) executive officers and directors of the
Company as a group:
<TABLE>
<CAPTION>
COMMON STOCK (1)
---------------------------------
NUMBER OF PERCENTAGE OF
NAME AND ADDRESS (2) SHARES OUTSTANDING (3)
-------------------- ---------- ---------------
<S> <C> <C>
Frank J. LaChapelle...................................(4) 835,000 10.20
Arthur Ekroos ........................................ 250,000(5) --
Robert Pearson........................................(6) -- --
Norman Baker ......................................... 152,500(7) --
Steven Spector ....................................... 90,000(8) --
Walter Kornbluh ...................................... 1,170,000(9) 12.79
Stephen Crosson ...................................... 768,800(10) 8.67
Renaissance Capital Growth &
Income Fund III, Inc. ................................ 2,815,000(11) 32.41
8080 N. Central Expressway
Suite 210
Dallas, Texas 75206
</TABLE>
<PAGE> 15
<TABLE>
<S> <C> <C>
Renaissance US Growth &
Income Trust PLC ........................................... 1,000,000 12.22
8080 N. Central Expressway
Suite 210
Dallas, Texas 75206
All executive officers and
directors as a group
(6 persons) ........................................... 2,431,300 23.69
----------------------------------------------------------------------------------------------
</TABLE>
(1) As used herein, the term beneficial ownership is defined by Rule 13d-3
under the Securities Exchange Act of 1934 as consisting of sole or
shared voting power and/or sole or shared investment power subject to
community property laws where applicable.
(2) The address of each person is c/o the Company at 600 Hampshire Road,
#105, Westlake Village, California 91361.
(3) Based on 8,184,556 shares of Common Stock outstanding, as of December
15, 2000, represents to Company's estimate of shares outstanding on the
date of filing this report.
(4) All shares are held in the LaChapelle Family Trust with respect to which
Mr. LaChapelle exercises voting and investment power.
(5) Consists of options from the Company to purchase 150,000 shares at $3.44
per share, 50,000 shares from the Company at $5.00 per share and 50,000
shares from the Company at $6.00 per share.
(6) Does not include any shares owned by the Renaissance Capital Growth and
Income Fund III and Renaissance U.S. Growth & Income Trust PLC. Mr.
Pearson is an executive officer of RCG and the
Renaissance Capital Growth and Income Fund III.
(7) Includes three year warrants to purchase 50,000 shares of Common Stock
of the Company at $1.00 per share and four year non-qualified options
from the Company to purchase 65,000 shares at $3.63 per share.
(8) Includes four year non-qualified stock options from the Company for
65,000 shares at $3.63 per share.
(9) Includes currently exercisable options to purchase 300,000 shares from
RCG at $2.00 per share and 120,000 shares from Frank LaChapelle at $3.00
per share and 82,200 shares from LaJolla Cove Investors for $1.80 per
share and 12,000 shares from the Company at $.56 per share, 180,000
shares from the Company at $3.87 per share, 90,000 shares from the
Company at $5.00 per share, 90,000 shares from the Company at $6.50 per
share and 90,000 shares from the Company at $7.50 per share.
(10) Includes currently exercisable options to purchase 200,000 shares from
RCG at $2.00 per share and 80,000 shares from Frank LaChapelle at $3.00
per share and 54,800 shares from LaJolla Cove Investors at $1.80 per
share and 48,000 shares from the Company at $.56 per share, 120,000
shares from the Company at $3.87 per share, 60,000 shares from the
Company at $5.00 per share, 60,000 shares from the Company at $6.50 per
share and 60,000 shares from the Company at $7.50 per share.
(11) According to Schedule 13D, dated September 13, 1994, filed with the
Commission, RCG is the investment advisor of Renaissance Capital Growth
& Income Fund III, Inc. (the "Fund"). The Fund owns 2,250,000 shares of
the Company's Common Stock and has three year warrants to purchase
500,000 shares of Common Stock at $1.00 per share and four year options
to purchase 65,000 shares at $3.63 per share.
Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During fiscal 2000 and 1999 the Company paid $32,000 and $111,400,
respectively, in consulting fees to a firm owned by the Company's Chairman of
the Board.
<PAGE> 16
Item 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - Exhibit 27 Financial Data Schedule
10.1 Settlement Agreement dated December 29, 1999 among OCE Printing
Systems U.S.A. Inc., OCE Printing Systems, G.m.b.H. and Interscience
Computer Corporation.
(b) Reports on Form 8-K. None
<PAGE> 17
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
CAMINOSOFT CORP
By /s/ WALTER KORNBLUH
--------------------------------
Walter Kornbluh, Chairman of the
Board, and Chief Executive Officer
In accordance with 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>
<CAPTION>
Signature Capacity Date
--------- -------- ----
<S> <C> <C>
/s/ WALTER KORNBLUH Chairman of the Board December 15, 2000
---------------------------- and Chief Executive
Walter Kornbluh Officer
/s/ STEPHEN CROSSON Chief Operating Officer, December 15, 2000
---------------------------- Secretary and Treasurer
Stephen Crosson and Principal Financial and
Accounting Officer
/s/ NORMAN BAKER Director December 15, 2000
---------------------------
Norman Baker
/s/ ROBERT PEARSON Director December 15, 2000
---------------------------
Robert Pearson
/s/ STEVEN SPECTOR Director December 15, 2000
---------------------------
Steven Spector
</TABLE>
<PAGE> 18
CAMINOSOFT CORP.
CONTENTS
Independent Certified Public Accountants' Report F-2
Financial Statements
Balance Sheets F-3
Statements of Operations F-4
Statements of Shareholders' Equity F-5
Statements of Cash Flows F-6
Notes to Financial Statements F-7
F-1
<PAGE> 19
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS' REPORT
To the Board of Directors and Shareholders
CaminoSoft Corp.
We have audited the accompanying balance sheets of CaminoSoft Corp. as of
September 30, 2000 and 1999 and the related statements of operations,
shareholders' equity and cash flows for the years then ended. 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 Caminosoft Corp. as of
September 30, 2000 and 1999 and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles.
BDO Seidman, LLP
Los Angeles, California
December 4, 2000
F-2
<PAGE> 20
CAMINOSOFT CORP.
BALANCE SHEETS
<TABLE>
<CAPTION>
September 30,
------------------------------
2000 1999
------------ -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 2,219,323 $ 464,311
Accounts receivable, net of allowance for doubtful accounts
of $5,687 and $53,687 (Note 9) 67,955 45,444
Inventories (Notes 3 and 9) -- 208,442
Deferred income taxes (Note 10) -- 250,000
Other receivables (Note 5) 1,585,000 --
------------ ------------
Total current assets 3,872,278 968,197
------------ ------------
Property and equipment, net of accumulated depreciation of
$5,068 and $22,989 (Note 4) 26,564 7,746
Software, net of accumulated amortization of $71,677 and $0 (Note 12) 430,605 502,372
Patents, net of accumulated amortization of $0 and $318,803 (Notes 2 and 11) -- 414,951
Deposits 9,581 11,280
------------ ------------
Total assets $ 4,339,028 $ 1,904,546
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $ 111,587 $ 232,815
Accrued liabilities 123,263 271,516
Accrued legal costs -- 229,907
Current portion of long-term debt (Note 9) -- 114,607
------------ ------------
Total current liabilities 234,850 848,845
Long-term debt, less current portion (Note 9) -- 500,000
------------ ------------
Total liabilities 234,850 1,348,845
------------ ------------
Commitments and contingencies (Note 2 and 8)
Shareholders' equity (Note 6)
Common stock, no par value; authorized 100,000,000 shares;
issued and outstanding 8,184,556 and 5,704,556 shares 13,642,539 8,626,430
Accumulated deficit (9,538,361) (8,070,729)
------------ ------------
Total shareholders' equity 4,104,178 555,701
------------ ------------
Total liabilities and shareholders' equity $ 4,339,028 $ 1,904,546
============ ============
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE> 21
CAMINOSOFT CORP.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years ended September 30,
----------------------------
2000 1999
----------- ----------
<S> <C> <C>
Sales (Note 2) $ 343,421 $ --
Cost of sales 12,988 --
----------- -----------
Gross profit 330,433 --
----------- -----------
Operating expenses:
Sales and administrative 2,090,384 --
Depreciation and amortization 76,835 --
Research and development 189,797 --
----------- -----------
Total operating expenses 2,357,016 --
----------- -----------
Loss from continuing operations (2,026,583) --
----------- -----------
Other income:
Interest income 87,200 --
Miscellaneous income (Note 13) 149,748 --
----------- -----------
Total other income 236,948 --
----------- -----------
Net loss from continuing operations (1,789,635) --
Discontinued operations (Note 11)
Income from operations of discontinued Fusing Agent business (includes
$1,189,421 and $1,751,219 of sales in 2000 and 1999,
respectively and $950,000 from obligation settlement in 2000 (Note 13)) 646,350 252,983
Loss on disposal of Fusing Agent business (324,347) --
----------- -----------
Gain on discontinued operations 322,003 252,983
----------- -----------
Net income (loss) applicable to common stock $(1,467,632) $ 252,983
=========== ===========
Weighted average number of common shares outstanding:
Basic 6,777,008 5,253,225
Diluted 6,777,008 5,262,129
=========== ===========
Net income (loss) per common share (basic and diluted):
From continuing operations $ (.26) $ --
From discontinued operations .05 .05
----------- -----------
Net income (loss) per common share $ (.21) $ .05
=========== ===========
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE> 22
CAMINOSOFT CORP.
STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock Accumulated
--------------------------- ----------------------------
Shares Amount Deficit Total
---------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
BALANCE, at October 1, 1998 5,188,487 $ 8,439,230 $(8,323,712) $ 115,518
Common stock issued as partial settlement of unsecured
creditors (Note 1)* 48,069 -- -- --
Common stock issued in purchase of software (Notes 6) 468,000 187,200 -- 187,200
Net income -- -- 252,983 252,983
----------- ----------- ----------- -----------
BALANCE, at September 30, 1999 5,704,556 8,626,430 (8,070,729) 555,701
Common stock issued for exercise of
options/warrants (Note 6) 305,000 177,800 -- 177,800
Common stock issued as partial settlement of
legal expenses (Note 6) 40,000 45,200 -- 45,200
Common stock issued for private placements 2,060,000 4,620,000 -- 4,620,000
Common stock issued to employees (Note 6) 75,000 150,000 -- 150,000
Stock options issued for loan origination fees -- 23,109 -- 23,109
Net income -- -- (1,467,632) (1,467,632)
----------- ----------- ----------- -----------
BALANCE, at September 30, 2000 8,184,556 $13,642,539 $(9,538,361) $ 4,104,178
=========== =========== =========== ===========
</TABLE>
* The value of these shares was accounted for in prior year, however, these
shares were not issued by the transfer agent until the 1999 fiscal year.
See accompanying notes to financial statements.
F-5
<PAGE> 23
CAMINOSOFT CORP.
STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
Years Ended September 30,
-----------------------------
2000 1999
------------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss from continuing operations $(1,789,635) $ --
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization 76,835 --
Change in allowance for doubtful accounts 5,687 --
Common stock issued for financing fees 23,109 --
Common stock issued to employees 150,000 --
Changes in operating assets and liabilities net of effects of divestitures:
Accounts receivable (73,642) --
Other receivables (85,000) --
Deposits (9,255) --
Accounts payable and accrued expenses 234,850 --
----------- -----------
Net cash (used in) continuing operating activities (1,467,051) --
Net cash provided by discontinued operating activities 556,532 272,950
----------- -----------
Net cash provided by (used in) operating activities (910,519) 272,950
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in equipment (17,662) (174)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowing (Note 9) -- 500,000
Payment of long-term debt (614,607) (830,525)
Issuance of common stock 3,297,800 --
----------- -----------
Net cash provided by (used in) financing activities 2,683,193 (330,525)
----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,755,012 (57,749)
CASH AND CASH EQUIVALENTS, beginning of period 464,311 522,060
----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 2,219,323 $ 464,311
=========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid $ 20,516 $ 24,479
=========== ===========
</TABLE>
SUPPLEMENTAL NON-CASH FINANCING AND INVESTING ACTIVITIES
Inconjunction with the purchase of Camino Software in September 1999, the
Company issued 468,000 shares of common stock valued at $0.40 for a total
of $187,200 and assumed $315,172 in accounts payable for a total of
$502,372.
During September 2000, the Company issued 500,000 shares in conjunction with
the private placement for $1,500,000 of subscriptions receivable. The
Company received the full amount of $1,500,000 in November 2000.
See accompanying notes to financial statements.
F-6
<PAGE> 24
CAMINOSOFT CORP.
NOTES TO FINANCIAL STATEMENTS
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS AND NATURE OF OPERATIONS
CaminoSoft, Corp. (the "Company") previously known as Interscience Computer
Corporation, was incorporated under the laws of the State of California on
October 14, 1983, to be a third party provider of maintenance services for
computer hardware and related peripheral equipment. The Company previously
provided spare parts for the Siemens, Xerox, and Delphax families of business,
as well as technical support for Siemens. In 1992, the Company introduced a
non-chloroflurocarbon fusing agent, developed by the Company and patented on
July 26, 1994, for use with certain high speed laser printers. Soon thereafter,
the Company initiated a toner development program. As a result of the Company's
development of the Fusing Agent and toner, gross revenues from these items
constituted approximately 80% of Company sales, for the year ended 1999. During
the year ended September 30, 2000, the Company sold the Fusing Agent and toner
business (see Note 11).
On September 17 1999, the Company acquired the assets (the "Camino Assets") of
Camino Software Systems, Inc. ("Camino"), a data storage company, for 468,000
shares of the Company's common stock and assumed $315,172 of certain Camino
liabilities. The Camino assets consisted of the name, Camino Software Systems,
Inc., the data storage management software, certain business contracts and
intangible personal property. The Company allocated all amounts paid and assumed
in the amount of $502,372 to the cost of the software.
During the year ended September 30, 2000, the Company changed its name to
CominoSoft, Corp. to reflect the focus on the data management software business.
The Company is now distributing and developing data management software
purchased from Camino, which will work with NT, Windows 2000, Novell, Unix and
Linux systems.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly, actual results
could differ from those estimates.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with an original maturity of
three months or less when purchased to be cash equivalents. Such cash
equivalents, at times, may exceed federally insured limits. The Company
maintains its accounts with financial institutions with high credit ratings.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107 "Disclosures About Fair
Value of Financial Instruments," requires disclosure of the fair value of
certain financial instruments. Accounts receivable, other receivables, accounts
payable and other accrued current liabilities as reflected in the financial
statements approximate fair value because of the short-term maturity of these
instruments.
F-7
<PAGE> 25
CAMINOSOFT CORP.
NOTES TO FINANCIAL STATEMENTS
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The carrying amount of long-term debt approximates fair value because the
interest rates of these instruments approximate the rate at which the Company
could borrow at September 30, 1999.
INVENTORIES
Inventories consist of consumables held for sale in the normal course of
business. Consumables are recorded at the lower of cost or market. Cost is
determined on the first-in, first-out method. The Company periodically reviews
its components of replacement parts and establishes a provision for excess
quantities and obsolescence.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost. Depreciation is computed on the
straight-line and accelerated methods based upon the estimated useful life of
the asset, primarily 5 years.
REVENUE RECOGNITION
Revenue is recognized when earned. The Company's revenue recognition policies
are in compliance with all applicable accounting regulations, including American
Institute of Certified Public Accountants (AICPA) Statement of Position (SOP)
97-2, Software Revenue Recognition, and SOP 98-9, Modification of SOP 97-2, With
Respect to Certain Transactions. Revenue from sale of product is recognized upon
shipment to the customer. Maintenance revenue is recognized ratably over the
contract period.
RESEARCH AND DEVELOPMENT
Research and development costs, which consist primarily of software development
costs, are expensed as incurred. Statement of Financial Accounting Standards No.
86, "Accounting for the Cost of Computer Software to be Sold, Leased, or
Otherwise Marketed" ("SFAS 86"), provides for the capitalization of certain
software development costs incurred after technological feasibility of the
software is established or for development costs that have alternative future
uses. To date, the Company has not capitalized such software development costs.
ADVERTISING
Advertising costs are charged to expense as incurred and such costs were
$161,555 and $7,308 for the years ended September 30, 2000 and 1999,
respectively.
INTANGIBLES
The cost of patents acquired were being amortized on the straight-line method
over seven years. The patents were written-off during the year ended September
30, 2000 (Note 11). The write-off is included in discontinued operations.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company periodically assesses the recoverability of the carrying amounts of
long-lived assets, including intangible assets. A loss is recognized when
expected undiscounted future cash flows are less than the carrying amount of the
asset. The impairment loss is the difference by which the carrying amount of the
asset exceeds its fair value.
F-8
<PAGE> 26
CAMINOSOFT CORP.
NOTES TO FINANCIAL STATEMENTS
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
STOCK-BASED COMPENSATION
The Company accounts for employee stock options or similar equity instruments in
accordance with Statement of Financial Accounting Standards (SFAS) No. 123,
"Accounting for Stock-Based Compensation" (SFAS No. 123). SFAS No. 123 defines a
fair-value-based method of accounting for employee stock options or similar
equity instruments. This statement gives entities a choice to recognize related
compensation expense by adopting the new fair-value method or to measure
compensation using the intrinsic value method under Accounting Principles Board
(APB) Opinion No. 25 "Accounting for Stock Issued to Employees", the former
standard. If the former standard for measurement is elected, SFAS No. 123
requires supplemental disclosure to show the effect of using the new measurement
criteria. The Company currently uses the disclosure standards of SFAS 123 but
accounts for stock based compensation using APB 25.
EARNINGS (LOSS) PER SHARE
The Company computes earnings (loss) per common share under Statement of
Financial Accounting Standards No. 128, "Earnings per Share" (SFAS No. 128),
which requires presentation of Basic and Diluted earnings (loss) per share.
Basic earnings (loss) per share includes no dilution and is computed by dividing
income (loss) available to common shareholders by the weighted average number of
common shares outstanding for the period. Diluted earnings (loss) per share
reflects the potential dilution of securities that could share in the earnings
of an entity, such as stock options, warrants or convertible debentures, unless
antidilutive (see Note 6). At September 30, 2000, options and warrants to
purchase 2,499,000 shares were outstanding and could affect future periods, but
were not included in the computation of diluted (loss) per common share as the
effect would be antidilutive.
NEW ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards ("FASB") No. 133, "Accounting for
Derivative Instruments and Hedging Activities" ("SFAS No. 133") issued by the
FASB is effective for all fiscal quarters of fiscal years beginning after June
15, 2000. SFAS 133 requires companies to recognize all derivatives contracts as
either assets or liabilities in the balance sheet and to measure them at fair
value. If certain conditions are met, a derivative may be specifically
designated as a hedge, the objective of which is to match the timing of gain or
loss recognition on the hedging derivative with the recognition of (i) the
changes in the fair value of the hedged asset or liability that are attributable
to the hedged risk or (ii) the earnings effect of the hedged forecasted
transaction. For a derivative not designated as a hedging instrument, the gain
or loss is recognized in income in the period of change. Historically, the
Company has not entered into derivatives contracts either to hedge existing
risks or for speculative purposes. Accordingly, the Company does not expect
adoption of the new standard on January 1, 2001 to affect its financial
statements.
In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 101 ("SAB 101"), Revenue Recognition in Financial Statements. SAB
101 provides guidance for revenue recognition under various circumstances. The
accounting and disclosures prescribed by SAB 101 will be effective in the fourth
quarter of the Company's fiscal year ending September 30, 2001, and retroactive
to the beginning of that fiscal year. The Company does not believe the effects
of adoption will be material to its financial position or results of operations.
F-9
<PAGE> 27
CAMINOSOFT CORP.
NOTES TO FINANCIAL STATEMENTS
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
In March 2000, the Financial Accounting Standards Board issued Interpretation
No. 44 (FIN 44) Accounting for Certain Transactions Involving Stock
Compensation, an Interpretation of APB Opinion No. 25. FIN 44 clarifies the
application of APB No. 25 for (a) the definition of employee for purposes of
applying APB No. 25, (b) the criteria for determining whether a plan qualifies
as a non-compensatory plan, (c) the accounting consequences of various
modifications to the terms of a previously fixed stock option or award, and (d)
the accounting for an exchange of stock compensation awards in a business
combination. FIN 44 is effective July 2, 2000, but certain conclusions cover
specific events that occur after either December 15, 1998, or January 12, 2000.
The Company adopted FIN 44 in accounting for the stock options granted during
the year ended September 30, 2000, and it had no impact on the Company's
financial position or results of operations and cash flows.
NOTE 2--DISCLOSURE OF CERTAIN RISKS AND UNCERTAINTIES
PATENT
The Company is the assignee of the entire right, title and interest in and to
U.S. Patent No. 5,333,042 (the "Patent") directed to a method for using fusing
agent in cold fusion laser printers. The Fusing Agent represented approximately
80% of the Company's sales for the year ended September 30, 1999 (included in
Gain on Discontinued Operations). On October 16, 1995, the Patent Office issued
a notice to the Company that an unnamed party had copied a claim of the Patent
for purposes of instituting an Interference proceeding under 35 U.S.C. 135 to
determine priority of invention. In February 1997, the Patent Office declared
Interference Number 103692 with a patent application filed in the name of Gerd
Goldman (the "Goldman Application"). The Company understands that the Goldman
Application is owned by OCE Printing Systems GmbH. The Company is identified as
the Junior Party in the Interference. The Company filed on December 7, 1998 its
claim to priority on the Patent. The Company was informed that OCE Printing
Systems USA Inc. had purchased the rights of a former employee of the Company
who claimed ownership of the Patent. In February, 1999, the former employee and
OCE Printing Systems USA Inc. filed a lawsuit against the Company in the U.S.
District Court of Maryland claiming the employee was the sole inventor and owner
of the Patent. The Company defended its rights vigorously. During the year ended
September 30 1999, the Company capitalized into the cost of the Patent certain
legal expenses of $242,886 incurred while defending the patent from
infringement. In December 1999, the Company settled with OCE GmbH and OCE
Printing Systems, USA Inc. Under the settlement, the Company retained all rights
to its Fusing Agent Patent, and all lawsuits pending between the Company and OCE
were dismissed. The Company also received $950,000 from OCE on December 31, 1999
and both sides have released all claims against each other (see Note 13). The
remaining book value of $414,951 was written-off in the current year and
included in discontinued operations. (See discontinued operations at Note 11.)
F-10
<PAGE> 28
CAMINOSOFT CORP.
NOTES TO FINANCIAL STATEMENTS
NOTE 3--INVENTORIES
Inventories at September 30, 1999 were $208,442 and consist of fusing agent and
raw materials and are valued on a first in - first out basis. There are no
inventories at September 30, 2000.
NOTE 4--PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
September 30,
--------------------------
2000 1999
---------- ----------
<S> <C> <C>
Furniture and fixtures $ 5,745 $ 9,905
Test and training equipment 25,887 20,830
---------- -----------
31,632 30,735
Less accumulated depreciation 5,068 22,989
---------- -----------
$ 26,564 $ 7,746
========= ==========
</TABLE>
Property and equipment are depreciated on a straight-line basis with an average
useful life of five years.
NOTE 5--OTHER RECEIVABLES
At September 30, 2000, the Company has two receivables for $85,000 and
$1,500,000 totaling $1,585,000. The first receivable of $85,000 is related to
the purchase of Camino Software Systems, Inc. (Note 12). The Company agreed to
pay certain liabilities of Camino and in return Camino agreed to repay the
Company. This receivable is non-interest bearing and payable in full in
September 2000. The Company is currently pursuing the collection of this
receivable. The note is secured by 360,000 shares of the Company's common stock.
The second receivable of $1,500,000, owed by an unrelated third-party, is
related to a private placement performed by the Company. The third-party agreed
to purchase 500,000 shares of the Company's common stock for $1,500,000. The
Company received the full amount of $1.5 million in November 2000.
NOTE 6--SHAREHOLDER'S EQUITY
In connection with its bankruptcy reorganization in 1997, the Company exchanged
1,750,000 shares of its common stock and warrants for 500,000 shares of common
stock at $1.00 per share for all outstanding preferred stock during the year
ended September 30, 1998. The warrants are exercisable during the three year
period commencing August 12, 1998. No warrants have been exercised as of
September 30, 2000. No value was recorded for the warrants issued as the value
was deminimus.
F-11
<PAGE> 29
CAMINOSOFT CORP.
NOTES TO FINANCIAL STATEMENTS
NOTE 6--SHAREHOLDER'S EQUITY
(CONTINUED)
In conjunction with the purchase of Camino Software in September 1999 the
Company issued 468,000 shares of common stock valued at $0.40 for a total of
$187,200 (Note 12).
During the year ended September 30, 1999, the Company issued warrants to
purchase 250,000 shares of common stock at $.50 per share to Renaissance Capital
Growth & Income Fund III in connection with the capital growth loan granted by
Renaissance for loan origination fees valued at $23,109. The warrants are
exercisable during the three year period commencing September 10, 1999. The
warrants were exercised during the year ended September 30, 2000 and the Company
received proceeds of $125,000 (Note 9).
In September 1999, the Company issued 37,500 warrants to purchase the Company's
common stock to employees of the Company.
During the year ended September 30, 2000, the Company issued 2,135,000 shares of
common stock in two private placements for a total of $4,770,000. As of
September 30, 2000, the Company had completed one private placement for
1,560,000 shares and received proceeds of $3,120,000. In September 2000, the
Company sold an additional 500,000 shares for a $1,500,000 subscription
receivable, which is recorded in other receivables. The full amount of
$1,500,000 was received in November 2000.
During the year ended September 30, 2000, the Company issued a total of 75,000
shares of common stock to the employees of the Company. These shares were valued
at $150,000.
During the year ended September 30, 2000, the Company issued 40,000 shares of
common stock valued at $45,200 to an attorney for services performed in
conjunction with the OCE settlement.
In September 2000, the Company issued 150,000 warrants to purchase the Company's
common stock to three individuals for consulting services to be provided during
the period of September 2000 to September 2001. No value was recorded for the
issuance of the warrants, as value is diminimus.
In September 2000, the Company issued 50,000 warrants to purchase the Company's
common stock to a company for services to be provided during the period of
September 2000 to September 2001. No value was recorded for the issuance of the
warrants as value is diminimus.
During the year ended September 30, 2000, the Company's Board of Directors
approved a qualified incentive stock option plan (the "Plan"). The maximum
number of shares that may be purchased pursuant to the Plan is 2,100,000.
Options granted under the Plan have a vesting period of four years from the date
of grant with a life of ten years at a price to approximate the fair market
value of the common stock at the date of grant.
During the year ended September 30, 2000, the Company issued 1,571,500 options
to purchase the Company's common stock at prices ranging from $0.56 to $7.50 to
employees and directors under the Plan.
During the year ended September 30, 2000, 55,000 warrants and options were
exercised and the Company received $52,800.
F-12
<PAGE> 30
CAMINOSOFT CORP.
NOTES TO FINANCIAL STATEMENTS
NOTE 6--SHAREHOLDER'S EQUITY
(CONTINUED)
The warrant and stock option summary and changes during the year are presented
below:
<TABLE>
<CAPTION>
Weighted
Average
Number of Exercise
Shares Price
----------- ---------
<S> <C> <C>
Warrants outstanding at October 1, 1998 700,000 $1.00
Warrants granted 287,500 0.50
---------- -----
Warrants outstanding at September 30, 1999 987,500 0.71
Warrants granted 245,000 3.56
Options granted 1,571,500 4.23
Warrants exercised (300,000) 0.58
Options exercised (5,000) 0.56
---------- -----
Warrants and options outstanding at September 30, 2000 2,499,000 $3.23
========== =====
Warrants and options exercisable at September 30, 2000 1,976,000 $3.11
========== =====
</TABLE>
The following table summarizes information about warrants and employee's stock
options outstanding at September 30, 2000.
<TABLE>
<CAPTION>
Outstanding Exercisable
----------------------------------------------------- ----------------------------------
Weighted Average Weighted Average
---------------------------------- ----------------------------------
Exercise Life Exercise Exercise
Price Options (Months) Price Options Price
--------------------- ---------------- --------------- --------------- ---------------- -------------
<S> <C> <C> <C> <C> <C>
$0.56 161,500 120 $0.56 156,000 $0.56
1.00 650,000 37 1.00 650,000 1.00
3.00 4,000 120 3.00 - -
3.44 150,000 120 3.44 - -
3.56 385,000 51 3.56 345,000 3.56
3.63 195,000 48 3.63 - -
3.87 364,000 120 3.87 337,500 3.87
4.13 2,000 120 4.13 - -
4.50 37,500 120 0.50 37,500 0.50
5.00 200,000 120 5.00 150,000 5.00
6.00 50,000 120 6.00 - -
6.50 150,000 120 6.50 150,000 6.50
7.50 150,000 120 7.50 150,000 7.50
------------------- -------------- ------------- ------------ -------------- -------------
$0.56-$7.50 2,499,000 82 $3.23 1,976,000 3.11
=================== ============== ============= ============ ============== =============
</TABLE>
F-13
<PAGE> 31
CAMINOSOFT CORP.
NOTES TO FINANCIAL STATEMENTS
NOTE 6--SHAREHOLDER'S EQUITY
(CONTINUED)
All stock options issued to employees have an exercise price not less than the
fair market value of the Company's common stock on the date of the grant, and in
accordance with accounting for such options utilizing the intrinsic value method
there is no related compensation expense recorded in the Company's financial
statements. Had compensation cost for stock-based compensation been determined
based on the fair value of the grant dates consistent with the method of SFAS
123, the Company's net loss and loss per share for the year ended September 30,
2000 would have been increased to the pro forma amounts presented:
<TABLE>
<CAPTION>
2000
---------------
<S> <C>
Net loss, as reported $ (1,467,632)
Net loss, pro forma $ (1,710,723)
Basic and diluted net loss per common share, as reported $ (.21)
Basic and diluted net loss per common share, pro forma $ (.25)
</TABLE>
The fair value of option grants is estimated on the date of grant utilizing the
Black-Scholes option-pricing model with the following weighted average
assumptions for grants in 2000, expected life of options was 1 year, expected
volatility of 10%, respectively, risk-free interest rate of 5.48% to 6.24%,
respectively, and a 0% dividend yield. The weighted average fair value on the
date of grants for options granted during 2000 was $0.15 per option. The fair
value of the options granted in and prior to 1999 were not material to the
financial statements.
NOTE 7--RELATED PARTY TRANSACTION
During fiscal 2000 and 1999, the Company paid $32,000 and $111,400,
respectively, in consulting fees to a firm owned by the Company's Chairman of
the Board.
NOTE 8--COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
The Company leases its facilities under noncancelable operating leases expiring
at various dates through 2003. Future minimum rental payments required under
noncancelable operating leases at September 30, 2000 are as follows:
<TABLE>
<CAPTION>
Year Ending September 30, Amount
------------------------- ----------
<S> <C>
2001 $ 101,712
2002 101,712
2003 33,904
----------
$ 237,328
==========
</TABLE>
Total rent expense for the years ended September 30, 2000 and 1999 amounted to
$78,345 and $35,435.
F-14
<PAGE> 32
CAMINOSOFT CORP.
NOTES TO FINANCIAL STATEMENTS
NOTE 9--LONG TERM DEBT
All of the following loans were paid in full during the year ending September
30, 2000.
The Company had a $62,897 loan from a bank at prime plus one percent (9.25% at
September 30, 1999). The loan had a term of two years requiring monthly payments
of principal and interest of approximately $2,518 with an irregular last payment
estimated at $9,816. The loan was secured by certain receivables and inventory
of the Company. The loan had a non-penalty prepayment option. As of September
30, 1999, $24,532 remained outstanding on this loan.
The Company had a $12,034 loan from a bank at 10.5%. The loan had a term of two
years requiring monthly payments of principal and interest of approximately
$2,047. The loan was secured by certain receivables and inventory of the
Company. The loan had a non-penalty prepayment option. As of September 30, 1999,
$4,149 remained outstanding on this loan.
On July 30, 1996, the Company obtained a $2,230,234 loan from a bank at the
bank's reference rate plus 3% (9.00% at September 30, 1999). The loan required
monthly payments for three years of principal and interest of approximately
$28,620 and a portion of the proceeds of the sale of the Company's Xerox
maintenance business which was discontinued and sold in 1997. The loan was
secured by certain receivables and inventory of the Company and was subject to
certain covenants which the Company was in compliance with at September 30,
1999. The loan had a non-penalty prepayment option. As of September 30, 1999,
$85,926 remained outstanding on this loan.
In September 1999 the Company obtained an unsecured $500,000 loan from a
business development company at 8% and was due on October 31, 2000. The Company
was required to make monthly payments of interest only of $3,333 beginning on
October 1, 1999.
NOTE 10--INCOME TAXES
The Company had no tax provision for the years ended September 30, 2000 and
1999.
The effective tax rate on income (loss) before income taxes differed from the
federal statutory tax rate. The following summary reconciles income taxes at the
federal statutory tax rate with the actual taxes and the effective tax rate:
<TABLE>
<CAPTION>
September 30,
----------------------
2000 1999
------- --------
<S> <C> <C>
Federal statutory tax rate (34)% 34%
Permanent differences (14) -
Change in valuation allowance 48 (34)
------- --------
Effective tax rate -% -%
======= ========
</TABLE>
Deferred tax assets as of September 30, 1999 were $2,819,381. A valuation
allowance of 2,569,381 was provided. The decrease in the net deferred tax asset
of 250,000 as of September 30, 1999 was related to the discontinued operations
(see Note 11).
F-15
<PAGE> 33
CAMINOSOFT CORP.
NOTES TO FINANCIAL STATEMENTS
NOTE 10--INCOME TAXES (CONTINUED)
At September 30, 2000, the Company has available net operating loss
carryforwards of approximately $8,000,000 for federal income tax purposes, which
expire in varying amounts through 2020. The temporary differences between assets
reported for financial statements and their related tax basis amounted to
approximately $8,700,000. These differences give rise to a deferred tax asset of
approximately $3,000,000. Due to the uncertainty of the ultimate realization of
the deferred tax assets, a valuation allowance of approximately $3,000,000 was
provided at September 30, 2000.
NOTE 11--DISCONTINUED OPERATIONS AND SALE OF FUSING AGENT AND TONER BUSINESS
On January 14, 2000, the Company's Board of Directors adopted a plan to sell the
Fusing Agent business and liquidate and discontinue the high speed printer parts
and equipment sales business. In January 2000, the Company sold its fusing agent
business including inventory and work in process on hand at the supplier's plant
in Chino, California and exclusive right to the Company's fusing agent patent
number 5,333,042 to the Bradshaw Group. Upon closing the Company received
$550,000 in cash for the sale. Accordingly, the Company wrote off the balance of
the fusing agent patent in the amount of $414,951. Profits and losses from the
current year sales and sale of the fusing agent business including the
write-offs of the patent and the deferred tax asset were included in
discontinued operations.
In June 2000, the Company sold the parts and equipment inventory from its Los
Angeles warehouse. The Company has closed the warehouse and all expense and
profit from the liquidation have been included in discontinued operations. The
amount paid to the Company for the assets was less than $10,000.
General and administrative expenses relating to the fusing agent business have
been included in discontinued operations for the year ended September 30, 1999.
NOTE 12--SOFTWARE
On September 17, 1999, the Company acquired the assets (the "Camino Assets") of
Camino Software Systems Inc. ("Camino") for 468,000 shares of the Company's
common stock valued at $187,200 and assumed $315,172 of certain Camino
liabilities. The Camino Assets consisted of the name, Camino Software Systems,
Inc., the data storage management software, certain business contracts and
intangible personal property. The Company has allocated all amounts paid and
assumed in the amount of $502,372 to the cost of software. The software is being
amortized over seven years. Net book value of software at September 30, 2000 and
1999 is $430,605 and $502,372, respectively.
NOTE 13--GAINS ON LEGAL AND INSURANCE SETTLEMENTS
During the year ended September 30, 1999, the Company received $145,000 in
settlement of its claims as a plaintiff against one of the defendants in an
anti-trust action involving various defendants. The gain of $121,529 is
presented net of $23,471 of legal fees related to the case. This amount is
included in discontinued operations for the year ended September 30, 1999.
During the year ended September 30, 2000, the Company received $950,000 in
settlement of its claim against defendants in an anti-trust action. This amount
is included in discontinued operations for the year ended September 30, 2000.
During the year ended September 30, 2000, the Company received $132,500 as an
insurance claim, which is included in miscellaneous income.
F-16
