<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended February 28, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 or 15(d) OF THE
EXCHANGE ACT
For the transition period from to
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Commission file number 1-13886
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CAM DESIGNS INC.
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(Exact name of small business issuer as specified in its charter)
Delaware 75-2257039
-------- ----------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
Birmingham Road, Allesley Coventry CV59QE
-----------------------------------------------
(Address of principal executive offices)
(011) 44-203-407-700
---------------------------
(Issuer's telephone number)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
--- ---
As of February 28, 1998, there were 2,542,857 shares of Class A Common Stock
issued and outstanding.
TOTAL PAGES IN THIS REPORT: 15 (including cover page & Exhibits)
<PAGE>
CAM DESIGNS, INC.
INDEX
Page No.
PART 1 - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements (Index) 1
Consolidated Balance Sheet as of
February 28, 1998 2-3
Consolidated Statements of Earnings for the
Three Months Ended February 28, 1998 and 1997 4
Consolidated Statements of Cash Flows for
the Nine Months ended February 28, 1998 and 1997 5-6
Consolidated Statement of Shareholder's Equity 7
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9-10
PART II - OTHER INFORMATION
Item 3. Exhibits and Reports on Form 8-K 11
SIGNATURES 15
1
<PAGE>
<TABLE>
<CAPTION>
CAM Designs Inc and Subsidiaries
Unaudited Condensed Consolidated Balance Sheet
February 28, 1998 May 31, 1997
$ $
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents 36,068 545,515
Contract billings receivable 4,147,322 4,289,450
Inventories 1,638,160 562,401
Other current assets 1,424,910 736,359
---------------- ---------------
Total current assets 7,246,460 6,133,725
Fixed assets
Investments 1,721 1,721
Property and machinery:
Freehold property 328,469 328,218
Leasehold property 512,994 538,822
Plant and machinery 10,223,814 9,392,186
Less accumulated depreciation (6,677,801) (5,881,455)
---------------- ---------------
Net property, plant and machinery 4,387,476 4,377,771
---------------- ---------------
Goodwill, less accumulated
amortisation 74,410 74,488
Deferred tax asset 205,588 205,501
---------------- ---------------
11,915,655 10,793,206
---------------- ---------------
</TABLE>
2
<PAGE>
CAM Designs Inc and Subsidiaries
Unaudited Condensed Consolidated Balance Sheet
<TABLE>
<CAPTION>
February 28, 1998 May 31, 1997
$ $
<S> <C> <C>
Liabilities
Current liabilities
Bank Overdraft 2,633,433 350,606
Current instalments of obligations
under bank loan 19,480 19,465
Current instalments of obligations
under capital leases 648,848 648,353
Current instalment of obligations
under loan 99,604 147,656
Billings in excess of costs and
estimated earnings on uncompleted
contracts - 510,072
Trade accounts payable 2,533,984 3,229,899
Income taxes payable - -
Accrual and other expenses 3,679,344 3,007,975
Promissory notes - 214,000
-------------- ---------------
Total current liabilities 9,614,693 8,128,026
Obligations under capital leases
excluding current instalments 221,953 468,833
Obligations under bank loan
excluding current instalments 214,913 228,981
-------------- ---------------
Total liabilities 10,051,559 8,825,840
-------------- ---------------
Stockholders' equity
Class 'A' common stock, $0.001 par value
Authorised 7,000,000 issued 2,542,857 2,543 2,250
Additional paid-in capital 5,273,222 4,229,765
Currency translaiton adjustment (47,599) 171,222
Treasury Stock (475,000) (475,000)
Retained earnings (2,889,070) (1,960,871)
-------------- ---------------
Total stockholders' equity 1,864,096 1,967,366
-------------- ---------------
11,915,655 10,793,206
============== ===============
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
3
<PAGE>
CAM Designs Inc and Subsidiaries
Unaudited Condensed Consolidated Statements of Operations
<TABLE>
<CAPTION>
Dec 1 to June 1 to Dec 1 to June 1 to
February 28, February 28, February 28, February 28,
1997 1997 1998 1998
$ $ $ $
<S> <C> <C> <C> <C>
Revenue
Automotive industry 5,249,999 14,873,904 4,658,713 13,985,888
Aerospace industry 714,742 2,217,142 544,501 1,689,701
Placement of Personnel 962,637 2,755,927 1,470,723 4,871,649
------------- ------------- ------------- ------------
6,927,378 19,846,973 6,673,937 20,547,238
------------- ------------- ------------- ------------
Operating Costs and expenses
Selling general and
administrative expenses 7,307,132 19,314,572 6,672,819 21,297,821
Depreciation 189,225 539,234 188,100 479,308
------------- ------------- ------------- ------------
7,496,357 19,853,806 6,860,919 21,777,129
------------- ------------- ------------- ------------
Operating profit (568,979) (6,833) (186,982) (1,229,891)
Other income/expense - - - -
Investment income 15,288 59,995 23,191
Interest expense (18,828) (35,398) (86,131) (304,531)
Gain on sale of equipment - - - -
------------- ------------- ------------- ------------
Income before taxes (572,519) 17,764 (273,113) (1,511,231)
------------- ------------- ------------- ------------
Income taxes Provision 193,080 (6,000) 80,000 463,000
------------- ------------- ------------- ------------
Net income (379,439) 11,764 (193,113) (1,048,231)
------------- ------------- ------------- ------------
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
<TABLE>
<S> <C> <C> <C> <C>
Net Earnings Per Share of
Common Stock and Common
Stock Equivalent - 0.038 - -
Net loss per Share of Common ($0.17) (0.08) (0.46)
Stock 0 - - -
Weighted Average Common
Shares and Common Stock
equivalents - 2,641,051 - -
Weighted Average Common
Shares 2,175,000 - 2,295,265 2,264,811
</TABLE>
4
<PAGE>
CAM Designs Inc
Unaudited Condensed Consolidated Statements of Cash Flow
<TABLE>
<CAPTION>
CAM Designs CAM Designs
Inc Inc
June 1 to June 1 to
February 28, 1997 Februay 28, 1998
$ $
<S> <C> <C>
Cash flows from operating
activities:
Net profit/(loss) 11,724 (1,048,231)
Adjustments to reconcile
net cash provided by
operating activities:
Depreciation 539,234 479,308
Change in operating assets
and liabilities:
Change in receivables 971,155 149,858
Change in Other Current Assets (2,570,444) (1,692,104)
Change in accounts payable 355,734 (724,135)
Change in other liabilities (1,044,724) (93,289)
------------ ------------
Net cash provided by operating
activities (1,737,321) (2,928,593)
------------ ------------
Cash flows from investing
activities:
Purchases of plant and equipment (633,645) (428,179)
------------ ------------
Net cash used in investing
activities: (633,645) (482,179)
------------ ------------
Cash flows from financing
activities:
Repurchase of stock (475,000) -
Repayment of borrowings (27,587) (14,535)
</TABLE>
5
<PAGE>
<TABLE>
<S> <C> <C>
Repayment of promissory note - (214,000)
Capital element of finance lease
repayments (383,106) (252,301)
Stock Issue - 1,043,750
Bank Overdraft - 2,324,892
------------ ------------
Net cash provided/(used in) by
financing activities (885,693) 2,887,806
------------ ------------
Net increase/(decrease) in
cash and cash equivalents
Cash and cash equivalents at
beginning of period 4,432,278 545,515
Movement in Cash (3,256,658) (522,966)
Exchange gain (72,534) 13,519
------------ ------------
Cash and cash equivalents at
end of period 1,248,154 36,068
============ ============
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
6
<PAGE>
CAM Designs Inc
Unaudited Condensed Consolidated Statements of Shareholders' Equity
<TABLE>
<CAPTION>
Additional Total
Treasury Common paid in Retained Stock-holders
Stock Stock Capital earnings Equity
$ $ $ $ $
<S> <C> <C> <C> <C> <C>
CAM Designs Inc
Balance at November 30, 1997 (475,000) 2,250 4,229,765 (2,695,957) 1,061,058
Additional paid in capital - 293 1,043,457 1,043,750
Loss for the period - - - (193,113) (193,113)
Exchange Difference - - - (47,599) (47,599)
---------- -------- --------- ----------- -----------
Balance at November 30, 1997 (475,000) 2,543 5,273,222 (2,936,669) 1,864,096
---------- -------- --------- ----------- -----------
</TABLE>
See accompanying notes to the unaudited consolidated condensed financial
statements.
7
<PAGE>
CAM Designs Inc and Subsidiaries
Notes to unaudited condensed consolidated financial statements
1. Organization
On September 9, 1994, CAM Designs Inc. was incorporated as MGA
Holdings Inc. The company name was changed to CAM Designs Inc ("CAM")
on April 18, 1995. CAM is a holding company and has not engaged in
any commercial operations during the period since incorporation.
On July 27, 1995 the shareholders' of MGA Holdings Limited ("MGA")
surrendered 100% of the issued shares of MGA (63,200 cumulative
convertible participating preference shares of (pound)1 each, 54,551
ordinary shares of (pound)1 each) to CAM. As a result, MGA became a
wholly owned subsidiary of CAM.
The economic environment in which MGA operates is in the United
Kingdom and hence its operating currency is the UK pound sterling
((pound)).
2. Basis of presentation
The accompanying unaudited condensed consolidated statements have
been prepared in accordance with generally accepted accounting
principles for interim financial information and pursuant to the
rules and regulations of the Securities and Exchange Commission.
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete
financial statements. For further information, refer to the financial
statements and footnotes thereto included in the Company's annual
report for the fiscal year ended May 31, 1997.
In the opinion of management, the unaudited condensed consolidated
financial statements contain all adjustments, consisting only of normal
recurring adjustments, considered necessary to present fairly the
Company's financial position at February 28, 1998 and 1997 and cash
flows for the periods ended February 28, 1998 are not necessarily
indicative of the results to be expected for the entire fiscal year
ending May 31, 1998.
Profit and Loss Accounts in foreign currencies are translated into US
Dollars at average rates for the relevant according periods. Assets
and Liabilities are translated at exchange rates ruling at the date
of the Group Balance Sheet.
8
<PAGE>
Management's Discussion and Analysis of Financial Condition and Result
of Operations
On July 27, 1995, both the consummation of the Company's initial public offering
and its reorganisation whereby the Company acquired all of the capital stock of
CAM Designs Ltd (formerly MGA Holdings Ltd) took place. For purposes of
permitting a comparison to prior periods, this section utilises the results for
the Company's fiscal quarters for comparison with those of the comparable
quarter of the Company's prior fiscal year, and ignores the actual date of
acquisition for accounting comparison purposes.
3 Months ended February, 1998 as compared to 3 Months ended February 28, 1997
Summary of Operations
Sales for the quarter totalled $6.7 million compared to $6.9 million for the
same period last year. Year to date revenues of $20.5 million compared to $19.8
million last year, and represents a rise of 4%. This was despite the closure of
the Company's Sheet metal facility in Quarter 1 and under utilisation of
released capacity due to the gradual completion of the Rolls Royce project.
Operating costs totalled $6.9 million representing a reduction of 8% on the same
period last year, further showing the long term potential benefits of the recent
realignment and cost reduction program.
After tax losses of $0.2 million have been further reduced compared to previous
quarters, despite a prolonged holiday period during the Quarter, which resulted
in lost revenues, and continued significant direct and indirect costs associated
with the Company's working capital difficulties.
Management considers core skills and minimum capacity levels need to be
maintained for future operations, but further additional cost reductions are
likely to be enacted in Quarter 4 to further reduce the fixed cost base and
establish a enhanced and flexible production capacity for 1998/99.
Now that the additional equity investments have been secured, management is
confident that new opportunities can be progressed and as a result of a mixture
of internal and acquisition growth, continued close control of fixed and
variable costs, and aggressive sales activities, operations can return to
improving profitability in 1998/99.
9
<PAGE>
Liquidity and Capital Resources
New equity of $1.0 million was completed during the period and a further $1.2
million in March and has resulted in the extension of banking facilities
totalling $2.2 million. Additional loan facilities are currently being discussed
to provide additional working capital funding to meet the Company's strategic
growth objectives.
Further equity funding options are also being reviewed to ensure that both
management forecasts and NASDAQ listing requirements can be maintained.
Year 2000 Compliance
The Company has organized a special team of employees in its computer technology
section to examine year 2000 considerations. The preliminary report of this
group is that year 2000 issues will not be significant or material to the
operations of the Company since substantially all of the computer software being
utilized is upgradable to easily eliminate any timing issues and the cost of
upgrades is covered by existing contracts with the respective software vendors.
The computer hardware equipment is generally free of any year 2000 issues except
for a server operating on Novell software, which is easily upgradable. Much of
the Company's computer originated data relates to CAD and CAM technology which
is not time sensitive and, accordingly, is not subject to year 2000
considerations. Moreover, the Company does not believe that any issues that
customers or suppliers may encounter with their own year 2000 considerations
will be relevant to the Company's operations or to its interaction with such
persons or firms since, once again, the Company's basic computer information
interchange relates to CAD and/or CAM material.
Forward looking Statements
This reports contains certain forward looking statement within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act, which are
intended to be covered by the safe harbours created thereby. Although the
Company believes that the assumptions underlying the forward-looking statements
contained herein are reasonable, any of the assumptions could be inaccurate,
,and therefore, there can be no assurance that the forward looking statements in
this report will prove to be accurate. Factors that could cause actual results
to differ from the results specifically discussed in the forward looking
statements included, but are not limited to the absence of anticipated contracts
or higher than historical costs incurred in performance of contracts.
10
<PAGE>
Part II
Other Information
Item 6. Exhibits
(a) Exhibits
(i) Calculation of Earnings Per Share - Exhibit 11.
(ii) Edgar-Financial Data Schedule - Exhibit 27.
8-K Reports
(b) The following reports on Form 8-K were filed during
the quarter in reference.
(i) Form 8-K Report dated January 19, 1998; and
(ii) Form 8-K Report dated February 12, 1998.
11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report on Form 10-Q to be signed on its behalf
by the undersigned thereto duly authorized.
Dated: April 9, 1998
CAM DESIGNS, INC.
/s/ John R. Davidson
------------------------------
John R. Davidson
Chairman of the Board,
President and Chief Executive Officer
(Principal Executive Officer)
/s/ Robert A. Righton
------------------------------
Robert A. Righton
Chief Financial Officer and Treasurer
(Principal Financial Officer)
12
<PAGE>
Exhibit A
CAM Designs Inc
EPS Calaculations for period December 1, 1997 to February 28, 1998
Total loss as per unaudited consolidated interim accounts (193,113)
Add: Net assumed interest income for whole period -
------------
Adjusted net loss (193,113)
Net loss per total weighted average (193,113)
------------
= ($0.08) cents/shares
EPS Calculations for period June 1, 1997 to February 28, 1998
Total loss as per unaudited consolidated interim accounts (1,048,231
Add: Net assumed interest income for whole period -
------------
Adjusted net income (1,048,231
Net Loss per total weighted average (1,048,231
------------
= ($0.46) cents/shares
13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
consolidated financial statements and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> JUN-1-1997
<PERIOD-END> FEB-28-1998
<CASH> 36,068
<SECURITIES> 0
<RECEIVABLES> 4,147,322
<ALLOWANCES> 0
<INVENTORY> 1,638,160
<CURRENT-ASSETS> 7,246,460
<PP&E> 11,065,277
<DEPRECIATION> 6,677,801
<TOTAL-ASSETS> 11,915,693
<CURRENT-LIABILITIES> 9,614,693
<BONDS> 0
<COMMON> 1,864,096
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 11,915,655
<SALES> 20,547,238
<TOTAL-REVENUES> 20,547,238
<CGS> 21,777,129
<TOTAL-COSTS> 21,777,129
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 304,531
<INCOME-PRETAX> (1,511,231)
<INCOME-TAX> 463,000
<INCOME-CONTINUING> (1,048,231)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,048,231)
<EPS-PRIMARY> (0.46)
<EPS-DILUTED> (0.46)
</TABLE>
