<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 August 31, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 or 15(d) OF THE
EXCHANGE ACT
For the transition period from ________ to ________
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
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
Birmingham Road, Allesley Coventry CV59QE
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(Address of principal executive offices)
(011) 44-203-407-700
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(Issuer's telephone number)
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(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 September 10, 1998, there were 2,669,053 shares of Class A Common Stock
issued and outstanding.
TOTAL PAGES IN THIS REPORT: 14 (including cover page & Exhibits)
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CAM DESIGNS, INC.
INDEX
Page No.
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PART 1 - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements (Index) 1
Consolidated Balance Sheet as of
August 31, 1998 2-3
Consolidated Statements of Earnings for the
Three Months Ended August 31, 1998 and 1997 4
Consolidated Statements of Cash Flows for
the Three Months ended August 31, 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 12
1
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CAM Designs Inc and Subsidiaries
Unaudited Condensed Consolidated Balance Sheet
August 31, 1998 May 31 1998
$ $
Assets
Current assets
Cash and cash equivalents 813 3,065
Contract billings receivable 2,450,857 2,626,267
Inventories 734,758 704,918
Other current assets 229,256 245,297
----------- -----------
Total current assets 3,415,684 3,579,547
Fixed assets
Investments 1,708 1,708
Property and machinery:
Freehold property 326,465 326,465
Leasehold property 535,945 535,945
Plant and machinery 10,632,672 10,558,872
Less accumulated depreciation (6,657,720) (6,482,240)
----------- -----------
Net property, plant and machinery 4,837,362 4,939,042
----------- -----------
Goodwill, less accumulated
amortisation 46,555 46,555
Deferred tax asset 65,498 65,498
----------- -----------
8,366,807 8,632,350
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2
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CAM Designs Inc and Subsidiaries
Unaudited Condensed Consolidated Balance Sheet
<TABLE>
<CAPTION>
August 31, 1998 May 31, 1998
$ $
<S> <C> <C>
Liabilities
Current liabilities
Bank Overdraft 2,642,762 1,846,708
Current instalments of obligations
under bank loan 19,361 19,361
Current instalments of obligations
under capital leases 730,409 845,209
Current instalment of obligations
under loan 199,988 199,988
Billings in excess of costs and
estimated earnings on uncompleted - -
contracts
Trade accounts payable 2,591,438 1,710,078
Income taxes payable - -
Accrual and other expenses 1,524,298 3,109,355
Promissory notes - -
---------- ----------
Total current liabilities 7,708,256 7,730,699
Obligations under capital leases
excluding current instalments 213,603 213,603
Obligations under bank loan
excluding current instalments 354,295 364,135
---------- ----------
Total liabilities 8,276,154 8,308,437
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Stockholders' equity
Class 'A' common stock, $0.001 par value
Authorised 9,000,000 issued 2,642,859 shares in 1998 & 2,250,000 shares in 1997 2,643 2,643
Class 'A' convertible Preferred Stock, $0.001 par value
Authorised 1,000,000 issued 800 shares in 1998 1 1
Additional paid-in capital 6,242,375 6,242,375
Retained earnings
Currency tranlation adjustment 237,283 237,283
Accumulated deficit (5,916,649) (5,683,389)
Treasury stock: 75,000 common stock at cost (475,000) (475,000)
---------- ----------
Total stockholders' equity 90,653 323,913
---------- ----------
8,366,807 8,632,350
========== ==========
</TABLE>
See accompanying notes to unaudited condensed consolidated financial
statements.
3
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CAM Designs Inc and Subsidiaries
Unaudited Condensed Consolidated Statements of Operations
<TABLE>
<CAPTION>
June 1 to June 1 to June 1 to June 1 to
August 31, August 31, August 31, August 31,
1997 1997 1998 1998
$ $ $ $
<S> <C> <C> <C> <C>
Revenue
Automotive industry 4,892,912 4,892,912 1,980,561 1,980,561
Aerospace industry 605,320 605,320 496,108 496,108
Placement of Personnel 1,674,374 1,674,374 1,773,648 1,773,648
---------- ---------- ---------- ----------
7,172,606 7,172,606 4,250,317 4,250,317
---------- ---------- ---------- ----------
Operating Costs and expenses
Selling general and
administrative expenses 7,716,490 7,716,490 4,374,872 4,374,872
Depreciation 186,504 186,504 175,480 175,480
---------- ---------- ---------- ----------
7,902,994 7,902,994 4,550,352 4,550,352
---------- ---------- ---------- ----------
Operating profit
Other income/expense (730,388) (730,388) (300,035) (300,035)
Investment income 23,097 23,097 - -
Interest expense (29,600) (29,600) 48,114 48,114
Gain on sale of equipment - - - -
---------- ---------- ---------- ----------
Income before taxes (736,891) (736,891) (348,149) (348,149)
---------- ---------- ---------- ----------
Income taxes Provision (220,000) (220,000) 114,889 114,889
---------- ---------- ---------- ----------
Net income (516,891) (516,891) (233,260) (233,260)
---------- ---------- ---------- ----------
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
<TABLE>
<S> <C> <C>
Net Earnings Per Share of
Common Stock and Common
Stock Equivalent (0.24) (0.09)
Weighted Average Common
Shares and Common Stock 2,524,538 2,669,053
equivalents
</TABLE>
4
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CAM Designs Inc
Unaudited Condensed Consolidated Statements of Cash Flow
CAM Designs CAM Designs
Inc Inc
June 1 to June 1 to
August 31, 1997 August 31, 1998
$ $
---------- ----------
Cash flows from operating
activities:
Net profit/(loss) (516,890) (233,260)
Adjustments to reconcile
net cash provided by
operating activities:
Depreciation 186,504 175,480
Change in operating assets
and liabilities:
Change in receivables (196,978) (175,410)
Change in Other Current Assets (151,722) (454,529)
Change in accounts payable (574,637) 881,360
Change in other liabilities (680,960) (1,585,057)
---------- ----------
Net cash provided by operating
activities (1,934,684) (1,391,416)
---------- ----------
Cash flows from investing
activities:
Purchases of plant and equipment (115,263) (73,800)
---------- ----------
Net cash used in investing
activities: (115,263) (73,800)
---------- ----------
Cash flows from financing
activities:
Repurchase of stock -
Repayment of borrowings (52,074) (9,840)
5
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Repayment of promissory note (214,000) -
Capital element of finance lease
repayments (67,460) (114,800)
Bank Overdraft 1,954,806 793,802
---------- ----------
Net cash provided/(used in) by
financing activities 1,621,272 669,162
---------- ----------
Net increase/(decrease) in
cash and cash equivalents
Cash and cash equivalents at
beginning of period 545,515 (1,846,708)
Movement in Cash (428,675) (796,054)
Exchange gain 8,222 -
---------- ----------
Cash and cash equivalents at
end of period 125,062 (2,642,762)
========== ==========
See accompanying notes to unaudited condensed consolidated financial
statements.
6
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CAM Designs Inc
Unaudited Condensed Consolidated Statements of Shareholders' Equity
<TABLE>
<CAPTION>
Additional Currency Accumulated Treasury Total
Treasury Convertible paid in translation deficit stock stockholders
Stock preferred stock Capital adjustment equity
$ $ $ $ $ $ $
<S> <C> <C> <C> <C> <C> <C> <C>
CAM Designs Inc
Balance at May 31, 1998 2,643 1 6,242,375 237,283 (5,683,389) (475,000) 323,913
Net Loss - - - - (233,260) - (233,260)
Dividends declared - - - - - - -
Acquisition of 75,000
common shares - - - - - - -
Exchange Difference - - - - - - -
---------- ---------- ---------- ---------- ---------- ---------- ----------
Balance at August 30, 1998 2,643 1 6,242,375 237,283 (5,916,649) (475,000) 90,653
---------- ---------- ---------- ---------- ---------- ---------- ----------
</TABLE>
See accompanying notes to the unaudited consolidated condensed financial
statements.
7
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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 (pounds)1 each, 54,551
ordinary shares of (pounds)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 (pounds).
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, 1998.
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 August 31, 1998 and 1997 and cash
flows for the periods ended August 31, 1998 are not necessarily
indicative of the results to be expected for the entire fiscal year
ended May 31, 1999.
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 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 reorganization 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 utilizes
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 August 31,1998 as compared to 3 Months ended August 31, 1997
Summary of Operations
Sales for the group in the first quarter were $4.25 million against $7.2
million in the same period last year. This fall in sales is a result of the
closure of low margin divisions during fiscal year 1998. These divisions
comprised manual sheetmetal work and the Warwick facility, while the assets of
Ruecker (U.S.) were sold.
The Company incurred an operating loss during the first quarter of $348,149,
before tax benefits, despite the reduction in operating costs as a result of
its having reduced operations. The cost reduction efforts have successfully
reduced operating expenses but the Company must increase its revenues if it is
to restore profitability.
Liquidity and Capital Resources
The Company's liquidity as at August 31, 1998 showed cash and cash equivalents
of approximately $125,000 but this limited liquidity has further deteriorated
as at the date hereof. Accordingly, the Company's ability to continue in
business is dependent upon current efforts to secure additional equity and/or
refinance liabilities. There can be no assurance that such efforts will be
successful. Accordingly, Management is considering placing its U.K. operations
into receivership in the immediate future.
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 ungradable 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
ungradable. Much of the Company's computer originated data relates to CAD and
CAM technology which is not 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.
9
<PAGE>
Forward looking Statements
This report contains certain forward looking statements 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 harbors 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 contained 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, lack of
further debt and/or equity financing, the absence of anticipated contracts or
higher than historical costs incurred in performance of contracts.
10
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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 March 31, 1998.
11
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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: October 16, 1998
CAM DESIGNS, INC.
/s/ John R. Davidson
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John R. Davidson
Chairman of the Board,
President and Chief Executive Officer
(Principal Executive Officer)
/s/ Robert A. Righton
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Robert A. Righton
Chief Financial Officer and Treasurer
(Principal Financial Officer)
12
<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>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1999
<PERIOD-START> JUN-01-1998
<PERIOD-END> AUG-31-1998
<CASH> 813
<SECURITIES> 0
<RECEIVABLES> 2,450,857
<ALLOWANCES> 0
<INVENTORY> 734,758
<CURRENT-ASSETS> 3,415,684
<PP&E> 11,495,082
<DEPRECIATION> 6,657,720
<TOTAL-ASSETS> 8,366,807
<CURRENT-LIABILITIES> 7,708,256
<BONDS> 0
0
1
<COMMON> 2,643
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 8,276,154
<SALES> 4,250,317
<TOTAL-REVENUES> 4,250,317
<CGS> 4,550,352
<TOTAL-COSTS> 4,550,352
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 48,114
<INCOME-PRETAX> (248,149)
<INCOME-TAX> 114,889
<INCOME-CONTINUING> (348,149)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (233,260)
<EPS-PRIMARY> (0.09)
<EPS-DILUTED> (0.09)
</TABLE>
