<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended November 30, 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
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
Baysham Court, Sellack, Ross-on-Wye, Herefordshire, England Hr9 6QR
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(Address of principal executive offices)
(011) 44-1-989-563473
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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 January 10, 1998, there were 2,642,375 shares of Class A Common Stock
issued and outstanding.
TOTAL PAGES IN THIS REPORT: 14 (including cover page & Exhibits)
1
<PAGE>
CAM DESIGNS, INC.
INDEX
Page No.
PART 1 - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements (Index) 1
Consolidated Balance Sheet as of
November 30, 1998 2-3
Consolidated Statements of Earnings for the
Six Months Ended November 30, 1998 and 1997 4
Consolidated Statements of Cash Flows for
the Six Months ended November 30, 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
<PAGE>
CAM Designs Inc and Subsidiaries
Unaudited Condensed Consolidated Balance Sheet
<TABLE>
<CAPTION>
November 30 1998 May 31 1998
$ $
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents 3,065
Contract billings receivable 25,000 2,626,267
Inventories 704,918
Other current assets 245,297
---------------- ---------------
Total current assets 25,000 3,579,547
Fixed assets
Investments 1,708
Property and machinery:
Freehold property 326,465
Leasehold property 535,945
Plant and machinery 10,558,872
Less accumulated depreciation (6,482,240)
---------------- ---------------
Net property, plant and machinery 4,939,042
---------------- ---------------
Goodwill, less accumulated
amortisation 46,555 46,555
Deferred tax asset 65,498
---------------- ---------------
71,555 8,632,350
---------------- ---------------
</TABLE>
<PAGE>
CAM Designs Inc and Subsidiaries
Unaudited Condensed Consolidated Balance Sheet
<TABLE>
<CAPTION>
November 30 1998 May 31, 1998
<S> <C> <C>
$ $
Liabilities
Current liabilities
Bank Overdraft 38,650 1,846,708
Current instalments of obligations
under bank loan 19,361
Current instalments of obligations
under capital leases 845,209
Current instalment of obligations
under loan 199,988
Billings in excess of costs and
estimated earnings on uncompleted - -
contracts
Trade accounts payable 105,000 1,710,078
Income taxes payable - -
Accrual and other expenses 5,000 3,109,355
Promissory notes - -
----------------- ----------------
Total current liabilities 148,650 7,730,699
Obligations under capital leases
excluding current instalments 213,603
Obligations under bank loan
excluding current instalments 364,135
----------------- ----------------
Total liabilities 148,650 8,308,437
----------------- ----------------
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
Accumulated deficit (5,847,114) (5,683,389)
Treasury stock: 75,000 common stock at cost (475,000) (475,000)
----------------- ----------------
Total stockholders' equity -77,095 323,913
----------------- ----------------
71,555 8,632,350
================= ================
</TABLE>
See accompanying notes to unaudited condensed consolidated financial
statements.
<PAGE>
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.
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
<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
November 30 1997 November 30 1998
$ $
<S> <C> <C>
Cash flows from operating
activities:
Net profit/(loss) (855,117) (163,725)
Adjustments to reconcile
net cash provided by
operating activities:
Depreciation 241,334 0
Change in operating assets
and liabilities:
Change in receivables 220,631 0
Change in Other Current Assets (857,557) 0
Change in accounts payable (859,295) 0
Change in other liabilities (227,192) 0
---------------- -----------------
Net cash provided by operating
activities (2,337,196) (163,725)
---------------- -----------------
Cash flows from investing
activities:
Purchases of plant and equipment (479,418) 0
---------------- -----------------
Net cash used in investing
activities: (479,418) 0
---------------- -----------------
Cash flows from financing
activities:
Repurchase of stock -
Repayment of borrowings (12,975) 0
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Repayment of promissory note (214,000) -
Capital element of finance lease
repayments (135,445) 0
Bank Overdraft 2,596,050 0
---------------- -----------------
Net cash provided/(used in) by
financing activities 2,233,630 0
---------------- -----------------
Effect of receivership of UK Co.'s (566,386)
see note below
Net increase/(decrease) in
cash and cash equivalents
Cash and cash equivalents at
beginning of period 545,515 (1,846,708)
Write off of bank overdraft -see below 1,642,680
Movement in Cash (582,984) 402,661
Exchange gain 63,399 (38,650)
---------------- -----------------
Cash and cash equivalents at
end of period 25,930 (38,000)
================ =================
</TABLE>
See accompanying notes to unaudited condensed consolidated financial
statements.
In view of the receivership of the major UK subsidiaries it would be misleading
to account for cash flow movements through operating activities other than the
loss for the period.
Effect of receivership of UK Co.'s where assets/liabilities in UK have been
extinquished.
<TABLE>
<S> <C>
Write off of : Net current assets (3,554,547)
:Investments (1,708)
:Fixed Assets (4,939,042)
:Deferred Tax (65,498)
:Liabilities 6,351,729
:Bank Overdraft 1,642,680
TOTAL NET EFFECT (566,386)
</TABLE>
<PAGE>
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 August 30, 1998 2,643 1 6,242,375 237,283 (5,916,649) (475,000) 90,653
Net Loss - - - - 69,535 - 69,535
Dividends declared - - - - - - -
Acquisition of 75,000
common shares - - - - - - -
Exchange Difference - - - (237,283) - - (237,283)
----------- -------------- ------------ ------------- ------------ ------------ --------------
Balance at Nov. 30 1998 2,643 1 6,242,375 0 (5,847,114) (475,000) (77,095)
----------- -------------- ------------ ------------- ------------ ------------- --------------
</TABLE>
See accompanying notes to the unaudited consolidated condensed financial
statements.
<PAGE>
Management Discussion and Analysis of Financial Condition and Result of
Operations
General
On October 22, 1998, the Company's United Kingdom based subsidiaries,
constituting all of its assets and operations, were placed into receivership in
the UK pursuant to Section 48 of the Insolvency Act of 1986. This receivership
was caused by an erosion in the business operations of the subsidiaries caused
by the deterioration of the market for its goods and services in the Far East,
as well as the finalization of the major troubled contract for Rolls Royce,
whereupon the new owners of Rolls Royce advised the Company that no further
contracts relating to the completed contract would be forthcoming in the
immediate future. This, in turn, caused management to close operations at the
facility in Warwick, England and caused these entities to incur significant
labor and other termination costs. Following appointment of the receiver,
certain of the existing contracts were completed and the businesses were
advertised for sale. On or about November 27, 1998, the manufacturing business
and plant and machinery of the UK subsidiaries were sold to Group Lotus and the
funds maintained by the UK entities for payment of outstanding indebtedness.
The assets of the special vehicle division were not purchased and remain
available for sale, although any funds generated by such a sale would not go to
the Company but would be used in the UK receivership.
In view of the foregoing, the Company, having severed its United
Kingdom assets and operations, is attempting to clear its liabilities, collect
cash proceeds represented by several assets, and prepare to seek either an
acquisition or to be, itself, acquired by another entity. The remaining assets
of the Company are comprised of (i) a potential stream of income of up to
$150,000 under a contract of sale, based upon future sales during the next
several years deriving from the Company's previous sale of its Reucker
Manufacturing Co. operations in Detroit, Michigan, and (ii) approximately
$25,000-35,000 due and owing it from a contract with a U.S. based auto entity.
The amount, if any, of the future earnings which may actually be derived under
the Reucker contract cannot be presently ascertained. As for the second
contract, the Company has been attempting to collect sums it alleges are owing
thereunder but has been frustrated by the debtor's refusal, as at this date, to
make payment. Accordingly, no assurance can be made that any part of the
foregoing sums will actually be paid to the Company.
There are estimated to be due and owing by the Company approximately
$105,000 to suppliers, professionals and others. In addition, there are two
claims pending by a former public relations firm, and a former financial
consultant, respectively. The Company is vigorously contesting the claims
against it (the first of which is in litigation) and is asserting cross-claims
and/or counterclaims; however, the outcome of these matters cannot be
predicted. The Company plans to negotiate with persons to whom monies are due,
in an attempt to reduce the sum due and owing to these persons or entities
and/or settle the same with a payment in cash and/or shares of the Company's
common stock. No assurance can be made that the foregoing accounts payable and
claims will be ultimately settled by the Company on terms acceptable to it. If
the Company is to conduct a search for an acquisition or merger partner, it
will require funding to do so and to
<PAGE>
negotiate and/or consummate any such transaction.
Statement of Operations
Since the UK assets were placed in receivership and substantially
disposed of during the quarter ended November 30, 1998, and these subsidiaries
no longer are operating, the Company's results of operations for this period,
exclude such discontinued operations. The Company's revenues during the quarter
ended November 30, 1998 were approximately $2,000,000 and a small profit before
tax effects was $69,535. The loss for the half year before tax effects was some
$163,725.
Liquidity and Capital Resources
For reasons indicated above, the Company's liquidity is nil, it has
negative working capital, and it must seek sources of both temporary and
long-term financing for the continuation of its existence and for the purpose
of implementing its search for a merger or other strategic partner. As noted
above, there can be no assurance that such source of financing will be
available for the Company, htat it will be able to enter into a new business,
or that it will survive as a viable entity.
Net Operating Losses
Because the losses were largely generated by the UK discontinued
operations, it does not presently appear likely that the Company will have the
availability of significant loss carryforwards applicable against future U.S.
tax liabilities, if any.
Year 2000 Compliance
The Company had previously organized a special team of employees in its
computer technology section to examine year 2000 considerations. The
preliminary report of this group was that year 2000 issues would not be
significant or material to the operations of the Company since substantially
all of the computer software utilized was ungradable to easily eliminate any
timing issues and the cost of upgrades was covered by existing contracts with
the respective software vendors. In light of the Company's reduced operations,
these considerations now appear to be moot.
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
<PAGE>
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 revenues from
contracts, inability to reach satisfactory agreements with creditors, and
inability to identify and conclude a transaction with a strategic or other
partner.
<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 October 21, 1998.
<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: January 29, 1999
CAM DESIGNS, INC.
/s/ John R. Davidson
--------------------
John R. Davidson
Chairman of the Board,
President and Chief Financial Officer
(Principal Financial Officer)
<PAGE>
Exhibit A
CAM Designs Inc
EPS Calaculations for period September 1, 1998 to August 30, 1998
Total loss as per unaudited consolidated interim accounts
Add: Net assumed interest income for whole period
<TABLE>
<S> <C>
69,535
--------------
Adjusted net profit 69,535
Net loss per total weighted average 69,535
--------------
= $0.03 cents/shares
EPS Calculations for period June 1, 1998 to November 30, 1998
Total income as per unaudited consolidated interim accounts
Add: Net assumed interest income for whole period (163,725)
--------------
Adjusted net income
(163,725)
Net Loss per total weighted average
(163,725)
--------------
= $0.06 cents/shares
</TABLE>
<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> 6-MOS
<FISCAL-YEAR-END> MAY-31-1999
<PERIOD-START> SEP-1-1998
<PERIOD-END> NOV-30-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 25,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 25,000
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 25,000
<CURRENT-LIABILITIES> 148,650
<BONDS> 0
<COMMON> 2,643
0
1
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 71,155
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (163,725)
<INCOME-TAX> 0
<INCOME-CONTINUING> (163,725)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (163,725)
<EPS-PRIMARY> (0.06)
<EPS-DILUTED> (0.06)
</TABLE>
