UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
|X| ANNUAL REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended MAY 31, 1999
OR
|_| TRANSITION REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to _______
Commission File Number 1-13886
CAM DESIGNS INC.
(Exact name of registrant as specified in its charter)
Delaware 75-2257039
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4 Ash Way, Netherend, Lydney, Gloucestershire, GL15 6QA, England
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 011-44-171 691 9533
Securities registered under Section 12(b) of the Act: None.
Securities registered under Section 12(g) of the Act:
|_| Class A Common Stock, $.001 par value
|_| Redeemable Warrants to Purchase Class A Common Stock
|_| Units (consisting of 2 shares of Class A Common Stock and one Warrant)
(Title of class)
Indicate by check mark whether the registrant (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 |_| No |X|
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K 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-K or any amendment to this
Form 10-K. |_|
[Cover page 1 of 2 pages]
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As of December 27, 1999, the aggregate market value, based on the average
bid and asked prices of the issuer's voting stock (Class A Common Stock), held
by non-affiliates was approximately $60,000. Exclusion of shares held by any
person should not be construed to indicate that such person possesses the power,
direct or indirect, to direct or cause the direction of management or policies
of the issuer, or that such person is controlled by or under common control of
the issuer.
As of December 27, 1999, there were 7,044,053 shares of Class A Common
Stock outstanding.
Forward Looking Statements: This Report contains, or incorporates by reference,
certain statements that may be deemed "forward looking statements" within the
meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act. All statements, other than statements of historical facts, that address
activities, events or developments that the Company intends, expects, projects,
believes or anticipates will or may occur in the future are forward-looking
statements. Such statements are based on certain assumptions and assessments
made by management of the Company in light of its experience and its perception
of historical trends, current conditions, expected future developments and other
factors it believes to be appropriate. The forward-looking statements included
in this Report are also subject to a number of material risks and uncertainties,
including but not limited to economic, competitive, governmental and
technological factors affecting the Company's operations, markets, services and
prices, and other factors discussed in the Company's filings under the
Securities Act and the Exchange Act. Stockholders and prospective investors are
cautioned that such forward-looking statements are not guarantees of future
performance and that actual results, developments and business decisions may
differ from those envisaged by such forward-looking statements.
DOCUMENTS INCORPORATED BY REFERENCE:
NONE.
[Cover page 2 of 2 pages]
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PART I
Item 1. BUSINESS.
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 a 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, plant and
machinery sectors of the UK subsidiaries were sold by the receiver to Group
Lotus and the funds maintained by the UK entities for payment of outstanding
indebtedness.
In view of the foregoing, the Company, having disposed of its United
Kingdom assets and operations, is attempting to clear its liabilities, and
prepare to seek either an acquisition or to be, itself, acquired by another
entity.
There are estimated to be due and owing by the Company approximately
$156,384 to banks, professionals and others.
We also failed to file our periodic reports with the Securities and
Exchange Commission and, as a result, were delisted from the National
Association of Securities Dealers' Bulletin Board. We are attempting to update
our SEC reporting in order that we may become potentially attractive to a
privately-held company interested in becoming a publicly-held company, without
the costs and the time incurred in publicly distributing its securities.
Proposed Business.
We currently have no operations, no revenues, own no assets and we have
not engaged in any business activities since October 22, 1998. We intend to
restructure ourselves in order to be used as a "public shell" for a suitable
privately-held company with both a business history and operating assets that
has the intention to become public. We do not intend to combine with a
privately-held company determined to be an investment company that would then
subject our Company to the Investment Company Act of 1940, as amended.
We believe a privately-held company intending to merge, consolidate or
reorganize with us will have the advantage of acquiring an ownership interest in
a public company without the costs and the time that would be incurred when
conducting an initial public offering.
We believe that the process of selecting a suitable privately-held company
and the subsequent merger or business transaction with us to become a public
company may be extremely complex and risky. In our search for a suitable
privately-held company to merge with us, we are determined to consider only
entities that we believe have growth opportunities. Because we have no business
activities and no current source of revenue we may be unable to satisfy any
liabilities incurred prior to the combination with a privately-held company. If
negotiations and transactions fail prior to a successful consummation, we may
not be able to continue to pursue new business
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opportunities with other privately-held companies. If this occurs, it is
foreseeable that our Company's common stock may become worthless and our
stockholders may receive, if any, a nominal distribution upon our Company's
liquidation and dissolution.
We can not predict the resulting value of the merger or business
transaction for the owners of the privately-held company selected for a business
combination. The privately-held company selected for the business combination
may incur significant expenses and costs associated with the business
combination including legal, accounting and administrative fees and expenses.
Item 2. PROPERTIES.
The Company presently occupies temporary office facilities at 4 Ash Way,
Netherend, Lydney, Gloucestershire, United Kingdom on a zero cost basis.
Item 3. LEGAL PROCEEDINGS.
There are two claims pending by a former public relations firm and a
former financial consultant, respectively. The Company has been contesting the
claims against it (the first of which is in litigation) and has asserted
cross-claims and/or counterclaims; however, the outcome of these matters cannot
be predicted.
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.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year ended May 31, 1999.
PART II
Item 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
(a) Trading in the Company's shares of Class A Common Stock and Warrants, until
October 20, 1999, took place on the Electronic Bulletin Board of the National
Association of Securities Dealers, Inc. under the following symbols:
Class A Stock CMDA
Warrants CMDAW
The Company's shares and warrants were de-listed from the Electronic
Bulletin Board of the National Association of Securities Dealers, Inc. on
October 20, 1999.
The following table sets forth the range of high and low sales prices for
the Company's Class A Common Stock for the Company's two most recent fiscal
years:
Fiscal 1999: High Low
6/01/98 - 8/31/98 $ 3.00 $ 0.625
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9/01/98 - 11/30/98 1.00 0.125
12/01/98 - 2/29/99 0.4375 0.0625
3/01/99 - 5/31/99 0.1875 0.0625
Fiscal 1998: High Low
6/01/97 - 8/31/97 $ 5.25 $ 3.38
9/01/97 - 11/30/97 3.97 3.33
12/01/97 - 2/29/98 4.00 3.38
3/01/98 - 5/31/98 4.31 2.75
The closing price of the Class A Common Stock on December 28, 1999 was $.05.
(b) The number of record holders of the Company's Class A Common Stock was
approximately 50 on December 27, 1999, computed by the number of record holders,
excluding record holders for whom shares are being held in the name of brokerage
houses and clearing agencies.
(c) The Company has paid a cash dividend at the annual rate of $.05 per share on
its Class A Common Stock from July, 1996 through the period ending April 11,
1997, but has not paid dividends since that date.
Item 6. SELECTED FINANCIAL DATA.
The financial statements required by this Item are set forth at the pages
indicated following page 14 of this Report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION.
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 a 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, plant and
machinery sectors of the UK subsidiaries were sold by the receiver to Group
Lotus and the funds maintained by the UK entities for payment of outstanding
indebtedness.
In view of the foregoing, the Company, having disposed of its United
Kingdom assets and operations, is attempting to clear its liabilities, and
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prepare to seek either an acquisition or to be, itself, acquired by another
entity.
There are estimated to be due and owing by the Company approximately
$156,384 to banks, professionals and others.
Plan of Business
Within the next twelve months, we intend to restructure ourselves in order
to be used as a "public shell" for a suitable privately-held company with both a
business history and operating assets that has the intention to become public.
We do not intend to combine with a privately-held company determined to be an
investment company that would then subject our Company to the Investment Company
Act of 1940, as amended. We believe a privately-held company will combine with
our "public shell" in either a merger, consolidation, reorganization, or any
other form that will subsequently create a publicly-held company when the two
companies combine.
We believe a combination will create the advantage of acquiring an
ownership interest in a public company without the costs or the time that would
be incurred when conducting an initial public offering.
We believe that the process of selecting a suitable privately-held company and
the subsequent merger or business transaction with us to become a public company
may be extremely complex and risky. In our search for a suitable privately-held
company to combine with us, we are determined to consider only companies we
believe have growth potential and opportunities. There may be significant
changes in the number of our employees if a business combination occurs. Because
we will rely on the information as provided by the management of the potential
company, there may be information concerning the potential company that we may
not have discovered through our own investigative research of the management,
key personnel, financial structure and facilities, or information which might
have been concealed by the potential company.
We currently have no revenue, no operations and own no assets. We are an
inactive Delaware corporation and may remain dormant if we do not merge or
combine with another company. We cannot predict the future financial condition
of our Company. We may be unable to satisfy any liabilities incurred prior to
the combination with a privately-held company. If negotiations and transactions
fail prior to a successful consummation, we may not be able to continue to
pursue business opportunities with other new privately-held companies. If this
occurs, it is foreseeable that our Company's Common Stock may become worthless
and our stockholders may receive, if any, a nominal distribution upon our
Company's liquidation and dissolution.
We can not predict the resulting value of the merger or business transaction for
the owners of the privately-held company selected for the business combination.
The privately-held company selected for the business combination may incur
significant expenses and costs associated with the business transaction
including legal, accounting and administrative fees and expenses. Further, it
may be difficult for the combined companies to afford marketing campaigns, new
developments or the ability to manufacture or provide services.
We can not provide any assurance that the combined company will be able to
receive additional equity or debt financing or funding from a third-party if the
combined company subsequently requires it.
The Company has outstanding six hundred and fifty (650) shares of Convertible
Preferred Stock which are convertible into shares of Common Stock, and warrants
to acquire up to one million, three hundred and ninety-three thousand, five
hundred (1,393,500) shares of Common Stock. The Company has also agreed to
provide certain registration rights under the Securities Act and the rules and
regulations thereunder. If the outstanding shares of preferred stock are
converted and/or the warrants exercised, the rights of our existing
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common stockholders could be adversely affected by among other things, the loss
of their voting control to others. Also, under the Certificate of Incorporation,
the Company is authorized to issue up to an additional nine million, nine
hundred and ninety-nine thousand and two hundred (9,999,200) shares of Preferred
Stock.
FISCAL YEAR ENDED MAY 31, 1999 ("FISCAL 99") AS COMPARED TO FISCAL YEAR ENDED
MAY 31, 1998 ("FISCAL 98").
Summary of Operations
Since the UK assets were placed in receivership and substantially disposed of
during the quarter ended November 30, 1998, and these subsidiaries are no longer
operating, the Company's results of operations for this period exclude such
discontinued operations. The Company's revenues for Fiscal 1999 were
approximately $4,225,317 compared to $25,127,804 in Fiscal 1998. The loss for
Fiscal 1999 was $196,394 compared to $3,723,518 in Fiscal 1998.
FISCAL YEAR ENDED MAY 31, 1998 ("FISCAL 98") AS COMPARED TO FISCAL YEAR ENDED
MAY 31, 1997 ("FISCAL 97").
On a historical basis, CAM UK has conducted its operations and reported
its financial results in Pounds; however, its financial statements are set forth
in US Dollars for years ended May 31, 1998 and 1997, since this is the currency
in which the Company makes its financial reports.
SUMMARY OF OPERATIONS
Revenues for Fiscal 98 totaled approximately $25.1 million compared to
$25.9 million in Fiscal 97, despite generally poor economic and commercial
conditions in the Company's areas of business in the United Kingdom and
elsewhere. As in prior years, the overwhelming segment of the Company's sales
occurred in the automotive design and placement field, with aerospace
engineering placement accounting for approximately 10%.
Gross margins on sales improved during Fiscal 98 compared to Fiscal 97 by
virtue of the fact that the cost overruns that the Company experienced in Fiscal
97 were largely absent. However, margins of profit in general continued to be
adversely impacted, both as a result of highly competitive conditions in the
Company's markets as well as the shift to a greater percentage of design and
engineering services in the Company's automotive contracts (which generate a
lower profit margin) over the manufacturing and tooling operations which, both
in aerospace and automotive activities, have historically given the Company
higher profit margins. In an effort to control costs and its attempt to restore
profitability, the Company, among other things:
. Terminated its operations at the Warwick plant, which were
focused upon manufacturing and tooling operations;
. Derived annualized cost savings of approximately $2 million
per year as a result of the reduction of unprofitable
operations (including Warwick) and other personnel and
operating costs.
However, despite these cost savings, the Company incurred a pre-tax loss
of approximately $3.7 million compared to a Fiscal 97 loss of approximately $4.6
million, the Fiscal 98 loss being exacerbated by more than $1 million of charges
emanating from labor and compensation costs to personnel previously involved in
operations now closed.
The Company's fixed cost base has been reduced to approximately $700,000
per month and the Company is reviewing additional options but believes that it
must concentrate on increasing revenues rather than attempting to further
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reduce fixed costs, in order to maintain the Company's business operations and
capacity intact.
In the latter part of Fiscal 98, the Company also encountered a number of
extraordinary and/or unexpected circumstances that adversely affected its
operations. These were:
(i) the sale of Rolls Royce Motors, which resulted in a deferral of a number of
projected programs for which the Company had reserved capacity;
(ii) the delay in the start of the EFA and Nimrod military aerospace programs
due to European political considerations; and
(iii) the Far East economic problems caused major delays and reductions in
expected and on-going programs in which the Company was interested.
Interest expense increased to $600,000 during Fiscal 98, reflecting the
high level of bank and other debt incurred during the period. The strength of
the U.S. Dollar has continued to adversely impact upon the Company's reported
operations, since the majority of the Company's revenues are Sterling
denominated.
Liquidity and Capital Resources
Fiscal 99:
For the 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, that it will be able to enter into a new business, or that it will
survive as a viable entity.
Fiscal 98:
The directors have considered the future working capital requirements of
the Company and have concluded that agreement will need to be reached with the
Group's bankers regarding continuing facilities and an injection of additional
funds will be required in the immediate future, if the Company is to continue to
operate as a going concern. Preliminary discussions are currently taking place
with a consortium of potential investors. No assurance can be given that either
new investor funds or continuing bank facilities will materialize.
In the event that the Company is unable to secure appropriate funding, or
is otherwise unable to trade, adjustments would have to be made to reduce the
value of assets to their recoverable amount, to provide for any further
liabilities that might arise and to reclassify fixed assets and long term
liabilities as current assets and liabilities.
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 carry forwards applicable against future U.S.
tax liabilities, if any.
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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 Company 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 upgradable 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 are moot.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial statements required by this Item are set forth at the pages
indicated following page 14 of this Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
The company's auditors, KPMG (located in Birmingham, England) resigned on
February 19, 1999 following the liquidation of the U.K. subsidiaries. There were
no disagreements with such auditors.
Part III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
During the year ending May 31, 1999 the following individuals served as
executive officers and directors of the Company:
NAME AGE POSITIONS
John R. Davidson 47 Chairman of the Board of Directors,
President, Chief Executive Officer
and a director
Robert A. Righton 35 Chief Financial Officer, Secretary
and a director
Peter D. Horbury 48 Director
Theodore Sall, Ph.D. 70 Director
Adrene Carty 47 President, Chief Executive Officer
and a director
During the year ending May 31, 1999, Messrs. Davidson, Righton, Horbury and Sall
resigned as directors and officers of the Company. At May 31, 1999, Adrene
Carty, who took office on April 21, 1999, was President, Chief Executive Officer
and the sole director of the Company.
Adrene Carty resigned as President, Chief Executive Officer and director of the
Company on September 7, 1999. On the same date, Geoffrey Taylor was appointed
sole director and president of the Company.
On October 14, 1999 the following appointments were made:
Franz Skryanz Secretary, Treasurer and director
Ira Lavin Director
GEOFFREY TAYLOR Age 58, is Chairman of the Board, President and Chief Executive
Officer of the Company. For the past five years, he served as a management
consultant for Geoffrey Taylor & Associates, a management consulting company. He
is an experienced international business man and
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management consultant, having worked with many sectors of commerce and industry
in the UK and the USA.
FRANZ SKRYANZ Age 61, is Secretary and Treasurer of the Company. From December
1995 to July 1999, he served as Treasurer and Chief Financial Officer of Nyros
Telecom Services, Inc. ("Nyros"), a privately held company with telecom ventures
in Russia. Prior to Nyros, he was active as a private consultant to several
start up businesses. He has extensive experience both as chief corporate
financial officer and as a consultant in all areas of financial management and
corporate administration. He has held senior positions in diverse commercial
environments and is a seasoned financial executive with a broad background in
international business.
IRA LAVIN Age 80 is a director of the Company. For the past five years, he has
served as a private consultant. The former President and CEO of Camelback
Cablevision, he is an acknowledged media expert and, in partnership with Dick
Van Dyke, was responsible for developing the metro Phoenix cable market. He has
also owned and operated radio stations in the Phoenix market. Currently he is
active in strategic planning in broad marketing activities.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
During the fiscal year ended May 31, 1999, based solely upon an
examination of the public filings, all of the Company's officers and directors,
excluding Adrene Carty, timely filed reports on Forms 3 and 4.
ITEM 11. EXECUTIVE COMPENSATION.
Directors who were not executive officers of the Company were compensated
for their services as such at the rate of approximately $5,000 per annum, plus
direct out-of-pocket reasonable expenses incurred in the course of performance
of their duties. In addition, each non-executive director received an option
under the Company's 1995 Stock Option Plan to acquire 5,000 shares of Class A
Common Stock, at an exercise price of $5.00 per share, all of which options are
presently exercisable.
The following Summary Compensation Table shows compensation paid by the
Company for services rendered during fiscal years 1999, 1998 and 1997 for (i)
John R. Davidson, who was the Chief Executive Officer at the end of those fiscal
years (excluding 1999) and (ii) Robert Righton who was Chief Financial Officer
at the end of those fiscal years (excluding 1999). No other executive officer of
the Company received salary and bonus compensation that exceeded $100,000 in
those fiscal years.
SUMMARY COMPENSATION TABLE
Annual Compensation(1)
Name and
Annual Other
Principal Position Year Salary ($) Compensation ($)
- -------------------- ---- ---------- ------------
John R. Davidson 1999 67,500 26,232(3)
Chief Executive Officer 1998 202,544 78,695(4)
1997 202,665 68,415(2)
Robert Righton 1999 26,606 8,866(6)
Chief Financial Officer 1998 79,820(8) 26,606(7)
1997 114,187 26,278(5)
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- ----------
(1) Calculated at an exchange rate of $1.65 per Pound for Fiscal 1998, $1.64
per Pound for Fiscal 97.
(2) Of such amount, $34,451 was a pension contribution and $32,467 was for
provision of a Company car.
(3) Of such amount, $11,487 was a pension contribution and $13,500 was for
provision of a Company car.
(4) Of such amount, $34,462 was a pension contribution and $40,503 was for
provision of a Company car.
(5) Of such amount, $11,419 was a pension contribution and $13,878 was for
provision of a Company car.
(6) Of such amount, $2,660 was a pension contribution and $5,272 was for
provision of a Company car.
(7) Of such amount, $7,983 was a pension contribution and $15,817 was for
provision of a Company car.
(8) Represents pro-rata payment of annual salary due since Mr. Righton was
allowed to work on a less than full-time basis.
1995 STOCK OPTION PLAN
Under the Company's 1995 Stock Option Plan (the "Plan"), officers,
directors and other key employees and independent contractors who perform
services on behalf of the Company may be granted either nonqualified stock
options or incentive stock options for the purchase of up to 500,000 shares of
the Company's Class A Common Stock. Options to grant 418,000 shares were granted
under the Plan. However, as a result of the Company's restructuring and changing
of personnel the options previously granted have lapsed. The Company currently
can grant up to 500,000 shares of the Company's Class A Common Stock. The Plan
also provides for the issuance of stock appreciation rights in connection with
the granting of stock options. Option prices may not be less than 100% of the
fair market value of the Class A Common Stock on the date of grant and
unexercised options expire not more than ten years from date of grant. The Plan
is administered by a Stock Option Committee ("Committee") of the Board of
Directors. Stock options are granted to management and others based upon a
variety of criteria including the position held by such executive, employee or
other person, the responsibilities with which such person is charged, the
person's length of service with the Company, and the necessity and desirability
to the Company of rendering an incentive to such person to continue his
relationship with the Company and to enthusiastically foster the Company's best
interests. Subject to the guidelines of the Plan, the Committee determines to
whom options will be granted, the type of options to be granted, the number of
shares, the option price per share, and the time when the options may be
exercised.
Both incentive stock options and non-statutory stock options may be
granted under the Plan to eligible participants, at a price to be determined by
the option committee, provided, however, that incentive stock options must be
granted at an exercise price not less than the fair market value of the shares
on the date of the grant. Such exercise price may be payable in cash or, with
the approval of the Committee, by a combination of cash and/or shares. Shares
received upon exercise of options granted under the Plan will be subject to
certain restrictions on sale or transfer. The term of any option may not exceed
ten years from the date of grant. Conditions for the exercise of options, which
must be consistent with the terms of the Plan, are fixed by the Committee. All
options heretofore granted under the Plan to officers, employees or directors
are for a term of five years, are not exercisable until after the first
anniversary of the date of grant, and are thereafter exercisable.
The Plan provides that in the event of the death of the optionee, the
option may be exercised, to the extent that the holder shall have been entitled
to do so at the date of death, by the optionee's executors or administrators, or
by any person who acquired the right to exercise such option by bequest or
inheritance or by reason of the death of the optionee, at
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any time, or from time to time, within one year after the date of the optionee's
death, but not later than the expiration of the option. If an optionee's
employment by the Company terminates, whether as a result of termination by the
Company or by the employee, normal retirement, early retirement, or disability
retirement, the Plan provides that the option holder may exercise the option, to
the extent that he may be entitled to do so at the date of the option holder's
termination, at any time, or from time to time, within ninety days of the date
of termination of the option holder's employment, but not later than the
expiration of the option.
The Plan also provides for stock appreciation rights, pursuant to which
the optionee may surrender to the Company all or any part of an unexercised
option and receive from the Company in exchange therefor shares of Class A
Common Stock having an aggregate market value equal to the dollar amount
obtained by multiplying (x) the number of shares of Class A Common Stock subject
to the surrendered options by (y) the amount by which the market value per share
of Class A Common Stock at the time of such surrender exceeds the exercise price
per share of Class A Common Stock of the related option. The Company's
obligation arising from an exercise of stock appreciation rights may also be
settled by the payment of cash, or a combination of cash and shares of Class A
Common Stock. The Board of Directors may at any time terminate or amend or alter
the Plan, subject to certain restrictions.
There were no stock option grants or exercises to the named executive
officers during Fiscal 99.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table of stock ownership and notes thereto relate as of
December 28, 1999 to the Class A Common Stock of the Company by (i) each person
known to be the beneficial owner of more than 5% of such voting security, (ii)
each director, (iii) each named executive officer and (iv) all executive
officers and directors as a group. The percentages have been calculated by
taking into account all shares of Class A Common Stock owned on such date as
well as all such shares with respect to which such person has the right to
acquire beneficial ownership at such date or within 60 days thereafter. Unless
otherwise indicated, all persons listed below have sole voting and sole
investment power over the shares owned.
Amount and
Nature of
Beneficial
Name and Address Ownership
of Beneficial Owner of Class (1)(2) Percent
- ------------------- --------------- -------
Christopher D. Taylor 1,000,000 14.3%
360 West 22nd Street, Apt. 16B
New York, New York 10011
Ned Elgart 651,000 9.3%
c/o Cam Designs Inc.
4 Ash Way, Netherend, Lydney
Gloucestershire, GL 15 6QA
England
Franz A. Skryanz 75,000 1.0%
30 East 81st Street
New York, New York 10028
Geoffrey Taylor(3) 75,000 1.0%
Baysham Court, Sellack
Ross-on-Wye, Herefordshire
HR9 6QR England
12
<PAGE>
Ira Lavin 50,000 .1%
5203 N. 24th Street, #102
Phoenix, AZ 85016
All directors and executive officers
as a group (3 Persons) 200,000 2.8%
- ----------
(1) Based on a total of 7,044,053 shares of Class A Common Stock issued and
outstanding.
(2) All such ownership is direct unless otherwise stated.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
N/A
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K.
(a) Documents filed as part of this report:
1. Financial Statements
Consolidated Financial Statements of CAM Designs Inc. and
Subsidiaries
Independent Auditors' Report
Consolidated Balance Sheets - Years Ended May 31, 1999 and 1998
Consolidated Statements of Operations - Years Ended May 31, 1999
and 1998
Consolidated Statements of Stockholders' Equity (Deficit) - Years
Ended May 31, 1999 and 1998
Consolidated Statement of Cash Flows - Years Ended May 31, 1999 and
1998
Notes to Consolidated Financial Statements - Years Ended May 31,
1999 and 1998
2. Financial Statement Schedules:
Financial Statement Schedules have been omitted because the required
information is inapplicable or because the information is presented
in the financial statements or related notes.
3. Exhibits and Index:
The following were filed as exhibits to the Company's Registration
Statement on Form SB-2 (File No. 33-92456) and are hereby
incorporated by reference herein:
Exhibit Description
No -----------
------------
3.1 Restated Certificate of Incorporation of the Registrant.
3.1A Amended Certificate of Incorporation of the Registrant.
3.2 By-Laws of the Registrant.
4.1 Form of Warrant Agreement between the Registrant and
American Stock Transfer & Trust Company, including form
of Warrant.
4.2 Specimen Class A Common Stock, Warrant and Unit
Certificates.
10.1 1995 Stock Option Plan
13
<PAGE>
10.5 Form of Unit Purchase Option between the Registrant and
the Underwriter.
(b) No Reports on Form 8-K were filed by the Registrant during the fiscal
quarter ended May 31, 1999.
14
<PAGE>
CAM DESIGNS INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
Contents
Independent Auditors' Report F-2
Consolidated balance sheets at May 31, 1999 and 1998 F-3
Consolidated statements of operations for the years ended
May 31, 1999 and 1998 F-5
Consolidated statements of stockholders' equity (deficit)
for the years ended May 31, 1999 and 1998 F-6
Consolidated statements of cash flows for the years ended
May 31, 1999 and 1998 F-7
Notes to consolidated financial statements for the year ended
May 31, 1999 F-8
F-1
<PAGE>
Independent Auditors' Report
The Board of Directors
CAM Designs Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheet of CAM Designs Inc.
and Subsidiaries as of May 31, 1999 and the related consolidated statements of
operations, stockholders' (deficit), and cash flows for the years then ended.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audit. The consolidated financial statements
at May 31, 1998, were audited by KPMG - Main Hurdman whose report dated
September 14, 1998 expressed an unqualified opinion on those statements.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of CAM Designs Inc. and
Subsidiaries at May 31, 1999, and the results of their operations and their cash
flows for the year then ended in conformity with generally accepted accounting
principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to the
consolidated financial statements, the Company has suffered recurring losses
from operations and has a net capital deficiency that raises substantial doubt
about its ability to continue as a going concern. Management's plans in regard
to these matters are also described in Note 1. The consolidated financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
Liebman Goldberg & Drogin, LLP
Garden City, New York
December 13, 1999
F-2
<PAGE>
CAM DESIGNS INC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
Assets
May 31, 1999 May 31, 1998
------------ ------------
Current Assets:
Cash in bank $ 65 $ 3,065
Contract billings receivable, less allowance
for doubtful accounts of $176,040 -- 2,626,267
Inventories -- 704,918
Prepaid expenses -- 171,304
Other receivables -- 42,993
Income taxes receivable -- 31,000
---------- -----------
Total current assets 65 3,579,547
---------- -----------
Investment -- 1,708
---------- -----------
Property, Plant and Machinery:
Freehold property -- 326,465
Leasehold property -- 535,945
Plant and machinery -- 10,558,872
Less: accumulated depreciaiton and amortization -- (6,482,240)
---------- -----------
Total property, plant and machinery -- 4,939,042
---------- -----------
Goodwill, less accumulated amortization 46,555 46,555
Deferred tax asset -- 65,498
---------- -----------
Total assets $ 46,620 $ 8,632,350
========== ===========
See notes to financial statements.
F-3
<PAGE>
CAM DESIGNS INC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (CONTINUED)
Liabilities and Stockholders' Deficit
May 31, 1999 May 31, 1998
------------ ------------
Current Liabilities:
Bank overdraft $ -- $ 1,846,708
Current installments of obligations under
bank loan -- 19,361
Current installments of obligations under
capital leases -- 845,209
Current installments of obligations under loan -- 199,988
Billings in excess of costs and estimated
earnings on uncompleted contracts -- --
Trade accounts payable 140,884 1,710,078
Accrued expenses 15,500 3,109,355
----------- -----------
Total current liabilities 156,384 7,730,699
Obligation under bank loan excluding current
installments -- 213,603
Obligation under capital leases excluding
current installments -- 364,135
----------- -----------
Total liabilities 156,384 8,308,437
----------- -----------
Stockholders' Deficit
Class "A" convertible preferred stock,
$.001 par value 1,000,000 shares
authorized 800 shares issued and
outstanding 1 1
Class "A" common stock, $.001 par value,
9,000,000 shares authorized 2,642,859
shares issued and outstanding 2,643 2,643
Additional paid-in-capital 6,242,375 6,242,375
Currency translation adjustment -- 237,283
Deficit (5,879,783) (5,683,389)
Treasury stock: 75,000 common shares at cost (475,000) (475,000)
----------- -----------
Total Stockholders' deficit (109,764) 323,913
----------- -----------
Total liabilities and Stockholders' deficit $ 46,620 $ 8,632,350
=========== ===========
See notes to financial statements.
F-4
<PAGE>
CAM DESIGNS INC AND SUBSIDIARIES
STATEMENT OF OPERATIONS
For the year ended May 31,
1999 1998
------------ ------------
Net sales $ 4,225,317 $ 25,127,804
Cost of goods sold -- (22,636,747)
------------ ------------
Gross profit 4,225,317 2,491,057
Selling, general and
administrative expenses 4,313,006 5,619,248
------------ ------------
Loss before other expenses and
provision for income taxes (87,689) (3,128,191)
------------ ------------
Other (Income) Expenses
Depreciation and amortization 175,480 --
Investment income (23,191)
Interest expense 48,114 614,735
------------ ------------
Total other expenses 223,594 591,544
------------ ------------
Loss before provision for income taxes (311,283) (3,719,735)
Provision for income taxes 114,889 (2,783)
------------ ------------
Net (loss) $ (196,394) $ (3,722,518)
============ ============
Basic and diluted weighted average loss
per ordinary share $ (0.07) $ (1.63)
============ ============
See notes to financial statements.
F-5
<PAGE>
CAM DESIGNS INC AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
For the year ended May 31, 1999 and 1998
<TABLE>
<CAPTION>
COMMON CONVERTIBLE ADDITIONAL CURRENCY ACCUMULATED TREASURY
STOCK PREFERRED PAID IN TRANSLATION DEFICIT STOCK
STOCK CAPITAL ADJUSTMENT
-------- ----------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance June 1, 1997 $ 2,250 $ -- $ 4,229,765 $ 171,222 (1,960,871) ($475,000)
Net Loss (3,722,518)
Issue of shares 393 1 2,012,610
Exchange difference 66,061
-------- ----------- ----------- ----------- ----------- ---------
Balance June 1, 1998 2,643 1 6,242,375 237,283 (5,683,389) (475,000)
Net Loss (196,394)
Effect of write off (237,283)
Balance May 31, 1999 $ 2,643 $ 1 $ 6,242,375 $ -- $ 5,879,783 ($475,000)
======== =========== =========== =========== =========== =========
</TABLE>
See notes to financial statements.
F-6
<PAGE>
CAM DESIGNS INC AND SUBSIDIARIES
COMBINED STATEMENT OF CASH FLOWS
For the year ended May 31,
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Cash Flows from Operating Activities:
Net cash (used in) operating activities $ (125,010) $(2,717,998)
----------- -----------
Cash Flows from Investing Activities
Capital expenditure -- (1,122,884)
----------- -----------
Net cash (used in) investing activities -- (1,122,884)
----------- -----------
Cash Flows from Financing Activities
Repayment of borrowings -- (14,407)
Principal payments under capital lease obligations -- (79,517)
Proceeds from issuance of ordinary stock -- 1,213,004
Proceeds from issuance of preference shares -- 800,000
Receipt of loan -- 54,065
Payments to redeem stock -- --
Dividends paid -- --
Bank overdraft -- 1,523,890
Repayment of promissory note -- (214,000)
----------- -----------
Net cash provided by (used in) financing
activities -- 3,283,035
----------- -----------
Net increase (decrease) in cash and cash equivalents 566,386 (557,847)
Cash and cash equivalents at beginning of year (1,846,708) 545,515
Writeoff of bank overdraft 1,642,680
Exchange gain (237,283) 15,397
----------- -----------
Cash and cash equivalents at end of year $ 65 $ 3,065
=========== ===========
</TABLE>
See notes to financial statements.
F-7
<PAGE>
CAM DESIGNS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 31, 1999
Note 1 - Summary of Significant Accounting Policies
Organization and Description of Business
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,
1996. CAM is a holding company and has not engaged in any commercial
operations since incorporation.
On October 4, 1995, MGA Holdings Limited changed its name to CAM Designs
Limited and 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. No new basis of accounting was deemed to
have arisen and as such, the difference in book values on acquisition was
charged to additional paid-in capital.
As part of the acquisition of MGA, 785,000 class "B" common shares were
issued to Company management in exchange for their shareholding in MGA and
$2,030,851 in consideration was paid to a corporate stockholder, for its
common stock held in MGA. The consideration was satisfied by $1,602,851 in
cash and (pound) 270,000 promissory notes. The promissory notes were
payable in two installments, without interest, with the first installment
paid on May 31, 1996 and the second installment on May 31, 1997.
CAM Designs Limited (formerly MGA Holdings Limited) and its subsidiaries
operated three sites in the United Kingdom engaged in the provision of
vehicle design and engineering services to the automotive and aerospace
industries. During recent years, a significant proportion of sales were to
customers in the automotive sector. The Company's raw materials are
readily available and the Company is not dependent on a single supplier.
On October 22, 1998, the Company's United Kingdom subsidiaries,
constituting all of its assets and operations, were placed into
receivership. Operating facilities were closed, certain contracts
completed and certain equipment and facilities were sold and payments used
to liquidate outstanding indebtedness. Certain other assets are still
available for sale, but proceeds (if any) will not come to the Company.
F-8
<PAGE>
CAM DESIGNS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 31, 1999
Note 1 - Summary of Significant Accounting Policies (Continued)
Basis of Consolidation
The consolidated financial statements include the financial statements of
CAM Designs Inc. and its wholly owned subsidiaries. All significant
inter-company balances and transactions have been eliminated on
consolidation.
Going Concern
For the year ended May 31, 1999, the Company's cash flows were
insufficient to cover its working capital requirements. The principal
reason for the net cash outflow was significant losses on contracts, which
had commenced in prior financial years.
Additionally, the liquidation of the United Kingdom subsidiaries and
discontinuance of current business activities raise doubt about the
Company's ability to continue as a going concern. The Company has
considered its working capital needs and must seek sources of both
temporary and permanent capital sources or other strategic partners. There
is presently no assurance that a resolution for continuance as a viable
entity will occur.
Foreign Currency Translation
All assets and liabilities of operations outside the United States are
translated into US dollars at period end exchange rates and income and
expenses are translated at average rates for the period. Gains and losses
resulting from translation are usually included in the foreign currency
translation adjustment component of stockholders' equity, however, the
severance of the subsidiaries has effected the translation as a cash flow
item only.
Revenue Recognition
Revenues on short-term contracts were accounted for on the completed
contract method and included in income upon substantial completion or
shipment to the customer.
Long-term contracts were valued at cost plus attributable profits less
provisions for future losses where appropriate. Attributable profit is
recognized where, in the opinion of the Company, the outcome of the
contract can be assessed with reasonable certainty and is the difference
between the reported values of work completed in turnover and the costs
for that contract.
F-9
<PAGE>
CAM DESIGNS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 31, 1999
Note 1 - Summary of Significant Accounting Policies (Continued)
Inventories
Raw material and work in progress on contracts were valued at the lower of
cost or market. Work in progress includes attributable labor and overhead
expenses. There is no ending inventory, as all subsidiaries were severed
in receivership.
Property, Plant and Machinery
Property, plant and machinery are stated at cost. Plant and machinery held
under capital leases is stated at the equivalent of the present value of
minimum lease payments.
Depreciation on property, plant and machinery is calculated using the
straight-line method over the estimated useful lives of the assets. Plant
and machinery held under capital leases and leasehold property are
amortized using the straight line method over the shorter of the lease
term or estimated useful life of the asset.
All fixed assets have been written off as part of the receivership and
severance of the subsidiaries.
Goodwill
Goodwill, which represents the excess of purchase price over fair value of
net assets acquired, was amortized on a straight-line basis over the
expected periods to be benefited. The Company assessed the recoverability
of this intangible asset by determining whether the amortization of the
goodwill balance over its remaining life can be recovered through
undiscounted future operating cash flows of the acquired operation. The
amount of goodwill impairment, if any, is measured based on projected
discounted future operating cash flows using a discount rate reflecting
the Company's average cost of funds.
Income Taxes
Under the asset and liability method of FASB Statement 109, deferred tax
assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying
amounts of existing assets and liabilities, and their respective tax bases
and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are
expected to be recovered or settled. Deferred tax assets are reduced by a
valuation allowance, when in the Company's opinion it is likely that some
portion or all of the deferred tax asset will not be realized.
F-10
<PAGE>
CAM DESIGNS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 31, 1999
Note 1 - Summary of Significant Accounting Policies (Continued)
Pension
The group had a defined contribution pension plan. Total contributions to
the plan during the year ended May 31, 1999 was $102,462 and for May 31,
1998 was $330,333.
Cash and Cash Equivalents
All highly liquid debt instruments with original maturities of three
months or less are considered to be cash equivalents.
Loss Per Common Share
Basic loss per common share is based upon the weighted average number of
common shares outstanding during the year. Diluted earnings (loss) per
common share include the effects of potential dilution that would occur if
securities (such as warrants) or other contracts (such as options) to
issue common stock were exercised or converted into common stock. Such
instruments that are convertible into common stock are excluded from the
computation in periods in which they have an anti-dilutive effect. The
weighted average number of common shares used to calculate loss per common
share during May 31, 1999 and 1998 was 2,642,859 and 2,285,181,
respectively.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the balance sheet dates
and the reported amounts of revenues and expenses during the years then
ended. Actual results could differ from those estimates.
Note 2 - Major Customers
The Company had four major customers in the automotive and aerospace
industries, which accounted for approximately 49% of the Company's
revenue. In 1998, the major customers accounted for 17.5%, 11.2%, 10.5%
and 10% of Company's revenue, respectively. No other customer accounted
for 10 percent or more of Company's revenue in 1998.
F-11
<PAGE>
CAM DESIGNS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 31, 1999
Note 3 - Industry Segment Information
Principal financial data by industry
segment is as follows:
1999 1998
---- ----
Net sales
Automotive industry $ 1,955,561 $16,767,064
Aerospace industry 496,108 2,426,040
Placement of personnel 1,773,648 5,934,700
----------- -----------
Total revenues $ 4,225,317 $25,127,804
=========== ===========
Note 4 - Inventories
Inventories consist of the following:
1999 1998
---- ----
Cost and estimated earnings in excess of
billings on uncompleted contracts (see below) $ 0 $ 539,517
Raw materials and consumables 0 165,401
----------- -----------
$ 0 $ 704,918
=========== ===========
Uncompleted contracts comprise:
Costs incurred on uncompleted contracts$ 0 $ 2,287,373
Estimated earnings 0 346,896
----------- -----------
0 2,634,269
Less: billings to date 0 (2,094,752)
----------- -----------
$ 0 $ 539,517
=========== ===========
Included in the accompanying balance sheets under the following captions:
Costs and estimated earnings in excess of
billings on uncompleted contracts (included
in inventories) $ 0 $ 539,517
Billings in excess of costs and estimated
earnings on uncompleted contracts 0 0
Provision for contract losses included in
expenses 0 0
----------- -----------
$ 0 $ 0
=========== ===========
F-12
<PAGE>
CAM DESIGNS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 31, 1999
Note 5 - Leases
The group was obligated under various capital leases for certain plant and
machinery that expired at various dates during the next five years. At May
31, 1999, there are no continuing or existing leases due to the severance
of all operating divisions.
Note 6 - Income Taxes
Income tax benefit/(expense) attributable to income consists of:
Net Current Deferred
--- ------- --------
Year ended May 31, 2000 $ 114,889 $ 114,889 $ 0
Year ended May 31, 1999 $ (2,783) $ 137,220 $(140,003)
Income tax expense/(benefit) attributable to loss was $114,889 and
$(2,783) for the years ended May 31, 1999 and 1998 respectively and
differed from the amounts computed by applying the statutory United
Kingdom rate of 31% to pre-tax (loss)/income as a result of the following:
1999 1998
---- ----
Corporate benefit (tax) at United Kingdom
Statutory rate $ 114,889 $ 1,174,926
Non-deductible expenses 0 (46,500)
Taxable losses not recorded 0 (1,131,209)
----------- -----------
Benefit (Provision) for income taxes $ 114,889 $ (2,783)
=========== ===========
Effective rate 0% 0%
=========== ===========
The tax effects of temporary differences that gave rise to significant
portions of the deferred tax asset at May 31, 1999 and 1998 are presented
below:
1999 1998
---- ----
Deferred tax assets relating to:
Short-term timing differences $ 0 $ 0
Taxable losses available net of
liabilities for future profits 0 1,196,707
Valuation allowance 0 (1,131,209)
----------- -----------
$ 0 $ 65,498
=========== ===========
F-13
<PAGE>
CAM DESIGNS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 31, 1999
Note 7 - Bank Overdraft
The Company had an overdraft facility available from the National
Westminster Bank of (pound) 1,050,000. The overdraft facilities were
subject to daily review by the bank and granted on terms that they may be
at any time and without prior notice be withdrawn on advice by the Bank.
Outstanding sums were repayable on demand. Interest was charged at a rate
equal to the Bank's base rate plus 2.5% per annum.
The facilities were secured by:
(1) a composite guarantee between certain group companies;
(2) legal mortgage debenture from certain group companies incorporating
fixed and floating charges over the assets;
In addition, the group had an overdraft facility available from DG Bank
Deutsche Genossenschaftsbank of (pound) 250,000 and a further $250,000
credit line with Michigan National Bank. The terms and conditions were
similar to those noted in respect of the overdraft facility available from
the National Westminster Bank, however, interest will be charged at a rate
equal to the Bank's base rate plus 2% per annum.
The facility with DG Bank Deutsche Genossenschaftsbank was secured by a
composite guarantee between certain group companies.
All lines of credit and overdraft facilities are part of the several
subsidiaries in receivership.
Note 8 - Long-Term Debt
Long-term debt consisted of the following:
1999 1998
---- ----
Loan (secured) $ 0 $ 232,964
Less: Current installment 0 (19,361)
--------- ---------
$ 0 $ 213,603
========= =========
The bank loan was secured on the property with a net book value of
$326,465 at May 31, 1998.
Interest was payable on this loan at a rate of 2 1/2 % above the UK base
bank lending rate.
The loan was part of the severed subsidiary.
F-14
<PAGE>
CAM DESIGNS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 31, 1999
Note 9 - Property, Plant and Machinery
<TABLE>
<CAPTION>
Freehold Leasehold Plant and
Property Property Machinery Total
-------- -------- --------- -----
<S> <C> <C> <C> <C>
Cost
At beginning of year $ 328,218 $ 538,822 $ 9,392,186 $ 10,259,226
Additions 0 0 1,254,486 1,254,486
Disposals 0 0 (37,853) (37,853)
Exchange adjustment (1,753) (2,877) (49,947) (54,577)
--------- --------- ------------ ------------
At end of year - May 31, 1998 326,465 535,945 10,558,872 11,421,282
--------- --------- ------------ ------------
Depreciation
At beginning of year $ 0 $ 374,641 $ 5,506,814 $ 5,881,455
Additions 0 34,230 632,634 666,864
Disposals 0 0 (35,034) (35,034)
Exchange adjustment 0 (2,000) (29,045) (31,045)
--------- --------- ------------ ------------
At end of year - May 31, 1998 0 406,871 6,075,369 6,482,240
--------- --------- ------------ ------------
At May 31, 1998 326,465 129,074 4,483,503 4,939,042
Less: write-off - discontinued
Operations 326,465 129,074 4,483,503 4,939,042
--------- --------- ------------ ------------
At May 31, 1999 $ 0 $ 0 $ 0 $ 0
========= ========= ============ ============
</TABLE>
Depreciation for the year ended May 31, 1998 was $666,864.
Note 10- Stockholders' Deficit
The Company has two categories of authorized stock as follows:
Authorized
1999 1998
---- ----
Class "A" common stock 9,000,000 9,000,000
Preferred stock 1,000,000 1,000,000
F-15
<PAGE>
CAM DESIGNS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 31, 1999
Note 10- Stockholders' Deficit (Continued)
Class "A" common stock is subject to any express rights of Preferred
Stock. There are no express rights set out in the Company's Certificate of
Incorporation, but authority is given to the Board of Directors to issue
Preferred Stock on such rights as they deem fit.
Class "A" shareholders are entitled to a preference dividend of $0.05 per
share per annum.
Each share of the Series A Convertible Preferred Stock is convertible into
share of Common Stock based on the following formula:
The issue price of $1,000 of each Preferred Stock (as such value is
increased by an annual premium of 7%) is divided by the then current
conversion price of the Series A Common Stock. The current conversion
price is determined, generally, by reference to 80 percent of the average
of the two lowest sales prices of the Common Stock during the thirty
consecutive trading days immediately preceding the date of determination.
Based on a conversion price of $2.75 per share, the 800 shares issued of
Convertible Preferred Stock would be convertible into approximately
704,000 shares of Common Stock at maturity.
In addition, an additional 250,000 shares of Common Stock are issuable
under the terms of the Certificate of Designation in the event of certain
failures of the Company to comply with various provisions. The Company has
reserved 954,000 shares of Common Stock following the issuance of the 800
shares of Convertible Preferred Stock.
No dividends are payable on the Series A Preferred Stock, and the holders
of the Series A Preferred Stock shall have no voting rights.
All shares of the Series A Preferred Stock shall rank prior to the Common
Stock as to distribution of assets upon liquidation, dissolution or
winding up of the Company, whether voluntary or involuntary.
The Company has the following warrants all of which are held over the
Common Stock of the Company, outstanding as at May 31, 1999:
Number of Warrants Price at which warrants are exercisable
500,000 $3.50
150,000 $4.00
100,000 $6.00
587,500 $8.00
56,000 110% of market price
----------
1,393,500
==========
All of the above warrants are exercisable from their immediate date of
issue for an indefinite period.
F-16
<PAGE>
CAM DESIGNS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 31, 1999
Note 11- Stock Option Plan
As at May 31, 1999 there are options outstanding to officers, directors,
and employees covering 418,000 shares of Class A stock issued under the
Company's 1995 Stock Option Plan. Option prices may not be less than 100%
of the fair market value of the Common Stock on the date of grant. 30,000
options have an exercise price of $5.00. 10,000 options have an exercise
price of $7.00, 7,500 options have an exercise price of $7.50 and 50,000
options have an exercise price of $9.50.
A summary of the status of the Company's fixed stock option plan as of May
31, 1999 and 1998 and changes during the years ended on those dates is
presented below:
1999 1999 1998 1998
Shares Weighted Shares Weighted
average average
exercise exercise
price price
Fixed options
Outstanding at beginning
of year 420 $ 5.67 420 $ 5.67
Lapsed (2) 7.50 (2) 7.50
---- ------- ---- -------
Outstanding at end of year 418 $ 5.56 418 $ 5.56
==== ======= ==== =======
Options exercisable at year end 418 418
==== ====
The following table summarizes information about fixed stock options
outstanding at May 31, 1999.
Options outstanding Options exercisable
Range of exercise prices Number of Weighted Number Weighted
outstanding average exercisable average
at May 31, exercise at May 31, exercise
1999 price 1999 price
$4 30 $4.00 30 $4.00
$5 320 $5.00 320 $5.00
$7 10 $7.00 10 $7.00
$7.50 8 $7.50 8 $7.50
$9 50 $9.50 50 $9.50
---- ----
418 418
==== ====
F-17
<PAGE>
CAM DESIGNS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 31, 1999
Note 12- Disclosure about the Fair Value of Financial Instruments
The carrying amount of cash and cash equivalents, contract billings
receivable, trade accounts payable and accrued expenses approximates fair
value of these instruments.
Note 13- Contingencies
The Company is involved in two legal claims by former business associates.
Counter claims have been filed and the outcome of these lawsuits cannot
presently be predicted.
As previously discussed, the Company is no longer maintaining any
operational activities due to the severence of its subsidiaries when they
entered into receivership in the United Kingdom. Also, the ability of the
Company to continue as a going concern is doubtful, unless additional
sources of capital, merger with an active business partner, or other
resolution can be affected. The financial statements do not include any
adjustments that might be necessary if the company is unable to continue
as a going concern.
F-18
<PAGE>
SIGNATURES
Pursuant to the requirements of 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.
Date: December 28, 1999 CAM DESIGNS INC.
By: /s/Geoffrey Taylor
------------------------------------
Geoffrey Taylor
Chairman of the Board, President
and Chief Executive Officer
Pursuant to the requirements of 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:
Signatures Title Date
---------- ----- ----
/s/Geoffrey Taylor Chairman of the Board, President,
- ------------------ Chief Executive Officer and Director
Geoffrey Taylor (Principal Executive Officer) December 28, 1999
/s/Franz Skryanz Chief Financial Officer, Secretary,
- ---------------- Treasurer and Director (Principal
Franz Skryanz Financial and Accounting Officer) December 28, 1999
- ---------------
Ira Lavin Director December , 1999
15
EXHIBIT 11
CAM Designs Inc.
EPS Calculations for period June 1, 1997 to May 31,1998
Basic ($0.07)
Diluted ($0.07)
EPS Calculations for period June 1, 1996 to May 31,1997
Basic ($1.63)
Diluted ($1.63)
16
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This 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> YEAR
<FISCAL-YEAR-END> MAY-31-1999
<PERIOD-END> MAY-31-1999
<CASH> 65
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 65
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 46,620
<CURRENT-LIABILITIES> 156,384
<BONDS> 0
0
1
<COMMON> 2,643
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 46,620
<SALES> 4,225,317
<TOTAL-REVENUES> 4,225,317
<CGS> 0
<TOTAL-COSTS> 4,536,600
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (313,283)
<INCOME-TAX> 114,889
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (196,394)
<EPS-BASIC> (0.07)
<EPS-DILUTED> (0.07)
</TABLE>
