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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended September 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [No Fee Required]
For the transition period from: __________ to __________
Commission file number : 0-16569
CAM DATA SYSTEMS, INC.
(Exact name of registrant as specified in its Charter)
DELAWARE 95-3866450
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
17520 NEWHOPE STREET
SUITE 100
FOUNTAIN VALLEY, CALIFORNIA 92708
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (714) 241-9241
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
Title of each class
Common Stock $.001 par value
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
----- -----
(cover page 1 of 2 pages)
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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. ( )
The aggregate market value of voting stock held by non-affiliates of
the Registrant as of December 12, 1995 was approximately $5,619,800. As of
December 12, 1995, there were outstanding 1,931,000 shares of Common Stock of
the Registrant, par value $.001 per share.
DOCUMENTS INCORPORATED BY REFERENCE.
Part II Annual Report to Stockholders for
fiscal year ended September 30, 1995
(cover page 2 of 2 pages)
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PART I
ITEM 1. BUSINESS
General
THE COMPANY
Cam Data Systems, Inc. (the "Company") was organized under the laws of the
State of Delaware on April 29, 1987. On June 5, 1987, Cam Data Systems, Inc.,
a corporation organized on September 20, 1983 under the laws of the State of
California was merged with and into the Company. The Company's principal
business is to design, assemble, market, service, and support point of sale,
order entry, inventory control, and accounting systems for small to medium size
retailers. The Company earns revenues from the sale of its systems and monthly
service fees charged to its customers under service agreements. Sales and
service operations are located in California and Massachusetts while the
Company's customers are located throughout the United States.
THE SYSTEMS
The Company offers two Turn Key Systems:
1. THE CAM SYSTEM - designed for hardgoods retailers whose inventory is
reorderable in nature.
2. THE PROFIT$ SYSTEM - designed for Apparel and Shoe retailers whose
inventory is seasonal in nature and color and size oriented.
The Company's systems offer the ability to obtain: (i) automated
pricing of each item; (ii) billing for charge account customers; (iii) printing
of a customer invoice; (iv) tracking of inventory count on an item by item
basis; (v) computation of gross profit, dollars and/or percentage of each item;
and (vi) tracking of sales by clerk and department by hour, day and/or month.
In addition, the Company's systems provide full management reporting including
zero sales reports, inventory ranking, overstock and understock, sales
analysis, inventory valuation (cost, average cost and retail) and other
reports. The systems can also provide accounting functions including accounts
receivable, accounts payable, general ledger, and payroll functions.
The Company's systems integrate IBM compatible computers, electronic
and terminal style cash registers, hand held and table top bar code laser
scanning equipment, terminal work stations, printers, and the Company's circuit
boards and software. The Company is able to adapt its software to existing IBM
compatible computer hardware. Each system is configured to meet the customer's
particular needs and, as a result, the components included in each system,
including the personal computer, printer,
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cash register and the Company's circuit boards and software, depend on the
needs, the size and the industry type of the customer.
The Company's software is derived from software originally designed
and subsequently licensed to (or acquired by) the Company by Retail Solutions
Inc. for the CAM system, and by MicroStrategies Inc. for the Profit$ system. The
Company continues to make modifications and enhancements to the software.
The Company provides an entire system to each customer on a "turn key"
basis, in that the Company provides all of the hardware and the software as
well as the installation of a system in the customer's premises. The CAM
system is capable of linking up to 20 retail outlets per defined region and up
to 20 regions. The Profit$ system is capable of linking up to 99 stores. In a
multiple outlet system, the Company typically installs a single computer at
each outlet that, through a modem system, communicates with a central computer
at the customer's main accounting location. The central computer compiles all
information from the other locations for processing and reporting.
INVENTORY MANAGEMENT
The Company believes that inventory control is the most important and
time consuming task facing the management of retail outlets. The systems were
designed by the Company to address the retailer's need for simpler and yet more
accurate means of controlling a large and diverse inventory. All inventory
information, once entered into the system, is updated for each sale that is
transmitted from the cash register to the computer. The systems are able to
provide the following managerial reports:
1. POPULARITY RANKING. The systems will report on the popularity of each
item in the store by producing a report listing each item of inventory ranked
according to the number of sales of each item. The report is generated
automatically and can produce a list on daily, weekly, monthly, year-to-date
and/or trailing 13 months of sales basis. The systems will also analyze the
popularity data and indicate to the retailer which particular items of
inventory are needed and which items are overstocked.
2. ZERO SALES REPORT. The systems provide a sales analysis on a monthly
and year-to-date basis for inventory items for which no sales have been made.
The analysis can be reported on a total sales basis or on a departmental or
item level basis.
3. INVENTORY TABULATION AND VALUATION. The systems provide reports
listing all inventory on hand, the valuation of such inventory on a cost and
retail basis, the average cost of each item in inventory, and all items of
inventory on order but not yet received.
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4. AUTOMATIC PURCHASING. The systems provide a report listing all items
that should be ordered based upon historical data stored in the system,
including the number of items in inventory, the number on the shelf, the
number on order and the minimum quantities required. The systems can also
automatically provide a purchase order if desired.
5. PRICING. The systems are capable of producing price stickers in 20
customized label formats, assigning Uniform Purchase Code numbers and printing
bar-codes directly upon the price labels for reading by laser scanners. In
addition, if there is a price change, the systems will automatically update the
pricing information and, if desired, print new pricing labels.
6. REPORTS. The systems permit the retailer to customize and produce
reports and forms utilizing the data in the system in a format preferred by the
retailer.
ACCOUNTING MANAGEMENT
The CAM system is capable of performing accounting functions through
software available from the Company. The system can maintain accounts
receivable, accounts payable and general ledgers and can maintain and perform
all payroll functions including the printing of payroll checks. The Company
markets Great Plains software to customers that want accounting functions for
the Profit$ system.
SERVICE AND SUPPORT
Customer service and support is a critical element in maintaining
customer satisfaction. Each purchaser of a system, for an ongoing fee ranging
from .75% to 1.2% per month of the initial purchase price of the system
purchased, receives service and support from the Company. The service and
support provided by the Company includes:
1. HARDWARE SERVICE. The Company's service representatives will service the
computer hardware included in a system at the customer's location, and
currently contracts with AT&T for on site service and repair. The
representatives are trained to determine the source of the problem or
malfunction in the hardware and, once determined, replace the defective
component. The Company's on-site service representatives do not attempt to
repair defective components. Defective components, after removal from the
system, are either repaired at the Company's facility or sent to a
manufacturer's authorized service center for repair
2. SOFTWARE SERVICE AND ENHANCEMENTS. Software service involves either the
replacement or reinstallation of existing software. The Company, while not
performing any customizing of its software for particular customers, is
sensitive to comments from customers concerning the Company's software.
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Such comments, together with planned revisions to the software, result in
enhancements and improvements which are provided without additional cost to all
customers on a service contract.
3. TRAINING. In order to assure a customer that he will be able to properly
integrate the Company's system into his business, the Company provides training
on the use and application of the system to each customer at the Company's
in-house training facility during the ninety day warranty period. Customers
located away from a CAM office, receive two on-site visits for initial
installation and training. The amount of training required depends upon the
knowledge and experience of the user plus the complexity of the business to
which the system is being adapted. The data input into the system by a
retailer is also dependent upon the complexity of the business plus the
functions the user intends the system to perform.
4. PHONE ASSISTANCE. By having phone assistance available seven days a week,
the Company enables a customer to obtain assistance whenever necessary.
MARKETING
DIRECT SALES
The Company markets its systems primarily through the Company's direct
sales force consisting of seventeen salespersons, all of whom work exclusively
for the Company. The Company's marketing efforts extend nationwide with
offices in the states of California and Massachusetts. Each salesperson is
assigned a specific geographical territory in which to offer the systems.
Typically, the salesperson will telephone canvas an area, and in some cases
make visits to retailers in the assigned territory. Each salesperson is
provided with a sales kit and demonstration equipment. Each salesperson is
trained by the Company to be able to define the needs of the potential
customer, recommend a system configuration, and provide appropriate price
quotes. Upon the execution of a typical sales contract, the Company is
generally able to install an entire system within four to six weeks. The
Company is paid directly by the customer or by third party leasing companies.
Salespersons are compensated on the basis of a percentage of gross profit to
the Company for each system sold.
BROCHURES, TRADE SHOWS, AND ADVERTISING MEDIA
The Company continues to increase awareness of its systems by
advertising in trade journals and other print media targeted at retail
businesses, attending industry specific trade shows, the use of sales
promotional videos on VHS format, and through direct mail advertising.
ASSEMBLY AND SOURCES OF SUPPLY
The computer hardware which makes up the Company's systems consists
primarily of standard components purchased by the Company from outside
distributors and manufacturers such as Okidata (printers), Symbol
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Technologies (hand held laser scanners and portable data terminals), Wyse
(Terminals), Ithaca (40 column printers),and U.S. Robotics (modems). For most
computer hardware components, the Company has more than one source of supply.
Certain hardware, such as the Company's proprietary computer circuit
board, was designed by the Company and is manufactured to the Company's
specifications by manufacturers unaffiliated with the Company. The Company
does not have any agreements with the manufacturers of its proprietary circuit
boards but management believes if the current manufacturers were not available,
additional manufacturers could readily provide the required services.
BACKLOG
The Company purchases component hardware for its systems based upon
system purchase orders and its forecast of demand for its products. Orders
from customers are usually shipped by the Company pursuant to an agreed upon
schedule. However, orders may be cancelled or rescheduled by the customer
without penalty. For this reason, management believes backlog information is
not indicative of the Company's future sales or business trends and is subject
to fluctuation. As of December 10, 1995, backlog was approximately $583,000 as
compared to $1,200,000 on December 10, 1994. Backlog is based upon purchase
orders placed with the Company which the Company believes are firm orders.
COMPETITION
The industry in which the Company operates is highly competitive. The
Company competes with suppliers dedicated to one type of business and suppliers
of software that provide functions similar to the Company's software.
The Company competes on the basis of the capabilities and
competitiveness of its systems and the additional information they provide and
functions they perform. The Company believes its systems offer greater
capabilities to the small and medium size retailers than suppliers of other
systems. Included among such capabilities are multi-user capability, ongoing
software enhancement, and a service organization in place to support the
customer after the initial sale.
The Company also competes with vertical market suppliers of automated
retail systems which include hardware and software intended for use by a
particular retail industry segment. Some of these suppliers have a shorter
operating history, less financial resources and overhead expenses, and attempt
to compete with the Company on the basis of lower pricing. This has caused the
Company to discount sales prices in some instances, and this may continue in
future periods.
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The ability of the Company to meet competition will depend upon, among
other things, the Company's ability to maintain its marketing effort, increase
the capabilities of its systems through ongoing enhancements and improvements,
contend with sales price discounting, and to obtain financing when, and if,
needed.
PATENTS AND TRADEMARKS
The Company does not hold any patents or trademarks. The Company
relies on a combination of trade secrets, copyright laws and technical measures
to protect its rights to its proprietary software. The software included in a
system is not accessible by customers for purposes of revisions or copying as
the Company does not release the software source code to customers. In
addition, as the Company performs software service at the customer's location,
the Company maintains strict control of its software disks.
The Company's proprietary circuit board was designed specifically to
link the computer hardware included in the CAM system with the CAM software.
The expertise required to design and build such circuit boards is readily
available to competitors and there can be no assurance that such circuit boards
will not be produced and utilized by such competitors.
SEASONALITY
The Company believes that seasonality has not had a significant
effect on their business.
SOFTWARE DEVELOPMENT
The Company's software has been developed using a modular approach.
Modular designing allows a programmer to incorporate, replace or delete parts
of a computer software program without affecting the operation of the remaining
parts of the program. Accordingly, modular design facilitates the development
of the Company's software and new products enabling the Company's programmers
to incorporate entire sections from existing programs into the designs for such
products. The incorporation of existing software, which has already been fully
tested, into new products, reduces the time and expense that the Company would
otherwise incur in developing and enhancing its products.
The Company spent approximately $979,400, $652,300, and $513,400 on
software development, including amounts capitalized during the years ended
September 30, 1995, 1994, and 1993, respectively. The Company anticipates that
it will continue to incur software development costs in connection with
enhancements and improvements of its software and the development of new
products. These activities may require an increase in the Company's
programming and technical staff which presently consists of ten programmers and
four quality control and testing personnel.
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EMPLOYEES
The Company has one hundred and two full time employees, seven of whom
are employed in administration, fifteen in programming and testing, twenty-five
in sales and marketing, and fifty-five in operations, installation, and service
and support.
None of the Company's employees are represented by a labor union and
the Company believes that it enjoys harmonious relationships with its
employees.
ENVIRONMENTAL REGULATIONS
There has been no material effect on the Company from compliance with
environmental regulations.
ITEM 2. PROPERTIES
The Company currently leases approximately 15,200 square feet of space
in Fountain Valley, California pursuant to a five-year lease expiring January
31, 1998 at an average annual rent of approximately $119,000 a year. This
facility houses the Company's executive and administrative offices, research
and development facilities, service and support staff, and inventory warehouse.
In addition, the Company also leases the following properties: (i)
approximately 2,513 square feet of office space in Hayward, California pursuant
to a twelve month lease expiring on April 30, 1996, at an annual rent of
approximately $16,500; and (ii) approximately 1,400 square feet of office space
in Millis, Massachusetts on a month to month lease of $800 per month.
ITEM 3. LEGAL PROCEEDINGS
The Company believes that there are no material legal proceedings,
pending or contemplated, to which the Company or any of the Company's
properties is the subject or to which the Company is a party and which are not
in the ordinary course of business. The Company is not aware of any material
legal proceeding pending or threatened, or judgments entered against any
director or executive officer of the company in his capacity as such where the
position of any such director or executive officer is adverse to the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Neither the Board of Directors nor any security holder submitted any
matter during the fourth quarter of the fiscal year covered by this report to a
vote of security holders through the solicitation of proxies or otherwise.
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PART II
Pursuant to General Instruction G(2), Items, 5, 6, 7 and 8 have been
omitted since the required information is contained in the Company's 1995
Annual Report to Stockholders pursuant to Rule 14A-3(B), copies of which are
being filed as an Exhibit to the Form 10-K, and is hereby incorporated by
reference herein.
ANNUAL REPORT
FORM 10-K TO STOCKHOLDERS
--------- ---------------
ITEM 5: MARKET FOR REGISTRANT'S PAGE 14: STOCK AND DIVIDEND
COMMON EQUITY AND RELATED DATA.
STOCKHOLDER'S MATTERS.
ITEM 6: SELECTED FINANCIAL DATA. PAGE 15: SELECTED FINANCIAL
DATA.
ITEM 7: MANAGEMENT'S DISCUSSION PAGES 4-5: MANAGEMENT'S
AND ANALYSIS OF DISCUSSION AND
FINANCIAL CONDITION AND ANALYSIS OF
RESULTS OF OPERATIONS FINANCIAL CONDITION
AND RESULTS OF
OPERATIONS
ITEM 8: FINANCIAL STATEMENTS AND SEE BELOW.
SUPPLEMENTARY DATA.
Information for Item 8 is included in the Company's financial
statements as of September 30, 1995 and 1994 and for each of the three years in
the period ended September 30, 1995 and the Company's unaudited quarterly
financial data for the two years ended September 30, 1995 on pages 6 through 13
and page 15, respectively, of the Company's 1995 Annual Report to Stockholders
which is hereby incorporated by reference. The report of the independent
auditors is included on page 14 of the Annual Report to Stockholders.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
NOT APPLICABLE.
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PART III
MANAGEMENT
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
IDENTIFICATION OF EXECUTIVE OFFICERS AND DIRECTORS
As of September 30, 1995, the executive officers and directors of the
Company and their ages are as follows:
NAME AGE POSITION WITH THE COMPANY
Geoffrey D. Knapp 37 Chief Executive Officer, President
Secretary and Director
Paul Caceres, Jr. 35 Chief Financial Officer and
Chief Accounting Officer
Timothy D. Coco 38 Vice President, Customer Service
Mark Bolton 37 Vice President, Operations
David Fuller 51 Vice President, Research and
Development
Walter W. Straub 52 Director
David Frosh 37 Director
Geoffrey D. Knapp, founder of the Company, has been a director, and an
officer of the Company since its organization in September, 1983. From 1980 to
1983, he was employed by Triad Systems Corporation as a point of sale systems
salesman selling to retail hardware stores. Mr. Knapp received a B.S. in
marketing from the University of Oregon in 1980.
Paul Caceres, Jr. has been the Chief Financial Officer and Chief
Accounting Officer of the Company since September 1987. From 1982 to 1987, Mr.
Caceres was employed by Arthur Young & Company, the predecessor to Ernst &
Young LLP, as an Audit Senior and in 1987, was promoted to Audit Manager. He
received a B.S. in Business Administration from the University of Southern
California in 1982.
Timothy D. Coco has been the Vice President of Customer Service since
January 1994. From 1990 to 1993, Mr. Coco served as sales manager for Lindy
Office products, a company that sells office supplies, office furniture and
printing services to small and medium size businesses. From 1989 to 1990, Mr.
Coco served as a sales trainer and management consultant for IDK Group Inc., a
company that provides sales training, management
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consulting, and employee development related services to the micro computer
industry. From 1984 to 1989, Mr. Coco was the President of his own Company
called Quality Automation Systems (QAS). QAS developed and marketed turn key
computerized distribution management, point of sale, and accounting systems to
the office supply industry. Mr. Coco sold this company in 1989.
Mark Bolton has been the Vice President of Operations since January
1994. From 1991 to 1994, Mr. Bolton was employed by Disneyland as the
Supervisor of Transportation Services. From 1987 to 1991, Mr. Bolton was
employed by CAM Data Systems in various positions that included customer
service representative, installation coordinator, purchasing agent, inventory
control, and most recently, operations manager. From 1985 to 1987, Mr. Bolton
was employed by JANACO BMW as the service manager.
David Fuller has been the Vice President of Research and Development
since April 1995. From 1988 to 1995, Mr. Fuller was the sole proprietor of
Retail Software Innovators, a company that provided point of sale software,
programming services, and technical support to small and medium size retailers.
From 1982 to 1988, Mr. Fuller was the Vice President of Research and
Development for Retail Solutions Inc., a company that provided point of sale
software, programming services, and technical support to small and medium size
retailers.
Walter W. Straub, has been a director of the Company since May 1989.
He is also currently, and has been since October 1983, President, Chief
Executive and a director of Rainbow Technologies, Inc., a public company
engaged in the business of designing, developing, manufacturing and marketing
of proprietary computer related security products. Mr. Straub received a B.S.
in Electrical Engineering in 1965 and an MBA in Finance in 1970 from Drexel
University.
David A. Frosh was elected as a director in August 1991. Since June
1990, Mr. Frosh has been employed as a sales executive for the national
accounts division of Automatic Data Processing (ADP). ADP provides computerized
transaction processing, data communications and information services. From
June 1988 to June 1990, Mr. Frosh served as director of marketing for Optima
Retail Systems, a privately held company which manufactured and marketed
inventory control systems for the retail apparel industry. From July 1980 to
June 1988, Mr. Frosh held several marketing and management positions including
national accounts manager for the Los Angeles division of Savin Corporation, a
marketer of office copier and facsimile machines. Mr. Frosh received a B.A. in
Marketing from Central Michigan University in 1980.
The terms of office of directors expire at the next Annual Meeting of
Shareholders, or at such time as their successors have been duly elected and
qualified.
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Directors who are not officers of the Company are entitled to an
expense reimbursement for attending meetings. Officers serve at the discretion
of the Board of Directors.
Except as stated, there are no arrangements or understandings by or
between any director or executive officer and any other person(s), pursuant to
which he or she was or is to be selected as a director or officer,
respectively.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than ten percent of
the Company's common stock to file reports of ownership and changes in
ownership with the Securities and Exchange Commission (SEC). Officers,
directors and greater than ten percent shareholders are required by SEC
regulations to furnish the Company with copies of all Section 16(a) forms they
file. Management believes all such individuals were in compliance with Section
16(a) at September 30, 1995, except as noted below. These reports were
subsequently filed.
The following table sets forth the individuals who met the requirements of
Section 16(a) during the year ended September 30, 1995 and were filed late:
No. of No. of
No. of Transactions reports
Name Late Reports on Late Reports Not Filed
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Walter Straub 1 1 --
David Frosh 1 1 --
CERTAIN SIGNIFICANT EMPLOYEES
The Company does not have any significant employees who are not
officers.
FAMILY RELATIONSHIPS
There are no family relationships by or between any director or
officer of the Company.
ITEM 11. EXECUTIVE COMPENSATION
The following summary compensation table sets forth, as of the date
hereof, information concerning cash compensation, bonuses and deferred
compensation paid by the Company for services rendered to the Company during
the fiscal year ended September 30, 1995, and the prior two fiscal years, to
the Company's Chief Executive Officer and each additional executive officer
whose total compensation exceeded $100,000:
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SUMMARY COMPENSATION TABLE
Annual Long Term
Compensation Compensation
Name and Other (2)
Principal (1) Annual Number of All Other
Position Year Salary Bonus Compensation Options Compensation
- -------- ---- ------ ----- ------------ ------- ------------
Geoffrey Knapp
Chairman of 1995 $164,500 $31,400 -- 0 $2,000
the Board 1994 $150,000 $13,000 -- 50,000 $2,000
CEO 1993 $131,500 $30,000 -- 10,000 $2,000
Paul Caceres Jr.
CFO 1995 $103,800 $20,000 -- 0 $2,000
1994 $ 90,000 $ 9,000 -- 45,000 $2,000
1993 $ 85,000 $18,000 -- 0 $1,700
Timothy D. Coco
Vice Pres. 1995 $ 84,000 $16,800 -- 0 0
Customer 1994 $ 80,000 $ 8,000 -- 10,000 0
Service 1993 $ 32,500 $ 0 -- 5,000 0
(1) Bonuses paid to the Named executives are pursuant to annual incentive
compensation programs established each year for selected employees of the
Company, including the Company's executive officers. Under this program,
performance goals, relating to such matters as sales growth, gross profit
margin and net income as a percentage of sales and individual efforts were
established each year. Incentive compensation, in the form of cash bonuses,
was awarded based on the extent to which the Company and the individual
achieved or exceeded the performance goals.
(2) All other compensation consists of interest on employee notes payable to
the Company, that was declared compensation during the year.
There were no options issued to officers in fiscal 1995, table is excluded.
AGGREGATE OPTION EXERCISES AND FISCAL YEAR END OPTION VALUES
Value of
Number of Unexercised
Unexercised In-the-Money
Options Options
Shares at Sept. 30, at Sept. 30,
Acquired 1995 1995
on Value(1) Exercisable/ Exercisable/
Name Exercise Realized Unexercisable Unexercisable
- ----------------------------------------------------------------------------------
Geoff Knapp -- -- 60,000/ 0 $97,600/ $0
Paul Caceres Jr. -- -- 32,500/12,500 $54,400/$18,800
Timothy D. Coco -- -- 4,400/ 5,600 $ 6,600/$ 8,400
(1) Market value of the underlying securities at the exercise date minus the
exercise price of the options.
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REPORT OF COMPENSATION COMMITTEE
The following report of the Compensation Committee is provided solely to the
shareholders of the Company pursuant to the requirements of Schedule 14A
promulgated under the Securities Exchange Act of 1934, and shall not be deemed
to be "filed" with the Securities and Exchange Commission for the purpose of
establishing statutory liability. The Report shall not be incorporated by
reference in any document previously or subsequently filed with the Securities
and Exchange Commission that incorporates by reference all or any portion of
this document.
TO: THE BOARD OF DIRECTORS
As members of the Compensation Committee, it is our duty to review and
recommend the compensation levels for members of the Company's management,
evaluate the performance of management and administer the Company's various
incentive plans. This Committee has reviewed in detail the Compensation of the
Company's five executive officers. In the opinion of the Committee, the
compensation of the five executive officers of the Company is reasonable in
view of its performance and the respective contributions of such officers to
the Company' performance.
In determining the management compensation, this Committee compares the
compensation paid to management to the level and structure of compensation paid
to competing companies. Additionally, the Committee considers the sales and
earnings performance of the Company compared to competing and similarly
situated companies. The Committee also takes into account such relevant
external factors as general economic conditions, geographic market of work
place, stock price performance and stock market prices.
Management compensation is comprised of 75% to 80% of fixed salary, and 20%
to 25% variable compensation based on performance factors. Stock options are
granted at the discretion of the Board of Directors, and there is no set
minimum or maximum amount of options that can be issued. Performance factors
that determine management compensation are sales and net income of the Company.
These performance factors were exceeded in fiscal 1995, with a revenue increase
of 11%, and a 56% increase in net income.
The committee examines compilations of executive compensation such as
various industry compensation surveys for middle market companies. In 1995,
the compensation for the Chief Executive Officer was comparable to other Chief
Executive Officers of middle market companies in related industries.
Mr. Knapp, a member of the Committee, is also an executive officer of
the Company. However, Mr. Knapp abstained from any considerations with respect
to any decision directly affecting his compensation.
Compensation Committee
David Frosh, Walter Straub and Geoffrey D. Knapp
December 1, 1995
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INCENTIVE STOCK OPTION PLAN
An Incentive Stock Option Plan (the "ISO Plan") in accordance with
Section 422A of the Internal Revenue Code of 1954, as amended (the "Code"), was
adopted by the Board of Directors and approved by the stockholders of the
Company in June 1987. The ISO Plan authorizes the Board of Directors to grant
options from time to time to directors, officers and key employees of the
Company. In April 1990, the total number of shares of the Company's Common
Stock that may be issued or delivered under the ISO Plan net of forfeiture and
based on the present capitalization was increased from 100,000 to 250,000
shares.
Options granted under the ISO Plan must comply with certain provisions
of the Code relating to, among other things, the maximum dollar amount of
options that may be exercised by an optionee in any calendar year, the minimum
exercise price of an option and the persons eligible to be granted options. No
options granted under the ISO Plan will be exercisable for a period exceeding
five years, and the ISO Plan expires in June 1997.
Except as otherwise required by the Code with respect to optionees
owning 10% or more of the Common Stock outstanding at the time of grant, the
exercise price of an option under the ISO Plan must not be less than 100% of
the fair market value of the underlying Common Stock at the time of grant. The
fair market value of a share of Common Stock is to be determined by the Board
of Directors, or by a committee of the Board of Directors, as the case may be,
in good faith based upon the trading market of such shares.
The exercise price of any options granted pursuant to the ISO Plan to
optionees owning more than 10% of the Common Stock outstanding at the time of
grant may not be less than 110% of the fair market value of the underlying
Common Stock at the time of grant.
1993 STOCK OPTION PLAN
In April 1993, the shareholders of the Company approved the Company's
1993 Stock Option Plan (the "1993 Plan") under which non- statutory options may
be granted to key employees and individuals who provide services to the
Company, at a price not less than the fair market value at the date of grant,
and expire ten years from the date of grant. The options are exercisable based
on vesting periods as determined by the Board of Directors. The Plan allows
for the issuance of an aggregate of 400,000 shares of the Company's common
stock. The Plan has a term of ten years. There have been 327,000 options
granted under the 1993 Plan as of September 30, 1995.
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401-K PLAN
In July 1991, the Company adopted a contributory profit-sharing plan
under Section 401(k) of the Internal Revenue Code, which covers substantially
all employees. Under the plan, eligible employees are able to contribute up to
15% of their compensation. The Company's contributions are at the discretion
of the board of directors. The Company contribution for the fiscal year ended
September 30, 1995, totaled $34,000.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of September 30, 1995, certain
information regarding ownership of the Company's Common Stock by (i) each
person that the Company knows is the beneficial owner of more than 5% of the
Company's outstanding Common Stock, (ii) each director and executive officer
of the Company who owns Common Stock and (iii) all directors and officers as a
group, without naming them, showing name and address, amount and nature of
shares beneficially owned and the percentage of the class owned.
Name and Address Amount & Nature Percentage
Title of of Beneficial of Beneficial of
Class Owner Ownership (9) Class (10)
----- ----- ------------- ----------
Common Stock Geoffrey D. Knapp(1) 387,900(2) 18.1%
Common Stock Paul Caceres Jr. (1) 52,500(3) 2.5%
Common Stock Timothy D. Coco (1) 7,500(4) *
Common Stock Mark Bolton (1) 4,400(5) *
Common Stock David Fuller (1) 5,000(6) *
Common Stock Walter W. Straub(1) 65,000(7) 3.0%
Common Stock David Frosh (1) 32,800(8) 1.5%
Common Stock ZPR Investment Mgmt. 437,200 20.4%
Common Stock All Directors and
Officers as a
Group (of 7 persons) 555,100 26.4%
* Less than 1.0%.
(1) c/o Cam Data Systems, Inc., 17520 Newhope Street, Suite 100, Fountain
Valley, California 92708.
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(2) Includes (i) an aggregate of 3,100 shares of Common Stock held in trust for
three daughters of Mr. Geoffrey Knapp over which he has shared voting power
(ii) options to purchase an aggregate of 10,000 shares until the sooner of
October 12, 1997 or twelve months after ceasing to serve as a director at a
price of $2.34 per share.(iii) options to purchase an aggregate of 50,000
shares until October 20, 2003 at a price of $1.93 per share.
(3) Includes options to purchase (i) an aggregate of 15,000 shares of Common
Stock until October 20, 2003 at a price of $1.75 per share (ii) an aggregate of
17,500 shares of Common Stock until January 3, 2004 at a price of $2.13 per
share.
(4) Includes options to purchase (i) an aggregate of 3,100 shares of Common
Stock until April 1, 2003 at a price of $3.38 per share (ii) an aggregate of
4,400 shares of Common Stock until January 3, 2004 at a price of $2.13 per
share.
(5) Includes options to purchase an aggregate of 4,400 shares of Common Stock
until January 3, 2004 at a price of $2.13 per share
(6) Includes options to purchase an aggregate of 5,000 shares of Common Stock
until March 13, 2005 at a price of $2.25 per share
(7) Includes options to purchase (i) an aggregate of 10,000 shares of Common
Stock until the sooner of August 29, 1995 or twelve months after ceasing to
serve as a director at a price of $.50 per share and (ii) options to purchase
an aggregate of 10,000 shares until the sooner of August 7, 1996 or twelve
months after ceasing to serve as a director at a price of $.875 per share and
(iii) options to purchase an aggregate of 10,000 shares until the sooner of
October 12, 1997 or twelve months after ceasing to serve as a director at a
price of $2.125 per share (iv) options to purchase an aggregate of 7,500 shares
until the sooner of October 19, 2003 or twelve months after ceasing to serve as
a director at a price of $1.75 per share.
(8) Includes options to purchase (i) options to purchase an aggregate of 5,000
shares until the sooner of August 7, 1996 or twelve months after ceasing to
serve as a director at a price of $.875 per share and (ii) options to purchase
an aggregate of 10,000 shares until the sooner of October 12, 1997 or twelve
months after ceasing to serve as a director at a price of $2.125 per share
(iii) options to purchase an aggregate of 7,500 shares until the sooner of
October 19, 2003 or twelve months after ceasing to serve as a director at a
price of $1.75 per share.
(9) For the purposes of the above table and the notes thereto, the Company's
Common Stock shown as "beneficially owned" includes all securities which
pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as amended,
may be deemed to be "beneficially owned" including,
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without limitation, all securities which the "beneficial owner" has the right
to acquire within 60 days, as, for example, through the exercise of any option,
warrant or right, the conversion of convertible securities or pursuant to the
power to revoke a trust, discretionary account or similar arrangement.
(10) The percentage of ownership of the class of voting securities in the above
table has been calculated by dividing (i) the aggregate number of shares of
such class actually owned plus all shares of such class which may be deemed to
be "beneficially owned," by (ii) the number of shares of such class actually
outstanding plus the number of shares of such class such "beneficial owner" may
be deemed to "beneficially own" assuming no other acquisitions of shares of
such class through the exercise of any option, warrant or right by any other
person.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the fiscal year ended September 30, 1995, the Company granted
non-qualified options to certain employees and directors to purchase an
aggregate of 65,000 shares of Common Stock of the Company at a price ranging
from $2.25 to $2.37 per share expiring ten years from the date of grant.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS
ON FORM 8-K
(A) 1. FINANCIAL STATEMENTS
The financial statements required to be filed hereunder are listed on
page 10 hereof. See Part II, Item 8 of this report for information regarding
the incorporation by reference herein of such financial statements.
(A) 2. FINANCIAL STATEMENT SCHEDULES
The following financial statement schedule of CAM Data Systems Inc.,
is included on page 25 hereof:
Page
Schedule II - Valuation and Qualifying Accounts 25
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable, and therefore have
been omitted.
(A) 3. OTHER EXHIBITS
3(a) Articles of Incorporation of the Company, as amended (incorporated by
reference to Exhibit 3(a) to the 1988 Annual Report on Form 10-K filed
on January 12, 1989 - File No. 0-16569).
3(b) By-Laws of the Company (incorporated by reference to Exhibit 3(b) to
the S-18 Registration Statement).
10(a) Incentive Stock Option Plan (incorporated by referenced to Exhibit
10(b) to the S-18 Registration Statement).
10(b) Company's Lease for premises at Fountain Valley, California
(incorporated by reference to Exhibit 10(b) to the 1988 Annual Report
on Form 10-K filed on January 12, 1989 - File No. 0-16569).
10(c) 1993 Stock Option Plan (incorporated by reference to the exhibits on
Form S-8 Registration Statement filed on June 21, 1993).
10(d) Registration Statement (incorporated by reference to the exhibits on
Form S-3 No. 33-57564 Registration Statement filed on June 17, 1993).
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21
10(e) Extension to Company's Lease for premises at Fountain Valley,
California (incorporated by reference to Exhibit 10 (i) to the 1993
Annual Report on Form 10-K filed on December 27, 1993 - File No.
0-16569).
10(f) Line of Credit Agreement, dated July 17, 1995, with Silicon Valley
Bank.
10(g) Amendment to Company's lease for premises at Hayward, California, dated
May 1, 1995
13(a) Annual Report to Stockholders for the fiscal year ended September 30,
1995.
23 Consent of Independent Auditors.
(B) REPORTS ON FORM 8-K
No reports on Form 8-K have been filed during the last quarter of the
year ended September 30, 1995 covered by this report.
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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 filed on
its behalf by the undersigned, thereunto duly authorized.
CAM DATA SYSTEMS, INC.
By: /s/ Geoffrey D. Knapp
--------------------------------
Geoffrey D. Knapp,
Chief Executive Officer
By: /s/ Paul Caceres, Jr.
--------------------------------
Paul Caceres, Jr.,
Chief Financial Officer and Chief
Accounting Officer
Date: December 20, 1995
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.
/s/ Geoffrey D. Knapp Chief Executive December 20, 1995
- ---------------------
Geoffrey D. Knapp Officer and Director
/s/ Walter W. Straub Director December 20, 1995
- --------------------
Walter W. Straub
/s/ David Frosh Director December 20, 1995
- ---------------
David Frosh
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CAM DATA SYSTEMS, INC.
INDEX TO
FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES
ITEM 14(A)
Page Reference
--------------
Annual Report
-------------
to Stockholders Form 10-K
------------ ---------
Report of Independent Auditors . . . . . . . . . . . . . . . . . . 14
Balance Sheets at September 30, 1995 and 1994 . . . . . . . . . . . 6
Statements of Income for Years Ended
September 30, 1995, 1994 and 1993 . . . . . . . . . . . . . . . . 7
Statements of Cash Flows for Years Ended
September 30, 1995, 1994 and 1993 . . . . . . . . . . . . . . . . 8
Statements of Stockholders' Equity
for Years Ended September 30, 1995,
1994 and 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . 10-13
Report of Independent Auditors on Financial
Statement Schedule . . . . . . . . . . . . . . . . . . . . . . . . 24
Financial Statement Schedule
II. Valuation and Qualifying Accounts
for the Years Ended
September 30, 1995, 1994 and 1993 . . . . . . . . . . . . . 25
All other financial statement schedules are omitted as the required information
is inapplicable or the information is presented in the financial statements or
related notes.
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REPORT OF INDEPENDENT AUDITORS ON FINANCIAL STATEMENT SCHEDULE
The Board of Directors
CAM Data Systems, Inc.
We have audited the financial statements of CAM Data Systems, Inc. as of
September 30, 1995 and 1994, and for each of the three years in the period
ended September 30, 1995, and have issued our report thereon dated November 17,
1995. Our audits also included the financial statement schedule of CAM Data
Systems, Inc. listed in the accompanying index to financial statements and
financial statement schedules (Item 14(a)). This schedule is the
responsibility of the Company's management. Our responsibility is to express
an opinion based on our audits. In our opinion, the financial statement
schedule referred to above, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
ERNST & YOUNG LLP
Orange County, California
November 17, 1995
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25
CAM DATA SYSTEMS, INC.
SCHEDULE II-- VALUATION AND QUALIFYING ACCOUNTS
Years Ended September 30, 1995, 1994, and 1993
Deductions/
Balance at Additions Accounts written
Beginning charged to off net of Balance at
of Year income recoveries end of year
Allowance for doubtful
accounts receivable:
1995: $120,000 $157,800 $137,800 $140,000
1994: $90,000 $135,900 $105,900 $120,000
1993: $85,000 $124,800 $119,800 $90,000
25
26
CAM DATA SYSTEMS, INC.
EXHIBIT INDEX TO THE FORM 10-K
FOR THE YEAR ENDED SEPTEMBER 30, 1995
27
CAM DATA SYSTEMS, INC.
EXHIBIT INDEX TO THE FORM 10-K
FOR THE YEAR ENDED SEPTEMBER 30, 1995
3(a) Articles of Incorporation of the Company, as amended (incorporated by
reference to Exhibit 3(a) to the 1988 Annual Report on Form 10-K
filed on January 12, 1989 - File No. 0-16569).
3(b) By-Laws of the Company (incorporated by reference to Exhibit 3(b) to
the S-18 Registration Statement).
10(a) Incentive Stock Option Plan (incorporated by referenced to Exhibit
10(b) to the S-18 Registration Statement).
10(b) Company's Lease for premises at Fountain Valley, California
(incorporated by reference to Exhibit 10(b) to the 1988 Annual Report
on Form 10-K filed on January 12, 1989 - File No. 0-16569).
10(c) 1993 Stock Option Plan (incorporated by reference to the exhibits on
Form S-8 Registration Statement filed on June 21, 1993).
10(d) Registration Statement (incorporated by reference to the exhibits on
Form S-3 No. 33-57564 Registration Statement filed on June 17, 1993).
10(e) Extension to Company's Lease for premises at Fountain Valley,
California (incorporated by reference to Exhibit 10 (i) to the 1993
Annual Report on Form 10-K filed on December 27, 1993 - File No.
0-16569).
10(f) Line of Credit Agreement, dated July 17, 1995, with Silicon Valley
Bank.
10(g) Amendment to Company's lease for premises at Hayward, California,
dated May 1, 1995
13(a) Annual Report to Stockholders for the fiscal year ended September 30,
1995.
23 Consent of Independent Auditors.
27 Financial Data Schedule.
28
10(f) Line of Credit Agreement, dated July 17, 1995, with
Silicon Valley Bank.