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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, 1997
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 a 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 11, 1997 was approximately $4,000,000. As of December
11, 1997, there were outstanding 2,008,700 shares of Common Stock of the
Registrant, par value $.001 per share.
DOCUMENTS INCORPORATED BY REFERENCE.
Part II Annual Report to Stockholders for
fiscal year ended September 30, 1997
(cover page 2 of 2 pages)
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PART I
ITEM 1. BUSINESS
General
THE COMPANY
CAM Data Systems, Inc. (the "Company") was organized under the laws of
the State of Delaware on April 29, 1987. On June 5, 1987, CAM Data Systems,
Inc., a corporation organized on September 20, 1983, under the laws of the State
of California was merged with and into the Company. The Company's principal
business is to design, assemble, market, service, and support point of sale,
order entry, inventory control, and accounting systems for small to medium size
retailers. The Company earns revenues from the sale of its systems and monthly
service fees charged to its customers under service agreements. Sales and
service operations are located in California, Florida and Massachusetts while
the Company's customers are located throughout the United States.
THE SYSTEMS
The Company offers two Turn Key Systems:
1. THE CAM SYSTEM - designed for hardgoods retailers whose inventory is
re-orderable in nature.
2. THE PROFIT$ 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.
The Company's systems integrate IBM compatible computers, terminal
style or computer cash registers, hand held and table top bar code laser
scanning equipment, terminal or computer 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, cash register and the
Company's circuit boards and software, depend on the needs, the size and the
industry type of the customer.
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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 main 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.
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.
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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
sells M.A.S. 90(R) software and provides training to its customers that want an
integrated accounting and inventory control 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 Lucent Technologies, formerly known as 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.
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
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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 sixteen salespersons, all of whom work exclusively for
the Company. The Company's marketing efforts extend nationwide with offices in
the states of California, Florida 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, 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 Technologies
(hand held laser scanners and portable data terminals), Wyse (Terminals), Ithaca
(40 column printers),and Hayes (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.
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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 canceled 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 11, 1997, backlog was approximately $867,000 as
compared to $1,364,000 on December 11, 1996. 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.
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.
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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 $1,548,800, $1,219,300, and $979,400 on
software development, including amounts capitalized during the years ended
September 30, 1997, 1996, and 1995, 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 twenty-one programmers and four
quality control and testing personnel.
EMPLOYEES
The Company has one hundred and forty-five full time employees, ten of
whom are employed in finance and administration, twenty-five in programming and
testing, twenty-nine in sales and marketing, and eighty-one in operations,
installation, consulting, 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.
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ITEM 2. PROPERTIES
In January 1996, the Company purchased 2.4 acres of land in the Wagon
Wheel Industrial Park in Henderson, Nevada, for a total sum of $143,000. The
Company plans to construct an 11,000-square foot building which will house its
development group and the ICS staff. The construction is under way and is
expected to be completed in the Spring of 1997.
The Company currently leases approximately 22,000 square feet of space
in Fountain Valley, California pursuant to a five-year lease expiring January 1,
2002, at an average annual rent of approximately $187,000 a year. This facility
houses the Company's executive and administrative offices, service and support
staff, system integration, and inventory warehouse.
In addition, the Company also leases the following properties: (i)
approximately 800 square feet of office space in Millis, Massachusetts on a
month to month lease of $300 per month; (ii) approximately 600 square feet of
office space in Altamonte Springs, Florida on a month to month lease of $600 per
month; (iii) approximately 11,000 square feet of office space in Henderson,
Nevada, which houses the Company's research and development team and the MAS 90
consulting division on a ten year lease that expires March 31, 2007, at an
average annual rent of $11,000 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 1997 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 15: STOCK AND DIVIDEND
COMMON EQUITY AND RELATED DATA.
STOCKHOLDER'S MATTERS.
ITEM 6: SELECTED FINANCIAL DATA . PAGE 16: 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, 1997 and 1996 and for each of the three years in
the period ended September 30, 1997, and the Company's unaudited quarterly
financial data for the two years ended September 30, 1997, on pages 6 through 14
and page 16, respectively, of the Company's 1997 Annual Report to Stockholders
which is hereby incorporated by reference. The report of the independent
auditors is included on page 15 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, 1997, the executive officers and directors of the
Company and their ages are as follows:
NAME AGE POSITION WITH THE COMPANY
- ---- --- -------------------------
Geoffrey D. Knapp 39 Chief Executive Officer, Chairman
of the Board and Secretary
David A. Frosh 39 President and Director
Paul Caceres, Jr. 37 Chief Financial Officer and
Chief Accounting Officer
Timothy D. Coco 40 Vice President, Customer Service
and Installations
David Fuller 53 Vice President, Research and
Development
Walter W. Straub 54 Director
Dr. Fred M. Haney 56 Director
Corley Phillips 43 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 bachelor's
degree in marketing from the University of Oregon in 1980.
David A. Frosh joined the Company as president in June 1996. Mr. Frosh
has been a member of the board directors since August 1991. From June 1990 to
June 1996, Mr. Frosh was 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
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and facsimile machines. Mr. Frosh received a bachelor's degree in marketing from
Central Michigan University 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 bachelor's degree 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 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.
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 bachelor's degree in
electrical engineering in 1965 and a master's degree in finance in 1970 from
Drexel University.
Dr. Fred M. Haney joined CAM Data as director in September 1996. Dr.
Haney has been the president of Venture Management Company, Palos Verdes
Estates, California, since 1991. From 1984 to 1991, he was founder and manager
of 3I Ventures, California, a high technology venture capital fund. From 1980 to
1983, he performed senior management functions at TRW, and from 1968 to 1980, he
held management positions at Xerox Corporation and Computer Science Corporation.
Dr. Haney has extensive experience in strategic planning, operations and finance
in the information and computer industry. Dr. Haney holds a doctorate in
computer science from Carnegie-Mellon University.
Corley Phillips joined CAM Data as a director in September 1996. Mr.
Phillips is an independent investor. From 1996 to 1997, Mr. Phillips served as
president, CEO and a director for Telephone Response Technologies, a Roseville,
California-based developer of computer
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technology software. From 1995 to 1996, Mr. Phillips served as vice president of
marketing and product support for State of The Art, an accounting software
company based in Irvine, California. From 1990 to 1994, Mr. Phillips was
president and CEO of Manzanita Software Systems, a developer of Windows-based
accounting software. From 1984 to 1990, Mr. Phillips was president and
co-founder of Grafpoint, a developer of software for computer applications based
in San Jose, California. Mr. Phillips has also held various sales and marketing
positions with Envision Technology and Hewlett-Packard. Mr. Phillips holds both
a bachelor's degree and a master's degree in electrical engineering from
Washington University in St. Louis, Missouri, as well as a master's degree in
business administration from Santa Clara University in Santa Clara, California.
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.
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, 1997, except as noted below. These reports were subsequently filed.
The following table sets forth the individual(s) who met the
requirements of Section 16(a) during the year ended September 30, 1997, and were
filed late:
No. of No. of
No. of Transactions reports
Name Late Reports on Late Reports Not Filed
- ---- ------------ --------------- ---------
Fred Haney 1 1 --
Corley Phillips 1 1 --
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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, 1997, and the prior two fiscal years, to the
Company's Chief Executive Officer and each additional executive officer whose
total compensation exceeded $100,000:
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 1997 $200,700 $ -- -- 20,000 $7,500
Chairman of 1996 $194,600 $54,300 -- 0 $7,800
the Board CEO 1995 $164,500 $31,400 -- 0 $7,300
Paul Caceres Jr. 1997 $127,700 $ -- -- 10,000 $4,900
CFO 1996 $123,200 $34,500 -- 0 $7,200
1995 $103,800 $20,000 -- 0 $4,400
David Frosh 1997 $127,500 $ -- -- 0 0
President
Timothy D. Coco 1997 $100,000 $ -- -- 5,000 0
Vice President 1996 $ 92,400 $27,700 -- 0 0
Customer Service 1995 $ 84,000 $16,800 -- 0 0
- -----------------------
(1) Bonuses paid to the Named executives are pursuant to annual incentive
compensation programs established each year for selected employees of the
Company, including the Company's executive officers. Under this program,
performance goals, relating to such matters as sales growth, gross profit
margin and net income as a percentage of sales and individual efforts were
established each year. Incentive compensation, in the form of cash
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bonuses, was awarded based on the extent to which the Company and the
individual achieved or exceeded the performance goals.
(2) All other compensation consists of interest on employee notes payable to the
Company and the amortization of the notes, that was declared compensation
during the year.
The following table sets forth information concerning grants of stock
options during the fiscal year ended September 30, 1997, to the officers
identified in the Summary Compensation Table:
OPTION GRANTS IN FISCAL YEAR 1997
INDIVIDUAL GRANTS
Potential Realizable
(1) Value at Assumed
Number of Annual Rates of
Securities % of Total (2) Stock Price
Underlying Options Exercise Appreciation for
Options Granted to or Base Option Term
Granted Employees Price Expiration -------------------
Name (#) in 1997 ($/Sh) Date 5($) 10($)
- ------------- ---------- ----------- -------- ---------- -------------------
Geoff Knapp 20,000 5% 3.75 12/16/06 47,200 119,500
Paul Caceres Jr. 10,000 2% 3.75 12/16/06 23,600 59,800
David Frosh 4,400 1% 3.75 12/16/06 10,400 26,300
Timothy D. Coco 5,000 1% 3.75 12/16/06 11,800 29,900
- --------------------
(1) Options granted in fiscal year 1997 vest over a four-year period.
(2) The exercise price was equal to the market price on the date of grant.
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 1997 1997
on Value(1) Exercisable/ Exercisable/
Name Exercise Realized Unexercisable Unexercisable
- ---- -------- -------- ------------- -------------
Geoff Knapp -- -- 60,000/0 $52,600/$0
Paul Caceres Jr. -- -- 45,000/0 $39,400/$0
David Frosh -- -- 15,000/0 $12,200/$0
Timothy D. Coco -- -- 9,400/600 $ 7,000/$500
- --------------------
(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's performance.
In determining the management compensation, this Committee compares the
compensation paid to management to the level and structure of compensation paid
to management of 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 not met in fiscal 1997, and no bonuses were paid..
The committee examines compilations of executive compensation such as
various industry compensation surveys for middle market companies. In 1997, 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
Walter Straub, Fred Haney, and Geoffrey D. Knapp
December 1, 1997
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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 900,000 shares of the Company's common stock. The
Plan has a term of ten years. There have been 808,400 options granted under the
1993 Plan as of September 30, 1997.
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
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are at the discretion of the board of directors. The Company contribution for
the fiscal year ended September 30, 1997, totaled $15,000.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of September 30, 1997, 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) 391,900(2) 17.1%
Common Stock Paul Caceres Jr.(1) 47,000(3) 2.0%
Common Stock Timothy D. Coco(1) 18,500(4) *
Common Stock David Fuller(1) 25,800(5) 1.1%
Common Stock Walter W. Straub(1) 84,400(6) 3.7%
Common Stock David Frosh(1) 91,000(7) 4.0%
Common Stock Corley Phillips(1) 20,500(8) *
Common Stock Fred Haney(1) 12,500(8) *
Common Stock ZPR Investment Mgmt. 535,200 23.3%
Common Stock All Directors and
Officers as a
Group (of 8 persons) 691,600 30.2%
- ------------------
* Less than 1.0%.
(1) c/o Cam Data Systems, Inc., 17520 Newhope Street, Suite 100, Fountain
Valley, California 92708.
(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 (iv) options to
purchase an aggregate of 20,000 shares until December 16, 2006 at a price
of $3.75 per share.
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(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 30,000 shares of Common Stock until January 3, 2004 at a price
of $2.13 per share (iii) an aggregate of 2,000 shares until December 16,
2006 at a price of $3.75 per share..
(4) Includes options to purchase (i) an aggregate of 5,000 shares of Common
Stock until April 1, 2003, at a price of $3.38 per share (ii) an aggregate
of 9,400 shares of Common Stock until January 3, 2004, at a price of $2.13
per share (iii) an aggregate of 3,100 shares of Common Stock until June 26,
2006, at a price of $4.75 per share (iv) an aggregate of 1,000 shares of
Common Stock until December 16, 2006, at a price of $3.75 per share.
(5) Includes options to purchase an aggregate of 25,800 shares of Common Stock
until March 13, 2005, at a price of $2.25 per share.
(6) Includes options to purchase (i) 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 (ii) an aggregate of 7,500 shares
until the sooner of May 25, 2005, or twelve months after ceasing to serve
as a director at a price of $2.375 per share (iii) an aggregate of 7,500
shares until the sooner of May 9, 2006, or twelve months after ceasing to
serve as a director at a price of $5.50 per share (iv) an aggregate of
4,400 shares until May 8, 2007, at a price of $3.38 per share.
(7) Includes options to purchase (i) 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 (ii) an aggregate of 7,500 shares
until the sooner of May 25, 2005, or twelve months after ceasing to serve
as a director at a price of $2.375 per share (iii) an aggregate of 7,500
shares until the sooner of May 9, 2006, or twelve months after ceasing to
serve as a director at a price of $5.50 per share (iv) an aggregate of
41,300 shares until June 10, 2006, at a price of $5.50 per share.
(8) Includes options to purchase (i) an aggregate of 5,000 shares until the
sooner of September 23, 2006, or twelve months after ceasing to serve as a
director at a price of $4.375 per share (ii) an aggregate of 7,500 shares
until the sooner of May 8, 2007, or twelve months after ceasing to serve as
a director at a price of $3.375 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, 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
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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, 1997, the Company granted
non-qualified options to certain employees and directors to purchase an
aggregate of 369,400 shares of Common Stock of the Company at a price ranging
from $2.62 to $3.75 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 26 hereof:
Page
Schedule II - Valuation and Qualifying Accounts 26
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).
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 January 9, 1997, with Silicon Valley Bank.
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13(a) Annual Report to Stockholders for the fiscal year ended September 30,
1997.
23 Consent of Independent Auditors.
27 Financial Data Schedule.
(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, 1997, 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 22, 1997
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.
Signature Position Date
--------- -------- ----
/s/ GEOFFREY D. KNAPP Chief Executive Officer December 22, 1997
- -------------------------- and Chairman of the Board
Geoffrey D. Knapp
/s/ DAVID FROSH President and Director December 22, 1997
- --------------------------
David Frosh
/s/ WALTER W. STRAUB Director December 22, 1997
- --------------------------
Walter W. Straub
Director December 22, 1997
- --------------------------
Dr. Fred M. Haney
Director December 22, 1997
- --------------------------
Corley Phillips
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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........................ 15
Consolidated Balance Sheets at
September 30, 1997 and 1996.......................... 6
Consolidated Statements of Income for Years
Ended September 30, 1997, 1996 and 1995.............. 7
Consolidated Statements of Cash Flows for Years
Ended September 30, 1997, 1996 and 1995.............. 8
Consolidated Statements of Stockholders' Equity
for Years Ended September 30, 1997, 1996 and 1995.... 9
Notes to Consolidated Financial Statements............ 10-14
Report of Independent Auditors on Consolidated
Financial Statement Schedule ........................ 25
II. Valuation and Qualifying Accounts
for the Years Ended September 30, 1997,
1996 and 1995..................................... 26
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 consolidated financial statements of CAM Data Systems, Inc.
as of September 30, 1997 and 1996, and for each of the three years in the period
ended September 30, 1997, and have issued our report thereon dated November 14,
1997. Our audits also included the financial statement schedule of CAM Data
Systems, Inc. listed in the accompanying index to the consolidated 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 14, 1997
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CAM DATA SYSTEMS, INC.
SCHEDULE II-- VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED SEPTEMBER 30, 1997, 1996, AND 1995
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:
1997: $150,000 $177,700 $167,700 $160,000
1996: $140,000 $175,600 $165,600 $150,000
1995: $120,000 $157,800 $137,800 $140,000
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CAM DATA SYSTEMS, INC.
EXHIBIT INDEX TO THE FORM 10-K
FOR THE YEAR ENDED SEPTEMBER 30, 1997
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 January 9, 1997, with Silicon Valley Bank.
13(a) Annual Report to Stockholders for the fiscal year ended September 30,
1997.
23 Consent of Independent Auditors.
27 Financial Data Schedule.
28
CAM DATA SYSTEMS, INC.
EXHIBITS TO FORM 10-K
FOR THE YEAR ENDED SEPTEMBER 30, 1997