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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, 1998
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 11, 1998 was approximately $5,700,000. As of December
11, 1998, there were outstanding 2,139,000 shares of Common Stock of the
Registrant, par value $.001 per share.
DOCUMENTS INCORPORATED BY REFERENCE.
Part II Annual Report to Stockholders for
fiscal year ended September 30, 1998
(cover page 2 of 2 pages)
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PART I
ITEM 1. BUSINESS
General
Except for the historical information contained herein, this Annual
Report on Form 10-K contains forward looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from those
discussed in this report. Factors that could cause or contribute to such
differences include, but are not limited to, those discussed in this section as
well as the section entitled "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations."
THE COMPANY
CAM Data Systems, Inc. (the "Company") was organized under the laws of the
State of Delaware on April 29, 1987. On June 5, 1987, CAM Data Systems, Inc., a
corporation organized on September 20, 1983, under the laws of the State of
California was merged with and into the Company. The Company's principal
business is to design, assemble, market, service, and support point of sale,
order entry, inventory control, and accounting systems for small to medium size
retailers. The Company earns revenues from the sale of its systems and monthly
service fees charged to its customers under service agreements. Sales and
service operations are located in California, Nevada, Colorado, Georgia, Florida
and Massachusetts while the Company's customers are located throughout the
United States.
THE SYSTEMS
The Company offers three Turn Key Systems:
1. THE CAM SYSTEM - designed for hardgoods retailers whose inventory is
re-orderable in nature.
2. THE PROFIT$ SYSTEM - designed for apparel and shoe retailers whose
inventory is seasonal in nature and color and size oriented.
3. THE RETAIL STAR SYSTEM - a Windows-based system designed to incorporate
multiple functions of both the CAM and Profit$ systems.
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
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accounting functions including accounts receivable, accounts payable, and
general ledger.
The Company's systems integrate Intel-based personal computers, computer
point of sale stations, hand held and table top bar code laser scanners,
terminal or computer work stations, printers, and the Company's software. The
Company is able to adapt its software to existing Intel-based personal computer.
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, point of sale station and the Company's 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, by MicroStrategies Inc. for the Profit$ system, and Teamsoft
Inc. for the Retail Star 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. All three systems
are capable of handling multiple stores for a given customer. In a
multiple-store system the Company typically installs a computer network. The
server computer at each store communicates with the server computer at the
customer's main office. The main server 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 stores. 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 point of sale station 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
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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.
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 Company sells M.A.S. 90(R) software and
provides training to its customers. The Company's software interfaces with the
M.A.S. 90(R) software.
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 Wang Global 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. 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 significant 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. INSTALLATION AND TRAINING. In order to assure customers that they will be
able to properly integrate the Company's system into their business, the
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Company offers on-site installation and training on the use and application of
the system to each customer. The training can take place at the Company's
in-house training facility or at the customer location 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.
4. TECHNICAL SUPPORT. By having technical phone support 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, Nevada, Oregon, Colorado, Georgia, Minnesota, Florida
and Massachusetts. Each salesperson is assigned a specific geographical
territory and is responsible for following up on sales leads in that 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 provides appropriate
price quotes. Upon the execution of a typical sales contract, the Company is
generally able to install an entire system within four to eight 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 markets its systems by advertising in trade journals and other
print media targeted at retail businesses, attending industry specific trade
shows, using sales promotional videos, and 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 include products such as Intel-based personal computers,
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.
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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, 1998, backlog was approximately $1,760,000 as
compared to $867,000 on December 11, 1997. 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. 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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SEASONALITY
The Company believes that seasonality has not had a significant effect on
its 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 $1,460,000, $1,548,800, and $1,219,300 on
software development, including amounts capitalized during the years ended
September 30, 1998, 1997, and 1996, 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 eighteen programmers and four
quality control and testing personnel.
EMPLOYEES
The Company has one hundred and sixty-one full time employees, ten of whom
are employed in finance and administration, twenty-four in programming and
testing, thirty-two in sales and marketing, and eighty-five 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.
ITEM 2. PROPERTIES
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. 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 11,000 square feet of office space in Henderson, Nevada,
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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 $132,000;.(ii) approximately 800 square feet of office
space in Minneapolis, Minnesota, at an average annual rent of $6,000.
ITEM 3. LEGAL PROCEEDINGS
Because of the nature of its business, the Company is from time to time
threatened or involved in legal actions. The Company does not believe any of the
legal actions now pending against it will result in a material adverse effect on
the Company and, further, does not consider that any such proceedings fall
outside ordinary, routine litigation incidental to the business of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report.
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 1998 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 3-4: 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, 1998 and 1997 and for each of the three years in the period
ended September 30, 1998, and the Company's unaudited
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quarterly financial data for the two years ended September 30, 1998 and 1997, on
pages 5 through 13 and page 15, respectively, of the Company's 1998 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.
PART III
MANAGEMENT
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
As of September 30, 1998, the executive officers and directors of the
Company and their ages are as follows:
NAME AGE POSITION WITH THE COMPANY
- ---- --- -------------------------
Geoffrey D. Knapp 40 Chief Executive Officer, Chairman
of the Board and Secretary
David A. Frosh 40 President and Director
Paul Caceres, Jr. 38 Chief Financial Officer and
Chief Accounting Officer
Timothy D. Coco 41 Vice President, Customer Service
and Installations
Walter W. Straub 55 Director
Dr. Fred M. Haney 57 Director
Corley Phillips 44 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
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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 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.
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 director for Telephone Response Technologies, a Roseville,
California-based developer of computer technology software. From 1995 to 1996,
Mr. Phillips served as vice president of marketing and
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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. Based solely on a
review of the copies of such reports furnished to the Company, the Company
believes all Section 16(a) filing requirements applicable to all such persons
were complied with during the fiscal year covered by this report.
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 table sets forth, information concerning compensation paid by the
Company for services rendered to the Company during the fiscal year ended
September 30, 1998, and the prior two fiscal years, to the Company's Chief
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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
Chairman of 1998 $209,200 $ -- -- 0 $8,100
the Board 1997 $200,700 $ -- -- 20,000 $7,500
CEO 1996 $194,600 $54,300 -- 0 $7,800
Paul Caceres Jr.
CFO 1998 $131,700 $ -- -- 0 $4,700
1997 $127,700 $ -- -- 10,000 $4,900
1996 $123,200 $34,500 -- 0 $7,200
David Frosh
President 1998 $128,800 $ -- -- 0 0
1997 $127,500 $ -- -- 0 0
Timothy D. Coco
Vice Pres. 1998 $107,700 $ -- -- 0 0
Customer 1997 $100,000 $ -- -- 5,000 0
Service 1996 $ 92,400 $27,700 -- 0 0
(1) Bonuses paid to the Named Executives officers 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 and the amortization of the notes, that was declared compensation during
the year.
STOCK OPTIONS GRANTED AND EXERCISED DURING 1998
There were no options granted to any of the named Executive Officers in fiscal
year 1998; therefore, no table of options granted is presented.
The following table sets forth certain information concerning options
exercised by the Named Executive Officers during the fiscal year covered by this
report, and outstanding options at the end of such year held by the Named
Executive Officers.
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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 1998 1998
on Value(1) Exercisable/ Exercisable/
Name Exercise Realized Unexercisable Unexercisable
- ---- -------- -------- ------------- -------------
Geoff Knapp -- -- 60,000/ 0 $ 86,500/$ 0
Paul Caceres Jr. -- -- 45,000/ 0 $ 64,800/$ 0
David Frosh -- -- 48,700/35,700 $ 48,500/$33,600
Timothy D. Coco -- -- 15,000/ 0 $ 13,500/$ 0
(1) Market value of the underlying securities at the exercise date minus the
exercise price of the options.
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 four 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
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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, net income of the Company, and
individual performance.
The committee examines compilations of executive compensation such as
various industry compensation surveys for middle market companies. In 1998, 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, 1998
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 1,200,000 shares of the Company's common stock. The
Plan has a term of ten years. There have been 835,100 options granted under the
1993 Plan as of September 30, 1998.
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, 1998, totaled $15,000.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of September 30, 1998, 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.
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Shares Beneficially Owned
Name and Address Amount & Nature Percentage
Title of of Beneficial of Beneficial of
Class Owner Ownership (8) Class (8)
----- ----- ------------- ---------
Common Stock Geoffrey D. Knapp(1) 396,900(2) 16.36%
Common Stock Paul Caceres Jr. (1) 49,500(3) 2.04%
Common Stock Timothy D. Coco (1) 22,800(4) *
Common Stock Walter W. Straub(1) 94,400(5) 3.89%
Common Stock David Frosh (1) 79,000(6) 3.26%
Common Stock Corley Phillips (1) 30,500(7) 1.26%
Common Stock Fred Haney (1) 22,500(7) *
Common Stock ZPR Investment Mgmt. 547,600 22.57%
Common Stock All Directors and
Officers as a
Group (of 7 persons) 695,600 28.67%
* Less than 1.0%.
(1) The address of each beneficial owner is in care of 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, 2002, 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 9,000 shares until December 16, 2006, at a price of $3.75 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
30,000 shares of Common Stock until January 3, 2004, at a price of $2.13 per
share (iii) an aggregate of 4,500 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
10,000 shares of Common Stock until January 3, 2004, at a price of $2.13 per
share (iii) an aggregate of 5,600 shares of Common Stock until June 26, 2006, at
a price of $4.75 per share (iv) an aggregate of 2,200 shares of Common Stock
until December 16, 2006, at a price of $3.75 per share.
(5) 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
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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 $2.38 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 $2.50 per share (iv) 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 $3.38 per share (v) an aggregate of 4,400 shares until May 8, 2007, at a
price of $3.38 per share (vi) an aggregate of 10,000 shares until May 7, 2008,
at a price of $2.75 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 $2.38 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 29,300 shares until June 10,
2006, at a price of $2.50 per share (v) 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 5,000 shares until the
sooner of September 23, 2006, or twelve months after ceasing to serve as a
director at a price of $2.50 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 $3.38 per share (iii) an aggregate of 10,000 shares until the
sooner of May 7, 2008, or twelve months after ceasing to serve as a director at
a price of $2.75 per share.
(8) Shares Beneficially Owned. Beneficial ownership is determined in accordance
with the rules of the Securities and Exchange Commission. In computing the
number of shares beneficially owned by a person and the percentage ownership of
that person, shares of Common Stock subject to options or warrants held by that
person that are currently exercisable, or will become exercisable within 60 days
from the date hereof, are deemed outstanding. Such shares, however, are not
deemed outstanding for purposes of computing the percentage ownership of any
other person.
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, 1998, the Company granted
non-qualified options to certain employees and directors to purchase an
aggregate of 106,500 shares of Common Stock of the Company at a price ranging
from $2.50 to $2.88 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 9 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 hereof:
Page
Schedule II - Valuation and Qualifying Accounts 23
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 filed July 13, 1987 - File No. 33-15821-LA).
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).
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10(f) Employment Agreement, and Change in Control Agreements for Geoffrey D.
Knapp, dated January 1, 1996, (incorporated by reference to Exhibits 10
(h) and (i) to the Form 10-Q for the period ended March 31, 1996, filed
on May 7, 1996).
10(g) Employment Agreement, and Change in Control Agreements for Paul Caceres
Jr., dated January 1, 1996, (incorporated by reference to Exhibits 10 (j)
and (k) to the Form 10-Q for the period ended March 31, 1996, filed on
May 7, 1996).
10(h) Line of Credit Agreement, dated January 9, 1998, with Silicon Valley
Bank.
10(i) Amendment to 1993 Stock Option Plan (incorporated by reference to the
exhibits on Form S-8 Registration Statement filed on June 26, 1998).
13(a) Annual Report to Stockholders for the fiscal year ended September 30,
1998.
23 Consent of Independent Auditors.
27 Financial Data Schedule for the Period Ended September 30, 1998
(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, 1998, 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 21, 1998
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 21, 1998
- --------------------- Officer and Chairman
Geoffrey D. Knapp of the Board
/s/ David Frosh President and December 21, 1998
- --------------- Director
David Frosh
/s/ Walter W. Straub Director December 21, 1998
- --------------------
Walter W. Straub
Director December 21, 1998
- ---------------------
Dr. Fred M. Haney
Director December 21, 1998
- ---------------------
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............... 14
Balance Sheets at
September 30, 1998 and 1997................. 5
Statements of Income for Years
Ended September 30, 1998, 1997 and 1996..... 6
Statements of Cash Flows for Years
Ended September 30, 1998, 1997 and 1996..... 7
Statements of Stockholders' Equity
for Years Ended September 30, 1998,
1997 and 1996............................... 8
Notes to Financial Statements................ 9-13
Report of Independent Auditors on
Financial Statement Schedule ............... 22
II. Valuation and Qualifying Accounts
for the Years Ended
September 30, 1998, 1997 and 1996.... 23
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, 1998 and 1997, and for each of the three years in the period ended
September 30, 1998, and have issued our report thereon dated November 6, 1998.
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 6, 1998
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CAM DATA SYSTEMS, INC.
SCHEDULE II-- VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED SEPTEMBER 30, 1998, 1997, AND 1996
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:
1998: $160,000 $203,400 $128,400 $235,000
1997: $150,000 $177,700 $167,700 $160,000
1996: $140,000 $175,600 $165,600 $150,000
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EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- -----------
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 filed July 13, 1987 - File No. 33-
15821-LA).
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).
25
10(f) Employment Agreement, and Change in Control Agreements for Geoffrey D.
Knapp, dated January 1, 1996, (incorporated by reference to Exhibits
10 (h) and (i) to the Form 10-Q for the period ended March 31, 1996,
filed on May 7, 1996).
10(g) Employment Agreement, and Change in Control Agreements for Paul
Caceres Jr., dated January 1, 1996, (incorporated by reference to
Exhibits 10 (j) and (k) to the Form 10-Q for the period ended March
31, 1996, filed on May 7, 1996).
10(h) Line of Credit Agreement, dated January 9, 1998, with Silicon Valley
Bank.
10(i) Amendment to 1993 Stock Option Plan (incorporated by reference to the
exhibits on Form S-8 Registration Statement filed on June 26, 1998).
13(a) Annual Report to Stockholders for the fiscal year ended September 30,
1998.
23 Consent of Independent Auditors.
27 Financial Data Schedule for the Period Ended September 30, 1998