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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, 1999
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
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 [ ]
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 8, 1999 was approximately $56,682,000. As of December
8, 1999, there were outstanding 2,412,000 shares of Common Stock of the
Registrant, par value $.001 per share.
DOCUMENTS INCORPORATED BY REFERENCE.
Part II Annual Report to Stockholders for
fiscal year ended September 30, 1999
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PART I
ITEM 1. BUSINESS
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GENERAL
Except for the historical information contained herein, this Annual Report on
Form 10-K contains forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from those
discussed in this report. Factors that could cause or contribute to such
differences include, but are not limited to, those discussed in this section as
well as the section entitled "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations."
THE COMPANY
CAM Data Systems, Inc. (the "Company") was organized under the laws of the State
of Delaware on April 29, 1987. Previous to this date, CAM Data Systems, Inc. was
a California corporation organized on September 20, 1983, and was subsequently
merged into the Delaware corporation on June 5, 1987. The Company's principal
business is to provide total commerce solutions for small to medium size,
traditional as well as web retailers. These solutions are based on the Company's
open architecture software products for managing inventory, point of sale, sales
transaction processing and accounting. In addition to software, these solutions
often include hardware, installation, training, service and consulting provided
by the Company. Sales, service, research, and development are located in
California and Nevada, while the Company's customers are located throughout the
United States.
THE SYSTEMS
The Company offers three Turn Key Systems:
(1) THE CAM SYSTEM - designed for hard goods retailers whose inventory is
re-orderable in nature.
(2) THE PROFIT$ SYSTEM - designed for apparel and shoe retailers whose
inventory is seasonable 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 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 barcode 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
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Profit$ system, and by 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 on 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
for 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 of 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.
(5) PRICING. The systems are capable of producing price stickers in 20
customized label formats, assigning Uniform Purchase Code numbers and
printing barcodes 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 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) accounting software.
SERVICE AND SUPPORT
Customer service and support is a critical element in maintaining customer
satisfaction. For a monthly fee, each purchaser of a system receives service and
support from the Company. The service and support provided by the Company
includes:
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(1) HARDWARE SERVICE. The Company offers hardware service to its customers
on a time and material billing basis. The Company's service
representatives are trained to determine the source of the problem or
malfunction in the hardware and, once determined, replace the
defective component. Defective components are either repaired at the
Company's facility or sent to a manufacturer's authorized service
center for repair.
(2) TECHNICAL PHONE SUPPORT AND SOFTWARE ENHANCEMENTS. The Company
provides technical support by troubleshooting the customer's systems
problems via the telephone and via modem. The Company, while not
performing any significant customizing of its software for particular
customers, is receptive to comments from customers concerning the
Company's software. Such comments, together with planned enhancements
to the software, result in 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 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 implemented. The Company also
offers training to its customers via the telephone.
MARKETING
DIRECT SALES
The Company markets its systems primarily through the Company's direct sales
force consisting of twenty-eight salespersons and sales associates, all of whom
work exclusively for the Company. The Company's marketing efforts extend
nationwide with offices in the states of California, Nevada, Oregon, Washington,
Colorado, Georgia, Minnesota, Florida, Missouri, 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 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 eight weeks. The Company is paid directly by the customer
or by third-party leasing companies. Compensation for salespeople is based on a
percentage of gross profit for each system sold.
BROCHURES, TRADE SHOWS, AND ADVERTISING MEDIA
The Company markets its systems by advertising in trade journals, the World Wide
Web, and other print media targeted at retail businesses, by attending industry
specific trade shows, by using sales promotional videos, and by direct mail
advertising.
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
includes 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.
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
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to an agreed upon schedule. However, orders may be canceled or rescheduled by
the customer with a minimal penalty. For this reason, management believes such
backlog information is not indicative of the Company's future sales or business
trends and is subject to fluctuation. As of November 29, 1999, backlog was
approximately $1,682,000 as compared to $1,760,000 on December 11, 1998. 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 features of its
systems. We believe the introduction of the Windows-based Retail Star software
product gives the Company a competitive advantage because most of the Company's
competitors are still selling DOS-based software products. The Company considers
its systems to have greater capabilities to the small and medium size retailers
than suppliers of other systems. Included among such capabilities are 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 compete with the Company on the
basis of lower pricing.
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, and
to obtain financing when, and if, needed.
PATENTS AND TRADEMARKS
The Company has four pending trademarks: Retail Star, Retail Ice, Retail
America, and I.Star. 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.
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 $1,606,000, $1,460,000, and $1,548,800 on
software development, including amounts capitalized during the years ended
September 30, 1999, 1998, and 1997, 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-three programmers and
quality control and testing personnel.
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EMPLOYEES
As of September 30, 1999, the Company had 182 full time employees, including 16
employed in finance and administration, 23 in programming and testing, 35 in
sales and marketing, 27 in installation, 44 in service and support, and 37 in
operations and consulting.
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
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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 $188,000. 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, 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
$136,000; (ii) and various immaterial month-to-month leases for sales offices
throughout the country.
ITEM 3. LEGAL PROCEEDINGS
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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 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
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No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report.
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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 1999 ANNUAL REPORT
TO STOCKHOLDERS PURSUANT TO RULE 14A-3(b), WHICH IS INCORPORATED HEREIN BY
REFERENCE BELOW.
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FORM 10-K ANNUAL REPORT TO STOCKHOLDERS
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ITEM 5: MARKET FOR REGISTRANT'S PAGE 18: STOCK AND DIVIDEND DATA
COMMON EQUITY AND RELATED
STOCKHOLDER'S MATTERS
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ITEM 6: SELECTED FINANCIAL DATA PAGE 19: SELECTED FINANCIAL DATA SEE
NOTE (A) BELOW
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ITEM 7: MANAGEMENT'S DISCUSSION PAGES 6-7: MANAGEMENT'S DISCUSSION AND
AND ANALYSIS OF FINANCIAL ANALYSIS OF FINANCIAL CONDITION AND
CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS
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ITEM 8: FINANCIAL STATEMENTS AND SEE BELOW
SUPPLEMENTARY DATA
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Note (A) The selected financial data incorporated herein by reference to the
Company's 1999 Annual Report to Stockholders as of September 30, 1999 and 1998
and for each of the years in the three-year period ended September 30, 1999,
have been derived from the Company's audited financial statements included
elsewhere in this report. The selected financial data for the years ended
September 30, 1997 and 1996 have been derived from audited financial statements
of the Company not included herein. The data is qualified in its entirety by
reference to, and should be read in conjunction with, the Company's financial
statements and related notes, and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included elsewhere in this
report.
Information for Item 8 is included in the Company's financial statements as of
September 30, 1999 and 1998, and for each of the years in the three-year period
ended September 30, 1999, and the Company's unaudited quarterly financial data
for the two years ended September 30, 1999 and 1998, on pages 8 through 17 and
page 19, respectively, of the Company's 1999 Annual Report to Stockholders which
is hereby incorporated by reference. The report of the independent auditors is
included on page 18 of the Annual Report to Stockholders.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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INTEREST RATE RISK
At September 30, 1999 and 1998, the Company's cash equivalents and short-term
investments included approximately $5,049,000 and $2,812,000, respectively.
Since the Company typically does not purchase fixed-income securities, its cash
equivalents are not subject to significant interest rate risk. The Company
places substantially all of its interest bearing investments with major
financial institutions and by policy limits the amount of credit exposure to any
one financial institution. Additionally, the Company does not hold or issue
financial instruments for trading, profit or speculative purposes.
EQUITY PRICE RISK
The Company does not invest in available-for-sale equity securities, and is not
subject to significant equity price risk.
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FOREIGN EXCHANGE RATE RISK
The Company does not operate internationally and, therefore, is not subject to
market risk from changes in foreign exchange rates.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
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Not applicable.
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PART III
MANAGEMENT
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
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As of September 30, 1999, the executive officers and directors of the Company
and their ages are as follows:
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NAME AGE POSITION WITH THE COMPANY
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Geoffrey D. Knapp 41 Chief Executive Officer, Chairman
of the Board, and Secretary
David A. Frosh 41 President and Director
Paul Caceres, Jr. 39 Chief Financial Officer and Chief
Accounting Officer
Walter W. Straub 56 Director
Dr. Fred M. Haney 58 Director
Corley Phillips 45 Director
Scott Broomfield 42 Director
Geoffrey D. Knapp, founder of the Company, has been a Director, and an officer
of the Company since its organization in September 1983. 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 of directors since August 1991. From June 1990 to June
1996, Mr. Frosh was employed as 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. Mr. Frosh received a bachelor's
degree in marketing from Central Michigan University in 1980 and a master's
degree in business administration from Claremont Graduate School in 1999.
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.
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
Director or 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 the Company 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. 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.
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Corley Phillips joined the Company as 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 product support for State
of The Art, an accounting software company based in Irvine, California. From
1990 to 1994, Mr. Phillips served 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.
Scott Broomfield joined the Company as Director in March 1999. Mr. Broomfield
has been, since 1997, Chief Executive and a Director of Centura Software, Inc.,
a public company engaged in the business of providing a suite of products usable
by application developers to build and deploy component based distributed
business applications. From February 1993 to December 1997, Mr. Broomfield was a
principal with the firm of Hickey & Hill Incorporated "Hicky & Hill". In this
capacity, Mr. Broomfield assisted companies with executive management, strategy,
operational and financial consulting, business planning and business
development. Prior to joining Hicky & Hill, Mr. Broomfield held senior
management positions at Trilogy Systems, Inc., and Digital Equipment
Corporation. Mr. Broomfield has a bachelor's degree in psychology from Azusa
Pacific University and master's degree in business administration from Santa
Clara University.
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 and officer of the
Company.
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ITEM 11. EXECUTIVE COMPENSATION
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The following table sets forth information concerning compensation paid by the
Company for services rendered to the Company during fiscal year ended September
30, 1999, and the prior two fiscal years, to the Company's Chief Executive
Officer and each additional executive officer whose total compensation exceeded
$100,000:
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SUMMARY COMPENSATION TABLE
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ANNUAL COMPENSATION LONG-TERM
COMPENSATION
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AWARDS
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SECURITIES
UNDERLYING (2)
NAME AND PRINCIPAL (1) OTHER ANNUAL OPTIONS/ ALL OTHER
POSITION YEAR SALARY BONUS COMPENSATION SARS (#) COMPENSATION
- ------------------ ---- -------- -------- ------------ ----------- -------------
Geoffrey Knapp 1999 $222,500 $140,400 -- 0 $ 8,800
Chairman of the 1998 $209,200 $ -- -- 0 $ 8,100
Board and CEO 1997 $200,700 $ -- -- 20,000 $ 7,500
David Frosh 1999 $133,900 $109,200 -- 0 $ --
President 1998 $128,800 $ -- -- 0 $ --
1997 $127,500 $ -- -- 0 $
Paul Caceres Jr 1999 $136,800 $ 62,400 -- 0 $ 4,500
CFO and CAO 1998 $131,700 $ -- -- 0 $ 4,700
1997 $127,700 $ -- -- 10,000 $ 4,900
(1) Bonuses paid to the Named Executive 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 1999
There were no options granted to any of the Named Executive Officers in fiscal
year 1999; 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
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VALUE OF UNEXERCISED
SHARES NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS AT
ACQUIRED ON VALUE (1) OPTIONS AT SEPT. 30, 1999 SEPT. 30, 1999
NAME EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
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Geoff Knapp -- -- 74,000/6,000 $595,400/$39,800
David Frosh -- -- 55,900/36,000 $420,400/$283,500
Paul Caceres -- -- 52,000/3,000 $423,300/$19,900
(1) Market value of the underlying securities at the exercise date minus
the exercise price of the options.
REPORT OF COMPENSATION COMMITTEE
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 three
executive officers. In the opinion of the Committee, the compensation of the
three 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 60% to 70% of fixed salary, and 30% to
40% 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, 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 1999, 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, 1999
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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 1,017,000 options granted under the 1993 Plan as
of September 30, 1999.
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, 1999, totaled $55,000.
STOCK PRICE PERFORMANCE GRAPH
1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ----
NASDAQ STOCK MARKET 100 138 164 225 229 372
NASDAQ RETAIL TRADE STOCKS 100 110 132 151 130 158
CAM DATA SYSTEMS STOCK 100 363 463 288 344 1038
12
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- --------------------------------------------------------------------------------
The following table sets forth as of September 30, 1999, 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.
- -------------------------------------------------------------------------------------------
SHARES BENEFICIALLY OWNED
- -------------------------------------------------------------------------------------------
NAME AND ADDRESS OF AMOUNT & NATURE OF PERCENTAGE OF
TITLE OF CLASS BENEFICIAL OWNER BENEFICIAL OWNER (9) CLASS (10)
- -------------------------------------------------------------------------------------------
Common Stock Geoffrey D. Knapp (1) 444,100 (2) 17.66%
Common Stock Paul Caceres Jr. (1) 52,000 (3) 2.07%
Common Stock Walter W. Straub (1) 101,900 (4) 4.05%
Common Stock David Frosh (1) 55,900 (5) 2.22%
Common Stock Corley Phillips (1) 41,500 (6) 1.65%
Common Stock Fred Haney (1) 30,000 (7) 1.19%
Common Stock Scott Broomfield (1) 7,900 (8) 0.44%
Common Stock All Directors and
Officers as a Group (of 7
persons) (1) 733,300 29.16%
(1) The address of each beneficial owner is in care of CAM Data Systems,
Inc., 17520 Newhope Street, 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 the sooner of
October 20, 2003 at a price of $1.93 per share (iv) options to
purchase an aggregate of 14,000 shares until the sooner of 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 the sooner of October 20, 2003, at a price of $1.75
per share (ii) an aggregate of 30,000 shares of Common Stock until the
sooner of January 3, 2004, at a price of $2.13 per share (iii) an
aggregate of 7,000 shares until the sooner of December 16, 2006, at a
price of $3.75 per share.
(4) 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 $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 the sooner
of May 8, 2007, or twelve months after ceasing to serve as a director
at a price of $3.38 per share (vi) 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 (vii) an aggregate of 7,500
shares until the sooner of May 6, 2009, or twelve months after ceasing
to serve at a director at a price of $5.38 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 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 29,500
13
15
shares until the sooner of June 10, 2006, at a price of $2.50 per
share (v) an aggregate of 4,400 shares until the sooner of May 8,
2007, at a price of $3.38 per share.
(6) 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 (iv) an aggregate of 7,500 shares until the sooner of May 6,
2009, or twelve months after ceasing to serve at a director at a price
of $5.38 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 (iv) an aggregate of 7,500 shares until the sooner of May 6,
2009, or twelve months after ceasing to serve at a director at a price
of $5.38 per share.
(8) Includes options to purchase (i) an aggregate of 7,500 shares until
the sooner of May 6, 2009, or twelve months after ceasing to serve at
a director at a price of $5.38 per share (ii) an aggregate of 360
shares until the sooner of April 22, 2009, or twelve months after
ceasing to serve as a director at a price of $5.25 per share.
(9) 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.
(10) The percentage of ownership of the class of voting securities in the
above table has been calculated by dividing (i) the aggregate number
of shares of such class actually owned plus all shares of such class
which may be deemed to be "beneficially owned," by (ii) the number of
shares of such class actually outstanding plus the number of shares of
such class such "beneficial owner" may be deemed to "beneficially own"
assuming no other acquisitions of shares of such class through the
exercise of any option, warrant or right by any other person.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- --------------------------------------------------------------------------------
During the fiscal year ended September 30, 1999, the Company granted
non-qualified options to certain employees and directors to purchase an
aggregate of 185,400 shares of Common Stock of the Company at a price ranging
from $3.13 to $5.38 per share expiring ten years from the date of grant.
14
16
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS OF FORM 8-K
- -------------------------------------------------------------------------------
(a) 1. FINANCIAL STATEMENTS
The financial statements required to be filed hereunder are listed on page 6
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 the page hereof indicated below:
Page
Schedule II - Valuation and Qualifying Accounts 20
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 - SEC 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 - SEC File No.
33-15821-LA).
10(a) Incentive Stock Option Plan (incorporated by referenced to Exhibit
10(b) to the S-18 Registration Statement filed July 15, 1997 - SEC
File No. 33-15821LA).
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 - SEC 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) Individual Option Agreements (incorporated by reference to the
exhibits on Form S-3 SEC File 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 -SEC File No.
0-16569).
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).
15
17
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) Amendment to Line of Credit Agreement, dated February 8, 1999, 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,
1999.
23 Consent of Independent Auditors.
27 Financial Data Schedule for the Period Ended September 30, 1999.
(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, 1999, covered by this report.
16
18
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 10, 1999
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 10, 1999
- -----------------------
Geoffrey D. Knapp Officer and Chairman
of the Board
/s/ David Frosh President and December 10, 1999
- ----------------------- Director
David Frosh
/s/ Walter W. Straub Director December 10, 1999
- -----------------------
Walter W. Straub
/s/ Corley Phillips Director December 10, 1999
- -----------------------
Corley Phillips
Director
- -----------------------
Scott Broomfield
Director
- -----------------------
Dr. Fred M. Haney
17
19
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 18
Balance Sheets at
September 30, 1999 and 1998 8
Statements of Income for Years
Ended September 30, 1999, 1998 and 1997 9
Statements of Cash Flows for Years
Ended September 30, 1999, 1998 and 1997 10
Statements of Stockholders' Equity
for Years Ended September 30, 1999,
1998 and 1997 11
Notes to Financial Statements 12-17
Report of Independent Auditors on
Financial Statement Schedule 19
II. Valuation and Qualifying Accounts
for the Years Ended
September 30, 1999, 1998 and 1997 20
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.
18
20
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, 1999 and 1998, and for each of the three years in the period ended
September 30, 1999, and have issued our report thereon dated November 5, 1999.
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 5, 1999
19
21
CAM DATA SYSTEMS, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED SEPTEMBER 30, 1999, 1998, AND 1997
- --------------------------------------------------------------------------------------------------
DEDUCTIONS/ACCOUNTS
BALANCE AT ADDITIONS WRITTEN OFF NET OF BALANCE AT END
BEGINNING CHARGED TO RECOVERIES OF YEAR
OF YEAR INCOME
- -------------------------------------------------------------------------------------------------
Allowance for Doubtful Accounts Receivable
1999 $235,000 $490,000 $345,000 $380,000
1998 $160,000 $203,400 $128,400 $235,000
1997 $150,000 $177,700 $167,700 $160,000
20
22
EXHIBIT INDEX
Exhibit
Number Description Page
- ------ ----------- ----
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 - SEC 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 - SEC File No. 33-15821-LA).
10(a) Incentive Stock Option Plan (incorporated by referenced to Exhibit 10(b)
to the S-18 Registration Statement filed July 15, 1997 - SEC File No.
33-15821LA).
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 - SEC 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) Individual Option Agreements (incorporated by reference to the exhibits on
Form S-3 SEC File 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 -SEC File No.
0-16569).
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) Amendment to Line of Credit Agreement, dated February 8, 1999, 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,
1999.
23 Consent of Independent Auditors.
27 Financial Data Schedule for the Period Ended September 30, 1999.