10QSB 1 q203.txt FORM 10-QSB SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 Quarterly Report Under Section 13 Or 15(d) Of The Securities Exchange Act Of 1934 For the Quarter Ended: June 30, 2003 Commission File No: 0-6933 CAMBEX CORPORATION (Exact name of registrant as specified in its charter) Massachusetts 04-244-2959 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 115 Flanders Road, Westborough, Massachusetts (Address of principal executive offices) 01581 (Zip Code) Registrant's telephone number, including area code: (508) 983-1200 Indicate by "X" 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 the number of shares outstanding of each of the issuer's classes of stock, As of the latest practicable date. Class Outstanding as of June 30, 2003 Preferred 245,463 shares Common 18,320,351 shares Part I. FINANCIAL INFORMATION Item 1. Financial Statements CAMBEX CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS JUNE 30, 2003 AND DECEMBER 31, 2002 ASSETS JUNE 30, DECEMBER 31, 2003 2002 (unaudited) (audited) CURRENT ASSETS: CASH AND CASH EQUIVALENTS $ 215,209 $ 544,911 ACCOUNTS RECEIVABLE, Less Reserves of $120,000 in 2003 and in 2002 822,173 1,334,374 INVENTORIES 293,304 364,851 PREPAID EXPENSES 70,516 68,953 TOTAL CURRENT ASSETS $ 1,401,202 $ 2,313,089 PROPERTY AND EQUIPMENT, at cost: MACHINERY AND EQUIPMENT $ 3,072,567 $ 3,072,567 FURNITURE AND FIXTURES 162,625 162,625 LEASEHOLD IMPROVEMENTS 602,092 602,092 $ 3,837,284 $ 3,837,284 LESS - ACCUMULATED DEPRECIATION AND AMORTIZATION 3,819,937 3,812,872 NET PROPERTY AND EQUIPMENT $ 17,347 $ 24,412 OTHER ASSETS: GOODWILL $ 257,372 257,372 OTHER 37,830 37,830 TOTAL OTHER ASSETS $ 295,202 $ 295,202 TOTAL ASSETS $ 1,713,751 $ 2,632,703 2 CONSOLIDATED BALANCE SHEETS JUNE 30, 2003 AND DECEMBER 31, 2002 LIABILITIES AND STOCKHOLDERS' INVESTMENT JUNE 30, DECEMBER 31, 2003 2002 (unaudited) (audited) CURRENT LIABILITIES: LINE OF CREDIT $ 456,887 $ 802,097 LOAN AGREEMENT 1,024,060 1,032,869 NOTES PAYABLE 714,669 425,000 ACCOUNTS PAYABLE 928,933 1,560,147 OBLIGATIONS FOR TRADE-IN MEMORY 240,000 240,000 OTHER LIABILITIES 2,108,267 2,543,181 ACCRUED EXPENSES 1,765,122 1,616,864 TOTAL CURRENT LIABILITIES $ 7,237,938 $ 8,220,158 STOCKHOLDERS' INVESTMENT: PREFERRED STOCK, $ 1.00 PAR VALUE PER SHARE AUTHORIZED - 3,000,000 SHARES SERIES A - ISSUED - 98,223 shares in 2003 and 2002 $ 98,223 $ 98,223 SERIES B - ISSUED - 147,240 shares in 2003 and 2002 147,240 147,240 COMMON STOCK, $ .10 PAR VALUE PER SHARE AUTHORIZED - 25,000,000 SHARES ISSUED -19,865,609 shares in 2003 and 2002 1,986,561 1,986,561 CAPITAL IN EXCESS OF PAR VALUE 20,498,545 20,498,545 ACCUMULATED OTHER COMPREHENSIVE INCOME 101,774 101,774 RETAINED EARNINGS (DEFICIT) (27,467,559) (27,530,827) LESS - COST OF SHARES HELD IN TREASURY 1,545,258 in 2003 and in 2002 (888,971) (888,971) TOTAL STOCKHOLDERS' INVESTMENT $ (5,524,187) $ (5,587,455) TOTAL LIABILITIES AND STOCKHOLDERS' INVESTMENT $ 1,713,751 $ 2,632,703 3 CAMBEX CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2003 AND JUNE 30, 2002 For the Quarter Ended For the Six Months Ended June 30, June 30, June 30, June 30, 2003 2002 2003 2002 REVENUES $2,473,581 $5,845,369 $5,303,701 $8,074,077 COST OF SALES 1,571,877 4,658,934 3,237,271 6,166,955 Gross profit $ 901,704 $1,186,435 $2,066,430 $1,907,122 OPERATING EXPENSES: Research and development $ 166,418 $ 251,770 $ 355,994 $ 488,948 Selling 606,855 1,114,372 1,340,182 1,543,884 General and administrative 138,268 372,944 279,917 507,775 Total operating expenses $ 911,541 $1,739,086 $1,976,093 $2,540,607 OPERATING INCOME (LOSS) $ ( 9,837)$ (552,651)$ 90,337 $ (633,485) OTHER INCOME (EXPENSE) 34,696 (171,149) ( 27,069) (364,955) INCOME(LOSS) BEFORE INCOME TAXES $ 24,859 $ (723,800)$ 63,268 $( 998,440) Provision for income taxes - - - - NET INCOME (LOSS) $ 24,859 $ (723,800)$ 63,268 $( 998,440) INCOME(LOSS) PER COMMON SHARE $ 0.00 $ (0.05)$ 0.00 $ (0.08) Weighted Average Common Shares Outstanding 18,320,000 13,500,000 18,320,000 13,000,000 Weighted Average Common and Common Equivalent Shares Outstanding 18,320,000 13,500,000 18,320,000 13,000,000 4 CAMBEX CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENT Common Stock Capital in Accumulated Retained Cost of $.10 Excess of Other Earnings Shares Par Value Par Value Comprehensive (Deficit) Held in Income Treasury BALANCE AT JANUARY 1, 2002 $1,148,474 $16,268,677$102,677 $(26,053,690)$(888,971) ADD: Net loss $ - $ - $ - $( 998,440)$ - Conversion of long term debt 754,087 904,905 - - - Acquisition of business 84,000 302,800 - - - Conversion of notes payable - 3,022,163 - - - BALANCE AT JUNE 30, 2002 $1,986,561 $20,498,545$102,677 $(27,052,130)$(888,971) BALANCE AT JANUARY 1, 2003 $1,986,561 $20,498,545$101,774 $(27,530,827)$(888,971) ADD: Net income $ - $ - $ - $ 63,268 $ - BALANCE AT JUNE 30, 2003 $1,986,561 $20,498,545$101,774 $(27,467,559)$(888,971) Series A Series B Preferred Stock Preferred Stock $1.00 Par Value $1.00 Par Value BALANCE AT JANUARY 1, 2002 $ - $ - ADD: Conversion of notes payable 98,223 147,240 BALANCE AT JUNE 30, 2002 $ 98,223 $ 147,240 BALANCE AT JANUARY 1, 2003 $ 98,223 $ 147,240 ADD: BALANCE AT JUNE 30, 2003 $ 98,223 $ 147,240 5 CAMBEX CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOW FOR THE SIX MONTHS ENDED JUNE 30, 2003 AND JUNE 30, 2002 Six Months Ended June 30, June 30, 2003 2002 CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ 63,268 $( 998,440) Adjustments to reconcile net income(loss) to net cash provided by(used in) operating activities: Depreciation $ 7,065 $ 18,150 Amortization of prepaid expenses 9,550 4,048 Changes in operating assets and liabilities: Accounts receivable 512,201 494,563 Inventory 71,547 730,548 Prepaid expenses ( 11,113) 3,491 Other assets 166 Accounts payable ( 631,214) ( 320,951) Accrued expenses 148,258 301,319 Other liabilities ( 434,914) ( 15,713) Total adjustments $( 328,620)$ 1,215,621 Net cash provided by(used in) operating activities $( 265,352)$ 217,181 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of equipment, net $ - $ - Net cash provided by(used in)investing activities $ - $ - CASH FLOWS FROM FINANCING ACTIVITIES: Net borrowings (repayments)under line of credit $( 345,210)$( 547,223) Net borrowings (repayments)under loan agreement ( 8,809) 34,227 Increase(decrease) in notes payable 289,669 150,000 Net cash provided by (used in) financing activities $( 64,350)$( 362,996) Effect of exchange rate changes on cash - - Net increase (decrease) in cash and cash equivalents $( 329,702)$( 145,815) Cash and cash equivalents at beginning of period 544,911 209,573 Cash and cash equivalents at end of period $ 215,209 $ 63,758 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for: Interest $ 39,569 $ 44,564 Income Taxes - - Non-cash financing and investing activities: Conversion of long term debt and accrued interest into common stock $ - $ 1,658,992 Net assets of business acquired and increase in goodwill financed via issuance of common stock and accrued expenses $ - $ 511,800 Conversion of notes payable and accrued interest into preferred stock, net of deferred offering costs $ - $ 3,267,626 6 FORM 10-QSB CAMBEX CORPORATION AND SUBSIDIARIES For The Quarter Ended: June 30, 2003 Commission File: 0-6933 Notes & Comments: (1)Significant Accounting Policies The accompanying consolidated financial statements include our accounts and our wholly-owned subsidiaries. All material intercompany transactions and balances have been eliminated in consolidation. The condensed financial statements included herein have been prepared by us, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although we believe that the disclosures are adequate to make the information presented not misleading. The information furnished includes all adjustments and accruals consisting only of normal recurring accrual adjustments which are, in our opinion, necessary for a fair presentation of results for the interim period. It is suggested that these condensed financial statements be read in conjunction with the financial statements and the notes thereto included in our latest annual report on Form 10-KSB. Inventories, which include raw materials, labor and manufacturing overhead are stated at the lower of cost (first-in, first-out) or market and consist of the following: June 30, December 31, 2003 2002 Raw materials $ 199,898 $ 215,693 Work-in-process 53,629 69,412 Finished goods 39,777 79,746 $ 293,304 $ 364,851 7 FORM 10-QSB CAMBEX CORPORATION AND SUBSIDIARIES For The Quarter Ended: June 30, 2003 Commission File: 0-6933 Notes & Comments (Continued): (2) Income and Dividends Per Share Per share amounts are based on the weighted average number of shares outstanding during each period plus applicable common stock equivalents. There were no material differences for per share amounts assuming full dilution in either period. (3) Short Term Borrowings Our Super PC Memory, Inc. subsidiary has a line of credit of $2,000,000 available from GE Capital Commercial Services, Inc., limited to 75% of the eligible receivables of Super PC Memory, Inc. The outstanding balance due to GE Capital Commercial Services, Inc. was $456,887 and $802,097 at June 30, 2003 and December 31, 2002, respectively. We also have a loan and security agreement with B.A. Associates, Inc. which is a corporation owned by a son-in-law of Joseph F. Kruy, our Chairman, President and Chief Executive Officer. The outstanding balance due to B.A. Associates, Inc. was $1,024,060 and $1,032,869 at June 30, 2003 and December 31, 2002, respectively. Notes payable of $714,669 at June 30, 2003 and $425,000 at December 31, 2002 include $375,000 and $275,000, respectively, of advances payable which are due on demand. The $375,000 of advances payable includes amounts of $275,000 from related parties. The $275,000 of advances payable includes amounts of $175,000 from related parties. 8 FORM 10-QSB CAMBEX CORPORATION AND SUBSIDIARIES For The Quarter Ended: June 30, 2003 Commission File: 0-6933 Notes & Comments (Continued): (4) Acquisition of Super PC Memory, Inc. On March 12, 2002, Cambex Corporation completed the acquisition of 100% of the outstanding common stock of Super PC Memory, Inc. and Super PC Memory, Inc. became a wholly-owned subsidiary of Cambex Corporation. The results of Super PC Memory, Inc.'s operations have been included in the consolidated financial statements since that date. Super PC Memory is a leading provider of memory products for servers, workstations, desktop PCs and laptops. The purchase price initially included the issuance of 560,000 shares of Cambex common stock and payments based on the gross profit of the subsidiary over the next three years. The 560,000 shares are valued at $291,200 based on the closing price on March 12, 2002 of $0.52 per share of Cambex common stock. The Sellers, Son T. Pham, Simon Le and Richard G. Schaefer received 560,000 shares of Cambex Corporation common stock and were to receive fifteen percent (15%) of Super PC Memory, Inc.'s gross profit for the period from March 12, 2002 through December 31, 2004, payable in quarterly installment payments pursuant to the terms of the Stock Purchase and Sale Agreement. On July 29, 2002, we amended the agreement with the Sellers for the purchase of 100% of the outstanding common stock of Super PC Memory, Inc. We issued an additional 280,000 shares of Cambex common stock and in return the Sellers agreed that they were no longer entitled to receive 15% of Super PC's gross profit for the period from March 12, 2002 through December 31, 2004 or any other additional consideration for the sale of 100% of the outstanding common stock of Super PC Memory, Inc. The additional 280,000 shares are valued at $145,600 based on the closing price on the date of the acquisition of $0.52 per share of Cambex common stock. 9 FORM 10-QSB CAMBEX CORPORATION AND SUBSIDIARIES For The Quarter Ended: June 30, 2003 Commission File: 0-6933 Notes & Comments (Continued): (4) Acquisition of Super PC Memory, Inc. (continued) We have recorded the net assets of Super PC on our books as follows: Accounts receivable $ 2,684,194 Inventories 969,795 Prepaid expenses 18,172 Property and equipment 19,680 Goodwill 257,372 Total assets acquired $ 3,949,213 Line of credit $ 1,606,481 Accounts payable 1,487,774 Accrued expenses 343,158 Total liabilities assumed $ 3,437,413 Net assets acquired $ 511,800 The above amounts are the final amounts as reported in our annual report on Form 10KSB for the year ended December 31, 2002. Preliminary estimated amounts were included in our quarterly reports on Form 10QSB for the periods ended March 31, 2002, June 30, 2002 and September 30, 2002. The primary reasons for our acquisition of Super PC Memory, and the primary factors that contributed to a purchase price that resulted in recognition of goodwill, are: - Super PC Memory operations would deliver earnings prospects, a significant customer base, and other potential strategic benefits, - Combining the operations of the two companies could provide cost savings, - The acquisition would transform Cambex into a stronger, more integrated storage products company with the benefits of increased size and scale. 10 FORM 10-QSB CAMBEX CORPORATION AND SUBSIDIARIES For The Quarter Ended: June 30, 2003 Commission File: 0-6933 Notes & Comments (Continued): (4) Acquisition of Super PC Memory, Inc.(Continued) Had the results of operations for Super PC Memory, Inc. been included for the whole six months ended June 30, 2002, our revenue, net income(loss) and income(loss) per share would have been changed to the following pro forma amounts: Six Months ended June 30, 2002 Revenue: As Reported (000's) $ 8,074 Pro Forma 12,897 Net Income(Loss): As Reported (000's) ( 998) Pro Forma ( 991) Basic and Diluted EPS:As Reported ( 0.08) Pro Forma ( 0.08) 11 FORM 10-QSB CAMBEX CORPORATION AND SUBSIDIARIES For The Quarter Ended: June 30, 2003 Commission File: 0-6933 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The statements contained in "Management Discussion and Analysis of Financial Condition and Results of Operations" and elsewhere throughout this Report on Form 10-QSB that are not historical facts are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements are subject to certain risks and uncertainties which could cause actual results to differ materially from those reflected in the forward-looking statements. These forward-looking statements reflect management's analysis, judgment, belief or expectation only as of the date hereof. We undertake no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date hereof or to publicly release the results of any revisions to such forward-looking statements that may be made to reflect events or circumstances after the date hereof. In addition to the disclosure contained herein, readers should carefully review any disclosure of risks and uncertainties contained in other documents we file or have filed from time to time with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934. We are a designer and supplier of data storage products and solutions. Our products include memory for computing systems and fibre channel connectivity and storage products used to build storage area networks (SANs). We design, manufacture, and market memory products that enhance the performance and reliability of computing systems and networking devices. We have been selling memory products to our customers since 1970. A processor's memory is used to hold temporary instructions and data needed to execute tasks. This enables the computer's CPU to access instructions and data quickly. After upgrading a processor's memory, the computer will process data faster, because it will need to access its slower secondary storage (i.e., the disk drive) less frequently. We provide memory upgrade solutions for all the major servers, workstations, and personal computers manufactured by IBM, Sun, Hewlett-Packard, and Dell. Adding additional memory is both application transparent and the most cost-effective solution for eliminating many system performance bottlenecks. We develop and offer fibre channel host bus adapters and hubs, high availability software, fibre channel disk storage arrays and management software for the deployment of SAN solutions. SANs enhance and simplify the centralized management and sharing of data storage resources while providing improved availability, scalability, performance, and disaster recovery. SANs have been enabled by the emergence of fibre channel, a new generation of server to storage communications technology. By reselling fibre channel hardware and software products from leading manufacturers, together with our internally developed products, we are able to offer customers a complete interoperable SAN solution. 12 FORM 10-QSB CAMBEX CORPORATION AND SUBSIDIARIES For The Quarter Ended: June 30, 2003 Commission File: 0-6933 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) Comparison of the quarter ended June 30, 2003 and the quarter ended June 30, 2002 Our revenues were $2,473,581 for the quarter ended June 30, 2003 and $5,845,369 for the quarter ended June 30, 2002. Revenues for the three months ended June 30, 2003 decreased 58% compared to revenues for the same three months in the prior year due to decreased sales of our memory products partially offset by increased sales of our fibre channel connectivity products. The decrease in memory sales was the result of weaker demand for memory products and our decision not to accept orders with undesirable gross margins. Gross profit rate was 36% of sales for the three months ended June 30, 2003 and 20% for the three months ended June 30, 2002. The increase was due to the write-off of accrued liabilities relating to inventory purchases, which were incurred in prior periods, in the amount of $200,000 in the quarter ended June 30, 2003 and the product mix as there are higher gross margins on our fibre channel connectivity products than our memory products. Operating expenses for the three months ended June 30, 2003 decreased by 48% in comparison to operating expenses for the comparable three months of the prior year. Selling expenses for the three months ended June 30, 2003 decreased by 46% compared to the amount of these expenses in the second quarter of fiscal 2002 due to reductions in personnel and related expenses. Research and development and general and administrative expenses for the three months ended June 30, 2003 decreased by 34% and 63%, respectively, in comparison to the amount of these expenses in the second quarter of 2002 due to streamlining personnel and expenses in consolidating the acquisition of Super PC Memory, Inc. Other income (expense) for the quarter ended June 30, 2003 includes other income of $98,000 relating to the reversal of accrued expenses and $63,304 of interest expense. Other income (expense) for the quarter ended June 30, 2002 consists of $171,149 of interest expense. Interest expense decreased by 63% for the three months ended June 30, 2003 compared to the three months ended June 30, 2002. This decrease in interest expense was primarily due to the conversion of notes payable into common and preferred stock in the first and second quarters of 2002, partially offset by interest paid to GE Capital Commercial Services, the lender providing a line of credit to our subsidiary. Net income for the second quarter of fiscal 2003 was $25,000, or $0.00 per share, as compared with a net loss of $724,000, or $0.05 per share, for the second quarter of fiscal 2002. 13 FORM 10-QSB CAMBEX CORPORATION AND SUBSIDIARIES For The Quarter Ended: June 30, 2003 Commission File: 0-6933 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) Inflation We did not experience any material adverse effects in the second quarter of 2003 or in the second quarter of 2002 due to general inflation. Liquidity and Capital Resources We have suffered substantial recurring losses from operations for the last seven consecutive years. Consequently, our ability to continue as a going concern, is dependent upon several factors including, but not limited to our ability to generate revenues and gross profit in significantly greater amounts than in the past four fiscal years, and our ability to raise additional capital. Our working capital deficit is a significant threat to our ability to continue as a going concern. Management continues to work to establish new strategic alliances that it believes will result in increases in revenues and gross profit in the future through the sale of a greater volume of products. Management has also been active in trying to secure additional capital. We cannot give any assurances that the actions taken to date will increase revenues and gross profit or raise additional capital. 14 FORM 10-QSB CAMBEX CORPORATION AND SUBSIDIARIES For The Quarter Ended: June 30, 2003 Commission File: 0-6933 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) Requirements We need additional capital and additional financing may not be available. We believe that the combination of current existing cash, available borrowing capacity and our ability to obtain additional long-term indebtedness may not be adequate to finance our operations for our current activities and foreseeable future activities. Currently, our cash burn rate from operations is approximately $80,000 per month or $960,000 per year at the current sales levels. For each $100,000 reduction in sales, our cash burn rate would increase by approximately $28,000 per month. Conversely, for each $100,000 increase in sales, our cash burn rate would decrease by approximately $28,000 per month. These numbers may change based on product mix. The burn rate is an estimate. The actual burn rate may differ materially as a result of a number of factors, risks and uncertainties that are described herein. We are trying to raise additional capital and if we are unable to raise additional capital, we may not be able to meet our anticipated working capital requirements. Our lease for our Waltham, Massachusetts location expired May 31, 2003. We have relocated to Westborough, Massachusetts. The lease is for a term of 72 months. The new lease has a slightly positive impact on our cash requirements. We have a loan and security agreement with B.A. Associates, Inc. which is a corporation owned by a son-in-law of Joseph F. Kruy, our Chairman, President and Chief Executive Officer. The outstanding balance due to B.A. Associates, Inc. was $1,024,060 at June 30, 2003. We also have notes payable of $714,669 at June 30, 2003 including $375,000 of advances payable which are due on demand. The $375,000 of advances payable include $275,000 of borrowings from related parties. 15 FORM 10-QSB CAMBEX CORPORATION AND SUBSIDIARIES For The Quarter Ended: June 30, 2003 Commission File: 0-6933 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) Resources Our cash and marketable securities were $215,000 and $545,000 at June 30, 2003 and December 31, 2002, respectively. Working capital was a deficit of $5,837,000 and $5,907,000 at June 30, 2003 and at December 31, 2002, respectively. During the quarter ended June 30, 2003, we did not expend any funds for capital equipment. During fiscal 2003, we expect to acquire less than $100,000 of capital equipment. Our Super PC Memory, Inc. subsidiary has a line of credit of $2,000,000 available from GE Capital Commercial Services, Inc., limited to 75% of the eligible receivables of Super PC Memory. At June 30, 2003 we had a balance of $456,887 outstanding under this line of credit. We also have a revolving credit facility with B.A. Associates, Inc. which is a corporation owned by a son-in-law of Joseph F. Kruy, our Chairman, President and Chief Executive Officer under which we may borrow up to $1,100,000. At June 30, 2003 we had a balance of $1,024,060 outstanding under this revolving credit facility. We need additional capital and additional financing may not be available. We believe that the combination of current existing cash, available borrowing capacity and our ability to obtain additional long-term indebtedness may not be adequate to finance our operations for our current activities and foreseeable future activities. We are actively pursuing raising additional capital and if we are unable to raise additional capital, we may not be able to meet our anticipated working capital requirements. We are attempting to raise additional capital to cover the burn rate not covered by incremental gross profit. This amount is dependent upon sales and gross profit. If sales and gross profit do not increase or capital cannot be raised to cover the current burn rate, we intend to reduce operating expenses as much as practicable to continue operations until balance is established. If we are not successful in raising additional capital or increasing our sales to adequate levels, we will not be able to continue our current operations and there is substantial doubt as to our ability to continue as a going concern. There can be no assurance that we will be successful in raising such additional capital at all or on terms commercially acceptable to us or our shareholders. 16 FORM 10-QSB CAMBEX CORPORATION AND SUBSIDIARIES For The Quarter Ended: June 30, 2003 Commission File: 0-6933 Item 3. Controls and Procedures Our principal executive officer and principal financial officer, Joseph F. Kruy, has evaluated the effectiveness of our disclosure controls and procedures and concluded that there are no significant deficiencies in the design or operation of internal controls which could adversely affect our ability to record, process, summarize and report financial data and has determined that there are no material weaknesses in internal controls. There were no significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation. 17 FORM 10-QSB CAMBEX CORPORATION AND SUBSIDIARIES For The Quarter Ended: June 30, 2003 Commission File: 0-6933 Part II. OTHER INFORMATION Item 1. Legal Proceedings The Company is a party to litigation and claims arising in the normal course of its business. Barring unforeseen circumstances, management does not expect the results of these actions to have a material adverse effect on the Company's business or financial condition. Item 2. Change in Securities and Use of Proceeds None. Item 3. Defaults Upon Senior Securities None. Item 4. Submission of Matters to a Vote of Security Holders None. Item 5. Other Information None. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits EXHIBIT INDEX The following exhibits are filed herewith or incorporated by reference herein. Exhibit 3.1 Restated Articles of Organization of Cambex Corporation (included as Exhibit 3.1 to the Company's Registration Statement on Form SB-2, declared effective with the Commission on November 7, 2000, Reg. No. 333-43294, and incorporated herein by reference). 18 FORM 10-QSB CAMBEX CORPORATION AND SUBSIDIARIES For The Quarter Ended: June 30, 2003 Commission File: 0-6933 Item 6. Exhibit Index (continued) 3.2 Restated By-laws of Cambex Corporation (included as Exhibit 3.2 to the Company's Registration Statement on Form SB-2, declared effective with the Commission on November 7, 2000, Reg. No. 333-43294, and incorporated herein by reference). 3.3 Series A Preferred Stock Certificate of Designations (included as Exhibit 10.37 to the Company's Quarterly Report on Form 10-QSB for the quarter ended June 30, 2002 and incorporated herein by reference). 3.4 Series B Preferred Stock Certificate of Designations (included as Exhibit 10.39 to the Company's Quarterly Report on Form 10-QSB for the quarter ended June 30, 2002 and incorporated herein by reference). 4.1 Specimen Stock Certificate (included as Exhibit 4.1 to the Company's Registration Statement on Form SB-2, declared effective with the Commission on November 7, 2000, Reg. No. 333-43294, and incorporated herein by reference). 4.2 Registration Rights Agreement among the Company and the Purchasers identified therein (the "Sovereign Purchasers") dated as of January 18, 2000 (included as Exhibit 4.1 to the Company's Amendment to Quarterly Report on Form 10-Q/A for the quarter ended April 1, 2000, and incorporated herein by reference). 4.3 Registration Rights Agreement between the Company and Thumberland Limited dated as of July 14, 2000 (included as Exhibit 4.3 to the Company's Registration Statement on Form SB-2, declared effective with the Commission on November 7, 2000, Reg. No. 333-43294, and incorporated herein by reference). 10.1 Employment Agreement between Joseph F. Kruy and the Company, dated as of November 18, 1994 (included as Exhibit 10.1 to the Company's Amendment to Quarterly Report on Form 10-Q/A for the quarter ended April 1, 2000, and incorporated herein by reference). 10.2 Incentive Bonus Plan (included as Exhibit 10.2 to the Company's Registration Statement on Form SB-2, declared effective with the Commission on November 7, 2000, Reg. No. 333-43294, and incorporated herein by reference). 10.3 1987 Combination Stock Option Plan (included as Exhibit 10.8 to the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 1987, and incorporated herein by reference). 19 FORM 10-QSB CAMBEX CORPORATION AND SUBSIDIARIES For The Quarter Ended: June 30, 2003 Commission File: 0-6933 Item 6. Exhibit Index (continued) 10.4 2000 Equity Incentive Plan (included as Exhibit 10.12 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1999, and incorporated herein by reference). 10.5 Series 1 Bridge Note Purchase Agreement among the Company and the Sovereign Purchasers dated as of January 18, 2000 (included as Exhibit 10.7 to the Company's Amendment to Quarterly Report on Form 10-Q/A for the quarter ended April 1, 2000, and incorporated herein by reference). 10.6 Escrow Agreement among the Company, the Sovereign Purchasers and Suntrust Bank, Atlanta dated as of January 6, 2000 (included as Exhibit 10.8 to the Company's Amendment to Quarterly Report on Form 10-Q/A for the quarter ended April 1, 2000, and incorporated herein by reference). 10.7 Placement Agent Agreement between the Company and Sovereign Capital Advisors, LLC ("Sovereign Advisors") dated as of January 18, 2000 (included as Exhibit 10.9 to the Company's Amendment to Quarterly Report on Form 10-Q/A for the quarter ended April 1, 2000, and incorporated herein by reference). 10.8 Guaranty Agreement among Joseph F. Kruy, the Company and the Sovereign Purchasers dated as of January 18, 2000. (included as Exhibit 10.10 to the Company's Amendment to Quarterly Report on Form 10-Q/A for the quarter ended April 1, 2000, and incorporated herein by reference). 10.9 Guaranty Agreement among CyberFin Corporation, the Company and the Sovereign Purchasers dated as of January 18, 2000 (included as Exhibit 10.11 to the Company's Amendment to Quarterly Report on Form 10-Q/A for the quarter ended April 1, 2000, and incorporated herein by reference). 10.10 Stock Pledge Agreement by Joseph F. Kruy in favor of the Sovereign Purchasers dated as of January 18, 2000 (included as Exhibit 10.12 to the Company's Amendment to the Quarterly Report on Form 10-Q/A for the quarter ended April 1, 2000, and incorporated herein by reference). 10.11 Stock Pledge Agreement by CyberFin Corporation in favor of the Sovereign Purchasers dated as of January 18, 2000 (included as Exhibit 10.13 to the Company's Amendment to the Quarterly Report on Form 10-Q/A for the quarter ended April 1, 2000, and incorporated herein by reference). 20 FORM 10-QSB CAMBEX CORPORATION AND SUBSIDIARIES For The Quarter Ended: June 30, 2003 Commission File: 0-6933 Item 6. Exhibit Index (continued) 10.12 Series 1 Bridge Financing Note in favor of SovCap Equity Partners, Ltd. dated as of January 18, 2000 (included as Exhibit 10.14 to the Company's Amendment to the Quarterly Report on Form 10-Q/A for the quarter ended April 1, 2000, and incorporated herein by reference). 10.13 Series 1 Bridge Financing Note in favor of Correllus International, Ltd. dated as of January 18, 2000 (included as Exhibit 10.16 to the Company's Amendment to the Quarterly Report on Form 10-Q/A for the quarter ended April 1, 2000, and incorporated herein by reference). 10.14 Common Stock Purchase Warrant in favor of SovCap Equity Partners, Ltd. dated as of January 18, 2000 (included as Exhibit 10.18 to the Company's Amendment to the Quarterly Report on Form 10-Q/A for the quarter ended April 1, 2000, and incorporated herein by reference). 10.15 Common Stock Purchase Warrant in favor of Correllus International, Ltd. dated as of January 18, 2000 (included as Exhibit 10.19 to the Company's Amendment to the Quarterly Report on Form 10-Q/A for the quarter ended April 1, 2000, and incorporated herein by reference). 10.16 Sovereign Warrant Agreement between the Company and Sovereign Advisors dated as of January 18, 2000 (included as Exhibit 10.20 to the Company's Amendment to the Quarterly Report on Form 10-Q/A for the quarter ended April 1, 2000, and incorporated herein by reference). 10.17 Warrant Certificate registered in the name of Sovereign Advisors dated January 18, 2000 (included as Exhibit 10.21 to the Company's Amendment to the Quarterly Report on Form 10-Q/A for the quarter ended April 1, 2000, and incorporated herein by reference). 10.18 Series 1 Bridge Financing Note in favor of Arab Commerce Bank Ltd. dated as of February 9, 2000 (included as Exhibit 10.22 to the Company's Amendment to the Quarterly Report on Form 10-Q/A for the quarter ended April 1, 2000, and incorporated herein by reference). 10.19 Common Stock Purchase Warrant in favor of Arab Commerce Bank Ltd. dated as of February 9, 2000 (included as Exhibit 10.24 to the Company's Amendment to the Quarterly Report on Form 10-Q/A for the quarter ended April 1, 2000, and incorporated herein by reference). 21 FORM 10-QSB CAMBEX CORPORATION AND SUBSIDIARIES For The Quarter Ended: June 30, 2003 Commission File: 0-6933 Item 6. Exhibit Index (continued) 10.20 Series 1 Bridge Financing Note in favor of SovCap Equity Partners, Ltd. dated as of February 9, 2000 (included as Exhibit 10.25 to the Company's Amendment to the Quarterly Report on Form 10-Q/A for the quarter ended April 1, 2000, and incorporated herein by reference). 10.21 Common Stock Purchase Warrant in favor of SovCap Equity Partners, Ltd. dated as of February 9, 2000 (included as Exhibit 10.27 to the Company's Amendment to the Quarterly Report on Form 10-Q/A for the quarter ended April 1, 2000, and incorporated herein by reference). 10.22 Loan and Security Agreement, as amended, by and between the Company and BA Associates, Inc. (included as Exhibit 10.27 to the Company's Registration Statement on Form SB-2 filed with the Commission on November 29, 2000, Reg. No. 333-50936, and incorporated herein by reference.) 10.23 Fifth Amendment to Loan and Security Agreement, as amended, by and between the Company and B.A. Associates, Inc., dated as of December 27, 2000 (included as Exhibit 10.28 to the Company's Annual Report on Form 10-KSB for the fiscal year ended December 31, 2000 and incorporated herein by reference). 10.24 Form of Warrant Certificate between the Company and B.A. Associates, Inc. (included as Exhibit 10.29 to the Company's Annual Report on Form 10-KSB for the fiscal year ended December 31, 2000 and incorporated herein by reference). 10.25 Sixth Amendment to Loan and Security Agreement, as amended, by and between the Company and B.A. Associates, Inc., dated as of December 27, 2001(included as Exhibit 10.30 to the Company's Annual Report on Form 10-KSB for the fiscal year ended December 31, 2002 and incorporated herein by reference). 10.26 Stock Purchase and Sale Agreement dated as of January 31, 2002 by and among Cambex Corporation, Super PC Memory, Inc., Son T. Pham, Simon Le and Richard G. Schaefer (included as Exhibit 2.1 to the Company's Current Report on Form 8-K dated March 27, 2002, and incorporated herein by reference). 10.27 Amendment to the Stock Purchase and Sale Agreement dated as of July 29, 2002 by and among Cambex Corporation, Super PC Memory, Inc., Son T. Pham, Simon Le and Richard G. Schaefer (included as Exhibit 10.32 to the Company's Quarterly Report on 10QSB for the quarter ended June 30, 2002, and incorporated herein by reference). 22 FORM 10-QSB CAMBEX CORPORATION AND SUBSIDIARIES For The Quarter Ended: June 30, 2003 Commission File: 0-6933 Item 6. Exhibit Index (continued) 10.28 Securities Exchange Agreement dated as of June 28, 2002 by and among the Company and Richard Calvert(included as Exhibit 10.33 to the Company's Quarterly Report on 10QSB for the quarter ended June 30, 2002, and incorporated herein by reference). 10.29 Securities Exchange Agreement dated as of June 28, 2002 by and among the Company and H. Terry Snowday(included as Exhibit 10.34 to the Company's Quarterly Report on 10QSB for the quarter ended June 30, 2002, and incorporated herein by reference). 10.30 Securities Exchange Agreement dated as of June 28, 2002 by and among the Company and The Hankins Family Trust(included as Exhibit 10.35 to the Company's Quarterly Report on 10QSB for the quarter ended June 30, 2002, and incorporated herein by reference). 10.31 Securities Exchange Agreement dated as of June 28, 2002 by and among the Company and Joseph Kruy(included as Exhibit 10.36 to the Company's Quarterly Report on 10QSB for the quarter ended June 30, 2002, and incorporated herein by reference). 10.32 Securities Exchange Agreement dated as of June 28, 2002 by and among the Company and SovCap Equity Partners, Ltd. (included as Exhibit 10.38 to the Company's Quarterly Report on 10QSB for the quarter ended June 30, 2002, and incorporated herein by reference). 10.33 Lease by and between the Company and Bertech Flanders, LLC dated as of April 24, 2003 (included as Exhibit 10.33 to the Company's Quarterly Report on 10QSB for the quarter ended March 31, 2003, and incorporated herein by reference). 31.1 Certification as required by section 302 of the Sarbanes-Oxley Act of 2002 32.1 Certification as required by section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code). (b) Reports on Form 8-K None. 23 FORM 10-QSB CAMBEX CORPORATION AND SUBSIDIARIES For The Quarter Ended: June 30, 2003 Commission File: 0-6933 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CAMBEX CORPORATION By: /s/ Joseph F. Kruy Joseph F. Kruy President and Treasurer Dated: August 14, 2003 24