-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MSsmz6/BRc3M78jXo1VT4x6yAm3n+Ppz5Uh/6xoKz8J4vlzIEWe6gDKcfLJqaqx4 A0AEuVN/p1wyqP43q1SBEg== 0000856143-97-000019.txt : 19971027 0000856143-97-000019.hdr.sgml : 19971027 ACCESSION NUMBER: 0000856143-97-000019 CONFORMED SUBMISSION TYPE: 10KSB/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19971024 SROS: BSE SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: BCAM INTERNATIONAL INC CENTRAL INDEX KEY: 0000856143 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-ENGINEERING SERVICES [8711] IRS NUMBER: 133228375 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10KSB/A SEC ACT: SEC FILE NUMBER: 001-10420 FILM NUMBER: 97700621 BUSINESS ADDRESS: STREET 1: 1800 WALT WHITMAN RD CITY: MELVILLE STATE: NY ZIP: 11747 BUSINESS PHONE: 5167523550 MAIL ADDRESS: STREET 1: 1800 WALT WHITMAN RD CITY: MELVILLE STATE: NY ZIP: 11747 FORMER COMPANY: FORMER CONFORMED NAME: BIOMECHANICS CORP OF AMERICA DATE OF NAME CHANGE: 19920703 10KSB/A 1 10KSB/A FOR THE YEAR ENDED DECEMBER 31, 1996 U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-KSB/A ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended Commission File Number: 0-18109 December 31, 1996 Exact name of small business issuer as specified in its charter BCAM INTERNATIONAL, INC. State or other jurisdiction of IRS Employer incorporation or organization: New York Identification No.: 13-3228375 Address of principal executive offices: 1800 Walt Whitman Road, Melville, New York 11747 (516) 752-3550 Securities registered under Name of each exchange on Section 12(b) of the Exchange Act: which registered: Common Stock, $.01 par value Boston Stock Exchange NASDAQ Securities registered under Section 12(g) of the Exchange Act: Common Stock, $.01 par value Common Stock Purchase Warrants Units consisting of three common shares and two redeemable Class A Warrants Check whether the registrant (1) filed all reports to be filed by Section 13 or 15 (d) of the Exchange Act during the past 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 __ Check if disclosure of delinquent filers in response to Item 405 of Regulation S-B is not contained in this form, and no disclosure will be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB [ ]. Registrant's revenues for its most recent fiscal year were $604,554. The aggregate market value of the registrant's common stock held by non-affiliates as of March 21, 1997, was $19,880,916, based on the average of the bid and asked prices of such stock on March 21, 1997, as reported by NASDAQ. The number of shares outstanding of the registrant's common stock as of March 21, 1997, was 15,954,733. DOCUMENTS INCORPORATED BY REFERENCE None Transitional Small Business Disclosure Format (check one): Yes __; No X_ PART I ITEM 1. DESCRIPTION OF BUSINESS BCAM International Inc. (formerly Biomechanics Corporation of America prior to a name change effected June 22, 1995), (the "Company") was organized in 1984 under the laws of the State of New York. GENERAL BCAM International, Inc. (the "Company") is a software technology company, specializing in ergonomic (human factor) solutions for individuals, government, and for major corporations. The Company's focus since 1995 has been on (I) accelerating the development and commercialization of the Company's Intelligent Surface Technology ("IST"), (II) continuing its development of proprietary software, which consists of the intelligent part of IST, MQPro(TM) (formerly Mannequin(R)), the EARLY(R) process and Back-to-Work(TM) methodology, and (III) in addition to the planned proprietary software ("HumanCAD(R)") product sales of MQPro(TM), EARLY(R) and Back-to-Work(TM), the Company will market Software Based Ergonomic Consulting Services. The Company will also continue to provide its Traditional Ergonomic Consulting Services in Ergonomic Product Assessment and Redesign and Ergonomic Workplace Assessment, but with emphasis on broadening and strengthening long term business relationships such as joint ventures, partnerships, licensees and other alliances. The Company's collaborative research and development relationships, such as the one with the State University of New York at Stony Brook, provide valuable resources in strengthening the Company's capabilities in ergonomic consulting. The Company anticipates that its business plan will be enhanced by the acquisition of a business which will provide a base for the commercialization of IST in medical footwear. On March 19, 1997, the Company signed a definitive agreement to acquire Drew Shoe Corporation ("Drew") of Lancaster, Ohio, a 125 year-old leading designer, manufacturer and distributor of medical footwear and orthotic products, for $4.6 million subject to financing. The Company's acquisition of Drew and the related financing are expected to be completed in the second quarter of 1997. Drew's 1996 sales were approximately $15 million. Upon completion of IST, the Company hopes to incorporate it into intelligent medical footwear and orthotic products. The Company believes that its ergonomic consulting service is the engine that drives new product ideas and with it, the potential for future royalty streams, as well as new product and service offerings. During the course of the Company's performance of ergonomic consulting services, the Company from time to time develops certain know-how based upon data from its services which it is able to embody into proprietary technologies. When this occurs, and it is believed that the technology is a significant enhancement from the existing technology, the Company files for patent protection under the laws of the United States, and if warranted, internationally. (I) INTELLIGENT SURFACE TECHNOLOGY Since 1991, the Company has developed and patented seven issued patents, one notice of allowance and four additional patent filings related to its IST which empowers surfaces to automatically measure any part of the body touching that surface and then, in real time, adjust themselves to conform to that user's body to provide the ultimate in comfort and fit. Such a surface is considered an intelligent surface because it is able to learn about the user and recognize patterns of the user's activities through its sophisticated proprietary software. The Company has identified applications for this technology in the primary areas of seating, footwear and bedding. In addition, the technology can be used for handtools, exercise equipment, helmets, etc. Current Licensees Textron. The Company and McCord Winn Textron, Inc., a subsidiary of Textron, Inc., ("Textron") signed a Development and License Agreement in March 1993, amended in October 1993 and August 1996, whereby the Company granted an exclusive worldwide license to Textron to use the IST patents and know-how in the manufacture, use and sale of seats, and seating components for the transportation industry, wheelchairs, office furniture applications and hospital beds. In 1996, Textron informed the Company that it expects a certain 1998 model automobile to be introduced in the fall of 1997, to incorporate IST in the design of the driver and passenger seat. Textron is obligated to pay the Company a royalty for the use of the Company's technology in the sale of the systems which is expected to commence in 1997. The August 1996 amendment obligated Textron to pay royalties to the Company through December 31, 1999, for any products designed using the Company's IST. After January 1, 2000, Textron shall be obligated to pay the Company royalties only for any products designed which actually incorporate IST patents and know-how transmitted to Textron by the Company after May 31, 1996. As of today, the Company has disclosed to Textron that it has received four patents and one "Notice of Allowance" after May 31, 1996. Reebok. In January 1994, the Company and Reebok International Ltd. ("Reebok") signed a world-wide exclusive licensing and development agreement for the use of IST footwear. In addition, Reebok has a right of first refusal to obtain exclusive licenses to use IST on athletic, sport and fitness equipment fields of use. The fields of medical equipment and orthopedic devices are specifically excluded from the Reebok license. The Company and Reebok are continuing to work closely in developing the application of the Company's IST, which is expected to be introduced in Reebok's footwear products in due course. Lumex. The agreement signed in September 1994 between the Company and Lumex, Inc. was terminated in April 1996. The fields relinquished by Lumex cover operating room tables, medical rockers and medical procedure chairs. Potential New Licensees The Company has identified several fields that can benefit from its technologies and ergonomic design expertise. The Company is in advanced discussions with a recliner company, an office furniture company for seating products, a company which manufactures operating room tables, a tool company which manufactures jackhammers and a hand tool company. It is actively pursuing the leading companies within these fields in order to increase the number of licensees and generate additional revenue. Sealy. In August 1996, the Company signed an agreement with Sealy, Inc. to utilize the Company's IST, computer software, know-how and expertise towards development of new Sealy products. Specifically, Sealy has an option agreement to license IST for its adjustable bed and a right of first refusal as applied to all bedding products (excluding medical bedding applications). Revenue from IST accounted for 4% of revenue in 1996 versus 13% in 1995 and 23% in 1994. The 1996 revenue was generated from the Sealy and Lumex licensing agreements, while the 1995 and 1994 revenue was generated from the Reebok and Lumex agreements. (II) PROPRIETARY SOFTWARE DEVELOPMENT In addition to the IST software, the Company's other software development efforts have always been focused in areas that support the Company's Traditional Ergonomic Consulting Services, and beginning in 1997 the Software Based Ergonomic Consulting Services. Since 1989, the Company has developed, marketed, maintained, and continuously upgraded two proprietary software packages: MQPro(TM) (formerly known as Mannequin(R)) and EARLY(R). Recently, the Company has been identifying, testing, validating, and modifying software technology for use in the Worker's Compensation area of "Back-to-Work(TM)" products. These proprietary software products will be further developed and marketed by the Company's HumanCAD(R) division. MQPro(TM) (Formerly known as Mannequin(R)) The Company's HumanCAD(R) division started the marketing of MQPro(TM) software on March 10, 1997. The software is compatible with CAD and other graphic programs, and has motion capture capabilities useful for graphical illustrations and motion analysis. The Company believes that many universities, design organizations and government agencies, including NASA, are current users of the earlier version of MQPro(TM) (formerly known as Mannequin(R)). The results of a successful beta test of the new version of MQPro(TM), and preliminary market survey confirmed that a substantial market exists, especially among CAD users and industrial designers. MQPro(TM) is a human modeling program that enables the user to render 3-dimensional scalable humanoid figures on a personal computer (PC). These figures can be articulated into any position and then can be viewed from any angle, distance or perspective. The result of that view can be printed, plotted or exported to other graphics software for further enhancement of the image. The figures can walk, bend, reach and grasp objects. A user can test the functionality of the design of almost anything used by humans. The Company has recently upgraded a Windows(R) version that processes in all Windows(R) platforms. The Company plans to extend its development and marketing effort of MQPro(TM) from the current standard version to include: a Lite version, a Plug-in version, a Companion version and a Heavy version. EARLY(R) The Company's EARLY(R) process (Ergonomic Assessment of Risk and Liability) allows the ergonomist to integrate videotapes of tasks with the assistance of sophisticated software to identify risk of Cumulative Trauma Disorders and determine opportunities for ergonomic intervention in order to fit the workplace better to the workers' capabilities. Currently, the Company's EARLY(R) process is marketed on a service retail basis to industrial companies and governments, and on a wholesale basis to insurance companies. See Ergonomic Consulting Services. The Company plans on developing and eventually marketing the EARLY(R) process as a stand alone software with the ancillary Software Based Ergonomics Consulting Services in addition to its traditional EARLY(R) workplace assessment services. Back-To-Work(TM) Technology The Company is currently completing the testing and validation of a diagnostic methodology which will, in a non-invasive way, measure the severity of back injury of an individual who is already on Workers' Compensation, or an individual who has filed a claim to be on Workers' Compensation. This diagnostic analysis combines the measurement of the range of motion, with strength calculation, in order to assess the functional capabilities of an individual. This objective, non-invasive analysis should identify malingerers, and provide doctors for employers and doctors for insurance companies with the objective necessary information on all employees that are claiming Workers' Compensation. In addition, medical providers can use this information to prescribe treatment protocol, monitor progress of treatment and determine proper back-to-work procedures. The Company intends to market this as a service to insurance companies and other third-party administrators ("TPA"). The Company's testing and validating of a Back-to-Work(TM) methodology, along with the necessary modifications, is to be completed in the near future. The Company then plans to work with Risk Enterprise Management ("REM"), a 75% owned subsidiary of Zurich Companies, to perform a pilot study, using a group of REM's managed care providers. If the pilot study is successful, the Company expects to roll out its new Back-to-Work diagnostic methodology some time in 1998. Several other large insurance companies have also been approached, and are very interested in this diagnostic technology. See Marketing of Traditional Ergonomic Consulting Services. (III) ERGONOMIC CONSULTING SERVICES The Company has restructured its ergonomic consulting services into two areas: (i) Software Based Consulting Services, tailored to the implementation and use of the HumanCAD(R) line of ergonomic software products, and (ii) Traditional Ergonomic Consulting Services, in Ergonomic Product Assessment and Redesign, and Ergonomic Workplace Assessment. The Company believes that its ergonomic consulting service is the engine that drives new product ideas and with it, the potential for future royalty streams, as well as new product and service offerings. During the course of the Company's performance of ergonomic consulting services, the Company from time to time develops certain know-how based upon data from its services which it is able to embody into proprietary technologies. When this occurs, and it is believed that the technology is a significant enhancement from the existing technology, the Company files for patent protection under the laws of the United States, and if warranted, internationally. Software Based Consulting Services As part of the Company's restructuring, the Company will focus resources for further development of its HumanCAD(R) ergonomic software product line. The eventual product sales of the HumanCAD(R) software will create an opportunity for the Company to provide a new consulting service based on implementation and use of such proprietary software. The Company anticipates that a portion of customers who will purchase its HumanCAD(R) ergonomic software line will need the added expertise to help them fully utilize the software products in order to meet their business objectives, whether those objectives are making better products, bringing those products to market more quickly, reducing product development costs or creating a safer and more efficient workplace environment. Traditional Ergonomic Consulting Services Ergonomic Product Assessment and Redesign The Company performs comprehensive subjective and objective ergonomic testing on products that quantifies the product's relationship in terms of comfort, fit, usability and user performance to human users. This knowledge is used by product developers, manufacturers and industrial design firms to improve existing products and/or develop new ones. In essence, the Company serves as the "User's Representative", communicating user needs in terms that engineers and industrial designers can apply in the design of their products. This analysis provides substantial guidance and a strong foundation to the design process. Ergonomic Product Assessment and Redesign Services provided 69% of the Company's revenue in 1996, 60% of the Company's revenue in 1995 and 70% of the Company's revenue in 1994. Ergonomic Workplace Assessment Workers' compensation coverage to employees cost U.S. employers over $100 billion in 1996. It is also estimated that more than 2.5 million people developed musculoskeletal disorders last year, and according to OSHA, each year over $20 billion dollars is spent on repetitive stress injuries (or Cumulative Traumatic Disorders). Many of these injuries involve lost duty time for recuperation, reassignment of injured workers to other jobs, in addition to medical treatment costs, thus escalating total workers' compensation costs. The Company provides Ergonomic Workplace Assessment services to industrial companies, government, and insurance companies, to reduce musculoskeletal injuries, through its proprietary EARLY(R) services and custom tailored consulting services. Other benefits are the potential for improved productivity, enhanced product and service quality. Ergonomic Workplace Assessment Services provided 26% of the Company's revenues in 1996, 27% of the revenues in 1995 and 7% of the revenues in 1994. SALES AND MARKETING Marketing Strategy for Licensing IST In order for the Company to obtain new licensees, the Company's marketing strategy has focused on identifying organizations that: - Are large, - Are financially strong, - Have marketing presence, and - Have the financial resources to commercialize the technology The Company will license the IST technology to organizations that meet the above criteria and will assist those organizations in commercializing the technology. Marketing of Traditional Ergonomic Consulting Services - - Ergonomics (human factors) originated in academia and was only recently popularized by industry. As a result, the sales cycle is long. Since the service is intangible, the Company's emphasis, therefore, is on building long-term relationships with major organizations that may lead to new product ideas and with it, potential royalty streams, as well as new product and service offerings. - - The Company is marketing and promoting its Traditional Ergonomic Consulting Services in traditional ways, including referrals from existing clients, publishing articles, speaking at seminars and conducting industry specific seminars. - - In addition to the above approaches to market the Traditional Ergonomic Consulting Services, the Company is also attending and exhibiting at trade shows, utilizing direct marketing techniques, and advertising in selected trade publications, including on its Internet web site (www.bcamergo.com). Pricing Policy During 1995, the Company changed its pricing practices in its Traditional Ergonomic Consulting Service business. Previously, the Company charged only a consulting fee per project. The Company's new pricing formula calls for, in addition to a consulting fee, a royalty which may be earned when the Company's ergonomic product redesign change recommendations are commercialized or a percentage of cost savings when major ergonomic workplace assessment recommendations are implemented. The following are some examples of the new pricing policy: - - The Long Island Lighting Company ("LILCO") and the Company will work together to market a "Lift Assist" for a Jackhammer, for which the Company provided design recommendations as part of its workplace assessment. The Company will share equally in the proceeds from an income stream in the future. - - Remington Arms Company, Inc. ("Remington"), pursuant to a Best-In-Class assessment by the Company, was provided redesign recommendations related to Remington's .22 caliber rifles. The contract signed with Remington states that if the Company's recommendations are incorporated into their product, royalties will be paid to the Company. Business Relationship Strategy During 1995 and 1996, the Company focused on building long-term relationships with major organizations as a key part of its marketing strategy. The Company's objective is to obtain repeat business from its clients (which the Company has already started accomplishing in 1996). The following are some examples, other than the IST licensing relationship, where repeat business has occurred or is imminent: - - In March 1996, the Company entered into a long-term relationship with REM to provide EARLY(R) service. The relationship is expected to broaden in 1997 to include both prevention, EARLY(R) service and a pilot study, using a group of REM's managed care providers. If the pilot study is successful, the Company expects to roll out its new Back-To-Work(TM) diagnostic methodology some time in 1988. - - Multiple contracts with United Airlines relating to the interior redesign of the plane, such as seating, have been entered into. In addition, the Company identified causes and then made recommendations for the redesign of food service carts on airplanes, specifically to reduce repetitive stress injuries. - - Multiple contracts with LILCO for Workplace Assessments, Product Assessments and Redesign and a project whereby LILCO and the Company will work together to market a "Lift Assist" for Jackhammers. The Company will share in the profit from sales of the product. - - After completing a Product Assessment and Redesign assignment for Stanley Tools, a division of The Stanley Works, the Company received additional Product Assessment and Redesign assignments from other divisions of Stanley Works. More are expected. - - Frisby Technologies, Inc. ("Frisby"), a leading technology company established to develop, manage and commercialize innovative dual use and environmental remediation technologies, and the Company entered into a Business Referral Agreement. In the agreement, the Company has the exclusive right to refer customers to Frisby relating to the following products: bedding, recliners and heat stress reduction products for workers at utilities. As of September 1996, LILCO awarded a grant to Frisby and to the Company to develop "cool" gloves and "cool" sleeves to reduce heat stress for linesmen. Research and Development The Company's research and development is focused on enhancing and commercializing the Company's core technologies. The Company attempts to minimize spending on research. Therefore, the Company typically will try to acquire the rights to use an existing technology, if available, rather than spend money and effort to invent a new technology. The Company will, however, fund research for technology, when the needed technology is not available. For example, in the case of certain components (i.e., a self-generating power supply and an intelligent switch) which are necessary to employ IST for handtools and footwear applications, the Company is seeking to acquire the rights to technology to manufacture such components instead of trying to invent those technologies. However, in the case of other control components (i.e., the microvalve that will control the "air pressure"), the Company is devoting resources to develop that technology, in order to be in a better position to exploit the commercial opportunities of IST in a miniaturized environment. In the area of development, the Company is focusing on software and application engineering. Further software developments include IST, several versions of MQPro(TM), Back-To-Work(TM), and fully automating the EARLY(R) process. The Company uses its internal resources and subcontractors, as needed, in its research and development activities. For example, the Company has established a collaborative research and development relationships with the State University of New York at Stony Brook, MCNC and the New Jersey Institute of Technology, and plans to establish additional relationships with other universities, and government laboratories, as necessary. Competition Management of the Company believes that its unique IST technology, HumanCAD(R) software, methodologies and know-how give it a significant competitive advantage. Although there may be similar systems to the Company's IST, the Company believes that its patents and know-how strongly protect its technology from competition. The Company believes that MQPro(TM) is the only software package of its kind that will process on a PC with a minimum of resources, i.e., 8 MB of memory. Therefore, MQPro(TM) has significant economic advantages over all other competing software of its kind. Although there are many competing sources for similar services to the Company's offerings, the Company believes its EARLY(R) process, with the accompanying EARLY(R) software provides significant advantages in cost, and proven solutions in its data base, to its clients. There are many sources of product design services, especially internal designers of organizations. However, the Company believes that its unique technology, proprietary software, know-how and methodologies, developed over the last 12 years, which are continuously updated, provide significant advantages to the Company's clients over other alternatives in cost, quality and faster turnaround, thus reducing the design cycle. Suppliers The Company provides services, and the materials it uses in its business may be obtained from numerous suppliers. Government Regulation The Company's present and proposed activities are not generally subject to government regulation in the United States or other countries. While the Company cannot predict the extent to which it may be affected by legislative or other regulatory developments, it does believe that the current policies of OSHA encourage the use of the Company's services. The Company is also of the view that if OSHA continues to focus on ergonomic issues, it will result in both industry and the general public becoming more aware of the need for ergonomic services and products. Focus is also occurring at the FDA to encourage more human factor engineering in the design of medical devices. The costs and effects of complying with environmental laws by the Company are not material. Proprietary Information The patent process is a major protection for the Company's intellectual property. As of today, the Company has obtained seven patents (six in the United States and one European) and one notice of allowance, and has filed four additional United States patent applications relating to its IST. This notice of allowance has special significance because it is a pending software patent filed prior to the June 22, 1995, GATT Treaty, which means, when this patent is issued, it will have a 17 year life from time of issue or 20 years from the date of filing, whichever is greater. One of the four patents filed is also very significant since it is for a critical component needed to miniaturize the application of the IST. Such miniaturization will allow the Company to a) accelerate the commercialization of many applications, b) enter the very large and expanding medical footwear market with applications for diabetics, arthritics and the aging population, and c) provide applications to other industries, such as the hand tool industry. The Company also has five U.S. patents in fields other than IST. The Company protects its proprietary written material, know-how, computer software and technology, which it has or may develop, through the use of United States copyrights, common-law trade secret protection, trademarks and service marks, and contractual arrangements. In addition, the Company enters into confidentiality arrangements with its employees, consultants and customers, and implements various measures to maintain "trade secret" protection for its products Major Customers During the year ended December 31, 1996, L.A. Rumbold Ltd., LILCO, and Stanley Tools, Inc. accounted for 38%, 18% and 18% respectively, and 74% in the aggregate, of net revenue. During the year ended December 31, 1995, BE Aerospace, Inc., Remington, and Reebok accounted for 29%, 12% and 11%, respectively, and 52%, in the aggregate, of net revenue. During the fiscal year ended December 31, 1994, an Indonesian government agency, Aircraft Industry of Indonesia ("IPTN"), Reebok and Lumex accounted for 59%, 17% and 9%, respectively, and 85%, in the aggregate, of net revenue. Because the Company is often retained to consult with respect to particular problems or to present particular seminars or training sessions, it is usually retained for limited periods of time and may not perform services pursuant to long-term contracts and its services may not typically be needed by clients after the completion of particular assignments. No assurance can be given that the Company will continue to be retained by any of its major clients beyond the current period or that such clients will find additional tasks to be performed by the Company in the future. Employees As of December 31, 1996, the Company had 13 employees and two part-time positions. The functions include six in technical staff, two in sales and marketing, and two senior management members, with the rest being accounting and administrative staff. In addition, the Company established a collaborative research & development relationship with the State University of New York at Stony Brook, with plans to establish additional relationships with other universities, government laboratories, and other sub-contractors. The Company has been able to attract and retain skilled employees by offering competitive salaries and benefits. None of the Company's employees are represented by a labor union and the Company believes that its relationship with its employees is good. Forward-Looking Statements Information set forth in this Form 10-KSB regarding the Company's plans for future operations constitutes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Any forward-looking statements should be considered in light of the factors set forth in the "Factors That May Affect Future Results" section of this Form 10-KSB. ITEM 2. DESCRIPTION OF PROPERTY Since 1990, the Company has leased office space at 1800 Walt Whitman Road, Melville, New York. The Company's lease expires on March 31, 2000. The current annualized lease rate for this space is approximately $138,000, which is subject to annual increases. The facility, which contains approximately 8,400 square feet, includes biomechanics research laboratories and a comprehensive ergonomic library as well as offices. The laboratories are used both for testing and for the redesign of products. The facilities are believed to be adequate for the Company's operations into the foreseeable future. ITEM 3. LEGAL PROCEEDINGS There are no material legal proceedings pending against the Company. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. PART II ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. The Common Stock of the Company is quoted primarily on the NASDAQ Small Cap Market under the symbol BCAM. It is also traded on the Boston Stock Exchange under the symbol BAM. The following table sets forth the high and low closing bid quotations for the Common Stock as reported by NASDAQ and the Boston Stock Exchange for each calendar quarter during 1996 and 1995. The NASDAQ Small Cap market quotations reflect inter-dealer prices without retail markup, markdown or commission and do not necessarily represent actual transactions. NASDAQ 1996 High Bid Low Bid First Quarter 1 1/4 29/32 Second Quarter 1 5/16 29/32 Third Quarter 1 23/32 15/16 Fourth Quarter 1 7/16 13/16 1995 High Bid Low Bid First Quarter 1 1/16 3/4 Second Quarter 1 9/32 7/8 Third Quarter 1 21/32 31/32 Fourth Quarter 2 1 Boston Stock Exchange 1996 High Sales Price Low Sales Price First Quarter No Activity No Activity Second Quarter 1 1/4 1 1/16 Third Quarter 1 19/32 1 Fourth Quarter 1 7/16 7/8 1995 High Sales Price Low Sales Price First Quarter 1 1/16 13/16 Second Quarter 1 9/32 31/32 Third Quarter 1 1/2 1 Fourth Quarter 1 13/16 1 1/8 Holders There were approximately 363 record holders of the Company's Common Stock as of March 21, 1997. Dividends The Company has paid no cash dividends on its Common Stock since its inception and does not anticipate paying cash dividends on its Common Stock in the foreseeable future. Recent sale of unregistered securities Between January 15 and March 28, 1997, in consideration for $1,075,000, the Company sold to accredited investors an aggregate of 1,075,000 shares of Common Stock at $1.00 per share, and 1,075,000 Non-Redeemable Class AA Warrants to purchase an additional 1,075,000 shares of Common Stock at an exercise price of $.65 per share exercisable through March 31, 2002. The purchasers of the securities are set forth in the following table: Common shares Common shares Name of purchaser Amount paid issuable under warrants - ----------------- ----------- ------------- -------------- 621 Partners $ 260,000 260,000 260,000 Appleton Associates 120,000 120,000 120,000 R. Weil & Associates 320,000 320,000 320,000 Karen Weil 100,000 100,000 100,000 David Latter 25,000 25,000 25,000 Howard Weingrow 50,000 50,000 50,000 Peter Orr 50,000 50,000 50,000 Joseph Offenberger 25,000 25,000 25,000 David Schultz 25,000 25,000 25,000 Howard Seiberman 50,000 50,000 50,000 Joe Schueller 50,000 50,000 50,000 ---------- --------- --------- $1,075,000 1,075,000 1,075,000 Kirr Marbach & Company, LLC ("Kirr Marbach") is a general partner of 621 Partners, Appleton Associates and R. Weil & Associates which in the aggregate are entitled to receive, or to direct the receipt of, dividends from, and the proceeds from sale of, all of the shares beneficially owned by Kirr Marbach. The Registrant claims exemption from registration of this placement by virtue of Section 4(2) of the Securities Act of 1933. ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS Except for the historical information contained herein, the following discussion contains forward looking statements that involve risk and uncertainties. The Company's actual results could differ materially from those discussed herein. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below in Factors That May Affect Future Results Overview BCAM International, Inc. (the "Company") is a software technology company, specializing in ergonomic (human factor) solutions for individuals, government, and for major corporations. The Company's focus since 1995 has been on (I) accelerating the development and commercialization of the Company's Intelligent Surface Technology ("IST"), (II) continuing its development of proprietary software, which consists of the intelligent part of IST, MQPro(TM) (formerly Mannequin(R)), the EARLY(R) process and Back-to-Work(TM) methodology, and (III) upgrading and marketing its proprietary software ("HumanCAD(R)") products of MQPro(TM), EARLY(R) and Back-to-Work(TM), and marketing Software Based Ergonomic Consulting Services. The Company is also committed to continue to provide its Traditional Ergonomic Consulting Services in Ergonomic Product Assessment and Redesign and Ergonomic Workplace Assessment, with emphasis on broadening and strengthening long term business relationships such as joint ventures, partnerships, licensees and other alliances. The anticipated acquisition of Drew will enhance its business plan by providing a base for the commercialization of IST in footwear. The Company will then focus on the core business which will include incorporating IST in seating products, exploitation of the medical footwear market and marketing HumanCAD(R) software and Software Based Consulting Services, and place less emphasis on the non-core business of Traditional Ergonomic Consulting Services. Results Of Operations - 1996 vs. 1995 Management anticipates a significant contribution from software sales and Software Based Ergonomic Consulting Services in the future starting with 1997. Software sales and Software Based Ergonomic Consulting Service contributed minimal revenue in 1996 and 1995. The Company's Traditional Ergonomic Consulting Services provided virtually all revenue to the Company from contracts providing for a fixed price or a fixed hourly rate. For the year ended December 31, 1996, revenue from long-term fixed price contracts accounted for under the percentage of completion method of accounting totaled approximately two thirds of revenues (See - Note 2 to financial statements). In setting its price for services, the Company seeks to estimate the man hours that will be required to provide the services. To the extent that the Company underestimates the man hours that will be required, or the expenses it will incur in performing a contract, the Company could realize a loss on any particular contract. Net revenue decreased by $147,523 in 1996 from 1995. Net revenue includes the following: Year Ended December 31, -------------------------- 1996 1995 ---------- ---------- Intelligent Surface Technology(IST) $ 28,030 $ 96,473 Ergonomic Product Assessment and Redesign services 415,160 451,508 Ergonomic Workplace Assessment services 161,364 204,096 ---------- ---------- $ 604,554 $ 752,077 ========== ========== Revenue from IST includes the initial payments for licensing the IST as well as fees associated with the development of the prototypes for the specific applications. Revenue from IST in 1996 includes $15,000 connected with the Sealy option and development agreement signed in 1996. In 1996, $12,500 of revenue from the 1994 Lumex agreement was written off after the termination of that agreement. IST revenue declined $68,443 in 1996 from 1995 and accounted for 5% of net revenue in 1996 versus 13% in 1995. The majority of 1995 revenue is attributable to the licensing and development agreements with Reebok for Intelligent Footwear and Athletic Sport and Fitness Equipment and Lumex. Due to the one-time nature of many of the Company's consulting contracts, revenue from Ergonomic Product Assessment and Redesign services, and Ergonomic Workplace Assessment services (Traditional Ergonomic Consulting Services) fluctuates from year to year. Ergonomic Product Assessment and Redesign services revenue decreased by $36,348 in 1996 from 1995 and provided 69% of the Company's revenue in 1996 compared to 60% in 1995. Revenue from Ergonomic Workplace Assessment services decreased $42,732 in 1996 from 1995 and accounted for 26% of net revenue in 1996 versus 27% in 1995. Both of these decreases reflect a change in the strategy to focus on industries where the Company has significant expertise, and to build long-term relationships for future integration of our technology in these companys' products. Direct costs include salaries, equipment purchases for contracts, consulting fees and certain other costs. Gross profit may fluctuate from period to period. Factors influencing fluctuations include the nature and volume of services provided to individual customers which affect contract pricing, the Company's success in estimating contract costs (principally professional time), the timing of hiring new professionals, who may require training before gaining experience, efficiencies and meeting customer demands. Direct costs decreased $325,290, to $272,980 in 1996 from $598,270 in 1995 primarily due to: (i) a more favorable mix of internal versus outside resources in 1996 as compared to 1995, and (ii) the elimination in 1996 of a reserve for $149,000 for Textron development, previously recorded in 1994, representing estimated expenses for providing additional development services to Textron. Under the agreed amendment with Textron, signed in August 1996, Textron may receive a credit for $150,000 from any royalties that may be earned by the Company and will be proportional over a four-year period commencing in the first year when royalties become payable. Gross profit, as set forth in the table below, increased by $ 177,767 in 1996 as compared to 1995. The increase was due to the reduction in direct costs which more than offset the decline in net revenue. Year Ended December 31, -------------------------- 1996 1995 ---------- ---------- Net Revenue $ 604,554 $ 752,077 Direct Costs 272,980 598,270 ---------- ---------- Gross Profit $ 331,574 $ 153,807 ========== ========== Gross Profit Percentage 55% 20% Since taking over in 1995, a key objective of the new management team has been to reduce selling, general and administrative expenses and redirect such cash savings in the development of core business such as IST and HumanCAD(R) software. Selling, general and administrative expenses were $1,801,915 in 1996, which included approximately $355,000 in certain costs which are non-recurring in nature and reflect certain acquisition, financing and other strategic costs, as well as reductions in personnel costs for positions eliminated, among other items. Without these non-recurring expenses the selling, general and administrative costs in 1996 would have been $1,446,653. Therefore, excluding these 1996 non-recurring items, selling, general and administrative expenses would have been approximately $1,446,653 in 1996, $1,831,494 in 1995 (which includes approximately $193,000 of non-recurring expenses consisting principally of non recurring consulting costs) and $2,339,225 in 1994, demonstrating management's commitment to lower these expenses and redirect cash into the core technology. The Company's research and development costs decreased $87,965 to $97,854 in 1996 from $185,819 in 1995. This decrease is primarily due to the capitalization of $85,191 of development expenditures in 1996 relating to the upgrade of the Company's MQPro(TM) software, released in March 1997. In prior years, these costs were R&D in nature and accordingly were expensed in the period they were incurred. The remaining costs reflect the development of several components relating to certain applications of the IST. During 1996 and 1995, the Company made significant progress in the development of the necessary components relating to certain applications of the IST, such as a microvalve (patent filed in June 1996), a self-generating power supply and an intelligent switch. Net interest income decreased $119,971 to $54,055 in 1996 from $174,026 in 1995. The decrease is primarily attributable to a decrease in cash available for investment from 1995 to 1996 utilized for operating activities. Due to the net losses and the accounting rules in accordance with Financial Accounting Standards Board ("FASB") Statement No. 109, "Accounting for Income Taxes", there was no provision for income taxes in 1996 and 1995. As a result of all of the above, the net loss in 1996 decreased $175,340 to $1,514,140 from $1,689,480 in 1995. Liquidity And Capital Resources Cash, cash equivalents and held-to-maturity securities decreased by $1,682,514 to $526,344 at December 31, 1996, from $2,208,858 at December 31, 1995. Net cash used in operating activities, mainly to cover the 1996 net loss, was $1,394,584 for the year ended December 31, 1996, compared to $2,010,346 in the year ended December 31, 1995. Financing activities used $98,246 in cash for the year ended December 31, 1996, compared to $59,299 for the year ended December 31, 1995. This consisted mainly of uses of cash for stock registration and issuance costs, as well as cash paid for deferred acquisition and finance costs associated with the Drew Shoe acquisition. Accounts receivable, net of the allowance for doubtful accounts, decreased to $22,537 at December 31, 1996, from $135,995 at December 31, 1995. Three customers comprised 84% of gross accounts receivable at December 31, 1996. Unbilled receivables decreased from $173,403 at December 31, 1995 to $100,362 at December 31, 1996 due to fluctuations in volume of business and patterns of billing. Prepaid expenses and other current assets increased to 74,491 at December 31, 1996, from 60,182 at December 31, 1995. Accounts payable, accrued expenses and sundry liabilities decreased to $285,065 at December 31, 1996, from $422,671 at December 31, 1995. The decrease of $137,606 resulted primarily from the elimination of an accrual for $149,000 relating to the Textron licensing agreement. Consequently, working capital decreased $1,717,098 to $438,669 at December 31, 1996, from $2,155,767 at December 31, 1995. The Company has no material commitments for any future capital expenditures. The Company expects that its working capital, together with revenue from operations, the proceeds from a private placement (see below), and potential exercise of its Class B and Class E Warrants, will be sufficient to meet liquidity and capital requirements through 1997. Longer term cash requirements are dictated by a number of external factors, which include, among others, further development of and royalties from IST, further development and product sales of HumanCAD(R) software and the Company's ability to introduce new competitive products and services. On March 19, 1997, the Company entered into an agreement with the owners of Drew whereby, the Company will purchase all of the Common Stock of Drew for $4,600,000 subject to financing. Drew, of Lancaster Ohio, is a 125 year-old leading designer, manufacturer and distributor of medical footwear and orthotic products. This acquisition will complement the Company's business strategy. Drew represents an opportunistic and synergistic vehicle for the Company to incorporate IST into medical footwear and orthotic products, for diabetics, arthritics, and the aging population. On March 10, 1997, at the National Design Engineering Show in Chicago, Illinois, the Company, through its HumanCAD(R) Systems division, introduced MQPro(TM), a PC-based human modeling and ergonomics design program that creates accurate, three-dimensional humanoids with point-and-click simplicity. MQPro(TM) will be the first ergonomic product in its series of computer-aided human ergonomic software. On January 15, 1997, the Company offered a minimum of 400,000 Units, each consisting of one share of the Company's Common Stock and a non-redeemable Class AA Warrant, which entitles the holder to purchase one share of the Company's Common Stock at a price of $1.10 per share, until March 31, 1999. The offering was completed on March 28, 1997, and 1,075,000 units have been sold raising $1,075,000 for the Company. On December 20, 1996, the Company extended the expiration date of the Company's Class B Warrants and Class E Warrants from January 17, 1997, to January 17, 1998, and of the Company's Class C Warrants from January 17, 1997, to March 18, 1997. The conversion of the Warrants is a potential source of additional capital. The Class C Warrants expired and were not converted. The Company's net revenue was $604,554 in 1996. Revenue is expected to be higher in 1997 than in 1996 because it will include sales of its HumanCAD(R) software, the start of royalties from Textron (Textron informed the Company in 1996 that certain 1998 model automobiles will be introduced in the fall of 1997 incorporating IST in the design of the drivers' and front passenger's seats) and continued revenues from the Company's Traditional Ergonomic Consulting Services as well as the new Software Based Ergonomic Consulting Services. Factors That May Affect Future Results The Company's future operating results are dependent on the Company's ability to (i) successfully further develop IST and increase the number of licensees, and the commercialization of IST by its licensees, (ii) further develop and sell its HumanCAD(R) software consisting of MQPro(TM), EARLY(R) process and Back-To-Work(TM) methodology, (iii) successfully market and sell its new Software Based Consulting Services and its Traditional Ergonomic Consulting Services and (iv) complete the Company's acquisition of Drew, future profitability of Drew and introduction of IST in medical footwear and orthotic products. ITEM 7. FINANCIAL STATEMENTS The response to Item 7 is submitted as a separate section of this Report. ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable. PART III ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS, COMPLIANCE - ------- ------------------------------------------------------------------------ WITH SECTION 16(A) OF THE EXCHANGE ACT -------------------------------------- Directors and Executive Officers - -------------------------------- As of April 28, 1997, the directors and executive officers of BCAM International, Inc. ("the Company") are as follows: Name Age Position With Company ---- --- --------------------- Michael Strauss 55 Chairman of the Board of Directors, President, Chief Executive Officer and Chief Operating Officer Robert P. Wong 55 Vice Chairman of the Board of Directors, Chief Technology Officer, Acting Chief Financial Officer and Treasurer Norman M. Friedland 49 Secretary Julian H. Cherubini 61 Director Joel L. Gold 55 Director Glenn F. Santmire 55 Director The Company's directors are elected by the Company's stockholders at each annual meeting or, in the case of a vacancy, are appointed by the directors then in office, to serve until the next annual meeting or until their successors are elected and qualified. Officers are appointed by and serve at the discretion of the Board of Directors. Michael Strauss became the Company's President and Chief Operating Officer effective January 2, 1995 and its Chairman of the Board and Chief Executive Officer on February 16, 1995. From 1991 to December 31, 1994, Mr. Strauss was President and Chief Operating Officer of Colorado Prime Corp., a home food service company providing home delivery of high quality, custom designed food programs to retail customers. From 1984 to 1991, he was Chairman and Chief Executive Officer of Capital Credit Corporation, a subsidiary of Union Corporation, a New York Stock Exchange Company. Capital Credit Corporation provides receivables management and consumer debt collection services to corporations in the financial services, telecommunications, health care and related businesses. On June 18, 1992, Mr. Strauss and his agents and employees at Capital Credit Corporation consented to a final judgment of permanent injunction enjoining Mr. Strauss from violating Section 10(b) of the Securities Exchange Act of 1934 (the "Exchange Act") and Rules 10b-5 and 13b2-1 of Sections 3(a) and 13(b)(2)(A) of the Exchange Act and Rules 12b-20 and 13a-13 promulgated thereunder. Senior managers at Capital Credit Corporation were also permanently enjoined as provided above. Prior to his tenure at Union Corporation, Mr. Strauss was employed by American Express Company in various senior management positions including Executive Vice President of the Financial Services Division of Shearson Lehman Brothers, Executive Vice President of Travel Related Services, and President of American Express Canada, Inc. Mr. Strauss has a BBA from the City University of New York and an MBA from the Baruch School-City University of New York. In February, 1995, Robert Wong was appointed Vice Chairman of the Board and Chief Technology Officer, after having become a director in February of 1994. Since September, 1996, Mr. Wong is also serving as Acting Chief Financial Officer and Treasurer. Previously, from February 1994 through February 1995, Mr. Wong worked as a representative for the Prudential Insurance Company, and was a private investor from 1989 to February 1995. Over the previous 27 years, Mr. Wong was founder and president of several technology companies and president of several subsidiaries of Coordinated Apparel, Inc. Mr. Wong has an SB in Electrical Engineering and also an SB in Industrial Management from Massachusetts Institute of Technology. In September, 1996, Norman M. Friedland was appointed Corporate Secretary. Since 1994, Mr. Friedland has been counsel to the law firm of Ruskin, Moscou, Evans & Faltischek, P.C., the Company's general counsel, and prior to that was in the private practice of law. Joel L. Gold was elected a Director in February 1994. In April 1996, Mr. Gold became Executive Vice President of L.T. Lawrence Co., an investment banking firm. From April 1995 to April 1996, Mr. Gold was a managing director and head of investment banking at Fechtor & Detwiler. From 1993 to 1995, Mr. Gold was a managing director at Furman Selz Incorporated, an investment banking firm. Prior to joining Furman Selz, from 1991 to 1993, he was a managing director at Bear Sterns & Co., an investment banking firm. Previously, Mr. Gold was a managing director at Drexel Burnham Lambert for nineteen years. He is currently a member of the Board of Directors of MSA Realty Corp., Action Industries, Inc., Concord Camera, William Greenberg, Jr. Desserts and Cakes, Inc., Sterling Vision, Inc. and Life Medical Sciences. Mr. Gold has a law degree from New York University and an MBA from Columbia Business School. Julian H. Cherubini was elected a director in April 1995. Mr. Cherubini is the President and Chief Executive Officer of AliMed, Inc., a company that manufactures and distributes a broad range of products for orthopedic rehabilitation, diagnostic imaging, operating rooms, occupational medicine and ergonomics. Mr. Cherubini founded AliMed, Inc. in 1970 and has served as its President and Chief Executive Officer since its inception. Mr. Cherubini holds a BS Degree in Metallurgy from the Massachusetts Institute of Technology and a Masters Degree in Materials and Radiochemistry from the University of Texas at Oak Ridge. Glenn F. Santmire was appointed a director in October 1995. Since 1995 he has been employed by Unisys Corporation as Group Vice President of the Worldwide Services-Market Sector Group. From 1994 to 1995 he was President of GFS Associates, Inc., a consulting firm which he founded. From 1992 to 1994 Mr. Santmire was a Senior Vice President at Mastercard International and from 1990 to 1992 he was President of Enhanced Telephone Services, Inc., a subsidiary of Citibank. Mr. Santmire possesses both a BA and an MBA degree from New York University as well as a law degree from George Washington University School of Law. 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 a registered class of the Company's equity securities (collectively, the "Reporting Persons"), to file reports of ownership and changes in ownership with the Securities and Exchange Commission and to furnish the Company with copies of these reports. Based solely on the Company's review of the copies of such forms received by it during the Company's fiscal year ended December 31, 1996, the Company believes that the Reporting Persons complied with all filing requirements applicable to them. ITEM 10. EXECUTIVE COMPENSATION - -------- ---------------------- Executive Compensation - ---------------------- The table set forth below shows information concerning the compensation for services in all capacities during the years indicated paid to or earned by (i) the Company's Chief Executive Officer and (ii) each executive officer of the Company (other than the Chief Executive) whose annual compensation exceeded $100,000 during 1996.
SUMMARY COMPENSATION TABLE Long Term Annual Compensation Compensation Awards Other Annual All Other Name and Principal Position Year Salary Bonus Compensation Options Compensation ($) ($) ($) (#) ($) - --------------------------- ---- --- --- --- --- ------------- Michael Strauss (1) 1996 $200,000 - $8,280 - - Chairman, President, 1995 $200,000 - $7,743 1,000,000 - Chief Executive Officer and 1994 - - - - - Chief Operating Officer Robert Wong (2) 1996 $102,000 - $6,000 - - Vice Chairman, 1995 $ 87,000 - $2,000 492,500 - Chief Technology Officer and 1994 - - - 7,500 - Acting Chief Financial Officer (1) Mr. Strauss became employed by the Company as its President and Chief Operating Officer on January 2, 1995 at an annual salary of $200,000. He subsequently became Chairman and Chief Executive Officer with no additional compensation on February 16, 1995. (2) Mr. Wong was elected a Director in February 1994. He became employed by the Company as its Chief Technology Officer, and was appointed Vice Chairman, on February 16, 1995 at an annual salary of $102,000.
Directors' Compensation - ---------------------- Employee-directors receive no compensation for serving on the Board of Directors other than reimbursement of expenses incurred in attending meetings. Non-employee directors elected or appointed to the Board of Directors are paid an annual director's fee of $5,000 plus $500 for each Board meeting attended and are reimbursed for expenses incurred in attending meetings. Employment Agreement - Michael Strauss - -------------------------------------- Mr. Michael Strauss became the President and Chief Operating Officer of the Company effective January 2, 1995 pursuant to an employment agreement dated October 13, 1994. On February 16, 1995 the employment agreement was amended to employ Mr. Strauss as the Chief Executive Officer of the Company and Chairman of the Board of Directors. The Company is currently negotiating a new employment agreement with Mr. Strauss to replace the amended employment agreement, which expired on January 2, 1997. Mr. Strauss receives a base salary at a rate of $200,000 per annum. Mr. Strauss received, on January 3, 1995, options to purchase 300,000 shares at an exercise price of $1.0313, on February 16, 1995, options to purchase 200,000 shares at an exercise price of $0.9219, and, on July 3, 1995, options to purchase 500,000 shares at an exercise price of $1.04069. Mr. Strauss is also entitled to participate in the Company's benefit plans and to receive an allowance for the cost of an automobile. ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT - -------- -------------------------------------------------------------- The following table sets forth information as of April 28, 1997, based on information obtained from the records of the Company with respect to the beneficial ownership of shares of Common Stock of the Company by (i) each person known by the Company to be owners of more than five percent of the outstanding shares of Common Stock, (ii) each director and nominee and certain executive officers, and (iii) all officers and directors as a group. Common Stock ------------ Amount and Nature Percentage of Name and Address of of Beneficial Common Stock Beneficial Owner Ownership (3) Owned - ------------------------------ ------------------- -------------- Kirr, Marbach & Company LLC (1) 2,042,500 (4) 12.3% Michael Strauss (2) 425,000 (5) 2.6% Robert P. Wong (2) 211,875 (6) 1.3% Norman M. Friedland (2) 0 * Joel L. Gold (2) 107,500 (7) * Julian H. Cherubini (2) 25,000 (8) * Glenn F. Santmire (2) 17,500 (9) * All officers and directors 786,875 (5,6,7,8,9) 4.7% as a group (6 persons) 1 Kirr Marbach & Company LLC, a beneficial owner of more than five percent of the outstanding shares of Common Stock whose address is 621 Washington Street, Columbus, IN 47201, is a general partner of three limited partnerships, which in the aggregate are entitled to receive, or to direct the receipt of, dividends from, and the proceeds from sale of, all of the shares beneficially owned by Kirr Marbach. The economic interest of one of such limited partnerships (R. Weil & Associates, a New York limited partnership) in the Company's Common Stock relates to more than five percent of that class.. 2 All addresses are c/o BCAM International, Inc., 1800 Walt Whitman Road, Melville, New York 11747. 3 The Company believes that all persons named in the table have sole voting and investment power with respect to all shares of Common Stock beneficially owned by them. 4 Includes warrants to purchase 700,000 shares of Common Stock exercisable within 60 days of the date hereof 5 Includes options to purchase 425,000 shares of Common Stock exercisable within 60 days of the date hereof. Does not include options to purchase 575,000 shares of Common Stock not exercisable within 60 days of the date hereof. 6 Includes options to purchase 211,875 shares of Common Stock exercisable within 60 days of the date hereof. Does not include options to purchase 288,125 shares of Common Stock not exercisable within 60 days of the date hereof. 7 Includes options to purchase 57,500 shares of Common Stock exercisable within 60 days of the date hereof. 8 Includes options to purchase 25,000 shares of Common Stock exercisable within 60 days of the date hereof. 9 Includes options to purchase 17,500 shares of Common Stock exercisable within 60 days of the date hereof. Does not include options to purchase 7,500 shares of Common Stock not exercisable within 60 days of the date hereof. * less than 1% ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS - -------- ---------------------------------------------- None. ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits. 3.1 Restated Certificate of Incorporation(1) 3.2 Restated and Amended By-Laws(1) 4.1 Underwriter's Unit Purchase Option(4) 4.2 Finder's Unit Purchase Option(4) 4.3 Warrant Agreement(4) 4.4 Form of Senior Secured Convertible Promissory Note (5) 4.5 Form of Class C common Stock Purchase Warrant(5) 4.6 Form of Class D Common Stock Purchase Warrant(5) 4.7 Revised Form of Amendment No. 1 to Warrant Agreement(7) 4.8 Revised Form of Class E Common Stock Purchase Warrant(7) 10.1 Stock Redemption Agreement(1) 10.2 1989 Stock Option Plan(1) 10.3 Employment Agreement with Dr. Clifford M. Gross(1) 10.4 Employment Agreement with Arthur Fein(1) 10.5 Bridge Warrant(1) 10.6 Bridge Note and Related Loan Agreement(1) 10.7 Consulting Agreement with Lear Siegler Seating Corporation(1) 10.8 Extension Agreement to Redemption Agreement (Exhibit 10.1) 10.9 Consulting Agreement dated August 1, 1988 with NRC Resources Group, Inc.(1) 10.10 General Release of NRC Resources Group, Inc.(1) 10.11 Mortgage Note and Related Loan Agreement and Mortgage and Security Agreement(1) 10.12 Second Extension Agreement to Redemption Agreement(4) 10.13 Merger and Acquisition Agreement with D.H. Blair & Co., Inc.(4) 10.14 1989 Nonstatutory Stock Option Plan(2) 10.15 Consulting Agreement with D.H. Blair & Co., Inc.(4) 10.16 Consulting Agreement with Steelcase, Inc.(2) 10.17 License and Manufacturing Agreement with MicroComputer Accessories, Inc.(4) 10.18 Employment Agreement with Cynthia Roth(4) 10.19 Employment Agreement with Kenneth Goodman(4) 10.20 Form of Employment Agreement with Ava Stern(4) 10.21 Form of Employment Agreement with William G. Sirois(4) 10.22 Lease of Premises at 1800 Walt Whitman Road, Melville, New York(4) 10.23 Consulting Agreement dated as of February 1, 1990, with NRC Resources Group, Inc.(4) 10.24 Underwriting Agreement (for IPO) with D.H. Blair & Co., Inc.(4) 10.25 Securities Purchase Agreement dated June 25, 1991, among the Company, the Purchasers and D.H. Blair & Co., Inc.(5) 10.26 Security Agreement dated as of June 25, 1991 between the Company and D.H. Blair & Co., Inc., as Purchasers' Representative(5) 10.29 Employment Agreement dated as of June 20, 1991 between David A. Deutsch and the Company(5) 10.30 Letter of Understanding between Kenneth A. Goodman and the Company(5) 10.31 Employment Agreement dated as of August 1, 1991 between Joel Sher and the Company(5) 10.32 Amendment to 1989 Stock Option Plan(5) 10.33 Distributor Agreement with Techexport, Inc.(3) 10.34 Partnership Agreement dated December 28, 1992, for Ergonomic Solutions Group (ESG)(8) 10.35 License Agreement dated December 28, 1992, between the Company and ESG (8) 10.36 Development and Licensing Agreement dated March 5, 1993, between the Company and McCord Winn Textron, Inc. (8) 10.37 Agreement dated August 22, 1992, between the Company and PT Industry Pesawat Terbang Nusantara (IPTN) (8) 10.38 Further Amendments to 1989 Stock Option Plan (8) 10.39 Amendment to Development and Licensing Agreement dated October 27, 1993, between the Company and McCord Winn Textron. (10) 10.40 Investors Consulting Agreement with Strategic Growth International Inc. (9) 10.41 Agreement dated December 22, 1993 between the Company and PT Industri Pesawat Terbank Nusantara (IPTN)(9) 10.42 Agreement dated September 29, 1993, between the Company, McCord Winn Textron, Inc. and Lear Seating Company. (9) 10.43 Development and Licensing Agreement dated January 4,1994, between the Company and Reebok International Ltd. (9) 10.44 Development and License Agreement dated September 28, 1994, between the Company and Lumex, Inc. (11) 10.45 Employment Agreement dated October 13, 1994, between Michael Strauss and the Company (10) 10.46 Letter Agreement dated February 15, 1996, between the Company and McCord Winn Textron, Inc. to extend the Development and License Agreement dated March 5, 1993(14) 10.47 Amendment to Employment Agreement between Michael Strauss and the Company (13) 10.48 1995 Stock Option Plan (13) 10.49 Amendment letter of agreement dated August 15, 1996 between the Company and McCord Winn Textron, Inc. (15) 10.50 Letter of agreement terminating the September 28, 1994, Development and License Agreement between the Company and Lumex, Inc.(15) 10.51 Letter of Agreement with Josephberg & Grosz to provide the Company investment banking services (15) 10.52 Stock Purchase Agreement between the Company and the owners of Drew Shoe Corporation (15) 21.00 Subsidiaries of the Company (12) (1) Filed as an Exhibit to Registrant's Registration Statement on Form S-18 (file no. 33-31282) and incorporated herein by reference thereto. (2) Filed as an Exhibit to Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1989 (file no. 0-18109) and incorporated herein by reference thereto. (3) Filed as an Exhibit to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1991 (file no. 0-18109) and incorporated herein by reference thereto. (4) Filed as an Exhibit to Registrant's Registration Statement on Form S-1 (file no. 33-38204) and incorporated herein by reference thereto. (5) Filed as an Exhibit to Post Effective Amendment No. 1 to Registrant's Registration Statement on Form S-1 (file no. 33-38204) and incorporated herein by reference thereto. (6) Filed as an Exhibit to Post Effective Amendment No. 2 to Registrant's Registration Statement on Form S-1 (file no. 33-38204) and incorporated herein by reference thereto. (7) Filed as an Exhibit to Post-Effective Amendment No. 3 to Registrant's Registration Statement on Form S-1 (file no. 33-38204) and incorporated herein by reference thereto. (8) Filed as an Exhibit to Registrant's Annual Report on Form 10-KSB for the fiscal year ended December 31, 1992 (file no. 0-18109) and incorporated herein by reference thereto. (9) Filed as an Exhibit to Registrant's Annual Report on Form 10-KSB for the fiscal year ended December 31, 1993 (file no. 0-18109) and incorporated by reference thereto. (10) Filed as an Exhibit to Registrant's Form 10-QSB/A filed December 5, 1994 amending the Form 10-QSB for quarterly period ended September 30, 1994 (file no. 0-18109) and incorporated by reference thereto. (11) Filed as an Exhibit to Registrant's Form 10-QSB/A for the fiscal year ended December 31, 1993 (file no. 0-18109) and incorporated by reference thereto. (12) Filed as an Exhibit to Registrant's Form 10-KSB for the fiscal year ended December 31, 1994 (file no. 0-18109) and incorporated by reference thereto. (13) Filed as an Exhibit to Registrant's Form 10-QSB for the quarter ended June 30, 1995 (file no. 0-18109) and incorporated by reference thereto. (14) Filed as an Exhibit to Registrant's Form 10-KSB for the fiscal year ended December 31, 1995 (file no. 0-18109) and incorporated by reference thereto. (15) Filed as an Exhibit to Registrant's Form 10-KSB for the fiscal year ended December 31, 1996 (file no. 0-18109) and incorporated by reference thereto. AVAILABLE INFORMATION Registrant will furnish any exhibits listed but not contained herein to any beneficial owner of its securities upon receipt of a written request from such person. Requests should be directed to Shareholder Relations Department, BCAM International, Inc., 1800 Walt Whitman Road, Melville, New York 11747. (b) During the fourth quarter of the period covered by this Report, the Company filed no reports on Form 8-K. SIGNATURES In accordance with Section 13 or 15(d) of the Exchange Act, the registrant has caused this report to be signed on its behalf by the undersigned, thereto duly authorized. BCAM International, Inc. By: /s/ Michael Strauss --------------------- Michael Strauss Chairman of the Board of Directors Chief Executive Officer (Principal Executive Officer) Date: October 24, 1997 By: /s/ Robert P. Wong ---------------------- Robert P. Wong Vice Chairman, Chief Technology Officer and Acting Chief Financial Officer (Acting Principal Accounting Officer) Date: October 24, 1997 In accordance with the Exchange Act, 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/ Michael Strauss Chairman of the Board October 24, 1997 - ----------------------- of Directors Michael Strauss and Chief Executive Officer (Principal Executive Officer) /s/ Robert P. Wong Director, Vice Chairman, October 24, 1997 - ----------------------- Chief Technology Officer and Robert P. Wong Acting Chief Financial Officer (Acting Principal Accounting Officer) /s/ Norman Friedland Corporate Secretary October 24, 1997 - ----------------------- Norman Friedland Director October 24, 1997 - ----------------------- Julian H. Cherubini /s/ Joel L. Gold Director October 24, 1997 - ----------------------- Joel L. Gold /s/ Glenn F. Santmire Director October 24, 1997 - ----------------------- Glenn F. Santmire Annual Report On Form 10-KSB Item 7, Item 13(a) and (b) List Of Financial Statements Certain Exhibits Consolidated Financial Statements Year ended December 31, 1996 BCAM International, Inc. Melville, New York Form 10-KSB - Item 13(a) and (b) BCAM International, Inc. Index of Financial Statements The following consolidated financial statements of BCAM International, Inc are included in Item 7: Report of Independent Auditors........................................ F-1 Consolidated balance sheet - December 31, 1996......................... F-2 Consolidated statements of operations- Years ended December 31, 1996 and 1995.............................. F-3 Consolidated statements of common shareholders' equity- Years ended December 31, 1996 and 1995............... .............. F-4 Consolidated statements of cash flows - Years ended December 31, 1996 and 1995 ............................. F-5 Notes to consolidated financial statements............................ F-6 Report of Independent Auditors Shareholders and Board of Directors BCAM International, Inc. We have audited the accompanying consolidated balance sheet of BCAM International, Inc., as of December 31, 1996, and the related consolidated statements of operations, shareholders' equity and cash flows for each of the two years in the period ended December 31, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of BCAM International, Inc. at December 31, 1996, and the consolidated results of their operations and cash flows for each of the two years in the period ended December 31, 1996, in conformity with generally accepted accounting principles. /s/Ernst & Young LLP Melville, New York February 27, 1997, except for Note 10, as to which the date is March 28, 1997 F-1
BCAM International, Inc. Consolidated Balance Sheet December 31, 1996 Assets Current assets: Cash and cash equivalents $ 526,344 Accounts receivable - trade, less allowance for doubtful accounts of $11,245 22,537 Unbilled receivables 100,362 Prepaid expenses and other current assets 74,491 ------------------- Total current assets 723,734 Property, plant and equipment, at cost: Furniture and fixtures 220,318 Equipment 593,542 Leasehold improvements 50,519 ------------------- 864,379 Less accumulated depreciation and amortization 670,591 ------------------- 193,788 Deferred finance and acquisition costs 158,624 Other assets, principally patents (net of accumulated amortization of $263,874) 228,535 ------------------- Total assets $ 1,304,681 =================== Liabilities and shareholders' equity Current liabilities: Accounts payable $ 118,501 Accrued expenses and sundry liabilities 166,564 ------------------- Total current liabilities 285,065 Other liabilities 4,289 Commitments and contingencies - Acquisition preferred stock, par value $.01 per share--authorized 750,000 shares, no shares issued or outstanding - Common shareholders' equity: Common stock, par value $.01 per share--authorized 40,000,000 shares, 15,642,915 shares issued and 14,879,733 shares outstanding 156,429 Paid-in surplus 14,959,288 Deficit (13,201,290) ------------------- 1,914,427 Less 763,182 treasury shares (899,100) ------------------- 1,015,327 =================== Total liabilities and shareholders' equity $ 1,304,681 =================== See accompanying notes.
F-2
BCAM International, Inc. Consolidated Statements of Operations Year ended December 31 1996 1995 -------------------------------------- Net revenue $ 604,554 $ 752,077 Costs and expenses: Direct costs of revenue 272,980 598,270 Selling, general and administrative 1,801,915 1,831,494 Research and development 97,854 185,819 -------------------------------------- 2,172,749 2,615,583 -------------------------------------- Net loss from operations (1,568,195) (1,863,506) Interest income, net of interest expense of $14,579 in 1996 54,055 174,026 ====================================== Net loss $ (1,514,140) $ (1,689,480) ====================================== Net loss per share $ (0.10) $ (0.11) ====================================== Weighted average number of common shares and common equivalent shares outstanding 14,868,128 14,818,055 ====================================== See accompanying notes.
F-3
BCAM International, Inc. Consolidated Statements of Common Shareholders' Equity Common Stock $.01 par value Shares held --------------------------- Paid-in in Shares Amount surplus Deficit Subtotal Treasury Total ------------------------------------------------------------------------------------------------------ Balance at January 1, 1995 15,520,415 $155,204 $14,994,058 $ (9,997,670) $ 5,151,592 $(899,100) $ 4,252,492 Shares issued in connection with conversion of BCA Services, Inc. stock 100,000 1,000 99,000 - 100,000 - 100,000 Registration and issuance costs - - (59,299) - (59,299) - (59,299) Net loss - - - (1,689,480) (1,689,480) - (1,689,480) ------------------------------------------------------------------------------------------------------ Balance at December 31, 1995 15,620,415 156,204 15,033,759 (11,687,150) 3,502,813 (899,100) 2,603,713 Exercise of common stock warrants 22,500 225 20,520 - 20,745 - 20,745 Registration and issuance costs - - (94,991) - (94,991) - (94,991) Net loss - - - (1,514,140) (1,514,140) - (1,514,140) ------------------------------------------------------------------------------------------------------ Balance at December 31, 1996 15,642,915 $156,429 $14,959,288 $(13,201,290) $ 1,914,427 $(899,100) $ 1,015,327 ====================================================================================================== See accompanying notes.
F-4
BCAM International, Inc. Consolidated Statements of Cash Flows Year ended December 31 1996 1995 ------------------------------------ Operating activities Net loss $ (1,514,140) $ (1,689,480) Adjustments to reconcile net loss to net cash used in operating activities: Provision for doubtful accounts - 34,726 Depreciation 86,220 103,479 Amortization 103,895 63,648 Interest accreted on held-to-maturity securities - (114,370) Changes in operating assets and liabilities: Accounts receivable, billed and unbilled 186,499 (156,769) Prepaid expenses and other current assets (14,309) 102,798 Accounts payable, accrued expenses and sundry liabilities (239,195) (277,998) (less amount accrued for finance and acquisition costs) Other liabilities (3,554) (26,888) ------------------------------------ Net cash used in operating activities (1,394,584) (1,960,854) ------------------------------------ Investing activities Purchases of property, plant and equipment (6,031) (5,188) Investment in software technology (150,618) (49,492) Proceeds from sale of equipment - 1,200 Purchases of held-to-maturity securities - (2,799,782) Proceeds from sale of held-to-maturity securities 1,507,172 4,535,000 Cash paid for deferred acquisition costs (33,035) - ------------------------------------ Net cash provided by investing activities 1,317,488 1,681,738 ------------------------------------ Financing activities Proceeds from note payable 400,000 - Repayment of note payable (400,000) - Net proceeds from exercise of stock options 20,745 - Payment of stock registration and issuance costs (94,991) (59,299) Cash paid for deferred finance costs (24,000) - ------------------------------------ Net cash used in financing activities (98,246) (59,299) ------------------------------------ Decrease in cash and cash equivalents (175,342) (338,415) Cash and cash equivalents at beginning of year 701,686 1,040,101 ==================================== Cash and cash equivalents at end of year $ 526,344 $ 701,686 ==================================== See accompanying notes.
F-5 BCAM International, Inc. Notes to Consolidated Financial Statements December 31, 1996 1. Description of Business and Principles of Consolidation BCAM International, Inc. (the "Company") is a software technology company, specializing in ergonomic (human factor) solutions for individuals, government, and for major corporations. The Company's focus since 1995 has been on (i) accelerating the development and commercialization of the Company's Intelligent Surface Technology ("IST"), (ii) continuing its development of proprietary software, which consists of IST, MQPro(TM) (formerly Mannequin(R)), the EARLY(R) process and Back-to-Work(TM) methodology, and (iii) upgrading and marketing its proprietary software products, and marketing Software Based Ergonomic Consulting Services. The Company also provides its Traditional Ergonomic Consulting Services in Ergonomic Product Assessment and Redesign and Ergonomic Workplace Assessment, with emphasis on broadening and strengthening long-term business relationships such as joint ventures, partnerships, licensees and other alliances. The consolidated financial statements include the accounts of BCAM International, Inc. and its subsidiaries, BCA Services, Inc., and BCAM Technologies, Inc., collectively referred to as the "Company". BCA Services, Inc. was established in December 1993 to directly focus on providing comprehensive ergonomic laboratory assessment services to U.S. manufacturing and service industries for measuring the potential risk of muscoloskeltal injury. The operations of BCAM Technologies, Inc., formed in December 1992, which were not significant, were terminated in December 1993. 2. Summary of Significant Accounting Policies Cash Equivalents The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Cash and cash equivalents at December 31, 1996 consist of demand and money market accounts with U.S. banks ($56,759) and a money market account with a U.S. investment institution ($469,585). Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and footnotes. Actual results could differ from those estimates. F-6 BCAM International, Inc. Notes to Consolidated Financial Statements (continued) 2. Summary of Significant Accounting Policies (continued) Revenue The Company's revenues are derived primarily from ergonomic (human factor) engineering consulting services and from license of related software. The majority of engineering consulting contracts are fixed price contracts. Revenues from long term engineering fixed price contracts are recognized based on the percentage of completion method in the ratio that costs (principally labor) incurred bear to estimated total costs. Adjustments to cost estimates are made periodically and related changes reflected in operations as they become known. Losses expected to be incurred are charged to operations in the period that such losses become known. Engineering revenues for contracts of less than one year duration are accounted for under the accrual method based upon engineering labor expended utilizing calculations which are similar to percentage completion accounting (based upon labor expended). This method is used because management considers it the best available measure of progress on these contracts. The aggregate costs incurred and income recognized on uncompleted contracts in excess of related billings is shown as a current asset and the aggregate of billings on uncompleted contracts in excess of related costs incurred and income recognized is shown as a current liability. Billings on contracts are made in accordance with the terms of the underlying contracts. Software license fee revenue is recorded when the software has been delivered to the value added reseller. There are no significant after sale obligations on the Company for the license of its software and there is no special customization of the software necessary for the user. The Company does not presently offer maintenance contracts to customers who license its software. Through December 31, 1996, software revenues have been immaterial. Property, Plant and Equipment Depreciation is computed using the straight-line method at rates based on the estimated useful lives of the related assets. The estimated useful lives for furniture and fixtures is 10 years and equipment is 7 years. Leasehold improvements are amortized over the lease term or estimated useful life of the improvements, whichever is shorter. Other Assets The costs of acquiring or processing (principally professional and government fees) patents, trademarks and other intellectual properties are capitalized at cost. This amount ($143,344 at December 31, 1996) is being amortized using the straight-line method over the estimated useful lives of the underlying assets of approximately 5 years. In 1996, the Company capitalized software development costs of $85,191 for costs incurred subsequent to establishing technological feasibility and prior to the product being available for general release to customers. These costs will be amortized over two years, the estimated life of the product, using the straight-line method commencing when the software is deemed available for sale. Research and Development Research and development costs are charged to operations in the period incurred. Income Taxes The Company accounts for income taxes using Financial Accounting Standards Board ("FASB") Statement No. 109, "Accounting for Income Taxes." At December 31, 1996, the Company has net operating loss carryforwards of approximately $13,741,000 for income tax purposes, expiring through 2011. F-7 2. Summary of Significant Accounting Policies (continued) At December 31, 1996 and 1995, deferred tax assets approximating $4,672,000 and $4,129,000, respectively, arising from the future availability of net operating loss carryforwards have been offset in full by valuation allowances in accordance with FASB Statement No. 109. Net Loss Per Share Net loss per share has been computed on the basis of the weighted average number of common shares outstanding. Common stock equivalents have been excluded because their effect is antidilutive. Stock-Based Compensation In 1996, the Company adopted SFAS No. 123, "Accounting for Stock-Based Compensation." In accordance with the standard, the Company elected to continue to account for its stock-based compensation under Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" and related interpretations (APB 25). Under APB 25, because the exercise price of the Company's stock options granted equals the market price of the underlying stock on the date of the grant, no compensation expense is required to be recognized. Accounting Change In 1996, the Company adopted Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," which requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amount. This adoption had no effect on the consolidated financial statements. Reclassification Certain amounts in the 1995 financial statements have been reclassified to conform with the 1996 presentation. F-8 3. Acquisition Preferred Stock The Company is authorized to issue 750,000 shares of its acquisition preferred stock, $.01 par value, none of which are presently issued and outstanding. The acquisition preferred stock is only permitted to be issued as consideration pursuant to (i) a statutory merger or consolidation as to which the Company is the surviving entity, (ii) the acquisition by the Company of substantially all the assets or business of another entity or (iii) the acquisition by the Company of 50% or more of the voting securities of another entity. The acquisition preferred stock is issuable from time to time in one or more series. The Board of Directors is authorized to fix, before issuance, the voting powers, if any, the designations, preferences and any other rights, qualifications, limitations and restrictions applicable to each series of acquisition preferred stock, including, without limitation, dividend rates and conditions, dividend preferences, conversion and redemption rights and liquidation preferences. 4. Common Shareholders' Equity On January 24, 1990, the Company issued and sold 1,100,000 units for $4.00 per unit in connection with a public offering. The net proceeds, after accounting for direct expenses of the offering, were approximately $3,397,000. On February 26, 1990, the underwriter issued and sold an additional 165,000 units at $4.00 per unit resulting from the exercise of the overallotment option and the Company received net proceeds of $574,200. Each unit consists of three shares of common stock and two Class A warrants. Each Class A warrant is exercisable to purchase one share of common stock and one Class B warrant at a price of $2.00, subject to adjustment, commencing one year from the date of the Prospectus (January 17, 1990) until January 17, 1997 (extended from January 16, 1995) subject, in certain circumstances, to earlier redemption by the Company. As a result of the dilutive effects of private placements (see Note 7) and the Discounted Warrant Plan (see below), the number of shares issuable under and the exercise price of the Company's Class B warrants, which may be exercised commencing upon issuance until January 17, 1998 (extended from January 17, 1997), have been adjusted such that each Class B warrant, as adjusted, entitles the holder to purchase one and two tenths (1.2) shares (originally one share) of Common stock at an adjusted price that varies from $2.69 to $3.23 to January 17, 1997 and $1.50 per share thereafter (originally $3.33 to $4.67). As a result of the issuance of approximately 1,717,000 Class E warrants pursuant to the Discounted Warrant Plan, each Class A warrant remaining unexercised entitles the holder thereof to purchase one and two-tenth (1.2) (originally one share) shares of common stock and one Class B warrant at an adjusted price per share, subject to further adjustment, of $1.72. Since the Company has satisfied the condition of redemption, F-9 4. Common Shareholders' Equity (continued) namely the closing Sales Price price of common stock of the Company exceeding $2.67 for a period of 30 consecutive business days, the remaining Class A Warrants were called effective November 19, 1993. The Company extended the redemption date to December 20, 1993 and 807,659 Class A Warrants were exercised resulting in the issuance of 969,191 shares of common stock and 807,659 Class B Warrants exercisable to purchase 969,191 shares of common stock and receipt by the Company of net proceeds of $1,667,008. In connection with the public offering, the Company sold 110,000 Unit Purchase Options (the "Unit Options") to the underwriter and a finder on January 24, 1990 for a nominal consideration. The units purchasable upon exercise of the Unit Options are identical to the units sold in the public offering, except that the warrants included therein are not redeemable. The Unit Options are exercisable at 130% of the public offering price subject to certain antidilution adjustments. The Unit Options are exercisable during the five-year period (originally three-years) commencing two years from the date of the public offering, expiring January 17, 1997. As a result of the dilutive effects of the private placement, the number of Unit Options has been increased to 127,547 and the unit price adjusted to $4.35 per unit (originally $5.20 per unit). Pursuant to a settlement agreement certain Unit Purchase Option holders surrendered for exercise in full 30,369 units in a cashless transaction that provided them with 85,674 shares of common stock representing the excess of the fair market value of the common stock and Class A warrants, over the exercise price of the Unit. At December 31, 1996, there were 97,178 units (underwriter) and 1,568 units (finder) outstanding. In October 1991, the Board of Directors of the Company approved a Discounted Warrant Plan, providing for 1) a reduction in the price of each Class A warrant which was exercised during the Class A Limited Exercise Period (expired in 1992) from $2.00 to the discounted price of $1.50 per share of common stock, and 2) the issuance to each holder who exercised a discounted Class A warrant during the Class A Limited Exercise Period, a Class E warrant, in lieu of a Class B warrant, which has the same terms and conditions as the Class B warrants, except that the price of each Class E warrant was reduced to the discounted price of $1.25 per share of common stock until the expiration date on January 17, 1998 (extended from January 16, 1995). Pursuant to the Discounted Warrant Plan, approximately 1,717,000 Class A warrants were exercised resulting in the issuance of approximately 1,717,000 shares of common stock and 1,717,000 Class E warrants exercisable to purchase approximately 1,888,700 shares of F-10 4. Common Shareholders' Equity (continued) common stock and the receipt by the Company of net proceeds of approximately $2,500,000. During the year ended December 31, 1993, 1,022,825 Class E warrants were exercised resulting in an issuance of 1,125,109 shares of common stock and receipt by the Company of net proceeds of $1,406,464. In connection with the exercise of the E warrants, options to purchase 38,508 unregistered shares of common stock exercisable at prices ranging from $3.31 through $3.44 per share were issued to two registered brokerage houses, as an inducement for their exercise of the aforementioned Class E warrants. The options were exercisable for 18 months from the dates of exercise of the Class E warrants (October 1993). In addition, through December 31, 1992, 202,588 Class E warrants were exercised resulting in the issuance of approximately 223,000 shares of common stock and the receipt by the Company of net proceeds of approximately $280,000. In connection with the Discounted Warrant Plan, the Board of Directors issued in 1992 an aggregate of 166,154 restricted shares of common stock of the Company to two registered brokers, in full payment of the compensation due them for soliciting the exercise of the Class A warrants. In June 1991, Class D warrants exercisable over a five-year term to purchase 176,250 shares of common stock at $2.00 per share and Class C warrants exercisable over a five and one-half year term (originally five-year term) to purchase 200,000 shares of common stock at $1.00 per share were issued in connection with the private placement (see Note 7). As a result of the exercise of Class E warrants and pursuant to provisions for adjustment of the exercise price of the Company's Class D warrants, each Class D warrant entitles the holder to purchase approximately two and three-tenths (2.3) (originally one share) shares of common stock at an adjusted price per share, subject to further adjustment, of approximately $.88 per share and each Class C warrant to purchase 228,571 (originally 200,000) shares of common stock at $.88 per share. Through December 31, 1996, 173,750 Class D warrants have been exercised resulting in an issuance of 397,143 shares of common stock and the receipt by the Company of $347,500 and 63,334 Class C warrants have been exercised resulting in an issuance of 72,334 shares of common stock and the receipt by the Company of $63,344. The Class C warrants still outstanding which were to expire on January 17, 1997 were extended to March 18, 1997 and the price was reduced to $.75 per share. Such warrants expired unexercised. Effective June 22, 1995, the Company's shareholders voted to increase the number of authorized common stock from 20 million shares to 40 million shares. F-11 4. Common Shareholders' Equity (continued) Common shares reserved for future issuance as of December 31, 1996 are approximately as follows: Units sold in public offering in 1990: Class B warrants 969,000 Class E warrants 541,000 Third party options (Note 5) 500,000 Unit Options 766,000 1989 Stock Option Plan (Note 5) 432,000 1989 Nonstatutory Plan (Note 5) 100,000 1995 Stock Option Plan 1,761,000 Warrants issued in private placement in 1991 (Note 7): 0 Class C warrants 156,000 Class D warrants 6,000 =============== 5,231,000 =============== 5. Stock Options In June 1995, the shareholders of the Company approved the adoption of the 1995 Stock Option Plan (the "1995 Plan"). The 1995 Plan provides for the granting of incentive stock options ("ISOs") and/or nonqualified stock options to employees, directors or consultants of the Company to purchase an aggregate of 2,000,000 shares of the Company's common stock. The option price per share for ISOs granted under the 1995 Plan shall not be less than the fair market value of the Company's common stock on the date of grant. Furthermore, the option price per share shall be determined by the Board of Directors. Options vest based on certain provisions related principally to future services. Options are exercisable over various periods up to ten years from the date of grant. No option may be granted under the 1995 Plan after June 2005. At December 31, 1996, there were 219,500 shares available for granting of future options. The 1995 Plan replaced all prior option plans and no further options will be granted under the prior option plans. In 1989, the shareholders of the Company approved the adoption of a 1989 Stock Option Plan (the "1989 Plan"). The 1989 Plan provided for the granting of incentive stock options and/or nonqualified stock options to key employees and consultants to purchase shares of the Company's common stock at a price per share not less than the fair market value on the date F-12 5. Stock Options (continued) of grant. In 1992, the Plan was amended to (a) increase the number of shares to 1,565,957, (b) permit the granting of nonqualified stock options at a price per share less than the fair market value of the Company's common stock on the date of grant and (c) permit options to be exercised up to two years after termination of employment under certain circumstances. Options vest based on certain provisions related principally to future services. Options are exercisable over various periods up to six years from the date of grant. Pursuant to the terms of the 1995 Plan, no options may be granted under the 1989 Plan subsequent to June 22, 1995. In 1989, the Company also adopted a Nonstatutory Stock Option Plan (the "1989 Nonstatutory Plan") for directors. Under the 1989 Nonstatutory Plan, the Company could grant options for the purchase of an aggregate of 355,000 shares of common stock at not less than fair market value at the date of grant. The options expire at various dates. Pursuant to the terms of the 1995 Plan, no options may be granted under the 1989 Nonstatutory Plan subsequent to June 22, 1995. Option activity during each of the two years ended December 31, 1996 for the 1989 Plan and the 1989 Nonstatutory Plan is summarized as follows:
1989 Nonstatutory Plan 1989 Plan Shares Under Option Shares Under Option ------------------------------------------------------------------------ Weighted Number Average Number Option price per of Option price Exercise of share Shares per share Price Shares ------------------------------------------------------------------------ Balance at January 1, 1995 190,833 988,008 Granted - $ .92 119,000 Cancelled/expired $1.13 to $2.56 (90,833) $.92 to $3.47 (655,008) --------------- Balance at December 31,1995 100,000 $1.95 452,000 Exercised - $ .92 $ .92 (2,500) Cancelled - $.92 to $3.13 $2.18 (17,500) ------- --------------- Balance at December 31,1996 100,000 $1.94 432,000 ======= ===============
F-13 5. Stock Options (continued) Option activity during each of the two years ended December 31, 1996 for the 1995 Plan is summarized as follows:
1995 Plan Shares Under Option -------------------------------------------------------- Weighted Number Option price per Average of share Exercise Price shares -------------------------------------------------------- Balance at January 1, 1995 - Granted $0.92 to $1.68 1,962,500 Cancelled/expired $0.92 (30,000) ----------------- Balance at December 31, 1995 $1.04 1,932,500 ----------------- Granted $0.95 to $1.20 $1.09 198,000 Cancelled/expired $0.92 $1.09 (350,000) Exercised $0.92 $0.92 (20,000) ----------------- Balance at December 31, 1996 1,760,500 =================
During 1996, the Company granted 100,000 fully vested nonstatutory stock options at fair market value to a third party, which are exercisable for a period of ten years at a price of $1.17 per share. In addition, during 1995, the Company granted 300,000 fully vested nonstatutory stock options at fair market value to a third party, which are exercisable for a period of eighteen months at a price of $1.05 per share, and 5,000 nonstatutory stock options at fair market value to a third party, which were cancelled in 1996. Further, in 1994 the Company granted 100,000 nonstatutory stock options at fair market value to a third party, which vest ratably over two years and are exercisable for a period of five years at a price of $1.69 per share. At December 31, 1996, 500,000 of these options are outstanding. * * * * * * * * Pro forma information regarding net income and earnings per share is required by FASB Statement No. 123, "Accounting for Stock-Based compensation" which requires that the information be determined as if the Company has accounted for its stock options granted F-14 5. Stock Options (continued) subsequent to December 31, 1994 under the fair value method of that statement. The fair value for these options was estimated at the date of the grant using a Black-Scholes option pricing model. The Company's pro forma information follows: December 31 1996 1995 ----------------- ---------------- Pro forma net loss $ (1,861,660) $ (1,876,559) Pro forma loss per share $ (.13) $ (.13) The fair value of these options at the date of the grant was estimated with the following weighted average assumptions for 1996 and 1995: risk free interest rates ranging from 5.7% to 7.1%, no dividend yield, volatility factor of the expected market price of the Company's common stock of 49%, and a weighted average expected life of the options ranging from six to eight years. Because Statement 123 is applicable only to options granted subsequent to December 31, 1994 and employee stock options granted vest over a period from one to four years, its pro forma effect will not be fully reflected in pro forma net income. The following table summarizes information about stock options outstanding at December 31, 1996:
Options Outstanding Options Exercisable ------------------------- ----------------------- Weighted Number Average Weighted Number Weighted Range of Outstanding Remaining Average Outstanding Average Exercise at December Contractual Exercise at December Exercise Price 31, 1996 Life Price 31, 1996 Price ----------- ----------- ----------- -------- ----------- --------- $0.92-$1.00 495,500 8.0 years $0.92 157,250 $0.92 $1.01-$2.00 1,589,000 6.8 years $1.12 708,375 $1.12 $2.01-$3.22 208,000 0.2 years $2.64 205,000 $2.65 ----------- ----------- ----------- -------- ----------- --------- $0.92-$3.22 2,292,500 2.5 years $1.22 1,070,625 $1.38 =========== =========== =========== ======== =========== ========= The weighted average fair value of all stock options granted in 1996 was $.70 per share.
F-15 6. Leases The Company leases its office space for a term extending through March 31, 2000. In August, 1996, this lease was modified to reflect a reduction in leased space. Additionally, the Company has entered into various operating leases for equipment. Future minimum payments under noncancellable operating leases for years ending December 31 are as follows: 1997 $150,674 1998 155,146 1999 155,865 2000 39,316 ================= $501,001 ================= Rent expense in 1996 and 1995, under all operating leases, was approximately $168,000 and $179,000, respectively. 7. Private Placements On June 25, 1991, the Company completed a private placement, for which D.H. Blair and Co. Inc. ("Blair") acted as placement agent, of $1,762,500 of its securities, consisting of $1,101,562 of Senior Secured Convertible Promissory Notes (the "Notes") convertible into Common Stock at $1.00 per share, 660,937 shares of common stock at $1.00 per share and 176,250 Class D warrants exercisable over a five-year term at $.88 per share (originally $2.00 per share) for 402,731 shares (originally 176,250 shares) of common stock. These securities had been sold pursuant to a Securities Purchase Agreement among the Company, the purchasers and Blair as purchasers' representative (the "Purchase Agreement"), in a total of 35.25 Units of $50,000 each, consisting of a $31,250 Note, 18,750 shares of common stock and 5,000 Class D warrants. The Company paid Blair a fee of $176,250 and expenses of $56,750 and issued to Blair, Class C warrants exercisable over a five-year term to purchase 228,571 shares (originally 200,000 shares) of common stock at $.88 (originally $1.00 per share). All of the Notes were converted or redeemed in 1992. During the period commencing in June 1993 and ending in September 1993, the Company completed four separate private placements ("Private Placements"), of an aggregate of 1,843,873 shares of the Company's common stock at prices ranging from $1.10 to $1.15 per F-16 7. Private Placements (continued) share for net proceeds of $2,039,925. The Company paid commissions in the amount of $35,075 to an individual, granted 100,000 shares of unregistered common stock and options to purchase an additional 425,000 shares of common stock at prices ranging from $1.31 to $3.47 per share, in consideration of services rendered in connection with the Private Placements. 8. Deferred Revenue On December 27, 1993, the Company sold 100,000 shares (2.4% interest) of its subsidiary BCA Services, Inc. to Polaris Partners for the sum of $100,000 resulting in the Company recording such amount as deferred revenue. Pursuant to an exchange agreement dated April 6, 1995, the Company agreed to exchange the 100,000 shares of BCA Services, Inc. for 100,000 shares of BCAM International, Inc., at which time $99,000 of the deferred revenue was credited to paid-in surplus and $1,000 was credited to common stock. 9. Significant Customers The Company generated a significant percentage of its revenue from a small number of customers. In 1996, revenue from three customers comprised approximately 74% of total revenue (38%, 18% and 18%). In 1995, revenue from four customers comprised approximately 62% of total revenue (29%, 12%, 11% and 10%). At December 31, 1996, three customers accounted for approximately 84% of the Company's gross accounts receivable. Consistent with industry standards, receivables are generally payable within 90 to 120 days and collateral is not required. 10. Subsequent Events On March 19, 1997 the Company entered into an agreement with another company (the "acquiree") to purchase all of the common stock of the acquiree for approximately $4,600,000. This commitment is contingent upon the Company obtaining the necessary financing to fund the purchase. The Company does not have any obligations under this agreement should management be unable to obtain this financing. F-17 10. Subsequent Events (continued) On January 15, 1997, the Company offered a minimum of 400,000 units, each consisting of one share of the Company's common stock and a non-redeemable Class AA warrant which entitles the holder to purchase one share of the Company's Common Stock at a price of $1.10 per share, until March 31, 1999. The offering was completed on March 28, 1997, and the Company sold 1,075,000 units for $1,075,000. The funds will be used for the advancement of various technologies as well as for working capital. 11. Restatement Of December 31, 1996 Balance Sheet Classification The previously filed Balance Sheet contained in the Form 10-KSB filed for the year ended December 31, 1996 included the costs associated with the acquisition and financing of Drew Shoe Corporation as a component of current assets. These costs are more appropriately classified as non-current assets under generally accepted accounting principles. The Balance Sheet as of December 31, 1996 has been restated to reflect the correct classification of these costs. Such change has an effect on the Statement of Cash Flows for the year ended December 31, 1996, which has similarly been restated. As a result, the working capital of the Company at December 31, 1996, which was previously recorded as $597,293, is now correctly recorded as $438,669 after the reclassification (restatement). F-18 EX-27 2 FDS FOR THE YEAR ENDED DECEMBER 31, 1996
5 This schedule contains summary financial information extracted from the Condensed Consolidated Balance Sheet, Condensed Consolidated Statements of Operations and Condensed Consolidated Statements of Cash Flows, and is qualified in its entirety by reference to such financial statements. 0000856143 BCAM International, Inc. 1 U.S. Dollars 12-MOS DEC-31-1996 JAN-01-1996 DEC-31-1996 1.000 526,344 0 33,782 11,245 0 723,734 864,379 670,591 1,304,681 285,065 0 0 0 156,429 858,898 1,304,681 0 604,554 0 272,980 1,899,769 0 14,579 (1,514,140) 0 (1,514,140) 0 0 0 (1,514,140) (0.010) (0.010)
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