<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year
ended February 29, 1996 Commission file no. 0-10823
----------------- -------
BCT INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 22-2358849
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation of organization)
3000 NE 30th Place, Fifth Floor, Fort Lauderdale, Florida 33306
---------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (305) 563-1224
--------------
Securities registered pursuant to Section 12 (b) of the Act:
NONE
----
Securities registered pursuant to Section 12 (g) of the Act:
COMMON STOCK, par value $.04 per share
--------------------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [_].
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [_]
The aggregate market value of Registrant's voting stock held by non-
affiliates of Registrant, at May 17, 1996 was approximately $10,546,213.
The number of shares outstanding of Registrant's Common Stock, par value
$.04 per share, at May 17, 1996 was 4,975,385.
DOCUMENTS INCORPORATED BY REFERENCE
NONE
----
This document consists of 51 pages.
The Index to exhibits appears on page 25.
<PAGE>
Item 1. Business
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(a) General
BCT International, Inc. (the "Company") is a holding company with one
direct wholly-owned subsidiary: Business Cards Tomorrow, Inc., a Florida
corporation ("BCT"). BCT operates the Business Cards Tomorrow system, the
world's largest wholesale printing chain. Since its founding in 1975, the system
has grown to include 100 "Business Cards Tomorrow Plants" (the "Plants")
specializing in trade thermography production in 38 states and Canada. Four of
the Plants -- located in Delray Beach, Florida; Newbury Park, California;
Riverside, California; and Marietta, Georgia -- are indirectly owned by BCT
through wholly-owned subsidiaries. An indirect subsidiary of BCT owns 70% of the
Louisville, Kentucky, Plant and the remaining 30% is owned by third parties.
BCT's operations also include the Pelican Paper Products Division ("PPP")
which supplies paper products to the BCT Plants. The Company operates in a
single industry segment: the franchising, ownership and operation of and sale of
paper products to trade thermography production facilities, i.e., the BCT
Plants.
(b) Narrative description of the business
Business Cards Tomorrow, Inc.
- -----------------------------
General
-------
The Plants typically operate through the placement of business card and
stationery catalogs with commercial and retail "quick" printers, office
superstores, forms brokers, office supply companies and stationers in the
Plants' trade areas (collectively, "Dealers"). These catalogs are utilized by
the Dealers to secure orders from their customers for thermographed printed
products. Such orders are normally picked up daily by the Plants' route drivers,
who also deliver products previously ordered. The Plants specialize in the "fast
turnaround" of their products, delivering some items, such as business cards
printed in black ink, in one business day, with most products being delivered
within one week of the date of order. While most Plants receive at least some
orders by mail and fax, this normally does not constitute a major portion of a
Plant's business.
Thermography is a specialized printing process that gives a raised printing
effect similar to engraving and requires specialized equipment and operating
techniques. Most commercial and "quick" printers and office superstores and
other Dealers choose not to invest in this specialized equipment, preferring to
subcontract this type of work to wholesale "trade" printing companies such as
Business Cards Tomorrow Plants that specialize in thermography.
BCT supplies business card, stationery, rubber stamp and wedding invitation
and social stationery catalogs to its Plants and also sells them the paper
products featured in the catalogs through PPP.
PPP is a supplier of paper products for the BCT Plants. PPP purchases raw
paper directly from paper mills and paper brokers and utilizes the services of
converters to convert the raw material to finished paper products. In November
1995, PPP purchased conversion equipment and began to perform certain
conversion functions "in house". PPP utilizes three public storage facilities
located strategically throughout the United States to house and ship out paper
products to the Plants.
BCT markets its franchise operations to potential franchisees through major
business newspapers as well as printing trade publications. The development of a
specific market is determined by a number of different criteria, including
resources available, customer base and operating efficiencies. In order for BCT
to penetrate franchise markets, it has assembled an experienced staff, certain
members of which have expertise in franchise development. BCT has developed the
BCT network primarily through the sale of franchises to third parties. BCT
indirectly owns and operates five Plants listed in Item 1(a) above (the "Company
Plants"). BCT Plants are located throughout the Continental U.S., Hawaii and
Canada. As demographics change and develop, the potential for new markets may
expand. As of May 1996, BCT has identified approximately 20 franchise markets
available for sale.
Page 1
<PAGE>
During the second quarter of fiscal 1996, BCT began offering for sale to
existing franchisees additional exclusive territories, known as "Facilities",
which do not require the opening of a Plant. The franchisee purchasing a
Facility is required to open a sales office in the territory and send all work
orders to the franchisee's Plant located in a neighboring territory. Once the
Facility's territory develops demographically to support approximately 500
Dealers, BCT has the right to require the franchisee to open a Plant in the
territory. BCT is offering the Facilities at a price of $35,000 each. As of May
1, 1996, one Facility has been sold (in August 1995). As of May 1, 1996, BCT has
identified approximately 10 Facilities available for sale.
Additionally, BCT may from time to time sell to existing franchisees
additional territories which are not expected to become able to support a Plant,
(each a "Territory"). The price of a Territory is currently set at $35,000. As
of May 1, 1996, two Territories have been sold in Colorado and Massachusetts.
BCT derives revenues from six principal sources: (i) royalties, which are
based on a percentage of sales from the BCT Plants; (ii) franchise fees from
newly franchised Plants and resale fees from the resale of operating Plants;
(iii) sales of paper products to franchisees; (iv) catalog and miscellaneous
equipment and parts sales classified as printing sales; (v) gross revenue from
the Company Plants; and (vi) sales of additional Territories and Facilities to
existing franchisees.
As of May 1, 1996, 100 BCT Plants are in operation in 38 states and Canada.
The current number of Plants compares with 98 and 97 Plants in operation on May
1, 1995 and 1994, respectively. Total BCT system sales reached approximately
$84,000,000 for fiscal 1996, an average of $853,000 per franchise, compared to
total and average sales of $80,000,000 and $824,000 for fiscal 1995 and
$74,000,000 and $792,000 for fiscal 1994, respectively.
BCT receives either a 5% or 6% royalty fee based on gross BCT Plant sales
for original 15 - 25 year contracts. The royalty fee is dependent on the initial
franchise agreement date. Generally, agreements dated through mid-1986 carry 5%
royalties. Thereafter, the 6% royalty applies. Certain franchise agreements are
up for renewal. The Company has developed a renewal royalty scale for these
Plants. See "Franchises" below for a detailed description. For fiscal years
ended 1996, 1995 and 1994, continuing franchise royalties comprised
approximately 27%, 34% and 31% of total revenue, respectively. Pelican Paper
Products sales to the franchisees for fiscal years ended 1996, 1995 and 1994
were approximately 47%, 52% and 52% of total revenue, respectively.
Raw Materials
-------------
The primary raw materials of the BCT Plants are paper products which are
readily available from numerous industry suppliers. It is common practice within
the paper industry to place minimum order levels when ordering specific
materials. In addition, the need to maintain a complete stock of raw materials
for all items listed in BCT's catalogs requires significant continuing inventory
investment. Consequently, PPP frequently carries higher levels of inventory than
what is required according to PPP's customer demands. While BCT, through PPP,
sells paper products to its franchised Plants and the Company Plants, the Plants
are under no obligation to purchase these products from BCT and all such
products are available from other suppliers.
The paper industry does suffer periodic shortages of specific paper
products as well as price fluctuations caused by supply and demand changes, but
these shortages and price fluctuations typically affect all similar types of
printers in an industry such as "trade" thermographers and can generally be
mitigated through the use of alternate supply sources in the industry and
substitution with similar products. Any increases in the cost of paper from the
mills is generally passed on to the Plants. It is not considered by BCT as very
likely that any of its Plants would be out of operation for any significant
period of time due to an unavailability of raw materials resulting from major
supply or price changes in the paper industry.
Franchises
----------
BCT's franchise agreements with individual franchised Plants are typically
for a 15-to-25 year period and are renewable for additional 10-year periods. The
right to renew is contingent upon the franchisee not being in default under any
material term of the franchise agreement. BCT may terminate a franchise
agreement under certain circumstances where the franchisee is in material
default under the franchise agreement and has not cured such default(s) after
notice from BCT. BCT's existing franchise agreements with individual Plants have
an average remaining term of approximately 18 years.
Page 2
<PAGE>
Franchise agreements for 16 Plants come up for renewal in fiscal years
1996 - 98, and in the subsequent 10 years, three Plants come up for renewal.
As of May 1, 1996, six of these Plants have renewed their franchise agreements
for 10-year terms and two Plants scheduled for renewal elected not to renew. In
fiscal 1995, management established a program to induce early renewal of its
franchise agreements. The Company began negotiating with each renewal candidate
as to the terms of its renewed franchise agreement. The renewal royalty scale
that the Company initiated is as follows:
<TABLE>
<CAPTION>
Gross Sales For Royalty
Each Quarter Percentage
-------------------- ----------
<S> <C>
$0 to $375,000 5.0%
$375,001 to $500,000 4.5%
$500,001 to $750,000 4.0%
$750,001 or more 3.5%
</TABLE>
The renewal royalty scale is based on total sales, not incremental sales.
For example, if a Plant increases quarterly sales from $350,000 to $380,000, its
aggregate royalty will decrease from $17,500 ($350,000 x .05) to $17,100
($380,000 x .045). This renewal scale is designed to provide a strong incentive
for growth of Plant revenues beyond the $1.5 million annual level. For the
fiscal year ended 1996, average Plant sales were $853,000. It is not anticipated
that this renewal royalty scale will have an adverse effect on the Company's
royalty revenues.
As of February 29, 1996, a new franchisee is required to pay an initial fee
of $85,000, which consists of a $35,000 franchise fee and a $50,000 opening
package fee, and an ongoing royalty of 6% of the gross sales of the franchised
Plant. Additionally, a new franchisee must obtain an initial equipment and
furnishings package at a cost of approximately $175,000. This package may be
purchased from BCT or from other sources as long as it meets the standards of
performance established by BCT. Each franchisee is typically expected to obtain
his own financing, but BCT may aid the franchisee in obtaining such financing.
In fiscal 1993, BCT began accepting interest-bearing term notes from franchisees
as a condition of the purchase of their franchises. BCT financed one sale in
fiscal 1996 and none in fiscal 1995 or 1994.
Each new BCT franchisee is required to attend a two week training session
at BCT's National Training Center in Fort Lauderdale, Florida. This training
consists of equipment orientation and business management, marketing and sales
techniques required to operate a successful Plant. Upon completion of the
initial training, BCT furnishes a qualified field representative for a period of
ten days to instruct the franchisee in the operation of his Plant, advise in the
hiring of personnel and assist in the establishment of standard operating
procedures.
BCT also provides ongoing support to its franchisees through periodic
regional seminars, annual conventions, and visits from Company management and
field representatives. Operational visits at its franchise plants are scheduled
on a priority basis depending on the relative needs of the franchisees. An
operational visit consists of an overview of the Plant's production, sales and
marketing efforts and financial performance.
To expedite the sale of the approximately 20 franchise markets available
for sale, BCT has developed its Guaranteed Sales Program ("GSP"). The GSP
program is designed to convey BCT's confidence in the profitability and
soundness of owning a BCT franchise. Within the first six months after execution
of a franchise agreement, a dissatisfied franchisee may notify BCT of its intent
to sell the Plant's assets back to BCT. The franchisee must pay all of its
outstanding obligations to third parties, exclusive of the leases on equipment
and the premises, and pay all monies owed to BCT for royalties, PPP paper and
miscellaneous items. BCT will acquire the equipment under lease, all inventory,
all accounts receivable and all customer files, books, records, and other
documents pertaining to all transactions. In the asset purchase transaction, BCT
will pay the fair market value of the equipment and fixtures, or if leased,
assume the lease, and will assume the lease of the Plant's premises. Revenue
from a GSP sale will not be recognized until the six month period lapses and all
conditions relating to the sale have been substantially performed.
Wedding Invitations and Social Stationery Catalog
-------------------------------------------------
BCT introduced its Wedding Invitations and Social Stationery Catalog in
February 1993. The introduction of this product line enables the BCT franchise
system to directly compete, product line by product line, with its two major
national competitors. See "Competition". BCT is utilizing its Company Plants and
four franchised Plants in an attempt to refine the implementation of this
product line. Due to disappointing results thus far, BCT is re-evaluating the
long term potential of this product line.
Page 3
<PAGE>
Company Plants
--------------
BCT, through its wholly-owned subsidiary BCT Delray, acquired its first
Company Plant in June 1993, in Delray Beach, Florida. In December 1994, BCT
acquired another Company Plant in Honolulu, Hawaii. The Honolulu Plant was sold
in fiscal 1996. During fiscal 1996, BCT, through its wholly-owned subsidiaries,
acquired or repossessed five Company Plants in the following locations: Boston,
Massachusetts; Marietta, Georgia; Louisville, Kentucky; Newbury Park,
California; and Riverside, California. The Boston Plant was sold in February
1996; however, due to active continuing involvement by management of BCT, the
recognition of this sale has been deferred. BCT intends to make additional
acquisitions of franchised Plants as appropriate opportunities arise. BCT
utilizes its Company Plants as its test sites for the improvement of the BCT
operating system, as well as the testing of new products.
In addition to the testing function, BCT uses its Company Plant
subsidiaries for three basic purposes which are designed to enhance the
Company's long term growth and profitability: (i) to acquire and manage well-
run, profitable or potentially profitable Plants situated in strategic
locations; (ii) to acquire independent thermographers and convert their
businesses into Plants for resale; and (iii) to repossess underperforming Plants
which are in default under their franchise agreements and upgrade them for
resale.
As of May 1, 1996, BCT has acquired two Company Plants which it intends to
hold for long-term growth: the Delray Beach and Louisville Plants. In addition,
as of May 1, 1996, BCT, acting jointly with two BCT franchisees, has acquired
one independent thermography business. Portions of the acquired business' assets
and customer base were allocated to the BCT franchisees, and the balance was
utilized to create the Marietta, Georgia, Company Plant, which is currently held
for sale. Also, BCT acquired an existing Plant in Riverside, California, which
is currently held for sale.
BCT has identified underperforming Plants throughout the network. As of
May 1, 1996, BCT has repossessed three underperforming Plants. Since the
Plants' repossessions, BCT has sold two of these Plants: Honolulu, Hawaii, and
Boston, Massachusetts. BCT presently holds for sale and operates a repossessed
Company Plant in Newbury Park, California.
Rubber Stamps Tomorrow
----------------------
In January 1990 BCT determined that "Rubber Stamps Tomorrow" ("RST") was a
valuable additional product line for the BCT system. As a result, BCT entered
into an agreement with the company that initially developed and test marketed
the RST concept to purchase all tradename, trademark, service mark and related
rights as they pertain to the Rubber Stamps Tomorrow name. Effective September
1, 1994, BCT incorporated the RST program into the BCT operating system,
requiring all franchised Plants to implement the RST program as part of their
franchise. Each participating BCT Plant is required to pay an ongoing royalty of
5% to 6% of the gross sales of rubber stamp products depending upon the initial
franchise agreement date.
Competition
-----------
The Company and its franchisees compete with other franchisors, franchisees
and independent operators in the graphic arts industry, some of whom may be
better established and/or have greater resources than the Company and its
franchisees. While the Company believes that its BCT franchise system is the
leading supplier of thermographed business cards to printers throughout the
United States (supported by the May 1993 Quick Print Magazine "Supply and
Services Survey," indicating a 23% market share in the brokered printing
category for business cards), there can be no assurance that competitors will
not imitate or improve upon the Company's business strategy. BCT's major
national competitors are Regency Thermographers and Carlson Craft; however,
BCT's franchisees also compete with numerous local and regional operations.
BCT's franchisees compete primarily on the basis of turnaround time, quality and
close customer contact.
Trade and Service Marks
-----------------------
The Company has received federal registration of the names "Business Cards
Tomorrow" and "BCT International, Inc." and the BCT commercial logo, as well as
the names and commercial marks for "Typesetting Express", "Engraving Tomorrow",
"Thrift-T-Cards", "Thermo-Rite", and "Rubber Stamps Tomorrow".
Page 4
<PAGE>
Research and Development
------------------------
The Company performs ongoing research and development, seeking improvements
in the operating procedures and products of its franchises. These activities are
primarily done at the Company Plants and at the Company's corporate
headquarters. Also, the Company often requests individual franchisees to perform
tests of various equipment, materials or techniques in an actual production
environment.
In fiscal 1993, the Company began a new research and development project
known as Advanced Management Operating System ("AMOS"). The Company believes
that, in order for individual BCT Plants to expand to a multi-million dollar
sales level, a system must be created to provide control over the expanded
production, thus resulting in increased profitability. The integral components
of the AMOS system are as follows: composition; verification; computer generated
grouping; job tracking; integration of accounts receivable and collections; and
generation of advanced management reports. The Company utilized the services of
experienced computer system design consultants to expedite the completion of the
test phase and make AMOS operational. In March 1995, the AMOS test phase was
completed, and AMOS is fully operational. The BCT Plants lease the AMOS software
at a nominal monthly rate from the computer system design consultants. To date,
the Company has incurred expenses totalling $540,000 for the research and
development of AMOS. During fiscal 1996, 1995 and 1994, the Company spent
approximately $421,000, $279,000, and $367,000 on research and development,
respectively.
Government Regulation
---------------------
The Federal Trade Commission has adopted rules relating to the sales of
franchises and disclosure requirements to potential franchise purchasers.
Additionally, various states have adopted laws regulating franchise sales and
operations. As a franchisor, the Company is required to comply with these
federal and state regulations and believes that it is not operating in violation
of any of these regulations.
Employees
---------
The Company has 136 employees, all of whom are located at either (i) the
Company's corporate headquarters in Fort Lauderdale, Florida, (ii) the Company's
printing facility in Fort Lauderdale, Florida, or (iii) the Company Plants in
Delray Beach, Florida; Newbury Park, California; Riverside, California;
Louisville, Kentucky and Marietta, Georgia.
Financial Information Relating to Foreign and Domestic Operations
-----------------------------------------------------------------
<TABLE>
<CAPTION>
February 29, February 28, February 28,
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Revenue:
Foreign operations $ 922,000 $ 779,000 $ 717,000
Domestic operations $16,668,000 $12,794,000 $12,404,000
Operating Profit:
Foreign operations $ 123,000 $ 112,000 $ 103,000
Domestic operations $ 823,000 $ 919,000 $ 665,000
Identifiable Assets:
Foreign operations $ 312,000 $ 251,000 $ 352,000
Domestic operations $10,426,000 $ 9,767,000 $ 7,429,000
</TABLE>
Page 5
<PAGE>
Item 2. Properties
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The Company's corporate headquarters are located at 3000 NE 30th Place,
Fifth Floor, Fort Lauderdale, Florida, and occupy approximately 8,200 square
feet. The lease on this facility continues to October 1997 at a monthly rental
of approximately $9,000. In May 1995, PPP leased 1,200 square feet of space on
the Fourth Floor of the same building. The lease on this facility continues to
October 1997 at a monthly rental of approximately $1,300.
The Company leases approximately 7,600 square feet of space in Fort
Lauderdale, at a monthly rental of approximately $5,200, for use as a Company
printing and training facility. The lease on this facility continues through
February 1997.
The Delray Beach, Florida, Company Plant utilizes a 6,000 square foot
facility, which is leased for a monthly rental of $3,500. The lease on this
facility continues through April 2000.
The Louisville, Kentucky, Company Plant utilizes a 5,000 square foot
facility, which is leased for a monthly rental of $1,200. The lease on this
facility continues through September 1999.
The Marietta, Georgia, Company Plant occupies a 5,700 square foot facility,
which is leased for a monthly rental of $2,700. The lease on this facility
continues through October 2000.
The Riverside, California, Company Plant rents a 3,400 square foot
facility, which is leased for a monthly rental of $1,800. The lease on this
facility continues through November 2000.
The Newbury Park, California, Company Plant leases a 4,000 square foot
facility, which is leased for a monthly rental of $2,700. The lease on this
facility continues through November 1996.
Management is working with a real estate broker to obtain additional space
for the Company's corporate facilities. Management believes that an expansion to
approximately 14,000 square feet will be needed by fiscal 1998. All other
existing facilities are adequate for the foreseeable future. Management believes
that additional suitable facilities will be available at commercially reasonable
rates.
Page 6
<PAGE>
Item 3. Legal Proceedings
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Varrieur v. BCT International, Inc.
On April 28, 1989, Douglas B. Varrieur, a former officer and director of
the Company, filed suit against the Company in the Circuit Court for
Hillsborough County, Florida. Varrieur's complaint was based on the Company's
April 19, 1989 termination for cause of his five-year employment agreement with
the Company dated August 4, 1988 (the "Employment Agreement"). The Employment
Agreement provided for an annual salary of $104,000 together with certain other
benefits and was entered into in connection with the Company's acquisition on
that date of a controlling interest in Print Shack International, Inc. ("Print
Shack"), from Varrieur and certain other Print Shack shareholders. Pursuant to
the Employment Agreement, Varrieur served as an executive officer of the Company
and Print Shack. Print Shack generated massive losses for the Company and was
shut down in fiscal 1991.
Varrieur's complaint is based on his allegation that the Company did not
have good cause to terminate his employment and therefore breached the
Employment Agreement. The original complaint contained four counts: Count I
sought unspecified money damages based on the alleged breach of the Employment
Agreement; Count II sought specific performance of the Employment Agreement,
i.e., that Varrieur be reinstated; Count III sought cancellation and rescission
of the August 4, 1988, agreement pursuant to which the Company acquired
Varrieur's 44% interest in Print Shack (the "Stock Purchase Agreement"); and
Count IV sought a declaratory judgment to the effect that the three-year non-
competition covenant of the Employment Agreement is unenforceable.
The court dismissed with prejudice all of Varrieur's initial claims, except
for Count I. In the fall of 1993, Varrieur amended his complaint to assert a
claim (new Count III) for an alleged breach by the Company of its agreement to
indemnify him and his wife against personal liability arising from debts of
Print Shack. This claim was based on a suit filed by a Print Shack creditor
against the Company, the Varrieurs as guarantors and others based on a
promissory note issued by Print Shack. The Company assumed full responsibility
for defending this action and settled it in January 1994, thereby extinguishing
the subject debt. Varrieur is seeking, pursuant to his indemnification claim, to
recover damages in excess of $1,750 in the form of legal fees, together with
unspecified damages allegedly arising from damage to his credit.
Discovery proceedings began in May 1990 and have continued on a sporadic
basis. In November 1994, Varrieur moved to set the case for jury trial. In March
1995, the court denied Varrieur's motion, finding that he had previously waived
his right to jury trial. In April 1995, Varrieur appealed the court's decision
denying him a jury trial. In July 1995, the appellate court affirmed the trial
courts decision denying Varrieur's motion. A non-jury trial has been set for
September 1996.
The Company intends to vigorously contest Varrieur's claim. Based on the
facts available to it and the advice of counsel, the Company believes that it
had good cause for terminating Varrieur and that Varrieur's claim is without
merit.
It is the opinion of the Company's management and counsel that the
likelihood that Varrieur's claim will have a material adverse effect on the
consolidated financial position and results of operations of the Company is
remote.
Item 4. Submission of Matters to a Vote of Securities Holders
- ------- -----------------------------------------------------
No matters were submitted to a vote of securities holders, through the
solicitation of proxies or otherwise, during the fiscal quarter ended February
29, 1996.
Page 7
<PAGE>
Item 5. Market for Registrant's Common Stock and Related Security
---------------------------------------------------------
Holder Matters
--------------
The Company's Common Stock is traded on the National Market tier of
the Nasdaq Stock Market under the symbol "BCTI".
The following table sets forth, for the quarters indicated, the high and
low closing bid prices in the Nasdaq Small Cap Market for a share of Common
Stock through February 15, 1995, and the closing price for the Common Stock as
reported on the Nasdaq National Market since February 15, 1995. The quotations
through February 15, 1995, represent prices between dealers, do not include
retail markups, markdowns or commissions, and may not represent actual
transactions.
<TABLE>
<CAPTION>
Fiscal Quarters High Low
--------------- ------ ------
<S> <C> <C> <C>
1995 First Quarter $3.38 $2.50
Second Quarter $3.38 $2.63
Third Quarter $5.63 $3.25
Fourth Quarter $5.38 $4.38
1996 First Quarter $5.38 $4.62
Second Quarter $6.00 $4.75
Third Quarter $5.62 $4.25
Fourth Quarter $4.62 $3.50
1997 First Quarter (through May 17, 1996) $4.38 $3.25
</TABLE>
On May 17, 1996, the closing price per share of common stock, as reported
by NASDAQ, was $3.38.
There is currently no established public trading market for any securities
of the Company other than the common stock.
The approximate number of holders of record of the Company's common stock
as of May 17, 1996 was 917.
During the fiscal years ended February 29, 1996, February 28, 1995, and
1994, no cash dividends were declared on the outstanding Common Stock. The
declaration of dividends on Common Stock was prohibited by the loan covenants
with the Company's bank. The Company's loan with the bank was satisfied in
February 1994. The Company has no plans to pay any dividends on the common
stock.
Page 8
<PAGE>
<TABLE>
<CAPTION>
Item 6. Selected Financial Data 000's omitted
- ------ ----------------------- -------------
OPERATIONS
for the fiscal year ended: FEB. 29, 1996 FEB. 28, 1995 FEB. 28, 1994 FEB. 29, 1993 FEB. 29, 1992
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
REVENUES:
Continuing Franchisee Fees
and Commissions $ 4,820 $ 4,540 $ 4,004 $ 3,517 $2,993
Paper Sales 8,241 7,077 6,886 5,849 5,045
Printing Sales 918 508 514 675 574
Company Plants 1,054 760 651 --- ---
Company Plants Held
for Sale 1,251 92 --- --- ---
Sales of Franchises 870 466 957 573 189
Interest and Other Income 436 130 109 78 108
------- ------- ------- ------- ------
17,590 13,573 13,121 10,692 8,909
------- ------- ------- ------- ------
EXPENSES:
Cost of Paper Sales 7,368 6,272 6,086 5,198 4,457
Cost of Printing Sales 428 385 290 338 364
Cost of Franchises Sold 521 326 691 402 122
Expenses of Company Plants 1,563 1,030 802 --- ---
Expenses of Company Plants
Held for Sale 1,734 90 --- --- ---
Selling, General and
Administrative 4,450 3,905 3,487 3,158 3,501
Research and Development Costs 421 279 367 283 123
Depreciation and Amortization 170 227 338 239 215
Interest and Other 9 28 292 296 424
Minority Interest (20) --- --- --- ---
------- ------- ------- ------- ------
16,644 12,542 12,353 9,914 9,206
------- ------- ------- ------- ------
Subordinated Debenture
Conversion Expense --- --- --- --- 331
Loss on Disposal of Rental
Properties --- --- --- --- 75
Income tax benefit 195 124 93 --- ---
------- ------- ------- ------- ------
Income (Loss) From
Continuing Operations 1,141 1,155 861 778 (703)
Extraordinary Item:
Gain on Early
Extinguishment of Debt --- --- --- 53 ---
------- ------- ------- ------- ------
Net Income (Loss) $ 1,141 $ 1,155 $ 861 $ 831 $ (703)
======= ======= ======= ======= ======
</TABLE>
Page 9
<PAGE>
Item 6. Selected Financial Data (continued) 000's omitted
- ------- -------------------------------------------------
(except for per share data)
<TABLE>
<CAPTION>
For the fiscal year ended: FEB. 29, 1996 FEB. 28, 1995 FEB. 28, 1994 FEB. 29, 1993 FEB. 29, 1992
------------- ------------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
Earnings (Loss) per Common Share:
Income (Loss) from Operations
Primary $ .19 $ .18 $ .17 $ .27 $ (.29)
Fully Diluted .19 .18 .10 .19 (.29)
Extraordinary Item:
Primary --- --- --- .02 ---
Fully Diluted --- --- --- .01 ---
Net Income (Loss)
------- ------- ------ ------ ------
Primary $ .19 $ .18 $ .17 $ .29 $ (.29)
------- ------- ------ ------ ------
Fully Diluted $ .19 $ .18 $ .10 $ .20 $ (.29)
======= ======= ====== ====== ======
Total Assets $10,738 $10,018 $7,781 $5,743 $5,137
Long-term Debt $ 5 $ 48 $ 459 $2,073 $2,619
Preferred Stock $ 260 $ 810 $1,622 $ 765 $ ---
Net Working Capital $ 4,633 $ 5,542 $1,067 $1,153 $ 22
Stockholders' Equity (1) $ 9,374 $ 7,759 $2,290 $1,247 $ 299
</TABLE>
(1) During the five fiscal years ended February 29, 1996, no cash dividends have
been declared on the common stock outstanding.
Page 10
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
- ------- -----------------------------------------------------------------------
of Operations
-------------
Fiscal 1996 Compared to Fiscal 1995
- -----------------------------------
Total revenue for fiscal 1996 increased by $4,017,000 or 30% over the prior
fiscal year. Royalty revenue increased by $280,000 or 6%; paper sales increased
by $1,164,000 or 16%; revenue from Company Plants increased by $294,000 or 39%;
revenue from Company Plants held for sale increased by $1,159,000 or 1,260%;
revenue from printing sales increased by $410,000 or 81%; revenue from the sales
of franchises increased by $404,000 or 87% and interest and other income
increased by $306,000 or 235%. The revenue growth reflects the use of the new
business card catalog by 95% of the franchisees and the sales of two franchises,
a Facility, two Territories and a Company Plant. Also, revenue from Company
Plants held for sale includes revenue from five Plants in fiscal 1996 versus one
in the prior year.
Cost of goods sold as a percentage of revenue was 47% and 51%,
respectively, for fiscal years ended 1996 and 1995. Although the percentage
generally remains stable, it does fluctuate due to periodic changes in the
revenue mix. Selling, general and administrative expenses represented 25% and
29% of gross revenues in fiscal 1996 and 1995, respectively. In fiscal 1996,
management focused on cost containment as it related to BCT operations.
In fiscal 1996, significant losses were incurred by both the Company Plants
and the Company Plants held for sale of $509,000 and $483,000, respectively. The
majority of the Company Plants' losses have been generated by the Delray Beach,
Florida, and Newbury Park, California, Plants. Due to the continuing operating
losses and negative cash flow of the Delray Beach Plant, the goodwill associated
with the acquisition of this Plant was accelerated and fully amortized in the
amount of $155,000 during fiscal 1996.
The Company had net income of $1,141,000 for fiscal 1996, compared to net
income of $1,155,000 for fiscal 1995.
Fiscal 1995 Compared to Fiscal 1994
- -----------------------------------
Total revenue for fiscal 1995 increased by $452,000 or 3% over the prior
fiscal year. Royalty revenue increased by $536,000 or 13%; paper sales increased
by $191,000 or 3%; revenue from the Company Plants increased by $109,000 or 17%;
and revenue from franchise Plant sales decreased by $491,000 or 51%, reflecting
the sale of two franchises. The decline in franchise Plant sales is not
indicative of a lack of marketable territories. The Company is aggressively
seeking experienced franchise sales staff to strengthen its franchise sales
department.
Cost of goods sold as a percentage of revenues for fiscal 1995, at 51%, was
consistent with the comparable percentage for fiscal 1994. Cost of goods sold
includes a $100,000 reserve for slow-moving inventory related to the Wedding and
Social Stationery Catalog. The Company has engaged a marketing consultant to
assist management in the repositioning of its Wedding and Social Stationery
Catalog and product line. Selling, general, and administrative expenses
represented 29% and 27% of gross revenues in fiscal 1995 and 1994, respectively.
The primary cause of the increase in selling, general and administrative
expenses as a percentage of revenues was the increased expenses associated with
the Company's formalization of its marketing department. The costs associated
with the marketing department in fiscal 1995 increased by $153,000 (58%) from
the prior year's level.
With the retirement of the Company's convertible subordinated debentures
and various notes payable, interest expense decreased by $231,000 or 79%, during
fiscal 1995.
The Company had net income of $1,155,000 for fiscal 1995, which compared
favorably to net income of $861,000 for fiscal 1994.
Page 11
<PAGE>
Liquidity and Capital Resources
- -------------------------------
As of May 1, 1996, the Company has utilized $852,000 of the $1,938,000 net
proceeds from the fiscal 1995 exercise of the Series B preferred stock warrants,
to fund operating losses of its Company Plants. As previously discussed, the
Company Plants incurred aggregate operating losses of $992,000 during fiscal
1996. These operating losses stem from two principal sources: the Delray Beach,
Florida, Plant and the Newbury Park, California, Plant.
The Delray Beach Plant, which is held for long-term growth, was responsible
for $456,000 of the losses. This location had two business purposes: to operate
and earn income as a traditional Plant and to be the alpha site for all research
and development products for the BCT network. Management believes that these
dual functions significantly impaired the Plant's ability to actively seek out
traditional business for this location and operate in accordance with the
franchise system. Due to its operating losses and negative cash flow, the
goodwill associated with the acquisition of this Plant was accelerated by
$108,000 and fully amortized at February 29, 1996 in the amount of $155,000. In
an attempt to cut this Plant's operating losses, its research and development
function was significantly curtailed and its manager was replaced in the fourth
quarter of fiscal 1996.
In fiscal 1996, operating losses of $483,000 were generated by the Company
Plants held for sale, $232,000 of which was generated by the Newbury Park Plant.
Upon repossession and/or acquisition of each of these plants, the Company must
refurbish the actual facility as well as rebuild its customer base.
Consequently, the Company incurs substantial losses initially. Once a
repossessed and/or acquired Plant is satisfactorily upgraded, usually six months
after repossession and/or acquisition, the Plant is sold. Due to the adverse
results thus far from the Company Plants held for sale, management is evaluating
alternatives to repossession of troubled Plants.
During fiscal 1996, the Company utilized working capital to make debt
payments totalling $214,000.
Through February 29, 1996, the Company made capital expenditures of
approximately $917,000, most of which were dedicated to office equipment,
computer software and equipment, furniture and fixtures, and other machinery and
equipment.
The Company intends to improve its working capital and cash positions
during fiscal 1997 by focusing its efforts on the turnaround of the Company
Plant subsidiaries, on increasing cash collections and on developing new product
lines while containing capital expenditures and keeping inventories at their
current levels.
The Company believes that internally generated funds will be sufficient to
satisfy the Company's working capital and capital expenditure requirements for
the foreseeable future; however, there can be no assurance that external
financing will not be needed or that, if needed, it will be available on
commercially reasonable terms.
Item 8. Financial Statements and Supplementary Data
- ------- -------------------------------------------
The financial statements and schedules listed in the accompanying Index to
consolidated financial statements and schedules on page F-1 are filed as a part
of this report.
Item 9. Disagreements on Accounting and Financial Disclosure
- ------- ----------------------------------------------------
None
Page 12
<PAGE>
<TABLE>
<CAPTION>
Item 10. Directors and Executive Officers of the Registrant
- -----------------------------------------------------------
Date Elected
Name Age Position Or Appointed
- ---- --- -------- ------------
<S> <C> <C> <C>
William Wilkerson 54 Chairman of the Board and January 1978
Chief Executive Officer
A. George Cann 39 Chief Operating Officer and May 1995
President of BCT
Donna M. Pagano-Leo 35 Chief Financial Officer, October 1992
Treasurer and May 1995
Secretary
Michael R. Hull 42 Chief Financial Officer May 1996
and Treasurer
Thomas J. Cassady 74 Director April 1988
Robert F. Bond 55 Director May 1980
Raymond J. Kiernan 71 Director December 1983
Henry A. Johnson 61 Director February 1975
Bill LeVine 76 Director May 1992
</TABLE>
William Wilkerson has been Chairman of the Board and a Director of the
Company since January 1986. In May 1988, he accepted the additional
responsibility of Chief Executive Officer. He was President and Chief Executive
Officer of Business Cards Tomorrow, Inc. (a Florida corporation) from January
1978 to January 1982 and Chairman from January 1982 to January 1986.
A. George Cann was appointed as President of Business Cards Tomorrow, Inc.
in April 1995. Previously, Mr. Cann worked in the Kinko's organization for 13
years in various capacities. Since December 1987, he has been President and a
principal shareholder of Kinko's Grand Rapids, Inc., and the owner and operator
of three Kinko's copy center stores in Michigan. Mr. Cann's role with Kinko's
Grand Rapids, Inc., has been limited to that of a passive investor since he
joined the Company. From February 1991 through September 1994, Mr. Cann held the
position of Vice President of Operations and Product Development at Kinko's
Service Corporation, Ventura, California. From June 1990 through February 1991,
he was a Director of Kinko's Service Corporation. From May 1990 through February
1991, he was Regional Manager in Michigan for K-Graphics, Inc., a multi-state
owner and operator of Kinko's stores.
Donna M. Pagano-Leo joined the Company in August 1992 and became Vice
President/Chief Financial Officer and Treasurer of the Company in October 1992.
In May 1995, Ms. Leo was elected as the Company's secretary. Ms. Leo is a
certified public accountant, a member of the Florida Institute of Certified
Public Accountants and the American Institute of Certified Public Accountants,
and has worked in public accounting since 1983. Prior to joining the Company,
Ms. Leo served as an audit manager with the accounting firm of Price Waterhouse
LLP for seven years and as a staff accountant with the accounting firm of Arthur
Young & Co. for two years. Ms. Leo has resigned from the Company effective May
30, 1996; however, she has informed the Company that she will remain available
to provide financial consulting services as requested by the Company.
Michael R. Hull joined the Company in May 1996 and will serve as Vice
President/Chief Financial Officer and Treasurer beginning May 31, 1996 . Mr.
Hull is a certified public accountant, a member of the Florida Institute of
Certified Public Accountants and the American Institute of Certified Public
Accountants and has worked in public accounting since 1985. Prior to joining the
Company, Mr. Hull served as an audit senior manager with the accounting firm of
Price Waterhouse LLP for three years.
Page 13
<PAGE>
Thomas J. Cassady became a Director of the Company in April 1988 and has
been a Director of Photo Control Corporation, Minneapolis, Minnesota, since
February 1978. Mr. Cassady is a veteran of more than 30 years in the financial
and securities field, having served as President and Chief Administrative
Officer of Merrill, Lynch, Pierce, Fenner and Smith, Inc., until his retirement
in 1978.
Robert F. Bond has been a Director of the Company since May 1980 and was
Secretary/Treasurer from February 1981 to August 1988 and Chairman of the Board
from January 1985 to January 1986. Since 1985, Mr. Bond has been a principal in
First Madison Group, an investment banking firm in Montville, New Jersey.
Raymond J. Kiernan has been a Director of the Company since December 1983
and has been a Director of Fleet Trust Company and Fleet Trust Company of
Florida since 1983. In 1979, Mr. Kiernan retired from his position as a Vice
President and Division Director of Merrill, Lynch, Pierce, Fenner & Smith, Inc.
He is a former Governor of the National Association of Securities Dealers.
Henry A. Johnson, founder of BCT, has been a Director of the Company since
January 1986. From January 1986 until October 1988, he was Senior Vice
President/Operations of the Company. In October 1988, he resigned his position
with the Company and became Senior Vice President/Operations of BCT. In February
1989, he accepted the additional responsibilities of Executive Vice President of
BCT. Previously, he was Senior Vice President/Operations for Business Cards
Tomorrow, Inc. (a Florida corporation), from January 1978. In March 1990, he
retired from his position with BCT; however, he has continued to provide
consulting services to BCT. Since March 1991, Mr. Johnson has owned and operated
a private printing business, Colorful Copies, located in Las Vegas, Nevada.
Bill LeVine became a Director of the Company in May 1992. Mr. LeVine is the
pioneer of the quick printing industry. He founded Postal Instant Press (PIP
Printing) in 1967 and served as its Chairman, Chief Executive Officer and
President until January 1988. Since that time, he has focused on private
investments. Since 1992, Mr. LeVine has been a Director of Fast Frame, Inc. Mr.
LeVine has been a Director of First Business Bank, Los Angeles, California,
since 1982, and Rentrak Corporation, formerly National Video, Portland, Oregon,
since 1987.
Compliance with Section 16 (a) of the Exchange Act
The Company has reviewed the Forms 3 and 4 and amendments thereto furnished
to it pursuant to SEC Rule 16a-3(e) during its most recent fiscal year and Form
5 and amendments thereto furnished to the Company with respect to its most
recent fiscal year. Based solely on such review, the Company has identified each
person who, at any time during the fiscal year, was a director, officer or
beneficial owner of more than 10% of the Company's Common Stock and failed to
file on a timely basis, as disclosed in the above-described Forms, reports
required by the Securities Exchange Act of 1934 during the most recent fiscal
year or prior fiscal years. The following table sets forth for each such person
the number of late reports and the number of transactions that were not reported
on a timely basis. The Company is not aware of any failure to file a required
Form, as all known delinquencies were cured.
NUMBER OF LATE
NAME POSITION NUMBER OF LATE REPORTS REPORTED TRANSACTIONS
- ---- -------- ---------------------- ---------------------
Bronson 10% Beneficial Owner 5 9
Page 14
<PAGE>
Item 11. Executive Compensation
- -------- ----------------------
(a) Board Compensation Committee Report on Executive Compensation
The Compensation Committee of the Board of Directors, which is
comprised of non-employee directors, has overall responsibility to review and
recommend broad-based compensation plans for executive officers of the Company
and its BCT subsidiary to the Board of Directors. One of the members of the
Compensation Committee, Mr. LeVine, has invested significant sums of money in
the Company. (See Item 13. "Certain Relationships and Related Transactions").
Pursuant to recently adopted rules designed to enhance disclosure of companies'
policies toward executive compensation, set forth below is a report submitted by
Messrs. Kiernan, and LeVine in their capacity as the Board's Compensation
Committee addressing the Company's compensation policies for fiscal 1996 as they
affected Mr. William A. Wilkerson, Chairman of the Board and Chief Executive
Officer, and Mr. A. George Cann, President of BCT and Chief Operating Officer.
Compensation Policies For Executive Officers
The executive compensation program is based on a philosophy which
aligns compensation with business strategy, Company values and management
initiatives. The principles underlying this compensation philosophy are: the
linkage of executive compensation to the enhancement of shareholder value;
maintenance of a compensation program that will attract, motivate and retain key
executives critical to the long-term success of the Company; creation of a
performance oriented environment by rewarding performance leading to the
attainment of the Company's goals; evaluation of competitiveness of salary and
equity incentive opportunities; and determination of the adequacy and propriety
of the annual bonus plan, including structure and performance measures.
Relationship of Performance Under Compensation Plans
Compensation paid Messrs. Wilkerson and Cann in fiscal 1996, as
reflected in the following Tables, consisted of base salary. The Compensation
Committee is awaiting the audited results for fiscal 1996 prior to determining
any annual bonus to Messrs. Wilkerson and Cann. In addition, as indicated in the
Tables, in fiscal 1996 the Compensation Committee awarded stock options to Mr.
Cann.
The Company's executive compensation policies are oriented toward
utilization of objective performance criteria. The principal measures of
performance that are utilized by the Compensation Committee are targeted versus
actual operating budget and income growth. Subjective performance criteria are
utilized to only a limited degree.
Annual Bonus Arrangements
The Company's annual bonuses to its executive officers, as indicated
above, are based on both objective and subjective performance criteria.
Objective criteria include actual versus target annual operating budget
performance and actual versus target annual income growth. Target annual income
growth and target annual operating budgets utilized for purposes of evaluating
annual bonuses are based on business plans which have been approved by the Board
of Directors. Subjective performance criteria encompass evaluation of each
officer's initiative and contribution to overall corporate performance, the
officer's managerial ability, and the officer's performance in any special
projects that the officer may have undertaken. Performance under the subjective
criteria was determined at the end of fiscal 1996 after informal discussions
with other members of the Board.
Page 15
<PAGE>
Mr. Wilkerson's Fiscal 1996 Compensation
During fiscal 1993, the Compensation Committee approved a seven year
employment contract for Mr. Wilkerson for fiscal years beginning in fiscal 1994.
All of Mr. Wilkerson's fiscal 1996 compensation was paid pursuant to this
contract. The agreement calls for minimum annual remaining salary amounts during
the employment term as follows:
<TABLE>
<CAPTION>
Year Ending February 28/29 Amount
-------------------------- ------
<S> <C>
1997 $300,000
1998 $300,000
1999 $300,000
2000 $300,000
</TABLE>
In the event that Mr. Wilkerson is substantially incapacitated during
the term of his employment for a period of 90 days in the aggregate during any
twelve month period, the Company has the right to terminate his employment.
Under such termination, Mr. Wilkerson will receive one-half of his salary in
effect on the date of termination for the remaining term of the agreement.
Additionally, in the event of Mr. Wilkerson's death during his employment, his
designated beneficiary or his estate shall be paid one-half of his salary in
effect on the date of his death for the remaining term of the agreement.
The performance considerations utilized by the Compensation Committee
in determining the terms of Mr. Wilkerson's employment contract were as follows:
. His hiring of a new and successful management team.
. His ability to lead the Company to substantial and increasing profitability.
. His implementation of a new franchisee credit and collection policy achieving
maximum collectibility.
. His development of new and positive investment banking and market maker
relationships.
. His success in maintaining the Company's NASDAQ listing under difficult
circumstances through conversion of subordinated debentures, a preferred
stock offering and increased profitability.
. The Company's overall performance in fiscal 1993 yielding substantial revenue
and income growth and substantially surpassing goals set forth in the
targeted operating budget.
Mr. Wilkerson's fiscal 1996 and 1997 salary was kept at $275,000 and
$300,000 respectively, which is the minimum level prescribed for those years in
his employment contract.
Mr. Cann's Fiscal 1996 Compensation
During fiscal 1996, the Compensation Committee approved the terms of
Mr. Cann's employment. Mr. Cann may be terminated by the Company at will;
however, under his agreement with the Company, if he is terminated during the
first three years of his employment, he is entitled to receive six months of
severance pay.
Mr. Cann's fiscal 1997 compensation reflects a cost of living salary
increase of 5%.
SUBMITTED BY THE COMPENSATION COMMITTEE OF THE COMPANY'S BOARD OF DIRECTORS:
RAYMOND J. KIERNAN BILL LEVINE
Page 16
<PAGE>
(c) Compensation Tables
The following tables set forth the compensation received for services
in all capacities to the Company during its fiscal years ended February 29,
1996, and February 28, 1995, and 1994, by the two executive officers of the
Company as to whom the total salary and bonus in the most recent year exceeded
$100,000.
Page 17
<PAGE>
BCT INTERNATIONAL, INC.
-----------------------
SUMMARY COMPENSATION TABLE
--------------------------
FISCAL YEARS 1996, 1995 AND 1994
--------------------------------
000'S OMITTED
-------------
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
- ----------------------------------------------------------------------------- -------------------
FORM OF PAYMENT
FISCAL ---------------
NAME POSITION YEAR SALARY BONUS CASH SHARES OPTIONS
- ---- -------- ------ ------ ----- ---- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
W.A. Wilkerson Chairman of 1996 $287(1) $10 $297 -- --
the Board and 1995 $287(1) $23(2) $310 -- 200
Chief Executive 1994 $237(1) $ 2(2) $239(2) -- --
Officer
A. G. Cann Chief Operating 1996 $109 $-- $109 -- 40(3)
Officer and
President of
Subsidiary
</TABLE>
(1) Salary for fiscal 1996, 1995 and 1994 includes a $12 car allowance.
(2) Bonus for fiscal 1994 of $25 was determined in July 1993, of which $2
was paid in fiscal 1994 and the remainder was paid in fiscal 1995.
(3) Options granted in fiscal 1996 were 40 of which 10 immediately vested
and the remainder are scheduled to vest over a three year period ending in
fiscal 1999.
Page 18
<PAGE>
BCT INTERNATIONAL, INC.
-----------------------
AGGREGATED OPTION EXERCISES AND YEAR-END
----------------------------------------
OPTION VALUES FOR FISCAL 1996
-----------------------------
000'S OMITTED
-------------
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
SHARES 2/29/96 (#) 2/29/96 ($)
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME POSITION EXERCISE # REALIZED ($) UNEXERCISABLE UNEXERCISABLE
- ---- -------- ---------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C>
W.A. Wilkerson Chairman of
the Board and
Chief Executive
Officer --- $ --- 346 / 0 $859 / 0
A. G. Cann Chief Operating
Officer and --- $ --- 10 / 30 $ 0 / 0
President
</TABLE>
Page 19
<PAGE>
BCT INTERNATIONAL, INC.
-----------------------
EXECUTIVE MANAGEMENT COMPENSATION
---------------------------------
OPTION GRANTS IN FISCAL YEAR 1996
---------------------------------
000'S OMITTED
-------------
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE
AT ASSUMED
% OF TOTAL ANNUAL RATES OF
OPTIONS STOCK PRICE
OPTIONS GRANTED TO EXERCISE EXPIRATION APPRECIATION
NAME POSITION GRANTED EMPLOYEES PRICE DATE FOR OPTION TERM
- ---- -------- ------- --------- ----- ---- ---------------
<S> <C> <C> <C> <C> <C> <C>
5% ($) 10% ($)
W.A. Wilkerson Chairman of
the Board and
Chief Executive
Officer --- --- --- --- $ --- / $ ---
A. G. Cann Chief Operating
Officer and
President of
Subsidiary 40 62% $4.94 3/15/05 $ 322 / $ 513
</TABLE>
Page 20
<PAGE>
(d) Other Compensation Arrangements
Outside directors of the Company receive director's fees of $750 per month
plus $750 for each Board of Directors meeting attended and $500 for each
committee meeting attended.
Item 12. (a) Security Ownership of Certain Beneficial Owners and Management
- ------------ --------------------------------------------------------------
The following table sets forth as of May 17, 1996, information with respect
to the only persons known to the Company to be beneficial owners of more than 5%
of the Company's outstanding Common Stock (excluding treasury stock), as well as
the beneficial ownership of all directors and officers of the Company
individually and all directors and officers as a group. Based on the information
available to the Company, except as set forth in the accompanying footnotes,
each person has sole investment and voting power with respect to the shares of
common stock indicated. At May 17, 1996, 4,975,385 shares of Common Stock were
outstanding.
Page 21
<PAGE>
<TABLE>
<CAPTION>
PERCENT OF
NUMBER OF SHARES OUTSTANDING
NAME BENEFICIALLY OWNED (1) COMMON STOCK
- ---- ---------------------- -------------
<S> <C> <C>
Certain Beneficial Owners:
Steven N. Bronson 635,320 (2) 12.21%
Barber & Bronson, Inc.
2101 West Commercial Blvd., Suite 1500
Fort Lauderdale, Florida 33309
Officers and Directors:
William A. Wilkerson 1,278,886 (3) 24.03%
Bill LeVine 685,032 (4) 13.60%
Henry A. Johnson 141,847 (5) 2.83%
Robert F. Bond 101,250 (6) 1.99%
Raymond J. Kiernan 81,500 (7) 1.61%
Thomas J. Cassady 26,250 (8) 0.53%
A. George Cann 11,000 (9) 0.22%
Donna M. Pagano-Leo 3,667 (10) 0.07%
Officers and Directors
as a group (8 persons) 2,329,432 (11) 41.26%
</TABLE>
- ---------------------------------
(1) This column sets forth shares of Common Stock which are deemed to be
"beneficially owned" by the persons named in the table under Rule 13D-3 of
the Securities and Exchange Commission ("SEC").
(2) Includes 228,750 shares covered by currently exercisable warrants.
(3) Includes 346,250 shares covered by currently exercisable stock options and
warrants.
(4) Includes 61,250 shares covered by currently exercisable stock options.
(5) Includes 43,750 shares covered by currently exercisable stock options.
(6) Includes 101,250 shares covered by currently exercisable stock options.
(7) Includes 80,000 shares covered by currently exercisable stock options.
(8) Includes 23,750 shares covered by currently exercisable stock options.
(9) Includes 10,000 shares covered by currently exercisable stock options.
(10) Includes 3,667 shares covered by currently exercisable stock options.
(11) Includes 669,917 shares covered by currently exercisable stock options and
warrants.
Page 22
<PAGE>
Item 13. Certain Relationships and Related Transactions
- -------- ----------------------------------------------
In February 1996, a company of which Mr. Wilkerson, the Chairman of the
Board, is a 50% shareholder, purchased the Honolulu, Hawaii, Company Plant for a
total purchase price of $400,000 plus accounts receivable and inventory. The
purchase price is payable pursuant to a $325,000 promissory note, representing
an assumption of the prior franchisee's debt to the Company, and a $108,000
promissory note representing the value of the inventory and accounts receivable
acquired. The $325,000 note bears interest at 8% per year and requires equal
monthly payments of principal and interest for 10 years based on a 15-year
amortization, with a balloon payment due at the end of 10 years. The $108,000
note bears interest at 8% per year and is payable in five years pursuant to
equal monthly payments of principal and interest. These notes are secured by
pledges of substantially all of the assets of the Hawaii Plant.
On May 7, 1992, Mr. LeVine was appointed to the Company's Board of
Directors. On that date, he purchased 550,000 shares of the Company's Series A
convertible preferred stock at a price of $1 per share. The Series A preferred
stock carried a cumulative annual dividend of 12%, was scheduled to be redeemed
in five years (May 1997), and was convertible into common stock at a ratio of
1.48 shares of preferred stock per share of common stock. The conversion ratio
was based on the market price of the common stock at the time of the
transaction. In connection with his appointment to the Board and his purchase of
the Series A preferred stock, Mr. LeVine was granted 10-year options to purchase
51,250 shares of common stock at a price of $1.48 per share (the market price on
the date of grant). On October 1, 1995, Mr. LeVine voluntarily converted his
550,000 shares of the Series A preferred stock into 371,622 shares of the
Company's Common Stock.
Page 23
<PAGE>
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
- ------- ---------------------------------------------------------------
(a) Financial Statements and Financial Statement Schedules
(1) Financial Statements - beginning on page F-1;
Report of Independent Certified Public Accountants - page F-2
Consolidated Balance Sheets at February 29, 1996 and February 28,
1995- page F-3
Consolidated Statements of Operations for the fiscal years ended
February 29, 1996, February 28, 1995, and February 28, 1994 - pages
F-4 and F-5.
Consolidated Statements of Changes in Stockholders' Equity for the
fiscal years ended February 29, 1996, February 28, 1995, and
February 28, 1994 - pages F-6 through F-8
Consolidated Statements of Cash Flows for the fiscal years ended
February 29, 1996, February 28, 1995, and February 28, 1994 - pages
F-9 through F-10
(2) Notes to Consolidated Financial Statements - pages F-11 through
F-22 Financial Statement Schedules
For the Years Ended February 29, 1996, February 28, 1995, and
February 28, 1994:
Schedule VIII - Valuation and Qualifying Accounts - page F-23
Schedule X - Supplementary Income Statement Information page F-24
All other schedules are omitted because they are not applicable or
the required information is shown in the financial statements or
notes thereto.
(b) Reports of Form 8-K
The Company did not file any report on Form 8-K during the last
quarter of fiscal 1996.
Page 24
<PAGE>
(c) Exhibits
3.1 Certificate of Incorporation of the Company, as amended, as filed
with the SEC as Exhibit 3.1 to the Company's Report on Form 10-K
for the fiscal year ended February 28, 1995, is incorporated
herein by reference.
3.2 By-Laws of the Company, as filed with the SEC as Exhibit 3.2 to
the Company's report on Form 10-K for the fiscal year ended
February 28, incorporated herein by reference.
4.1 Certificate of Designations, Preferences and Rights of Series A
Convertible Preferred Stock, as filed with the SEC as Exhibit 4.1
to the Company's report on Form 10-K for the fiscal year ended
February 29, 1995, is incorporated reference.
4.2 Certificate of Designations, Preferences and Rights of Series B
Convertible Preferred Stock, as filed with the SEC as Exhibit 4.2
to the Company's report on Form 10-K for the fiscal year ended
February 28, 1995, is incorporated herein by reference.
10.1 Agreement dated May 7, 1992, between the Company and Bill LeVine,
as filed with the SEC as Exhibit 10.1 to the Company's report on
Form 10-K for the fiscal year ended February 28, 1995, is
incorporated herein by reference.
10.2 Consulting Agreement dated March 1, 1992, between the Company and
Henry A. Johnson, as filed with the SEC as Exhibit 10.3 to the
Company's report on Form 10-K for the fiscal year ended February
28, 1995, is incorporated herein by reference .
10.3 Employment Agreement dated March 1, 1993 between the Company and
William A. Wilkerson, as filed with the SEC as Exhibit 10.4 to
the Company's report on Form 10-K for the fiscal year ended
February 28, 1995, is incorporated herein by reference.
10.4 Agreement dated January 1, 1993 between Business Cards Tomorrow,
filed with the SEC as Exhibit Inc. and Hence/EDP, as 10.5 to the
Company's report on Form 10-K for the fiscal year ended February
28, 1995, is incorporated herein by reference .
10.5 Agreement dated February 1, 1994 between the Company and Barber &
Bronson, Inc. as filed with the SEC as Exhibit 10.11 to the
Company's report on Form 10-K for the fiscal year ended February
28, 1995, is incorporated herein by reference.
10.6 Agreement dated May 24, 1993 between the Company and American
Equipment Leasing, Inc. as filed with the SEC as Exhibit 10.12 to
the Company's report on Form 10-K for the fiscal year ended
February 28, 1995, is incorporated herein by reference.
10.7 Line of Credit Agreement dated October 5, 1994 between the
Company and Intercontinental Bank, as filed with the SEC as
Exhibit 10.13 to the Company's report on Form 10-K for the year
ended February 28, 1995, is incorporated herein by reference.
10.8 Employment letter dated March 2, 1995 between the Company and A.
George Cann, as filed with the SEC as Exhibit 10.14 to the
Company's report on Form 10-K for the year ended February 28,
1995 is incorporated herein by reference.
10.9 Asset Purchase Agreement dated February 23, 1996, between BCT and
E.V. Antrim, Rosemary R. Antrim and William A. Wilkerson.
27 Financial Data Schedule
Page 25
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
BCT INTERNATIONAL, INC.
(Registrant)
DATE: MAY 23, 1996 By: WILLIAM WILKERSON
------------------------- ---------------------------
William Wilkerson
Chairman of the Board &
Chief Executive Officer
DATE: MAY 23, 1996 By: DONNA M. PAGANO-LEO
------------------------- ---------------------------
Donna M. Pagano-Leo
Vice President, Treasurer &
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf of
Registrant and in the capacities and on the dates indicated.
WILLIAM WILKERSON HENRY A. JOHNSON
- -------------------------------- --------------------------------
William Wilkerson Henry A. Johnson
Chairman of the Board & Director Director
Date: May 23, 1996 Date: May 23, 1996
ROBERT F. BOND RAYMOND J. KIERNAN
- -------------------------------- --------------------------------
Robert F. Bond Raymond J. Kiernan
Director Director
Date: May 23, 1996 Date: May 23, 1996
THOMAS J. CASSADY BILL LeVINE
- -------------------------------- --------------------------------
Thomas J. Cassady Bill LeVine
Director Director
Date: May 23, 1996 Date: May 23, 1996
Page 26
<PAGE>
BCT INTERNATIONAL, INC.
-----------------------
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
--------------------------------------------------------
<TABLE>
<CAPTION>
Financial Statements: Page Numbers
- -------------------- ------------
<S> <C>
Report of Independent Certified Public Accountants F-2
Consolidated Balance Sheets at February 29, 1996 and February 28, 1995 F-3
Consolidated Statements of Operations for the fiscal years ended February 29, 1996,
February 28, 1995 and February 28, 1994 F-4 to F-5
Consolidated Statements of Changes in Stockholders' Equity
for the fiscal years ended February 29, 1996,
February 28, 1995 and February 28, 1994 F-6 to F-8
Consolidated Statements of Cash Flows for the fiscal years ended February 29, 1996,
February 28, 1995 and February 28, 1994 F-9
Notes to Consolidated Financial Statements F-11 to F-22
Schedules:
- ---------
For the fiscal years ended February 29, 1996, February 28, 1995 and
February 28, 1994:
VIII Valuation and Qualifying Accounts F-23
X Supplementary Income Statement Information F-24
</TABLE>
All other schedules are omitted because they are not applicable or the required
information is shown in the consolidated financial statements or notes thereto.
F-1
Page 27
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
--------------------------------------------------
To the Board of Directors and Stockholders of BCT International, Inc.
In our opinion, the consolidated financial statements listed in the accompanying
index present fairly, in all material respects, the financial position of BCT
International, Inc. and its subsidiaries at February 29, 1996 and February 28,
1995, and the results of their operations and their cash flows for each of the
three years in the period ended February 29, 1996, in conformity with generally
accepted accounting principles. 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 of these statements in accordance with generally accepted auditing
standards which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Fort Lauderdale, Florida
May 23, 1996
F-2
Page 28
<PAGE>
<TABLE>
<CAPTION>
BCT INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS February 29, 1996 February 28, 1995
----------------- -----------------
000's omitted
<S> <C> <C>
ASSETS
------
Current Assets:
Cash and cash equivalents $ 923 $ 1,299
Short-term investments 50 1,071
Accounts and notes receivable, net of allowance for doubtful
accounts of $408 ($337 in 1995) and deferred interest of $0
($18 in 1995) 2,023 2,305
Receivables from employees 5 76
Inventory, net of reserve of $105 ($105 in 1995) 2,201 1,863
Assets held for sale, net 281 216
Prepaid expense and other current assets 58 25
Net deferred tax asset 211 88
------- -------
Total current assets 5,752 6,943
------- -------
Accounts and notes receivable, net of allowance for doubtful
accounts of $505 ($551 in 1995) 1,597 259
Property and equipment at cost, net of accumulated depreciation
and amortization of $500 ($313 in 1995) 1,014 640
Net deferred tax asset 1,604 1,466
Deposits and other assets 118 131
------- -------
4,333 2,496
Trademark, net of accumulated amortization of $29 ($24 in 1995) 165 170
Intangible assets, net of accumulated amortization of $283 ($113 in 1995) 488 409
------- -------
$10,738 $10,018
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current Liabilities:
Accounts payable $ 687 $ 928
Notes payable 64 162
Accrued liabilities 181 238
Deferred revenue 187 49
Accrued payroll --- 24
------- -------
Total current liabilities 1,119 1,401
Notes payable 5 48
------- -------
Total liabilities 1,124 1,449
------- -------
Commitments and contingencies (Note 10) --- ---
------- -------
Minority stockholder interest ( 20) ---
------- -------
Preferred stock, Series A, 12% cumulative, $1 par value,
mandatorily redeemable, 810 shares authorized, 260 shares
issued and outstanding 260 810
------- -------
Stockholders' equity:
Common stock, $.04 par value, authorized 25,000,
issued and outstanding 5,164 shares (4,785 shares in 1995) 207 191
Paid in capital 11,659 11,110
Accumulated deficit (1,991) (3,054)
------- -------
9,875 8,247
Less: Treasury stock, at cost, 226 shares (224 shares in 1995) (501) (488)
------- -------
Total stockholders' equity 9,374 7,759
------- -------
$10,738 $10,018
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
Page 29
<PAGE>
BCT INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the For the For the
Fiscal year ended Fiscal year ended Fiscal year ended
February 29, 1996 February 28, 1995 February 28, 1994
------------------ ----------------- -----------------
000's omitted
-----------------
<S> <C> <C> <C>
Revenues:
Continuing franchise fees
and commissions $ 4,820 $ 4,540 $ 4,004
Paper sales 8,241 7,077 6,886
Printing sales 918 508 514
Company Plants 1,054 760 651
Company Plants held for sale 1,251 92 ---
Sales of franchises 870 466 957
Interest and other income 436 130 109
------- ------- -------
17,590 13,573 13,121
------- ------- -------
Expenses:
Cost of paper sales 7,368 6,272 6,086
Cost of printing sales 428 385 290
Cost of Company Plants 1,563 1,030 802
Cost of Company Plants held for sale 1,734 90 ---
Cost of franchises sold 521 326 691
Selling, general and
administrative 4,450 3,905 3,487
Research and development costs 421 279 367
Depreciation and amortization 170 227 338
Interest 9 27 270
Interest - related party -- 1 22
Minority interest (20) -- --
------- ------- -------
16,644 12,542 12,353
------- ------- -------
Income before income taxes 946 1,031 768
Income tax benefit 195 124 93
------- ------- -------
Net income $ 1,141 $ 1,155 $ 861
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
Page 30
<PAGE>
BCT INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (continued)
<TABLE>
<CAPTION>
For the For the For the
Fiscal year ended Fiscal year ended Fiscal year ended
February 29, 1996 February 28, 1995 February 28, 1994
----------------- ----------------- -----------------
<S> <C> <C> <C>
000's omitted (except per share data)
- --------------------------------------
Primary:
Average number of
shares outstanding 4,721 3,410 2,765
Common stock equivalents 898 1,661 689
----- ----- -----
Totals 5,619 5,071 3,454
===== ===== =====
Fully diluted:
Average number of
shares outstanding 4,721 3,410 2,765
Common stock equivalents
and dilutive securities 1,291 3,184 2,312
----- ----- -----
Totals 6,012 6,594 5,077
===== ===== =====
Earnings per
- ------------
common share:
- ------------
Net income
Primary $ .19 $ .18 $ .17
===== ===== =====
Fully diluted $ .19 $ .18 $ .10
===== ===== =====
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-5
Page 31
<PAGE>
BCT INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock
------------------- Less: 000's omitted
Number of Par Paid In Accumulated Treasury -------------
Shares Value Capital Deficit Stock Total
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance March 1, 1993 2,958 $118 $6,323 $(4,745) $(449) $1,247
Cancellation of common stock for
notes receivable from employees (8) --- --- --- (25) (25)
Conversion of $175 of subordinated
convertible debentures with a
conversion rate of $3.00 58 2 173 --- --- 175
Tax benefit from exercise of employee
stock options and stock compensation
awards --- --- 76 --- --- 76
Issuance of warrants --- --- 53 --- --- 53
Dividend declared on Series A
Convertible Preferred Stock --- --- --- (97) --- (97)
Net income --- --- --- 861 --- 861
----- ---- ------ ------- ------ ------
Balance February 28, 1994 3,008 120 6,625 (3,981) (474) 2,290
Cancellation of common stock
for note receivable from an employee (5) --- --- --- (14) (14)
Cancellation of common stock
of an employee (59) (2) (15) --- --- (17)
Conversion of $252 of subordinated
convertible debentures with a
conversion rate of $3.00 84 3 249 --- --- 252
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
Page 32
<PAGE>
BCT INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (continued)
<TABLE>
<CAPTION>
000's omitted
-------------
Common Stock
---------------- Less:
Number of Par Paid In Accumulated Treasury
Shares Value Capital Deficit Stock Total
-------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Conversion of $150 of subordinated
convertible debentures with a
conversion rate $2.27 66 3 147 --- --- 150
Exercise of 10 stock options with an
exercise price of $1.25 10 --- 12 --- --- 12
Exercise of 6 warrants with an
exercise price of $2.92 3 --- 9 --- --- 9
Issuance of warrants --- --- 38 --- --- 38
Accretion of commission paid on
Series B convertible preferred stock --- --- (78) --- --- (78)
Conversion of 2,225 of Series B convertible
preferred stock to common stock
with a conversion rate of $1.25 989 40 2,185 --- --- 2,225
Exercise of 689 Series B convertible preferred stock
warrants with an exercise price of $3.00 689 27 2,039 --- --- 2,066
Cost associated with exercise of Series B
convertible preferred stock warrants --- --- (86) --- --- (86)
Redemption of 300 Series B convertible
preferred stock warrants with a
redemption price of $.05 --- --- (15) --- --- (15)
Net income --- --- --- 1,155 --- 1,155
Dividend declared on convertible
preferred stock --- --- --- (228) --- (228)
----- --- ----- ------- ---- -----
Balance February 28, 1995 4,785 191 11,110 (3,054) (488) 7,759
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-7
Page 33
<PAGE>
BCT INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (continued)
<TABLE>
<CAPTION>
000's omitted
-------------
Common Stock
------------------ Less:
Number of Par Paid In Accumulated Treasury
Shares Value Capital Deficit Stock Total
-----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Exercise of 9 warrants 7 1 13 -- (13) 1
Issuance of warrants -- -- 38 -- -- 38
Conversion of 550 shares of Series A
Preferred Stock at a conversion
ratio of $1.48 372 15 535 -- -- 550
Registration costs -- -- (37) -- -- (37)
Net income -- -- -- 1,141 -- 1,141
Dividend declared on
convertible preferred stock -- -- -- (78) -- (78)
----- ---- ------- ------ ----- ------
Balance February 29, 1996 5,164 $207 $11,659 (1,991) $(501) $9,374
===== ==== ======= ====== ===== ======
</TABLE>
F-8
Page 34
<PAGE>
BCT INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the For the For the
Fiscal year ended Fiscal year ended Fiscal year ended
February 29, 1996 February 28, 1995 February 28, 1994
----------------- ----------------- -----------------
000's omitted
-------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $1,141 $ 1,155 $ 861
Adjustments to reconcile net income
to net cash (used by) provided by
operating activities:
Income tax benefit (778) (594) (502)
Income tax expense 583 470 409
Depreciation and amortization 381 286 338
Cost assigned to warrants issued 38 38 53
Provision for doubtful accounts 435 352 196
Reserve for inventory -- 100 --
Minority interest (20) -- --
Changes in operating assets and liabilities
(Increase) in accounts and notes receivable (985) (355) (439)
(Increase) decrease in inventory (338) 4 (278)
(Increase) in assets held for sale (367) -- --
(Increase) decrease in prepaid expenses and
other assets (18) 20 (7)
(Decrease) increase in accounts payable (241) (308) 413
Increase (decrease) in other accrued liabilities 57 (78) (62)
------ -------- ------
Net cash (used by) provided by operating activities (112) 1,090 982
------ -------- ------
Cash flows from investing activities:
Maturity (purchase) of for short-term investments 1,021 (1,071) --
Capital expenditures for property and equipment (917) (261) (359)
Proceeds from disposition of equipment -- -- 4
Acquisition of Canadian Master Area Franchise
Agreement -- -- (120)
Acquisition of Company Plants (100) -- (50)
------ -------- ------
Net cash provided by (used for) investing activities 4 (1,332) (525)
------ -------- ------
Cash flows from financing activities:
Issuance of Series B Convertible Preferred Stock -- 1,300 738
Investment banker fee associated with Series B
Convertible Preferred Stock -- (65) --
Restricted cash -- -- (738)
Dividend payments on Series A Preferred Stock (81) (97) (97)
Dividend payments on Series B Preferred Stock -- (131) --
Exercise of Series B Convertible Preferred Stock -- 2,066 --
Investment banker fee associated with Series B warrants -- (86) --
Redemption of nonexercised Series B warrants -- (15) --
Exercise of stock options and warrants -- 21 --
Proceeds from borrowings -- -- 310
Repayments on borrowings (187) (352) (584)
Repayments on borrowings - related party -- -- (89)
Redemption of convertible subordinated debentures -- (1,180) --
------ -------- ------
Net cash (used for) provided by financing activities (268) 1,461 (460)
------ -------- ------
Net (decrease) increase in cash and cash equivalents (376) 1,219 (3)
Cash and cash equivalents at beginning of year 1,299 80 83
------ -------- ------
Cash and cash equivalents at end of year $ 923 $ 1,299 $ 80
====== ======== ======
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
F-9
Page 35
<PAGE>
BCT INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
000's omitted
-------------
<TABLE>
<CAPTION>
For the For the For the
Fiscal year ended Fiscal year ended Fiscal year ended
February 29, 1996 February 28, 1995 February 28, 1994
----------------- ----------------- -----------------
<S> <C> <C> <C>
Supplemental disclosures:
- -------------------------
Interest paid during the year $ 27 $ 85 $ 278
====== ====== ======
Income taxes paid during the year $ 71 $ 18 $ 17
====== ====== ======
</TABLE>
Noncash activities:
- ------------------
In fiscal 1996, $550 of convertible Series A preferred stock was converted
into 372 shares of common stock.
In fiscal 1996, the Company repossessed two existing franchisee plants and
acquired $50 in tangible assets in exchange for funds owed the Company.
In fiscal 1996, 9 warrants were exercised by the warrant holder for 3
shares of the Company's common stock.
In fiscal 1995, $252 and $150 of subordinated convertible debentures were
converted into 84 and 66 shares of common stock, respectively.
In fiscal 1995, a note receivable due from an employee in the amount of $17
was satisfied through the return of 5 shares of common stock of the Company
which collateralized this note.
In fiscal 1995, the Chairman of the Board exchanged $100 of convertible
debentures for 100 shares of Series B convertible preferred stock together with
44 additional warrants.
In fiscal 1995, 2,225 shares of Series B convertible preferred stock were
converted into 989 shares of the Company's common stock.
In fiscal 1994, 60 shares of Series A convertible preferred stock were
issued in exchange for assets purchased.
In fiscal 1994, $175 of convertible debentures were converted into 58
shares of common stock.
In fiscal 1994, notes receivable due from employees in the amount of $25
were satisfied through the cancellation of 8 shares of common stock of the
Company that collateralized these notes receivable. The value ascribed to the
common stock and additional paid in capital is $0 and $25, respectively.
In fiscal 1994, the Company issued debt of $300 relating to the acquisition
of BCT Delray and the Canadian Area Master Franchise Agreement.
In fiscal 1994, the Chairman of the Board exchanged $73 of notes payable
into Series B convertible preferred stock.
The accompanying notes are an integral part of these consolidated financial
statements.
F-10
Page 36
<PAGE>
BCT INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000's omitted)
NOTE 1: BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ------- -------------------------------------------------------
Business
BCT International Inc. (the Company), franchises wholesale thermography
printing Plants through its wholly-owned subsidiary, Business Cards Tomorrow,
Inc. (BCT), for which it receives initial franchise fees and continuing
royalties. At February 29, 1996, BCT, through its wholly-owned subsidiary BCT
Enterprises, Inc. and subsidiaries of BCT Enterprises, Inc., owns five Company
Plants of which three are held for sale. BCT's ownership interest in one of the
Company Plants is 70%. The Company also sells paper stock and catalogs to its
franchisees and the Company Plants. At February 29, 1996, the Company has 100
thermography printing Plants in operation, 95 of which are franchised. The total
number of Plants was 98 at February 28, 1995 and 97 at February 28, 1994.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company,
its wholly-owned subsidiaries, and its 70% owned subsidiary. All significant
intercompany transactions have been eliminated. The minority interest held by
third parties in the majority owned subsidiary is separately stated.
Management Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. The most significant estimates made by management in the
accompanying financial statements relate to accounts receivable allowances and
the tax valuation allowance. Actual results could differ from those estimates.
Short-Term Investments
Short-term interest bearing investments are those with maturities of less
than one year but greater than three months when purchased and are readily
convertible to cash. The short-term investments are classified as held to
maturity and are stated at amortized cost, which approximates fair value.
Fair Value of Financial Instruments
The carrying amount of cash and cash equivalents, short-term investments,
trade receivables, accounts payable, and notes payable approximate fair value as
of February 29, 1996.
Inventory
Inventory, consisting primarily of paper products, printing supplies and
catalogs for sale to its franchisees and the Company Plants, is stated at the
lower of cost (first in, first out method) or market.
Property and Equipment
Property and equipment is recorded at cost. Depreciation is provided on the
straight-line method over the estimated useful life of the asset. Leasehold
improvements are amortized over the lives of the respective leases or the
estimated useful lives of the improvements, whichever is shorter. Costs of major
additions and improvements are capitalized and expenditures for maintenance and
repairs which do not extend the life of the assets are expensed. Upon the sale
or disposition of property and equipment, the cost and related accumulated
depreciation is eliminated from the accounts, and any resultant gain or loss is
credited or charged to operations.
F-11
Page 37
<PAGE>
Repossessions of Franchises
Franchises are repossessed when management determines that the franchisees
are in default under their franchise agreements and are unable to properly
operate the business, meet their financial obligations, and their business
actions are detrimental to the franchise network. Prior to repossession, amounts
due to the Company are fully secured and fully reserved in the allowance for
doubtful accounts. Upon takeover, the Company owns all assets of the Plant in
forgiveness of the amounts due to it. The receivables owed to the Company are
written off through the allowance for doubtful accounts. All assets acquired and
the lease obligations assumed are recorded at fair value. The Company does not
value any of the existing revenue stream of the repossessed Plants. The Company
repossessed two Plants in 1996 (one in 1995).
Acquisitions of Plants
All acquisitions of Company Plants have been accounted for as purchases;
operations of the businesses acquired have been included in the accompanying
consolidated statements of operations from their respective dates of
acquisition. The excess of the purchase price over fair value of the net assets
acquired is included in goodwill. The Company acquired three Plants in 1996
(none in 1995).
Assets Held for Sale
Assets held for sale consist of the net assets of the Company Plants in
Marietta, Georgia; Newbury Park, California and Riverside, California, and are
carried at the lower of cost or market value.
Trademark
The trademark is amortized using the straight-line method over 40 years.
Intangible Assets
Intangible assets consist of the excess purchase price over the fair value
of the net assets acquired relating primarily to the acquisition of Company
Plants in fiscal 1994 and 1996, and the Canadian franchise rights in fiscal
1994. The amortization period for the Company Plants is 5 years and the Canadian
acquisition intangible asset is being amortized over 19 years, which represents
the remaining life of the franchise agreement acquired.
Impairment of Long-Lived Assets and Identifiable Intangibles
On March 1, 1995, the Company adopted Statement of Financial Accounting
Standards No. 121 (SFAS 121), "Accounting for the Impairment of Long Lived
Assets and for Long-Lived Assets To Be Disposed Of". Upon adoption, the goodwill
associated with the Delray Beach, Florida Company Plant was accelerated by $108
and fully amortized at February 29, 1996. The Company reviews long-lived assets,
identifiable intangibles and goodwill and will reserve for impairment whenever
events or changes in circumstances indicate the carrying amount of the assets
may not be fully recoverable.
F-12
Page 38
<PAGE>
Sales of Franchises
Revenue from the sales of individual franchises, including the initial
equipment package, is recognized upon the opening of the related franchise and
when all significant services or conditions relating to the sale have been
substantially performed. When these criteria have not been met, then the net
profit from the sale has been deferred and characterized as deferred revenue.
Revenue from the sale of an area franchise is recognized when all significant
services relating to the sale have been completed.
Continuing Franchise Royalties, Paper and Printing Revenues
Continuing franchise royalties and paper and printing revenues are
recognized monthly when earned. Collectibility of these revenues is assessed on
a regular basis. The allowance for doubtful accounts is established through a
provision for losses charged to selling, general and administrative expense.
Accounts receivable are charged off against the allowance for doubtful accounts
when management believes that collectibility is unlikely. The allowance is an
amount that management believes will be adequate to absorb possible losses in
existing accounts and notes receivable that may become uncollectible.
Accounting for Stock Based Compensation
In October 1995, the FASB issued Statement No. 123, (SFAS 123) "Accounting
and Disclosure of Stock-Based Compensation," which encourages but does not
require companies to recognize stock awards based on their fair value at the
date of grant. The Company currently follows, and expects to follow, the
provisions of APB No. 25 and related interpretations in accounting for its
employee stock options. Under APB No. 25, because the exercise price of the
Company's employee stock options equals the market price of the underlying stock
on the date of grant, no compensation expense is recognized. Although the
Company is permitted to continue to follow the provisions of APB No. 25 under
SFAS 123, certain pro forma disclosure will be required beginning in fiscal 1997
as if the Company had accounted for its stock options under the SFAS 123 fair
value method.
Research and Development
Research and development costs include costs for new product development
which are charged to operations as incurred.
Income Taxes
The Company utilizes an asset and liability approach to accounting for
income taxes that requires the recognition of deferred tax assets and
liabilities for the expected future tax consequences of events that have been
recognized in the Company's financial statements or tax returns. In estimating
future tax consequences, the Company generally considers all expected future
events other than enactments of changes in the tax law or rates.
Earnings Per Common Share
Primary earnings per common share are calculated by dividing net earnings
applicable to common stock by the weighted average number of common stock shares
outstanding and common stock equivalents which consist of stock options and
stock warrants. On a fully-diluted basis, net earnings, weighted average shares
outstanding and common stock equivalents are adjusted to assume the conversion
of convertible subordinated debentures and preferred stock from the date of
issue.
Cash and Cash Equivalents
For the purposes of reporting cash flows, cash and cash equivalents include
investments with maturities of ninety days or less at purchase date.
Presentation and Reclassification
All dollar and share amounts, except amounts related to per share data, are
expressed in thousands of dollars. Certain items in the 1995 and 1994
consolidated financial statements have been reclassified for comparative
purposes.
F-13
Page 39
<PAGE>
NOTE 2: SHORT-TERM INVESTMENTS
- ------ ----------------------
Short term investments consist of the following:
<TABLE>
<CAPTION>
February 29, 1996 February 28, 1995
---------------------- --------------------
Carrying Carying
Value Market Value Market
<S> <C> <C> <C> <C>
U.S. Treasury Bill, face value
of $50, due May 2, 1996 $49 $49 $ -- $ --
U.S. Treasury Bill, face value
of $75, due May 25, 1995 -- -- 74 74
U.S. Treasury Bill, face value
of $1,000, due June 1, 1995 -- -- 985 985
--- --- ------ ------
49 49 1,059 1,059
Accrued interest 1 1 12 12
--- --- ------ ------
$50 $50 $1,071 $1,071
=== === ====== ======
</TABLE>
NOTE 3: ACCOUNTS AND NOTES RECEIVABLE
- ------- -----------------------------
Accounts and notes receivable consist of the following:
<TABLE>
<CAPTION>
February 29, February 28,
1996 1995
------------- -------------
<S> <C> <C>
Continuing franchise fees
receivable $ 902 $1,231
Paper sales receivable
from franchisees 958 1,147
Notes receivable from sale of
franchises, interest at 8%
to 12%, due in monthly
installments through 2006 773 148
Notes receivable due from franchisees,
interest at 8% to 14%, payable
in monthly installments through
2005 1,380 605
Company Plant accounts receivable
from customers 187 86
Miscellaneous 333 253
------- ------
4,533 3,470
Less - allowance for doubtful accounts (913) (888)
and deferred interest -- (18)
------- ------
3,620 2,564
Less - amount not expected to
be collected within one year,
net of $505 allowance
for doubtful accounts
($551 in 1995) (1,597) (259)
------- ------
$ 2,023 $2,305
======= ======
</TABLE>
F-14
Page 40
<PAGE>
In the normal course of business, to meet the financing needs of its
franchisees, the Company extends credit to its franchisees throughout the United
States and Canada. Although the Company has a diversified receivable portfolio,
a substantial portion of the franchisees' ability to honor their commitments to
the Company is reliant upon the economic stability of the market in the
franchisee's particular geographic area. The Company's exposure to loss in the
event of nonperformance by the franchisees is represented by the contractual
amount of the notes and accounts receivables and the franchise equipment leases
guaranteed by the Company (see Note 10). The Company controls the credit risk of
its receivables through credit approvals, limits and monitoring procedures. The
Company may require collateral or other security to support the receivables with
credit risk.
At February 29, 1996, approximately $416 ($170 in 1995) of accounts
receivable, although currently due, are classified into long term accounts and
notes receivable, based upon historic payment performance of the franchisees. A
significant portion of the allowance for doubtful accounts relates to these
accounts and notes receivable. Amounts included in long term accounts and notes
receivable include the following contractual payment terms: 1998 - $366, 1999-
$230, 2000 and thereafter - $1,090.
At February 29, 1996, $433 of notes receivable, with an 8% interest rate
per annum, related to the purchase of the Honolulu, Hawaii Company Plant by
South Pacific Wholesale Printers, Inc. The Chairman of the Board of the Company
owns 50% of South Pacific Wholesale Printers, Inc.
Bad debt expense for the years ended February 29, 1996, February 28, 1995
and February 28, 1994, was approximately $504, $352 and $196, respectively.
Interest income is recognized on a cash basis for those accounts and notes
receivable with specific reserves. Interest income for all other accounts and
notes receivable are recognized on an accrual basis.
NOTE 4: ACQUISITIONS
- ------- ------------
On October 9, 1995, the Company acquired certain assets and liabilities
from a franchisee plant located in Riverside, California for $335. This
acquisition has been accounted for under the purchase method of accounting and
accordingly, the purchase price has been allocated to the assets acquired
(approximately $115) based on the estimated fair values at the date of
acquisition. The purchase price associated with the acquisition exceeded the net
assets acquired by approximately $220, which was recorded as an intangible
asset. The operating results associated with this business acquisition are
included in the Company's consolidated results of operations from October 9,
1995.
On November 1, 1995 the Company entered into an agreement with a franchisee
plant located in Louisville, Kentucky, in which it acquired 70% of all the
assets and related liabilities for $276. The original owners of the franchise
plant are maintaining a 30% minority interest. This acquisition has been
accounted for under the purchase method of accounting and accordingly, the
purchase price has been allocated to the assets acquired based on the estimated
fair values at the date of acquisition. The purchase price associated with the
acquisition exceeded the net assets acquired by approximately $276, which was
recorded as an intangible asset. The operating results associated with this
business acquisition are included in the Company's consolidated results of
operations from November 1, 1995.
On December 1, 1995, the Company acquired certain assets from United
Impressions, Inc. for $365 relating to its store operations. This acquisition
has been accounted for under the purchase method of accounting and accordingly,
the purchase price has been allocated to the assets acquired (approximately
$158) based on the estimated fair values at the date of acquisition. The
purchase price associated with the acquisition exceeded the net assets acquired
by approximately $207, which was recorded as an intangible asset. The operating
results associated with this business acquisition are included in the Company's
consolidated results of operations from December 1, 1995.
The pro forma unaudited results of operations for the years ended February
29, 1996 and February 28, 1995, assuming these acquisitions had been consummated
as of March 1, 1994 are as follows:
<TABLE>
<CAPTION>
February 29, 1996 February 28, 1995
----------------- -----------------
<S> <C> <C>
Revenues and other income $18,647 $15,267
Net income $ 949 $ 932
Earnings per common share $ .17 $ .18
======= =======
</TABLE>
F-15
Page 41
<PAGE>
NOTE 5: PROPERTY AND EQUIPMENT
- ------- ----------------------
Major classifications of property and equipment are as follows:
<TABLE>
<CAPTION>
Estimated
useful
February 29, February 28, lives
1996 1995 (in years)
------------- ------------- ----------
<S> <C> <C> <C>
Leasehold improvements $ 78 $ 53 5 - 32
Machinery and equipment 450 181 3 - 20
Dies and artwork 130 118 25
Videos 37 37 5
Furniture, fixtures and other
equipment 160 104 5 - 10
Computers 606 407 5
Franchisee software 48 48 3
Auto 5 5 5
------ -----
1,514 953
Less - accumulated depreciation
and amortization (500) (313)
------ -----
$1,014 $ 640
====== =====
</TABLE>
NOTE 6: NOTES PAYABLE
- ------- -------------
Notes payable consist of the following:
<TABLE>
<CAPTION>
February 29, February 28,
1996 1995
------------ ------------
<S> <C> <C>
Note payable to prior owner of Company Plant secured
by equipment, monthly principal and interest payments
of $4, interest at 8% per annum, due May 28, 1998 $ -- $ 131
Unsecured amount due to Continental Stamps West,
interest imputed at 13%, principal and interest due
in monthly installments of $4 through
February 1997 42 79
Note payable to prior owner of Company Plant
assumed in acquisition, monthly principal
and interest due in monthly installments
of $2 through May 1997 27 --
----- -----
69 210
Less - amount due after one year (5) (162)
----- -----
$ 64 $ 48
===== =====
</TABLE>
F-16
Page 42
<PAGE>
Scheduled maturities after February 29, 1996 for notes payable are as
follows:
Fiscal Note
Year Payable
------ -------
1997 $ 64
1998 $ 5
-----
$ 69
=====
NOTE 7: PREFERRED STOCK
- ------- ----------------
Effective May 1992 750 shares of Series A Convertible Preferred Stock,
$1.00 par value, were authorized and issued by the Company. In January 1994,
60 additional shares of Series A preferred stock were authorized and issued,
bringing the total to 810 shares. Dividends on preferred stock are cumulative
and accrue from the date of original issue at a 12% rate per annum, payable
quarterly on the first day of each January, April, July and October. Dividends
in arrears are non-interest bearing. Dividends must either be fully paid or
declared and aggregated for payment prior to the declaration of dividends on the
common shares. The Series A preferred stock is non-voting except as it relates
to any action affecting the terms of the priority of the preferred stock.
Upon the event of a voluntary or involuntary liquidation, the holders of
the Series A preferred stock will be entitled to receive $1.00 per share plus
all accrued and unpaid dividends. The Series A preferred stock is convertible
into common stock at a ratio of 1.48 shares of preferred stock for each share of
common stock. The Company has the option to require conversion of the preferred
stock beginning two years after the date of issuance if the common stock closing
price or last reported sales price is at least $7.00 per share for 10
consecutive business days. If the preferred stock is not converted within five
years of issuance, the Company must redeem the stock at $1.00 per share plus all
accrued and unpaid dividends.
On October 1, 1995, 550 shares of Series A preferred stock were voluntarily
converted, at a ratio of 1.48 shares, into 372 shares of common stock. At
February 29, 1996, 260 shares of Series A preferred stock remain outstanding.
Effective February 17, 1994, 2,500 shares of Series B convertible preferred
stock, $1.00 par value, were authorized by the Company for sale in a private
placement offering at a $1.00 price per share. A total of 2,225 shares were sold
in the offering. The net proceeds of the offering, which totalled $1,973, were
used by the Company (i) to pay off the outstanding 11% convertible subordinated
debentures due on March 31, 1994 of $1,180 and (ii) for general working capital.
Dividends on the Series B convertible preferred stock were cumulative and
accrued from the date of original issue at a 9% rate per annum, payable
quarterly on the first day of each January, April, July and October. Total
Series B dividends declared and paid to holders were $129 in fiscal 1995. The
Company exercised its right to require conversion of the Series B preferred
stock into common stock on November 1, 1994. As a result, the Series B preferred
stock totalling 2,225 shares was converted into 989 shares of the Company's
common stock.
The holders of the Series B convertible preferred stock received one
warrant for each 2.25 shares of preferred stock purchased, entitling the holder
to purchase one share of the Company's common stock for three years from the
date of issuance at an exercise price of $3.00 per share. Contemporaneous with
the Company's forced conversion of the Series B preferred stock into common
stock, the holders were required to either exercise their Series B Warrants or
have them redeemed by the Company. Effective December 8, 1994, 689 warrants were
exercised at $3.00 per warrant and the Company issued 689 shares of its common
stock, yielding gross proceeds to the Company of $2,067. A commission of $86 was
paid to an investment banker in connection with the exercise of these warrants
and was offset against additional paid in capital. The Company redeemed the 300
remaining Series B warrants at a price of $.05 each or $15. The original
commission of $78 paid in connection with the sale of the Series B preferred
stock was fully accreted to additional paid in capital upon the conversion of
Series B preferred stock into common stock.
F-17
Page 43
<PAGE>
NOTE 8: STOCKHOLDERS' EQUITY
- ------- --------------------
Stock Options
- -------------
Stock options outstanding, exercisable and exercise price for the three years
ended February 29, 1996 are as follows:
<TABLE>
<CAPTION>
Options
Outstanding Price Range Aggregate
----------- --------------- ---------
<S> <C> <C> <C>
At March 1, 1993 900 $1.25 to $3.50 $1,674
Options granted 115 $2.38 274
Options exercised -- -- --
Options cancelled (9) $1.25 to $1.48 (12)
----- -------------- ------
At February 28, 1994 1,006 $1.25 to $3.50 1,936
Options granted 215 $3.38 727
Options exercised (10) $1.25 (12)
Options cancelled (31) $1.25 to $2.38 (53)
Options expired (16) $3.00 (48)
----- -------------- ------
At February 28, 1995 1,164 $1.25 to $3.50 2,550
Options granted 65 $4.94 to $5.00 323
Options exercised -- -- --
Options cancelled (16) $2.38 to $5.00 (64)
Options expired -- -- --
----- -------------- ------
At February 29, 1996 1,213 $1.25 to $5.00 $2,809
===== ============== ======
Options exercisable
at February 29, 1996 1,131 $1.25 to $5.00 $2,491
===== ============== ======
</TABLE>
F-18
Page 44
<PAGE>
Warrants
- --------
As of February 29, 1996 and February 28, 1995, there were respectively,
outstanding warrants for the purchase of 721 and 694 shares of common stock,
respectively, 37 of which are held by the Chairman of the Board. During fiscal
1996, 9 warrants were exercised and paid for in-kind 22 warrants expired and
58 warrants were issued. The exercise price and the dates are as follows:
<TABLE>
<CAPTION>
Title of Issue Aggregate Amount Date from which Price at which
Called for of Securities Called Warrants Last Warrants
by Warrants for by Warrants are Exercisable Exercise Date are Exercisable
- -------------- -------------------- ----------------- ----------------- ---------------
<S> <C> <C> <C> <C>
Issued during 1985 merger 38 September 8, 1986 September 7, 1996 $1.25
Converted Subordinated
Debentures 175 August 30, 1991 - March 31, 1997 $3.50 to $4.46
March 31, 1994
Issued to Investment
Banker 208 May 31, 1993 May 31, 1998 $2.25
Issued to Investment
Banker 300 February 1, 1994 February 1, 1999 $2.00 to $4.00
---
Warrants outstanding 721
===
</TABLE>
As of February 28, 1995, 289 warrants issued in conjunction with
convertible subordinated debentures had expired and 6 of these warrants were
exercised yielding $9. The 989 warrants issued in conjunction with the Series B
convertible preferred stock were called for exercise at $3.00 per share or
redemption at $.05 each by the Company on November 1, 1994. Of the 989
warrants, 689 were exercised yielding gross proceeds of $2,066, and the
remaining 300 were redeemed by the Company for $15.
F-19
Page 45
<PAGE>
NOTE 9: INCOME TAXES
- ------- ------------
The components of the provision for (benefit from) income taxes for the
years ended February 28, 1996, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
-------- --------- --------
<S> <C> <C> <C>
Current Provision:
Federal $ 32 $ 26 $ 16
State 52 -- 20
------ ------ ------
Total current 84 26 36
Deferred provision (benefit) (279) (150) (205)
Tax benefit from exercise of employee stock
options and stock compensation awards
credited to paid in capital -- -- 76
------ ------ ------
Total (benefit) $ (195) $ (124) $ (93)
====== ====== ======
</TABLE>
The Company's net deferred tax asset is comprised of the following:
<TABLE>
<CAPTION>
February 29, 1996 February 28, 1995 February 28, 1994
----------------- ----------------- -----------------
<S> <C> <C> <C>
Deferred Tax Asset - Current:
Bad debt reserve $ 159 $ 132 $ 175
Other 41 44 27
Capitalization of inventory cost 102 -- --
-------- -------- --------
Total Deferred Tax Asset 302 176 202
-------- -------- --------
Valuation Allowance (91) (88) (121)
-------- -------- --------
Net Deferred Tax Asset - Current $ 211 $ 88 $ 81
======== ======== ========
Deferred Tax Asset - Non-Current:
Bad debt reserve $ 193 $ 215 $ 151
Net operating loss carryovers 2,052 2,747 3,213
Other 135 34 22
-------- -------- --------
Total Deferred Tax Asset 2,380 2,996 3,386
-------- -------- --------
Valuation Allowance (685) (1,466) (2,010)
-------- -------- --------
Deferred Tax Liabilities - Non-Current:
Fixed assets (91) (64) (36)
-------- -------- --------
Total Deferred Tax Liability (91) (64) (36)
-------- -------- --------
Net Deferred Tax Asset - Non-Current $ 1,604 $ 1,466 $ 1,340
======== ======== ========
Net Deferred Tax Asset - Total $ 1,815 $ 1,554 $ 1,421
======== ======== ========
</TABLE>
F-20
Page 46
<PAGE>
The net change in the valuation allowance for the deferred tax asset was a
decrease of $778, $577 and $1,706 for the fiscal years ended February 29, 1996,
February 28, 1995 and 1994, respectively. For fiscal year ended February 28,
1994, $288, of the reduction in the valuation allowance related to the
utilization of acquired net operating loss carryforwards which reduced goodwill.
The remaining reduction in the valuation allowance of $1,418 relates to
management's change in judgment about the realizability of the related deferred
tax asset in future years. Of this amount, $928 related to the valuation
allowance for acquired net operating losses which reduced goodwill and the
remaining decrease of $490 in the valuation allowance reduced tax expense. For
fiscal year ended February 29, 1996 and February 28, 1995, the decrease of $778
and $577 in the valuation allowance reduced tax expense of $583 and $577,
respectively.
Net operating loss carryforwards for Federal income tax purposes total
approximately $5,452 at February 29, 1996. The net operating loss carryforward
includes $540 with certain limitations. Net operating losses expire as follows:
<TABLE>
<CAPTION>
Year of
Expiration Amount
---------- ------
<S> <C>
1998 $ 7
2000 11
2001 1,102
2002 1,327
2003 294
2005 1,721
2006 962
2007 12
2008 16
------
$5,452
======
</TABLE>
For Federal income tax purposes, the Company has approximately $19 of
general business credit carryovers which expire at various dates through 2001.
If certain substantial changes in the Company's ownership should occur,
there would be an annual limitation on the amount of carryforward which could be
utilized.
The difference between the statutory and effective tax rates are as
follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
Amount Rate Amount Rate Amount Rate
------ ---- ------ ---- ------ ----
<S> <C> <C> <C> <C> <C> <C>
Tax at statutory rate $ 321 34% $ 351 34% $ 269 35%
Non-deductible amortization
of purchase price over
fair value of net assets
acquired -- -- 37 3 65 8
Other 178 19 (8) (1) (4) (1)
State income tax, net of
federal benefit 52 6 47 5 51 7
Alternative minimum tax 32 3 26 3 16 2
Decrease in Federal and
state valuation allowance (778) (82) (577) (56) (490) (62)
------ ---- ------ ---- ------ ----
$(195) (20)% $(124) (12)% $ (93) (11)%
====== ==== ====== ==== ====== ====
</TABLE>
F-21
Page 47
<PAGE>
NOTE 10: COMMITMENTS AND CONTINGENCIES
- -------- -----------------------------
The Company is a party to various litigation matters, including a matter
with a prior officer of the Company. In the opinion of management, potential
losses, if any, on the various matters will not have a material impact on the
financial condition or results of operation of the Company.
The Company's corporate offices and office equipment are leased under
noncancellable lease agreements. The leases initially expire at various dates
through 2000, and contain options for renewals. There are provisions in the
leases for rent increases based on cost of living increases under certain
conditions.
During the Company's operation of the Hawaii Company Plant, a lease was
executed with a lessor for its facilities. Upon sale of the Hawaii Plant, the
Company entered into a sublease agreement with its new franchisee. The
commitment of the Company is through May 1997 with minimum monthly payments of
$5. As part of the terms of the Hawaii Company Plant sale, the buyer is
obligated to reimburse the Company in full for the monthly lease cost for the
lease term.
The following are the approximate minimum annual noncancellable rentals to
be paid under the provisions of the leases:
<TABLE>
<CAPTION>
Fiscal Year Lease Commitments
----------- -----------------
<S> <C>
1997 $321
1998 197
1999 123
2000 119
2001 53
----
$813
====
</TABLE>
Rental expense amounted to the following approximate amounts for the
corresponding periods:
<TABLE>
<CAPTION>
For the year ended Amount
------------------ ------
<S> <C>
February 29, 1996 $295
February 28, 1995 $193
February 28, 1994 $175
</TABLE>
At February 29, 1996, the Company has guaranteed the payment of equipment
lease obligations for certain of its franchisees for an aggregate amount of
approximately $765.
In March 1993, the Company entered into an employment agreement with the
Chairman of the Board. The term of the employment contract is seven years. The
agreement calls for minimum annual salary amounts during the term of this
contract as follows:
<TABLE>
<CAPTION>
Year Ending February 28, Amount
----------------------- ------
<S> <C>
1997 $300
1998 $300
1999 $300
2000 $300
</TABLE>
In the event that the Chairman of the Board is substantially incapacitated
during the term of his employment for a period of 90 days in the aggregate
during any twelve month period, the Company has the right to terminate his
employment. Upon termination, the Chairman of the Board will receive one-half of
his salary in effect on the date of termination for the remaining term of the
agreement. Additionally, in the event of the Chairman's death during his
employment, his designated beneficiary or his estate shall be paid one-half of
his salary in effect on the date of his death for the remaining term of the
agreement.
In March 1995 the Company entered into an employment contract with the
President of BCT. The President may be terminated by the Company at will;
however, under his agreement with the Company, if he is terminated during the
first three years of his employment, he is entitled to receive six months of
severance pay. The President was granted 40 options of which 10 immediately
vested and the remainder are scheduled to vest over a three year period ending
in fiscal 1999.
F-22
Page 48
<PAGE>
BCT INTERNATIONAL, INC.
-----------------------
000's omitted SCHEDULE VIII
- -------------
VALUATION AND QUALIFYING ACCOUNTS
---------------------------------
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
Additions
-----------------
Balance at Charged to Balance at
beginning costs and end of
of year expenses Other Deductions year
--------- ---------- ----- ---------- ----------
<S> <C> <C> <C> <C> <C>
For the year ended February 29, 1996
Allowance for doubtful accounts $ 888 $504 $ -- $ (479)(1) $ 913
------ ---- ---- ------- ------
Deferred tax assets valuation allowance $1,554 $ -- -- $ (778) $ 776(2)
------ ---- ---- ------- ------
For the year ended February 28, 1995
Allowance for doubtful accounts $ 836 $352 $ -- $ (300)(1) $ 888
------ ---- ---- ------- ------
Deferred tax assets valuation allowance $2,131 $ -- $ -- $ (577) $1,554(2)
------ ---- ---- ------- ------
For the year ended February 28, 1994
Allowance for doubtful accounts $ 647 $196 $ -- $ (7)(1) $ 836
------ ---- ---- ------- ------
Deferred tax assets valuation allowance $3,837 $ -- $ -- $(1,706)(3) $2,131(2)
------ ---- ---- ------- ------
</TABLE>
Allowance for doubtful accounts at February 29, 1996 of $913 is comprised of
$408 related to current receivables and $505 to long-term receivables.
(1) Write off of uncollectible receivables.
(2) A deferred tax asset value.
(3) The excess of purchase price over fair value of net assets acquired was
reduced by $1,216 of the valuation allowance, since this reduction
represents the utilization of the acquired operating loss carryforwards.
F-23
Page 49
<PAGE>
SCHEDULE X
BCT INTERNATIONAL, INC.
-----------------------
000's omitted
-------------
SUPPLEMENTARY INCOME STATEMENT INFORMATION
------------------------------------------
<TABLE>
<CAPTION>
COLUMN A
- --------
Item February 29, 1996 February 28, 1995 February 28, 1994
---- ----------------- ----------------- -----------------
<S> <C> <C> <C>
Advertising Costs $210 $156 $162
==== ==== ====
Amortization of excess
cost over value of net
assets acquired $ -- $108 $193
==== ==== ====
Amortization of
intangible assets $182 $ 68 $ 22
==== ==== ====
</TABLE>
F-24
Page 50
<PAGE>
Exhibit 10.9
<PAGE>
ASSET PURCHASE AGREEMENT
------------------------
THIS ASSET PURCHASE AGREEMENT (the "AGREEMENT") made and entered into this
23rd day of February, 1996, by and between BUSINESS CARDS TOMORROW, INC., (BCT),
a Florida Corporation, hereinafter referred to as the "SELLER", and E. V.
ANTRIM, ROSEMARY R. ANTRIM and WILLIAM A. WILKERSON, jointly & severally,
hereinafter referred to as the "BUYERS".
W I T N E S S E T H :
That in consideration of the mutual covenants, conditions and agreements
herein contained, the Parties do hereby agree as follows:
1. ASSETS TO BE PURCHASED. The SELLER agrees to sell and the BUYERS agree
to buy, upon the terms and conditions hereinafter set forth, the following
described assets (the "ASSETS") of the Business owned and operated by SELLER
known as BCT, located at 801 Moowaa Street, Building A, Honolulu, Hawaii, 96817,
to-wit:
Certain leasehold improvements, existing Lease Agreement, furniture,
fixtures, transferable licenses, equipment, trade name, customer list,
accounts receivable and goodwill of the going Business known as BCT
HAWAII (#3045), located at 801 Moowaa Street, Building A, Honolulu,
Hawaii, 96817. A list of said furniture, fixtures, and equipment is
attached hereto as Exhibit "A", and the allocation of the Purchase
Price between the aforedescribed ASSETS shall be as follows:
A. Furnishings, fixtures
and equipment $145,000.00
B. Goodwill, trade name
and customer list $138,000.00
C. Inventory $ 25,000.00
<PAGE>
D. Accounts Receivable $ 50,000.00
E. Leasehold and leasehold
improvements $ 42,000.00
TOTAL $400,000.00
===========
The purchase price will be adjusted at closing to reflect the actual
value of the inventory and accounts receivable.
2. PURCHASE PRICE: The Purchase Price for the sale, conveyance and
delivery of the ASSETS described in paragraph 1 shall be Four Hundred Thousand
Dollars ($400,000.00), and payment shall be as follows:
A. Upon the CLOSING of this transaction, BUYERS shall execute and
deliver a Promissory Note ("NOTE 1") in favor of SELLER in the principal sum of
Three Hundred, Twenty-Five Thousand Dollars ($325,000.00), bearing interest at
the rate of eight percent (8%) per annum, with principal and interest being
payable in equal monthly installments with a fifteen (15) year amortization and
a ten (10) year balloon commencing one (1) month from the date of CLOSING.(*)
NOTE 1 shall be secured by a Security Agreement as provided in paragraph 4
below.
3. INVENTORY AND ACCOUNTS RECEIVABLE. At CLOSING, BUYERS shall purchase
SELLER's paper stock inventory, supplies, inventory and accounts receivable,
which shall be taken and verified by the Parties on the date prior to CLOSING.
BUYERS shall execute and deliver a Promissory Note ("NOTE 2") to SELLER for the
SELLER's cost of the paper stock inventory, supplies and accounts receivable as
shown on SELLER's books. The agreed value of SELLER's accounts receivable shall
be determined as follows:
A. 100% of accounts billed less than 45 days.
B. 90% of accounts billed 45 days or more but
less than 90 days.
C. 80% of accounts billed 60 days or more but
<PAGE>
less than 90 days.
D. 0% of accounts billed 90 days or more.
NOTE 2 will bear interest at the rate of eight percent (8%) per annum, with
principal and interest being payable in equal monthly installments over five (5)
years commencing one (1) month from the date of CLOSING and shall be secured by
a Security Agreement as provided in paragraph 4 below.
4. SECURITY DOCUMENTS. At CLOSING, NOTE 1 and NOTE 2 will be secured by
the following described documents:
A. Security Agreement (the "SECURITY AGREEMENT").
B. Collateral Assignment of Lease Agreement (the "COLLATERAL
ASSIGNMENT").
C. Uniform Commercial Code Financing Statement (the "UCC-1").
The aforedescribed Agreements (the 'SECURITY DOCUMENTS") provide
certain collateral for the payment of NOTE 1 and Note 2 to SELLER as hereinabove
specifically described. The SECURITY DOCUMENTS and all related documents
described or contemplated therein as determined to be appropriate by counsel for
SELLER, shall encumber the ASSETS being transferred herein during such time any
amounts remain outstanding on NOTE 1 or NOTE 2. The SECURITY DOCUMENTS shall
prohibit the transfer of the ASSETS by BUYERS during the term thereof, and shall
not be assumable by any third party. The aforedescribed SECURITY DOCUMENTS shall
contain such other additional terms and provisions as shall be approved by
counsel for SELLER.
5. CONVEYANCE OF ASSETS. Upon the CLOSING of this transaction as
hereinafter described, SELLER shall deliver to BUYERS all such bills of sale,
endorsements, assignments, acknowledgments, certificates and other good and
sufficient instruments of transfer as shall be effective to vest in BUYERS
<PAGE>
good title to the ASSETS and rights described in Paragraph 1 above as approved
by counsel for BUYERS. In addition, at CLOSING, BUYERS shall execute and deliver
to SELLER the standard form of Franchise Agreement and related documents (the
"FRANCHISE AGREEMENT") currently in use by SELLER in connection with its
BUSINESS CARDS TOMORROW franchise operations. BUYERS acknowledge having
previously received SELLER's Uniform Franchise Offering Circular and hereby
consent to and approve the FRANCHISE AGREEMENT.
6. ASSUMPTION OF TRADE DEBT. Except as otherwise provided herein, it is
hereby agreed between the Parties that BUYERS are not assuming any trade
obligations or non-trade obligations of SELLER which exist at the time of the
CLOSING of this transaction. All accounts payable as shall accrue before the
effective date hereof shall belong to, and be the responsibility of, SELLER. The
Parties acknowledge that certain adjustments of expense must be made between
them subsequent to CLOSING, for items of income and expense which will have
accrued as of the effective date, but not able to be reduced to a liquidated sum
by the date of CLOSING. The Parties agree to adjust such items of income and
expense between themselves within thirty (30) days subsequent to CLOSING.
7. REPRESENTATIONS BY SELLER. The SELLER makes the following
representations and warranties to the BUYERS, all of which shall survive the
CLOSING:
A. That SELLER is a corporation duly organized and existing in good
standing under the laws of the State of Florida. The Board of
Directors of said corporation have approved the sale described
hereunder and have authorized the officers executing this AGREEMENT
to do so. SELLER agrees to deliver a Corporate Resolution to BUYERS
at closing reflecting approval by the Board of Directors of this
transaction.
<PAGE>
B. That SELLER is the owner of, and has good and marketable title to,
the ASSETS described in Paragraph 1 above, free and clear of all
debts and encumbrances, except as otherwise reflected in this
AGREEMENT.
C. That SELLER has entered into no contract materially restricting the
ASSETS described in Paragraph 1 above.
D. That there are no judgments, liens, actions or proceedings pending
against SELLER which adversely affect the ASSETS and that SELLER
has complied with all laws, rules regulations imposed by and
governmental authority or otherwise relating to the ASSETS.
8. REPRESENTATIONS BY BUYERS: The BUYERS make the following
representations and warranties to the SELLER, all of which shall survive the
CLOSING:
A. BUYERS have all requisite power and authority to own all of their
properties and to carry on their business as contemplated by this
AGREEMENT and the BUYERS have unrestricted power and authority to
execute and deliver this AGREEMENT and to perform the transactions
contemplated hereby.
B. This AGREEMENT and all other agreements, documents and instruments
executed by the BUYERS pursuant hereto are and will be the legal,
valid and binding obligations of the BUYERS enforceable in
accordance with their terms.
C. The execution and delivery of this AGREEMENT do not, and the
consummation of the transactions contemplated hereby will not
constitute a violation of, and are not, and will not be, a default
under or conflict with the terms of any contract, lease, indenture,
agreement, order, judgment or decree to which BUYERS are a
<PAGE>
party or by which they are bound or to which any of their assets
are subject and do not, and will not, violate or constitute a
default under any statute, rule, regulation, order or ordinance of
any governmental, judicial or arbitral body.
D. There is no suit, action or legal, administrative, arbitration or
other proceeding of any nature pending, or, to the knowledge of the
BUYERS, threatened, against them which might affect the legality or
validity of this AGREEMENT, or the transactions contemplated
hereby, and there is no factual basis known to BUYERS for any such
suit, action or proceeding.
9. UNIFORM COMMERCIAL CODE BULK TRANSFER COMPLIANCE. The Parties
acknowledge that this transaction shall be closed in accordance with any
applicable Uniform Commercial Code (the "U.C.C.") provisions in effect in the
State of Hawaii, and the Parties agree to take all such action as may be
required to protect BUYERS in compliance with the U.C.C.
10. CLOSING. The closing and transfer of the title of the ASSETS being
purchased herein (the "CLOSING") shall take place on or before February 29, 1996
at the offices of SELLER, 3000 N.E. 30th Place, 5th Floor, Fort Lauderdale,
Florida 33306. Each of the Parties will execute and deliver at the CLOSING, or
as soon thereafter as reasonably practicable, all instruments reasonably
required to carry out the terms of this AGREEMENT, and all bills of sale,
endorsements, assignments, promissory notes, SECURITY DOCUMENTS, UCC-1 financing
statements and other good and sufficient instruments to effectively transfer to
the BUYERS full title to the ASSETS and rights as described herein, and to
secure the lien of SELLER therein. The Parties shall provide the customary and
necessary corporate resolutions and approvals, properly executed,
<PAGE>
authorizing this transaction. Possession of the ASSETS described in Paragraph 1
above shall be delivered to BUYERS at CLOSING.
11. PRORATIONS. The Parties agree that upon the CLOSING of this
transaction, all rents, security deposits, insurance policies, utilities,
utility deposits, and any and all items of income and expense, of a proratable
nature, shall be prorated, and a schedule of same included in the Closing
Statement.
12. FURTHER ASSURANCES. The parties hereby agree that at any time, and
from time to time after the CLOSING, at the request of the other party, and
without further consideration, each party will execute, acknowledge and deliver
such other instruments of conveyance, transfer or which may be required to
establish liens, and take such other action as the other party reasonably might
require to more effectively convey to, transfer to and vest in the other party,
any or all of the ASSETS, properties, liens, rights and goodwill being conveyed
and delivered hereunder.
13. CONDUCT OF BUSINESS PRIOR TO CLOSING. SELLER hereby agrees that,
subsequent to the execution of this AGREEMENT and prior to CLOSING, except as
otherwise consented to by BUYERS in writing:
A. Ordinary Course. SELLER's Business described in paragraph 1 above
shall be conducted only in ordinary course and in the normal and
regular manner. The SELLER will not violate the terms of any
contracts or other obligations of the Business. The SELLER will not
remove or cause to be removed any inventory or stock-in-trade
except as it may be consumed in the regular course of trade.
B. Changes in Compensation. No extraordinary increase (exceeding 20
percent increase per year) will be made in the compensation or
employee benefits payable or to become payable to any employee or
agent of BCT
<PAGE>
HAWAII, except as may be approved by SELLER in writing.
C. Preservation of Organization. SELLER will use its best efforts to
preserve the BCT HAWAII (#3045) organization intact, and make no
material changes therein.
D. Maintenance. SELLER will maintain its property and in
substantially its present order and condition subject to normal
wear and tear or replacement.
14. DEFAULT. If any Party fails to perform any of the covenants of this
AGREEMENT, the other Party shall be entitled to all remedies at law and in
equity, including the appointment of a Receiver and specific performance.
15. LITIGATION. In the event of a dispute arising out of this AGREEMENT,
the prevailing Party shall be entitled to recover its reasonable costs and
attorney's fees including, but not limited to, such fees incurred prior to the
institution of litigation, or in litigation, from the non-prevailing Party.
16. NON-WAIVER. The failure of either Party to require the performance of
any terms of this AGREEMENT, or the waiver by either Party of any breach of this
AGREEMENT, shall not prevent a subsequent enforcement of this term or be deemed
a waiver of any subsequent breach.
17. NOTICES. All notices given under the provision of this Agreement
shall be deemed given when sent by Certified Mail, Return Receipt Requested, to
the following addresses:
For SELLER: Mr. A. George Cann, President
Business Cards Tomorrow, Inc.
3000 NE 30th Place, 5th Floor
Fort Lauderdale, FL 33306
<PAGE>
For BUYERS: E. V. Antrim
Rosemary F. Antrim
2171 Executive Drive, Suite 300
Addison, Il 60101
William A. Wilkerson
321 Sunset Drive, #3
Fort Lauderdale, FL 33301
18. BROKER: SELLER and BUYERS each represent that neither of them have
had any discussions or negotiations with any broker concerning the subject
matter of this AGREEMENT. Each Party agrees to indemnify the other Party against
and from any claims for any brokerage commissions and all costs, expenses and
liabilities in connection therewith including, without limitation, reasonable
attorney's fees and expenses, for any breach of the foregoing representation.
19. ASSIGNMENT. This AGREEMENT shall not be assigned by BUYERS to anyone
without the prior written consent of the SELLER. SELLER may assign this
AGREEMENT, or any portion thereof, at its option.
20. BENEFIT. This AGREEMENT shall be binding upon the respective Parties,
their successors, heirs, personal representatives, nominees or assigns. All
words used herein in the singular number shall extend to and include the plural
number, and all words used herein in the plural number shall extend to and
include the singular number, when the context or facts require same. All words
used herein in any gender shall extend to and include all genders and any
pronoun will be taken to refer to the person or persons intended, regardless of
number or gender.
21. CONSTRUCTION. This AGREEMENT shall be construed without regard to any
presumption or other rule of law requiring construction against the Party
causing this AGREEMENT to be drafted.
<PAGE>
22. APPLICABLE LAW. Any questions or matters arising under this AGREEMENT
as to validity, construction, performance or otherwise, shall be governed,
interpreted and enforced in accordance with the law of the State of Florida. In
the event of a dispute arising out of this AGREEMENT, venue shall lie in the
Circuit Court of Broward County, Florida, or the U.S. District Court for the
Southern District of Florida.
23. INVALIDITY OF ANY PROVISION. In case any one or more of the
provisions contained in this AGREEMENT shall be invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected or
impaired thereby.
24. BINDING AGREEMENT. This AGREEMENT constitutes the entire and complete
AGREEMENT between the Parties hereto and supersedes all prior correspondence,
discussions, agreements and understandings between the Parties hereto relating
to the sale and purchase of the ASSETS. Neither this AGREEMENT nor any term or
provision hereof may be changed, waived, discharged or terminated except by an
instrument in writing signed by the Parties, including the same formalities with
which this instrument has been executed.
25. CAPTIONS. Paragraph headings shall not be deemed to be a part of the
provisions of such paragraph or have any effect upon the construction thereof,
but the same are inserted for purposes of reference only.
26. COUNTERPARTS. This AGREEMENT may be executed in counterparts, each of
which shall have the effect of being an original AGREEMENT.
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have hereunto set their hands
and seals the day and year first above written.
Signed, sealed and delivered
in the presence of:
Kerry Kabza E.V. Antrim
- ------------------------------ --------------------------------
E.V. Antrim
Kerry Kabza Rosemary F. Antrim
- ------------------------------ --------------------------------
Rosemary F. Antrim
Sharon Crowder William A. Wilkerson
- ------------------------------ --------------------------------
William A. Wilkerson
BUSINESS CARDS TOMORROW, INC.
a Florida Corporation
Sharon Crowder By: A. George Cann, President
- ------------------------------ ----------------------------
A. George Cann, President
- ------------------------------
As to SELLER
<PAGE>
ADDENDUM to Asset Purchase Agreement for E. V. ANTRIM, ROSEMARY R. ANTRIM and
WILLIAM A. WILKERSON:
(*)Note 1 represents Buyers' assumption of the indebtedness of Kevin J. Old and
Maria L. Old to BCT with respect to the Business pursuant to their $325,000
promissory note to BCT dated June 8, 1995.
ANNETTE FEDUS E.V. Antrim
- ------------------------------ --------------------------------
E.V. Antrim
ANNETTE FEDUS Rosemary F. Antrim
- ------------------------------ --------------------------------
Rosemary F. Antrim
Sharon Crowder William A. Wilkerson
- ------------------------------ --------------------------------
William A. Wilkerson
BUSINESS CARDS TOMORROW, INC.
a Florida Corporation
BETH CARLSON By: DONNA PAGANO - LEO
- ------------------------------ ----------------------------
Donna Pagano-Leo, V. President
Treasurer & Chief Financial
- ------------------------------ Officer
As to SELLER
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<PAGE>
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