As filed with the Securities and Exchange Commission on October 25, 1996
Registration No. 33-38204
==================================================================
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------
POST-EFFECTIVE AMENDMENT NO. 12 ON
FORM SB-2 TO
REGISTRATION STATEMENT
ON FORM S-1
Under
The Securities Act of 1933
--------------------------
BCAM INTERNATIONAL, INC.
(Name of small business issuer in its charter)
New York 8911 13-3228375
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction of Classification Code Number) Identification Number)
incorporation or
organization)
1800 Walt Whitman Road
Melville, New York 11747
(516) 752-3550
(516) 752-3558 (fax)
(Address and telephone number of principal executive
offices and principal place of business)
----------------------------------------------------------------
Michael Strauss, Chairman of the Board
BCAM International, Inc.
1800 Walt Whitman Road
Melville, New York 11747
(516) 752-3550
(516) 752-3558 (fax)
(Name, address and telephone number of agent for service)
------------------------------------------
Copies to:
Norman M. Friedland, Esq.
Ruskin Moscou Evans & Faltischek, P.C.
170 Old Country Road
Mineola, New York 11501
(516) 663-6600
(516) 663-6641 (fax)
------------------------------------------
Approximate Date of Commencement of Proposed Sale to the Public: As soon as
practicable after the Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
<PAGE>
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than the securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [x]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [x]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
<TABLE>
<CAPTION>
- --------------------------------------- --------------- ------------------- --------------------- ------------------
Proposed Maximum Proposed Maximum
Amount to be Offering Price Aggregate Offering Amount of
Title of Securities to be Registered Registered Per Share Price Registration Fee
<S> <C> <C> <C> <C>
- --------------------------------------- --------------- ------------------- --------------------- ------------------
Redeemable Class B Warrants (a).... 807,659 3.23 3,130,487 1,079.48
- --------------------------------------- --------------- ------------------- --------------------- ------------------
Redeemable Class E Warrants (a).... 491,588 1.25 675,934 233.08
- --------------------------------------- --------------- ------------------- --------------------- ------------------
Common Stock Issuable Upon Exercise
of Redeemable Class B Warrants (b). 969,191 (h) (h) (h)
- --------------------------------------- --------------- ------------------- --------------------- ------------------
Common Stock Issuable Upon Exercise
of Redeemable Class E Warrants (c). 540,747 (i) (i) (i)
- --------------------------------------- --------------- ------------------- --------------------- ------------------
Common Stock Issuable Upon Exercise
of Redeemable Class C Warrants..... 156,189 .875 136,665 39.63
- --------------------------------------- --------------- ------------------- --------------------- ------------------
Common Stock Issuable Upon Exercise
of Redeemable Class D Warrants (d). 5,714 .875 5,000 1.45
- --------------------------------------- --------------- ------------------- --------------------- ------------------
Common Stock Issued in Connection
with the January 24, 1990
Underwriter's Unit Purchase Option. 757,988 (j) 1,577,197 543.86
- --------------------------------------- --------------- ------------------- --------------------- ------------------
Common Stock Issued in Connection
with the January 24, 1990
Underwriter's Finder's Unit Purchase 8,095 3.23 17,774 6.13
Option (e).........................
- --------------------------------------- --------------- ------------------- --------------------- ------------------
Common Stock Issued in Connection
with Stock Options Issued to 900,000 3.2191 1,394,100 480.72
Consultants (g)
- --------------------------------------------------------------------------------------------------------------------
Total Registration Fee..............................................................................$2,384.35(f)
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) 2,530,000 Redeemable Class B Warrants were issuable upon the exercise
of 2,530,000 Redeemable Class A Warrants and 2,530,000 Class E Warrants were
registered by the original Registration Statement declared effective February
11, 1991 and by Amendment No. 3 (November 27, 1991) thereof. As of September 30,
1996, 807,659 Redeemable Class B Warrants and 491,588 Redeemable Class E
Warrants remain outstanding.
(b) 2,783,000 shares of Common Stock issuable upon exercise of the
Redeemable Class B Warrants were originally registered by the Original
Registration Statement declared. As of September 30, 1996, 969,191 shares of
Common Stock remain issuable upon the exercise of 807,659 Redeemable Class B
Warrants that are outstanding.
(c) 2,783,000 shares of Common Stock issuable upon exercise of the Class E
Warrants and such shares were originally registered by the original Registration
Statement declared effective February 11, 1991, and by Amendment No. 3 (November
27, 1991) thereof. Subsequent conversion of 1,717,000 Class A Warrants into
1,717,000 Class E Warrants per the Discounted Warrant plan provide the issuance
of 1,888,700 shares of Common Stock upon the exercise of the Redeemable Class E
Warrants. As of September 30, 1996, 540,747 shares of Common Stock remain
issuable upon the exercise of 491,588 Redeemable Class E Warrants that are
outstanding.
(d) 402,857 shares of Common Stock issuable upon exercise of Class D
Warrants were registered pursuant to a Form SB-2 Registration Statement (File
No. 33-47612) declared effective on February 11, 1991 (the "SB-2 Registration
Statement"). As of September 30, 1996, 5,714 shares of Common Stock remain
issuable upon exercise of 2,500 Class D Warrants that are outstanding.
(e) Finder's Unit Purchase Option to purchase 2,981 Units (including 8,943
shares of common stock) and 5,962 Redeemable Class A Warrants which were
issuable upon the exercise of the Finder's Option; and 7,154 shares of Common
Stock and 5,962 Redeemable Class B Warrants were issuable upon exercise of the
redeemable Class A Warrants; and 7,154 shares of Common Stock issuable upon
exercise of Class B Warrants owned by a finder were registered pursuant to the
SB-2 Registration Statement. As of September 30, 1996, a total of 8,095 shares
of Common Stock were issuable to the finder, including 3,391 shares issuable
upon exercise of the Class B Warrants owned by the finder.
(f) Fees relating to items (a), (b), (c), (d) and (e) above were paid upon
filing of the Registration Statement and the SB-2 Registration Statement.
(g) 900,000 shares of Common Stock issuable upon the exercise of 900,000
options issued to consultants.
(h) Common Stock issuable upon exercise of the Class B Warrants. No
separate filing fee required.
(i) Common Stock issuable upon exercise of the Class E Warrants. No
separate filing fee required.
(j) To determine the registration fee, 291,534 shares of Common Stock are
to be exercisable at $1.45 per share; 233,227 shares of Common Stock are to be
exercisable at $1.72 per share; and 233,227 shares of Common Stock are to be
exercisable at $3.23 per share.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
BCAM INTERNATIONAL, INC.
Cross Reference Sheet
<TABLE>
<CAPTION>
Item Number Caption in Form SB-2 Location in Prospectus
<S> <C> <C>
1. Forepart of the Registration Statement and Outside Cover of Prospectus
Front Cover Page of Prospectus.....................
2. Inside Front and Outside Back Cover Pages of Inside Front and Outside Back Cover
Prospectus......................................... Page of Prospectus
3. Summary Information and Risk Factors............... Prospectus Summary; Risk Factors
4. Use of Proceeds.................................... Use of Proceeds; Agreements
5. Determination of Offering Price.................... Underwriter; Agreements
6. Dilution........................................... Dilution
7. Selling Security Holders........................... Not Applicable
8. Plan of Distribution............................... Plan of Distribution
9. Legal Proceedings.................................. Business - Legal Proceedings
10. Directors, Executive Officers, Promoters and Management
Control Persons....................................
11. Security Ownership of Certain Beneficial Owners Principal Stockholders
and Management.....................................
12. Description of Securities.......................... Description of Securities
13. Interest of Named Experts and Counsel.............. Not Applicable
14. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities..... Not Applicable
15. Organization Within Last Five Years................ Business
16. Description of Business............................ Business
17. Management's Discussion and Analysis of Plan of Management's Discussion and Analysis
Operation..........................................
18. Description of Property............................ Business - Properties
19. Certain Relationships and Related Transactions..... Certain Transactions
20. Market for Common Equity and Related Stockholder
Matters............................................ Risk Factors
21. Executive Compensation............................. Management - Executive Compensation
22. Financial Statements............................... Financial Statements
23. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosures............... Not Applicable
</TABLE>
<PAGE>
PROSPECTUS
BCAM INTERNATIONAL, INC.
807,659 Redeemable Class B Warrants Expiring on January 17, 1997
491,588 Redeemable Class E Warrants Expiring on January 17, 1997
969,191 Shares of Common Stock Issuable
Upon Exercise of Redeemable Class B Warrants
540,747 Shares of Common Stock Issuable
Upon Exercise of Redeemable Class E Warrants
156,189 Shares of Common Stock Issuable Upon Exercise of Class C Warrants
5,714 Shares of Common Stock Issuable Upon Exercise of Class D Warrants
757,988 Shares of Common Stock, Representing 291,534 Shares of Common Stock
Issued Pursuant to a January 24, 1990 Underwriter's Unit Purchase Option to the
Holder of the "Underwriter's Unit Purchase Option" and an Aggregate of 466,454
Shares of Common Stock Issuable Upon Exercise of Class A Warrants and Class B
Warrants Owned by the Holder of the "Underwriter's Unit Purchase Option"
8,095 Shares of Common Stock Representing 4,704 Shares of Common Stock
Issuable Pursuant to a January 24, 1990 Finder's Agreement to the Holder of the
"Finder's Unit Purchase Option" and 3,391 Shares of Common Stock Issuable Upon
Exercise of Class B Warrants Owned by the Holder of the "Finder's Unit Purchase
Option"
900,000 Shares Issuable upon the Exercise of 900,000 Stock Options
(a) 807,659 Redeemable Class B Warrants expiring on January 17, 1997 were
issued in December 1993, upon the exercise of Class A Warrants that were issued
and sold as part of the Company's initial public offering ("IPO") in January,
1990 (Registration No. 33-31282). Each Redeemable Class B Warrant currently
entitles the registered holder thereof to purchase one and two-tenths (1.2)
shares of Common Stock at an exercise price of $2.69 per share (subject to
adjustment upon the occurrence of certain anti-dilution events) until December
13, 1996 and $3.23 from December 14, 1996 to January 17, 1997. The Redeemable
Class B Warrants are subject to redemption by the Company at $.03 per Warrant,
on 30 days' prior written notice if the average closing bid price of the Common
Stock exceeds certain amounts for certain periods, as provided in the Redeemable
Class B Warrant. See "Description of Securities - Redeemable Class B Warrants."
(b) 491,588 Redeemable Class E Warrants (initially registered by the
Company in November, 1991 [Registration No. 33-38204, Post-Effective
Registration No. 3]) were issued during a 70 day period ending February 19, 1992
(the "Special Class A Exercise Period") pursuant to a Discounted Warrant Plan
which provided that a holder of a Class A Warrant who exercised his right to
purchase the Common Stock during the Special Class A Exercise Period would
receive a Redeemable Class E Warrant. Each Redeemable Class E Warrant currently
entitles the registered holder thereof to purchase one and one-tenth (1.1)
shares of Common Stock at an exercise price of $1.25 per share (subject to
adjustment upon the occurrence of certain anti-dilution events) until January
17, 1997. See "Description of Securities - Redeemable Class E Warrants).
(c) 969,191 shares of Common Stock are issuable upon exercise of the
Redeemable Class B Warrants and 540,747 shares of Common Stock are issuable upon
exercise of the Redeemable Class E Warrants.
(d) 156,189 shares of Common Stock are issuable upon exercise of Class C
Warrants that were issued as a fee in connection with the Company's June, 1991
Private Placement of Common Stock, Promissory Notes and Class D Warrants. Each
Class C Warrant entitles the registered holder to purchase one and fourteen one
hundredths (1.14) shares of Common Stock at an exercise price of $.875 per share
1
<PAGE>
(subject to adjustment upon the occurrence of certain anti-dilution events)
until January 17, 1997. The Class C Warrants are not subject to redemption by
the Company. See "Description of Securities - Class C Warrants."
(e) 5,714 shares of Common Stock are issuable upon exercise of Class D
Warrants that were sold in the Company's June, 1991 Private Placement of Common
Stock, Promissory Notes and Class D Warrants. Each Class D Warrant entitles the
registered holder thereof to purchase two and twenty-nine hundredths (2.29)
shares of Common Stock at an exercise price of $.875 per share (subject to
adjustment upon the occurrence of certain anti-dilution events) until January
17, 1997. The Class D Warrants are not subject to redemption by the Company. See
"Description of Securities - Class D Warrants."
(f) In connection with the IPO, the Company issued to the Underwriter
97,178 Unit Purchase Options which entitles the holder to receive 291,534 shares
of Common Stock and 194,356 Class A Warrants upon exercise of the Unit Purchase
Options at $4.35 per unit. The Class A Warrants entitles the Underwriter to
purchase 233,227 shares of Common Stock at an exercise price of $1.72, and also
provides the holder with 194,356 Class B Warrants. The Class B Warrants entitles
the Underwriter to purchase 233,227 shares of Common Stock at a current exercise
price of $2.69 per share until December 13, 1996 and from December 14, 1996
until January 17, 1997, at an exercise price of $3.23 per share. The Warrants
are not redeemable by the Company and expire on January 17, 1997. See
"Description of Securities - Underwriter's Class A Warrants and Class B
Warrants."
(g) In connection with the IPO, the Company issue to a finder an option,
for nominal consideration, to acquire shares of Common Stock (4,704 shares of
which remain subject to such option) and Class B Warrants, of which 3,391 shares
of Common Stock remain issuable upon exercise, at an exercise price of $2.69 per
share until December 13, 1996 and from December 14, 1996 until January 17, 1997,
at an exercise price of $3.23 per share. These Class B Warrants are not subject
to redemption, and expire on January 17, 1997. See "Description of Securities -
Finder's Class B Warrants."
(h) The Company granted an aggregate of 900,000 options to several
consultants and a former joint venture partner and will issue 900,000 shares of
Common Stock upon the exercise of such options at the following exercise prices
(i) 300,000 stock options at $1.0469 with an expiration date of January 2, 1997;
(ii) 100,000 stock options at $1.1719 with an expiration date of August 20,
2006; (iii) 100,000 stock options at $1.3125 with an expiration date of December
25, 1996; (iv) 100,000 stock options at $1.3443, with an expiration date of
January 27, 1997; (v) 100,000 stock options at $1.69 with an expiration date of
July 21, 1999; (vi) 100,000 stock options at $2.0625 with an expiration date of
February 20, 1997; and (vii) 100,000 stock options at $3.2191 with an expiration
date of March 14, 1997.
The Company is not aware of any underwriting arrangements with respect to
the sale of the securities to which this Prospectus relates. The Common Stock is
traded from time to time on the Boston Stock Exchange and the Common Stock and
the Redeemable Class B Warrants and the Redeemable Class E Warrants are traded
in the NASDAQ Over-The-Counter market (Small Cap) at prices then prevailing.
The Company will receive proceeds from any exercise of the options and the
Warrants described (see "Use of Proceeds").
The representative average of the high and low bid quotations of the
Company's Common Stock on September 30, 1996, as reported on NASDAQ (symbol:
BCAM), is $1.34 per share. (See "Market for Company's Common Equity and Related
Stockholder Matters").
THESE SECURITIES ARE SUBJECT TO A HIGH DEGREE OF RISK AND SUBSTANTIAL
DILUTION. SEE "RISK FACTORS AND DILUTION."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
2
<PAGE>
The date of this Prospectus is _______________, 1996.
No dealer, salesman or any other person has been authorized to give any
information or to make any representation or projections of future performance
other than those contained in this Prospectus, and any such other information,
projections or representation if given or made must not be relied upon as being
authorized by the Company. The delivery of this Prospectus or any offer or sale
hereunder at any time does not imply that the information herein is correct as
of any time subsequent to the date hereof or that there has not been any change
in the affairs of the Company since the date hereof. This Prospectus does not
constitute an offer to sell or a solicitation of an offer to buy any securities
other than those to which it relates or any of the securities offered hereby in
any jurisdiction to any person to whom it is unlawful to make such offer or
solicitation.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "1934 Act") and files reports, proxy statements and
other information with the Securities and Exchange Commission ("SEC") in
accordance with such Act. Such reports, proxy statements and other information
can be inspected and copied at prescribed rates at the Public Reference
Facilities maintained by the Commission at Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549; at certain of its regional offices including the
Chicago Regional office, the Kluszynsky Building, 230 South Dearborn Street,
Room 3190, Chicago, Illinois 60604, the Los Angeles Regional Office, 5757
Wilshire Boulevard, Suite 500 East, Los Angeles, California 90036 and the New
York Regional Office, 75 Park Place, New York, New York 10007. This material can
also be inspected and copied at, and copies obtained at prescribed rates from,
the Public Reference Section of the Commission, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549. Certain reports, proxy statements and
other information concerning the Company can be inspected at the Boston Stock
Exchange, One Boston Place, Boston, Massachusetts 02108.
The Company has filed with the SEC a Registration Statement on Form SB-2
(the "Registration Statement") (which term includes any amendments thereto)
under Securities Act of 1933, as amended (the "Act"), with respect to the
securities offered hereby. This Prospectus does not contain all of information
set forth in the Registration Statement and the exhibits and schedules thereto,
to which reference is hereby made for further information with respect to the
Company and the securities offered hereby. Statements contained herein
concerning the provisions of any document are not necessarily complete and, in
each instance, reference is made to the copy of such document filed as an
exhibit to the Registration Statement for a more complete description of the
matter involved and each such statement shall be deemed qualified in its
entirety by such reference. The Registration Statement and the exhibits and
schedules thereto filed by the Company with the Commission may be inspected at
the at the public reference facilities maintained by the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the regional offices of the
Commission described above. Copies of such materials may be obtained from the
Public Reference Section of the Commission, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, at prescribed rates.
3
<PAGE>
PROSPECTUS SUMMARY
The following summary information is qualified in its entirety by reference
to the more detailed information, financial statements and notes appearing
elsewhere in this Prospectus.
THE COMPANY
BCAM International, Inc. (the "Company") is a software technology company,
specializing in ergonomic (human factor) solutions for individuals, government
and for major corporations. The Company completed its restructuring, in early
1996, by focusing on (a) accelerating the development and commercialization of
the Company's Intelligent Surface Technology ("IST"), (b) continuing its
development of proprietary software, which consists of the intelligent part of
IST, Mannequin(R), the EARLY(R) process and Back-to-Work(TM) Technology, (c)
building its ergonomic consulting services business, which consists of Ergonomic
Product Assessment and Redesign, and Ergonomic Workplace Assessment, and (d)
emphasizing a strategy of broadening and strengthening business relationships
such as joint ventures, partnerships, licenses and other alliances.
The Company continues to believe that its ergonomic consulting services was
and still is the engine that drives new product ideas and with it, the potential
of royalty income, as well as new product and service offerings.
4
<PAGE>
The Offer
Securities Offered........... 807,659 Redeemable Class B Warrants and 969,191
shares of Common Stock issuable upon exercise of
the Redeemable Class B Warrants;
491,588 Redeemable Class E Warrants and 540,747
shares of Common Stock issuable upon exercise of
the Redeemable Class E Warrants;
156,189 shares of Common Stock issuable upon
exercise of Class C Warrants;
5,714 shares of Common Stock issuable upon
exercise of Class D Warrants;
291,534 shares of Common Stock issuable upon
exercise of an Underwriter's Unit Purchase Option
issued on January 24, 1990, as well as 233,227
shares of Common Stock issuable upon exercise of
Class A Warrants and 233,227 shares of Common
Stock issuable upon exercise of Class B Warrants
owned by the holders of such Underwriter's Unit
Purchase Options, and 4,704 shares of Common
Stock issuable upon the exercise of Finder
Options and 3,391 shares of Common Stock issuable
upon exercise of Class B Warrants owned by the
holder of the Finders Options;
900,000 shares of Common Stock issuable upon the
exercise of 900,000 stock options by consultants
and a former joint venture partner.
Each Redeemable Class B Warrant may be exercised
until January 17, 1997 to purchase one and
two-tenths (1.2) shares of Common Stock at $2.69
per share until December 13, 1996 and $3.23 per
share from December 14, 1996 until January 17,
1997. Each Redeemable Class E Warrant may be
exercised until January 17, 1997 to purchase one
and one-tenth (1.1) shares of Common Stock at a
price of $1.25. Each Redeemable Class A Warrant
may be exercised until January 17, 1997 to
purchase 1.2 shares of Common Stock at a price of
$1.72. Each Redeemable Class C Warranty may be
exercised until January 17, 1997 to purchase one
and fourteen-hundredths (1.14) shares of Common
Stock at a price of $.875 per share. Each
Redeemable Class D Warrant may be exercised until
January 17, 1997 to purchase two and twenty-nine
hundredths (2.29) shares of Common Stock at a
price of $.875 per share. See "Description of
Securities - Warrants" and "Recent Events -
Discounted Warrant Plan." Stock options may be
exercised as follows: (i) 300,000 at $1.0469
until January 2, 1997; (ii) 100,000 at $1.1719
until August 20, 2006; (iii) 100,000 at $1.3125
until December 25, 1996; (iv) 100,000 at $1.3443,
until January 27, 1997; (v) 100,000 at $1.69
until July 21, 1999; (vi) 100,000 at $2.0625
until February 20, 1997; and (vii) 100,000 at
$3.2191 until March 14, 1997.
5
<PAGE>
Shares of Common Stock
Outstanding Before Offering.. 14,877,233 (1) (2)
Shares of Stock Outstanding
After Offering............... 18,215,157 (3) (4)
Use of Proceeds.............. For general working capital purposes.
(See "Use of Proceeds")
Risk Factors ................ Investment in the securities offered hereby
involves a high degree of risk and immediate
and substantial dilution. See "Risk Factors"
and "Dilution."
NASDAQ Symbols............... Common Stock - BCAM
Class B Warrants - BCAML
Class E Warrants - BCAMZ
Boston Stock Exchange Symbol.. Common Stock - BAM
(1) Does not include 3,337,924 shares of Common Stock related to the above
securities offered.
(2) Does not include (i) shares of Common Stock issuable under options to
acquire an aggregate of 439,500 shares (net of cancellations and exercises),
issued under the Company's 1989 Stock Option Plan, as amended (the "1989 Plan"),
(ii) shares of Common Stock issuable upon the exercise of options granted to
non-management directors under the Company's 1989 Non-Statutory Stock Option
Plan (the "Non-Statutory Plan"), under which options to acquire an aggregate of
100,000 shares (net of cancellations and exercises) have been granted, and (iii)
2,000,000 shares of Common Stock reserved for issuance under the Company's 1995
Stock Option Plan (the "1995 Plan"), under which options to acquire an aggregate
of 1,819,000 shares (net of cancellations and exercises) have been granted. See
"Management - Stock Options - Stock Option Plans" and "Management Director
Compensation."
(3) Does not include (i) shares of Common Stock issuable under options to
acquire an aggregate of 39,500 shares (net of cancellations and exercises),
issued under the Company's 1989 Stock Option Plan, as amended (the "1989 Plan"),
(ii) shares of Common Stock issuable upon the exercise of options granted to
non-management directors under the Company's 1989 Non-Statutory Stock Option
Plan (the "Non-Statutory Plan"), under which options to acquire an aggregate of
100,000 shares (net of cancellations and exercises) have been granted, and (iii)
2,000,000 shares of Common Stock reserved for issuance under the Company's 1995
Stock Option Plan (the "1995 Plan"), under which options to acquire an aggregate
of 1,819,000 shares (net of cancellations and exercises) have been granted. See
"Management - Stock Options - Stock Option Plans" and "Management Director
Compensation."
(4) Does include 3,337,924 shares of Common Stock related to the above
securities offered.
6
<PAGE>
Summary Financial Data
The summary financial data set forth below are derived from financial
statements of the Company appearing elsewhere in this Prospectus and from prior
years' Form 10K-SB. The financial statements for the six months ended June 30,
1995 and 1996 are unaudited. The summary financial data should be read in
conjunction with financial statements and notes thereto, and to prior years'
Form 10K-SB.
<TABLE>
<CAPTION>
Summary Financial Information
(In Thousands, Except Per Share Data)
Six Months Ended
Year Ended December 31, June 30, (unaudited)
1991 1992 1993 1994 1995 1995 1996
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of
Operations Data:
Net revenue...... 1,308 1,371 1,382 1,138 752 414 211
Net loss......... (2,491)(1) (2,228)(1) (595)(2) (2,389)(2) 1,689) (806) (919)
Weighted average
number of common
shares and common
equivalent shares
outstanding...... 5,981,324 9,056,231 10,949,876 14,681,530 14,818,055 14,778,227 14,858,222
Net loss per share (0.42)(1) (0.25)(1) (0.05)(2) (0.16)(2) (0.11) (0.05) (0.06)
Balance Sheet
Data:
Cash, cash
equivalents and
marketable
securities....... 226 817 6,040 4,168 2,209 3,023 1,604
Working capital.. 22 719 6,261 3,718 2,156 2,977 1,196
Total assets..... 1,923 1,721 6,975 5,088 3,034 4,013 2,340
Long term debt... 1,195 - - - - - -
Stockholders'
equity
(eficiency)..... (175) 1,166(3) 6,661(3) 4,252 2,604 3,487 1,644
</TABLE>
Notes:
1. The net loss for years 1991 and 1992 include the financial results of
the HumanCad division. The HumanCad division was discontinued on February 23,
1993. Net loss includes a loss from discontinued operations of $1,153,234 in
1991 or $.20 per share and $1,247,270 in 1992 or $.14 per share
2. In years 1993 and 1994, the Company's investment of approximately
$72,000 in a partnership was written off ($17,000 in 1994 and $55,000 in 1993).
ErgoRisk Services, Inc. (Canada) was purchased for $65,000 to effectively
terminate a joint venture, and was subsequently written off in 1994.
3. These were private placements in 1991 and 1993, which were completed in
1992 and 1993 respectively, which increased the amount of stockholder equity.
7
<PAGE>
RISK FACTORS
The securities offered hereby are speculative in nature, involve a high
degree of risk, and should only be made by investors who can afford the loss of
their entire investment. Each prospective investor should carefully consider the
following risks, as well as others described elsewhere in this Prospectus,
before purchasing the securities offered hereby.
Operating History; Operating Losses. The Company has operated as a software
technology company specializing in ergonomic solutions for individuals,
government and major corporations, and has incurred operating losses over its
existence. The Company reported a net loss of $918,908 for the six-month period
ended June 30, 1996, and net losses of $1,689,480 and $2,388,953 for the fiscal
years ended December 31, 1995 and 1994. Since inception, the Company had
accumulated deficits, and as of June 30, 1996, the accumulated deficit was
$12,606,058. The Company's operations are subject to numerous risks associated
with the establishment and development of a business and the commercialization
of new technologies. The Company expects to continue to incur operating losses
until the completion of the development and commercialization of its
technologies. The Company is also aggressively pursuing its consulting business
by strengthening its sales and marketing activities. There can be no assurance
that the Company will achieve or sustain profitable operations through the
development and commercialization of its technologies or the growth of its
consulting business.
Discretion in Use of Proceeds Designated for Working Capital. The Company
will have broad discretion with respect to the application of the proceeds.
While such funds are to be applied for working capital and general corporate
purposes in furtherance of the Company's business, investors will be reliant on
management as to the specific application of the amounts.
No Established Markets. Although the Company believes it has the right
products and services for the market place, there can be no assurance that the
Company's potential clients will find the Company's services or products of the
type provided or proposed by the Company to be desirable or of economic value.
Risks of Expansion. The Company has incurred and continues to incur
significant expenses to attract and retain qualified management personnel,
engineers, scientists, and ergonomists, for marketing and sales, and promotional
activities. The Company's expenses may exceed its revenues until such time as
the volume and profitability of its business increase to the extent necessary to
offset these expenses.
Dependence on Major Customers. During the first six months ended June 30,
1996, Long Island Lighting Company, Stanley Tools and PTC Aerospace accounted
for 32%, 32% and 16%, respectively, and 80%, in the aggregate of the Company's
net revenue. No assurance can be given that the Company will continue to be
retained by any of its major clients beyond the current projects or that such
clients will retain the Company for any future services. During the fiscal year
ended December 31, 1994, an Indonesian government agency, Aircraft Industry of
Indonesia ("IPTN"), Reebok and Lumex together accounted for 59%, 17% and 9%,
respectively, and 85%, in the aggregate, of the Company's net revenue. During
the fiscal year ended December 31, 1995, BE Aerospace, Inc., Remington Arms
Company, Inc. and Reebok accounted for 29%, 12% and 11% respectively, and 52%,
in the aggregate, of the Company's net revenue.
Effect of State of Economy. The market for the Company's services may be
adversely affected by a recession or other economic downturn. During an economic
recession, such services may be considered discretionary and delays in
commencing ergonomic programs are possible. These factors are not within the
control of the Company.
Growth Limitations Inherent in Service Portion of Business. The specialized
ergonomic services typically provided by the Company require significant time
and attention of the Company's technical personnel. Accordingly, the Company's
ability to deliver such specialized services is limited by the relatively few
qualified personnel employed by the Company, at any given time, to perform these
services.
8
<PAGE>
Fixed Price Contracts. The consulting services provided by the Company are
often offered to clients on a fixed price basis. In setting its price for
services, the Company seeks to estimate the technical staff's hours that will be
required to provide the services. To the extent that the Company underestimates
the total hours that will be required, the Company could realize a loss on any
particular contract or contracts.
Limited Rights to Certain Products. In certain cases, the Company may
develop products for its clients in response to a specific request of such
client. In such cases, the client may fund all or a significant portion of the
Company's development costs. Although the Company believes that it owns the
rights to develop any products derived from work performed, including certain
products under development by the Company, no assurance can be given that any
client which has retained the Company will not in the future assert the right to
restrict the Company's activities with respect to any technology developed or
claim rights to products sought to be commercialized by the Company.
Lack of Patent Protection; Reliance on Trade Secret and Copyright
Protection. The Company has obtained three issued patents and four patents with
Notice of Allowance from the patent office (six U.S. and one European) and has
filed four additional United States patent applications relating to its
Intelligent Surface Technology. The Company also has five U.S. patents in fields
other than Intelligent Surface Technology. There can be no assurance that its
software is entitled to patent protection or that the claims in the pending
patent applications will issue as patents, that any issued patent will provide
the Company with significant competitive advantages, or that challenges will not
be instituted against the validity or enforceability of any patents owned by the
Company or, if instituted, that such challenges will not be successful. The cost
of litigation to uphold the validity of a patent and prevent infringement can be
substantial even if the Company prevails. Furthermore, there can be no assurance
that others will not independently develop similar technologies, duplicate the
Company's technology or design around the patented aspects of the Company's
technology or that the Company will not infringe on patents or other rights
owned by others.
The Company protects its proprietary written material, know-how, computer
software and technology which it has or may develop, through the use of United
States copyrights, common-law trade secret protection, trademarks and service
marks, and contractual arrangements. These laws provide only limited protection,
however, since they do not protect the "ideas" or "concepts" reflected in such
materials or software, but only protect the expression of the "ideas" or
"concepts" contained therein. While the Company enters into confidentiality
arrangements with its employees, consultants and customers, and implements
various measures to maintain "trade secret" protection for its products in an
attempt to maintain the proprietary nature of its products, there can be no
assurance that these measures will be successful. Accordingly, there is no
assurance that competitors may not develop products, materials or software which
perform similar or identical functions as the Company's products or proprietary
software without infringing upon the Company's copyrights or violating trade
secret laws. The legal and factual issues arising in copyright or trade secret
litigation are often both complex and unclear and any attempt to enforce the
Company's rights thereunder will face both the high cost of litigation and the
uncertainty of the result.
Government Regulation. The Company does not believe that its present and
currently proposed activities are generally subject to any material government
regulation in the United States or other countries. It is possible that certain
products developed by the Company in the future as an adjunct to its principal
ergonomics business, might be deemed under new legislation or regulations to be
"medical devices" or otherwise be subject to the jurisdiction of the Federal
Food and Drug Administration or similar agencies. In the event that any product
is subject to such governmental regulation, the Company will be required to
obtain necessary approvals which could delay or, in certain circumstances, even
prevent the introduction to the marketplace of such product and result in
significant additional expense. Even though the Company believes that the
current policies of the Occupational Safety and Health Act ("OSHA") encourages
the use of the Company's services and creates greater awareness of the need for
its ergonomic services and products, it cannot predict the extent to which it
may be affected by legislative and other regulatory developments OSHA or
otherwise.
Retention of Key Personnel; Limited Experience with Company. There can be
no assurance that the Company will be able to retain the services of its key
9
<PAGE>
personnel, and the loss of the services of its key personnel could have a
material adverse effect on the Company's business and prospects. On February 16,
1995, Michael Strauss, the President and Chief Operating Officer, was elected to
the additional positions of Chairman of the Board of Directors and Chief
Executive Officer and one of the Company's directors, Robert Wong, was appointed
Vice Chairman and Chief Technology Officer and interim Chief Financial Officer.
The Board of Directors believes that Mr. Strauss and Mr. Wong possess the
operational, technical and management skills needed by the Company to further
the Company's proprietary technologies, and business in general.
Competition. Although management believes that the Company's unique
technologies, proprietary software, methodologies and know-how give it a
competitive advantage, other companies or agencies are developing, and have
developed, particular services and technologies that are competitive with the
Company's services and technology and that increased competition is likely. It
is certain that some competitors will have significantly greater financial,
technical and other resources than the Company. Many of the large industrial
companies, especially major insurance companies, that form the primary market
for the Company's services may also seek to develop or have already developed
their own ergonomic programs. Similar services may also be supplied by
universities, hospitals, government agencies or other entities, many of which
may have substantially greater financial and other resources than the Company.
Potential Liability; Insurance Coverage. The Company may be exposed to
liability claims for injuries, property damage or other losses arising out of
improper provision of services. The Company currently has liability insurance
for such losses which the company believes is sufficient to cover all claims.
However, there can be no assurance that it will be able to maintain such
coverage or obtain additional coverage, at a reasonable cost or otherwise, or
that the coverage that it has or that it may obtain will be sufficient to cover
any and all claims. Although no claims have been asserted to date, in the event
that a claim is successfully asserted against the Company, such claim could have
a material adverse effect on the Company.
Immediate and Substantial Dilution. Purchasers of the Common Stock offered
herein will incur an immediate dilution in net tangible book value at June 30,
1996 upon exercise of the Class B, C, D and E Warrants of approximately $2.458,
$.768, $.775 and $1.116 per share, respectively, and $1.739 per share upon
exercise of the Underwriter's Unit Purchase Options, $1.869 upon exercise of the
Finder's Option and 1.377 upon the exercise of all consultant stock options.
Outstanding Options. As of September 30, 1996, in addition to the 8,095
shares of Common Stock issuable upon exercise of the balance of the Finder's
Option (and the exercise of all warrants in connection therewith, the Company
had outstanding 807,659 Class B Warrants, (exercisable for 969,191 shares of
Common Stock), 491,588 Class E Warrants to purchase 540,745 shares of Common
Stock, the Underwriter's Unit Purchase Option to purchase 97,178 Units at $4.35
per Unit convertible into 291,534 shares of common stock, as adjusted, 194,356
Class A Warrants exercisable for 233,227 shares of Common Stock and 194,356
Class B Warrants exercisable for 233,227 shares of Common Stock issuable upon
the exercise of the aforementioned Class A Warrants and the exercise of 900,000
stock options for 900,000 shares. The Company has also granted stock options to
purchase an aggregate of 1,958,500 additional shares of its Common Stock (net of
exercises and cancellations, of which options for 25,000 shares were granted
prior to the IPO) at exercise prices ranging from $0.922 to $3.188 per share. Of
these, the Company has granted to its non-management directors options to
purchase an aggregate of 210,000 shares of its Common Stock at exercise prices
ranging from $0.922 to $1.68 per share. Holders of the Finder's Option and other
such options and warrants are likely to exercise them when, in all likelihood,
the Company could obtain additional capital on terms more favorable than those
provided by such Finder's Option, other options or warrants. Further, while such
options and warrants are outstanding, they may adversely affect the terms on
which the Company could obtain additional capital.
Financial Standards for Continued NASDAQ Listing. To maintain its listing
on the NASDAQ Small Cap Market, the Company must have total assets of at least
$2 million, capital and surplus of at least $1 million and a minimum bid price
of $1 per share; provided, however, the $1 minimum bid price per share is not
applicable if the Company maintains a public float of $1 million and capital and
surplus of $2 million. The Company currently meets these requirements, in the
10
<PAGE>
event the Company continues to sustain losses, at some point in the future, it
may not meet the above described standards and the Common Stock would be
delisted from NASDAQ which could adversely affect the market price of the Common
Stock. See "Shares Eligible for Future Sale" and "Principal Stockholders."
Market Overhang. Future sales of common stock could depress the market
price of the Company's common stock. Further, the options and warrants presently
outstanding could adversely affect the market for the Common Stock and any sale
of the Common Stock acquired pursuant to such options and warrants could also
depress the market price of the Common Stock.
Non-Registration in Certain Jurisdictions of Shares Underlying the
Warrants. The Class A Warrants are detachable from the Units and trade
separately. Holders of the Warrants may reside in or move to jurisdictions in
which the shares underlying the Class A Warrants or the Class B Warrants or
Class E Warrants issuable upon the exercise of the Class A Warrants or the
shares issuable upon exercise of the Class B Warrants, Class E Warrants, or the
Class D Warrants are not registered or otherwise qualified for sale during the
period that the Class A Warrants, Class B Warrants, Class E Warrants, or the
Class D Warrants are exercisable. In this event, the Company would be unable to
issue shares and Class B Warrants to those persons desiring to exercise their
Class A Warrants and would be unable to issue shares to those persons desiring
to exercise Class B, Class D or Class E Warrants unless and until the shares and
Class B Warrants, Class E Warrants, or Class D Warrants could be qualified for
sale in jurisdictions in which such purchasers reside, or an exemption to such
qualification exists in such jurisdiction. The Company has no obligation to
effect any such registration or qualification. If the Company elects to attempt
such registration or qualification, no assurances can be given that the Company
will be able to effect any required registration or qualification. The Company
has qualified the offering in the following states: Connecticut, Hawaii, Kansas,
Massachusetts, Mississippi, Ohio, Utah, Alabama, Florida, Georgia, Illinois,
Kentucky, Louisiana, Michigan, New Jersey, New York, Pennsylvania, Rhode Island,
Texas, West Virginia and Wisconsin. See "Description of Securities".
No Dividends. The Company has paid no cash dividends on its Common Stock
since its inception and does not anticipate paying cash dividends on its Common
Stock in the foreseeable future. See "Dividend Policy."
DIVIDEND POLICY
The Company has paid no cash dividends on its Common Stock since its
inception and does not anticipate paying cash dividends on its Common Stock in
the foreseeable future.
MARKET FOR COMPANY'S EQUITY SECURITIES
COMMON STOCK - NASDAQ
1994 High Bid Low Bid
First Quarter 3 7/16 2 9/32
Second Quarter 2 1/2 1 5/16
Third Quarter 2 1/16 1 7/16
Fourth Quarter 1 7/8 31/32
1995
First Quarter 1 1/16 3/4
Second Quarter 1 9/32 7/8
Third Quarter 1 21/32 31/32
Fourth Quarter 2 1
1996
First Quarter 1 1/4 29/32
Second Quarter 1 5/16 29/32
11
<PAGE>
COMMON STOCK - BOSTON STOCK EXCHANGE
1994 High Bid Low Bid
First Quarter 2 1/2 2 1/4
Second Quarter 1 13/16 1 9/16
Third Quarter 1 3/4 1 1/2
Fourth Quarter 1 7/8 15/16
1995
First Quarter 1 1/32 11/16
Second Quarter 1 1/8 1/2
Third Quarter 1 19/32 13/16
Fourth Quarter 1 23/32 1
1996
First Quarter 1 7/32 3/4
Second Quarter 1 1/4 7/8
CLASS B WARRANTS - NASDAQ
1994 High Bid Low Bid
First Quarter 3/4 9/32
Second Quarter 13/32 1/8
Third Quarter 3/16 1/8
Fourth Quarter 7/32 1/8
1995
First Quarter 1/8 1/8
Second Quarter 1/8 1/8
Third Quarter 1/8 1/8
Fourth Quarter 7/32 1/8
1996
First Quarter 1/8 1/8
Second Quarter 1/8 1/16
CLASS E WARRANTS - NASDAQ
1994 High Bid Low Bid
First Quarter 2/38 1 1/8
Second Quarter 1 1/4 3/8
Third Quarter 7/8 9/16
Fourth Quarter 11/16 1/4
12
<PAGE>
1995
First Quarter 11/32 1/4
Second Quarter 3/8 5/16
Third Quarter 5/8 3/8
Fourth Quarter 7/8 3/8
1996
First Quarter 7/16 3/8
Second Quarter 3/8 3/8
13
<PAGE>
DILUTION
As of June 30, 1996, the net tangible book value per share of the Company's
Common Stock was $0.10. "Net tangible book value per share" represents the
amount of the Company's tangible assets, less the amount of its liabilities and
redeemable stock, divided by the number of shares of Common Stock outstanding.
After giving effect to the receipt of the proceeds from the sale of Common Stock
upon exercise of the balance of Class B, E, C and D Warrants at exercise prices
per share of $2.69, $1.25, $0.875 and $0.875, respectively, and from the
exercise of the Underwriter's Unit Purchase Option at an exercise price of $1.45
per share and the related Class A and B Warrants at exercise prices of $1.72 and
$2.69, respectively, the Finder's Unit Purchase Option at an exercise price of
$2.69 and related Class B Warrants at an exercise price of $2.69, in each case
net of expenses of the Offering, and the Common Stock option to consultants at
an average price of $1.549, the pro forma net tangible book value per share of
Common Stock as of June 30, 1996, would have been $.42. This would result in
dilution to purchasers of Common Stock upon the exercise of all Warrants, Unit
Purchase Options and consultant stock options of $1.45. The dilution assumes
that all Class B Warrants will be exercised at $2.69 per share even though the
exercise price increases to $3.23 per share from December 14, 1996 to January
17, 1997. Refer to the following table for the dilution of each of the Warrants
and Unit Purchase Options. [Add dilution if the exercise price for the Class B
and E Warrants is $3.23 per share.]
<TABLE>
<CAPTION>
Underwriter's Unit Finder's List
Purchase Option Purchase Option
Class B Class E Class C Class D Common Class A Class B Common Class B Consultant
Warrants Warrants Warrants Warrants Stock Warrants Warrants Stock Warrants Options Total
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Public offering
price per share
of Common
Stock upon
exercise of
Warrants, Unit
Purchase
Options and
Stock Option... $2.69 $1.25 $0.875 $0.875 $1.45 $1.72 $2.69 $1.45 $2.69 $1.549 $1.87
Net tangible
book value per
share at June
30, 1996 ...... 0.10 0.10 0.10 0.10 0.10 0.10 0.10 0.10 0.10 .10 0.10
Net increase
per share
attributable
upon exercise
of the Warrants,
Unit Purchase
Options and
Stock Options.. .132 .034 .007 0.000 .022 .021 .032 0.00 0.00 .072 0.32
Pro forma net
tangible book
value per share
of Common
Stock after
exercise of the
Warrants, Unit
Purchase
Options and
Stock Options.. 0.232 .134 .107 .10 .122 .121 .132 0.10 0.10 .172 0.42
Dilution of net
tangible book
value per share
of Common
Stock to new
investors ..... $2.458 $1.116 $ .768 $ .775 $1.328 $1.599 $2.558 $1.35 $2.59 $1.377 $1.45
</TABLE>
14
<PAGE>
USE OF PROCEEDS
The Company will derive proceeds from any exercise of the Class A, B, C, D
and E Warrants, the Underwriter's Unit Purchase Option, the Finder's Option and
the Stock Options to consultants and its former joint venture partner offered
hereby. The Warrants and Options are exercisable no later than January 17, 1997
(formerly January 16, 1995 in the case of the Class B and E Warrants, January
24, 1995 in the case of the Underwriter's and Finder's Unit Purchase Options and
June 25, 1996 in the case of the Class D Warrants) and the options to
consultants have exercise dates from December 25, 1996 to August 20, 2006.
Assuming the exercise of all such Warrants, Unit Purchase Options and stock
options to consultants and its former joint venture partner, of which there can
be no assurance, the maximum aggregate amount of such proceeds is estimated at
approximately $6,286,021, less estimated transactions costs of $50,000, for net
proceeds to the Company of $6,236,021. If the Company were to receive such
proceeds, it would be utilized for general working capital purposes.
The foregoing represents the Company's best estimate of its use of the net
proceeds from any exercise of the Warrants, Unit Purchase Options and Stock
Options offered hereby, based upon the current state of its business operations,
its current plans and current economic and industry conditions. Further events,
including the problems, delays, expenses and complications frequently
encountered by businesses as well as changes in economic, regulatory or
competitive conditions or the success or lack thereof of the Company's research
and marketing activities, may require reallocation of funds or may require the
delay, abandonment or reduction of the Company's efforts.
The Company may also use working capital for acquisitions, although the
Company does not currently have any agreements or understandings with respect to
any planned acquisitions.
CAPITALIZATION
The following table sets forth the capitalization of the Company at June
30, 1996, as adjusted to reflect (a) the issuance and sale of 969,191 shares of
Common Stock upon exercise of the Redeemable Class B Warrants at $2.69 per
share; (b) the issuance of 156,189 shares of Common Stock upon exercise of the
Class C Warrants at $.875; (c) the issuance and sale of 5,714 shares of Common
Stock upon exercise of the Class D Warrants at $.875 per share; (d) the issuance
and sale of 540,747 shares of Common Stock upon issuance of the Class E Warrants
at $1.25; (e) the issuance and sale of the Underwriter's Unit Purchase Option
for 97,178 units (includes 291,534 shares of Common Stock; the issuance and sale
of 233,227 shares of Common Stock upon exercise of the Class A Warrants at $1.72
and the issuance and sale of 233,227 shares of Common Stock upon exercise of the
Class B Warrants at $2.69) and (f) the issuance and sale of the Finder's Unit
Purchase Option for 1,568 units (includes 4,704 shares of Common Stock and the
issuance and sale of 3,391 shares of Common Stock upon exercise of the Class B
Warrants at $2.69; and (g) the issuance of 900,000 shares upon the exercise of
900,000 stock options to consultants and its former joint venture partner at
prices ranging from $1.046 to $3.2191, or an average price of $1.549. The
capitalization table assumes the Class B Warrants are exercised at $2.69 which
is the exercise price until December 13, 1996. From December 14, 1996 until the
expiration date of January 17, 1997, the exercise price is $3.23.
15
<PAGE>
<TABLE>
<CAPTION>
June 30, 1996
Actual As Adjusted
<S> <C> <C>
Acquisition Preferred Stock, par value $.01 per $ - -
share, authorized 750,000 shares, no shares
issued or outstanding
Common Stockholders' Equity
Common Stock, $.01 par value; 40,000,000
shares authorized; 15,640,415 shares issued
and 14,877,233 outstanding; 18,978,339
shares issued and 18,215,157 outstanding,
as adjusted (1) 156,404 189,783
Paid-in surplus 14,992,780 21,195,422
Deficit (12,606,058) (12,606,058)
2,543,126 8,779,147
Less:
Treasury Shares (763,182 shares) (899,100) (899,100)
----------- -----------
Common Stockholders' Equity $1,644,026 $ 7,880,047
=========== ===========
Total Capitalization $1,644,026 $ 7,880,047
=========== ===========
</TABLE>
(1) Excludes 1,958,500 shares of Common Stock issuable upon exercise of
outstanding stock options.
16
<PAGE>
SELECTED FINANCIAL DATA
The following information is qualified by reference to, and should be read
in conjunction with, the Company's financial statements and the notes thereto,
and to prior years' From 10K-SB.
<TABLE>
<CAPTION>
Summary Financial Information
(In Thousands, Except Per Share Data)
Six Months Ended
Year Ended December 31, June 30, (unaudited)
1991 1992 1993 1994 1995 1995 1996
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of
Operations Data:
Net revenue...... 1,308 1,371 1,382 1,138 752 414 211
Direct costs..... 401 589 461 1,141 557 388 49
Selling, general
and administrative 2,059 1,735 1,454 2,339 1,918 824 1,075
Research,
development and
engineering...... 36 47 57 120 141 109 47
Operating loss... (1,188)(1) (1,000)(1) (590)(2) (2,462)(2) (1,864) (907) (960)
Interest income.. 48 55 59 155 175 101 41
Interest expense. 197 36 4 - - - -
Loss on investments - - 60 2 82 2 - - -
Net loss from
continuing
operations....... (1,337)(1) (981)(1) (595)(2) (2,389)(2) (1,689) (806) (919)
Loss from
discontinued
operations....... 1,154(1) 1,247(1) - - - - -
Net loss......... (2,491)(1) (2,228)(1) (595)(2) (2,389)(2) (1,689) (806) (919)
Weighted average
number of common
shares and common
equivalent shares
outstanding...... 5,981,324 9,056,231 10,949,876 14,681,530 14,818,055 14,778,227 14,858,222
Net loss per share (0.42)(1) (0.25)(1) (0.05)(2) (0.16)(2) (0.11) (0.05) (0.06)
Balance Sheet Data:
Cash, cash
equivalents and
marketable
securities....... 226 817 6,040 4,168 2,209 3,023 1,604
Working capital.. 22 719 6,261 3,718 2,156 2,977 1,196
Total assets..... 1,923 1,721 6,975 5,088 3,034 4,013 2,340
Long term debt... 1,195 - - - - - -
Stockholders'
equity (deficiency)
(175) 1,166(3) 6,661(3) 4,252 2,604 3,487 1,644
</TABLE>
Notes:
1. The net loss for years 1991 and 1992 include the financial results of
the HumanCad division. The HumanCad division was discontinued on February 23,
1993. Net loss includes a loss from discontinued operations of $1,153,234 in
1991 or $.20 per share and $1,247,270 in 1992 or $.14 per share
2. In years 1993 and 1994, the Company's investment of approximately
$72,000 in a partnership was written off ($17,000 in 1994 and $55,000 in 1993).
ErgoRisk Services, Inc. (Canada) was purchased for $65,000 to effectively
terminate a joint venture, and was subsequently written off in 1994.
3. There were private placements of 1991 and 1993, which were in 1992 and
1993 respectively, which increased the amount of stockholders' equity.
17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Year Ended December 31, 1995 Compared with Year Ended December 31, 1994
Results of Continuing Operations
The Company often provides services pursuant to contracts providing for a
fixed price or a fixed hourly rate. In setting its price for services, the
Company seeks to estimate the man hours that will be required to provide the
services. To the extent that the Company underestimates the man hours that will
be required, or the expenses it will incur in performing a contract, the Company
could realize a loss on any particular contract.
Gross profit increased by $197,885 in 1995 as compared to 1994. The
increase was primarily attributable to lower margin revenue in 1994 associated
with the Indonesian Contract (defined below) and certain additional costs
accrued in 1994 relating to the licensing fees of intelligent products. A
comparison of the two years is shown below:
Year Ended December 31,
1995 1994
Net Revenue............. $752,077 $1,138,304
Direct Costs............ 556,586 1,140,698
-------- ----------
Gross Profit (Loss)..... $195,491 $ (2,394)
======== ===========
Gross Profit Percentage.. 26% -
======== ===========
Direct costs include salaries, equipment purchases for contracts,
consulting fees and certain other costs. Gross profit may fluctuate from period
to period. Factors influencing fluctuations include the nature and volume of
services provided to individual customers which affect contract pricing, the
Company's success in estimating contract costs (principally professional time),
the timing of hiring new professionals who may require training before gaining
certain efficiencies and customer demands.
Net revenue is derived from services rendered and sale of products that are
adjunct to services, generally pursuant to fixed price contracts with terms of
less than one year. The Company's policy is to recognize revenue when services
are rendered or when the related products are shipped. Net revenue decreased by
$386,227 in 1995 from 1994.
18
<PAGE>
Net revenue includes the following:
Year Ended December 31,
1995 1994
Intelligent Surface Technology (1).. $ 96,473 $ 262,000
-------- ----------
Ergonomic Consulting Services:
Product Assessment (2)............ 451,508 800,135
Workplace Assessment (3).......... 204,096 76,169
------- ----------
Subtotal............................ $655,604 876,304
-------- ----------
Total Revenue $752,077 $1,138,304
======== ==========
(1) Revenue from licensing and development fees of Intelligent Surface
Technology declined $165,527 in 1995 from 1994 and accounted for 13% of net
revenue in 1995 versus 23% in 1994. The revenue in both 1995 and 1994 is
attributable to the two licensing agreements signed in 1994 with Reebok for
Intelligent Footwear and a right of first refusal for Athletic, Sport and
Fitness Equipment and Lumex for Intelligent Medical Procedure Equipment. Revenue
from intelligent products includes the initial payments for licensing the
Intelligent Surface Technology as well as fees associated with the completion of
the deliverables under the licensing agreements.
(2) Ergonomic Product Assessment and Redesign provided 60% of the Company's
revenue in 1995 compared to 70% in 1994. The $348,627 decrease in 1995 from 1994
reflects a contract primarily to resell computer equipment with IPTN (the
"Indonesian Contract") for $700,000 which accounted for $665,000 of revenue in
1994 and only $35,000 in 1995.
(3) Revenue from ergonomic workplace assessment increased $127,927 in 1995
from 1994 and accounted for 27% of net revenue in 1995 versus 7% in 1994. The
increase is primarily attributed to the Company's success in obtaining
additional contracts with certain utilities.
Direct costs decreased $584,112, to $556,586 in 1995 from $1,140,698 in
1994 primarily due to: (1) costs in 1994 associated with the Indonesian Contract
which represented 47% of the total cost of sales and (2) a change in estimate in
1994 on certain licensing agreements, whereby the Company recorded approximately
$224,000 of additional costs and accruals for losses on certain contracts.
Selling, general and administrative expenses decreased $420,408, or 18%, to
$1,918,817 in 1995 from $2,339,225 in 1994. The decrease was primarily
attributable to a reduction in salaries and benefits as a result of the
elimination of certain positions and the reduction in certain marketing
expenses.
The Company's research and development costs increased $20,297 to $140,767
in 1995 from $120,470 in 1994. The increase reflects the costs to develop
several components relating to certain applications of the intelligent surface
technology. During 1995 the Company progressed in the development of the
technology of several of the components relating to certain applications of the
intelligent surface technology. For certain other applications, significant
development is required. In the area of Intelligent Surface Technology, the
licensees may share in development costs through the payment of licensing fees.
In 1993 the Company incurred $57,208 of research and development costs.
Interest and other income increased $19,977 to $174,613 in 1995 from
$154,636 in 1994. The increase is primarily attributable to net realized losses
19
<PAGE>
in 1994 of $61,612 on the sale of available-for-sale securities. This was
partially offset by the reduction of interest income in 1995, which reflects the
reduction of assets available for investment as compared to 1994.
The loss on investments recognized in 1994 includes the following two
items: 1) In December 1994, the Company agreed to terminate its joint venture
with ErgoRisk Services, Inc. (Canada). Under the terms of the joint venture
entered into in July 1994, the Company granted ErgoRisk Services, Inc. (Canada)
an exclusive right to market the EARLY(R) System in Canada. The joint venture
was terminated in conjunction with the Company's decision to change its
marketing plans from a broad based approach to a selective market approach.
Under the termination agreement, the Company purchased 100% of the common stock
in ErgoRisk Services, Inc. (Canada) for $65,000, and subsequently wrote off the
investment. 2) The Company recognized a loss of $16,500 from the write-off of
the remaining investment of a partnership interest.
Due to the net losses and the accounting rules in accordance with Financial
Accounting Standards Board Statement No. 109, there was no provision for income
taxes in 1995 and 1994.
As a result of all of the above, the net loss in 1995 decreased $699,473 to
$1,689,480 from $2,388,953 in 1994.
20
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Cash, cash equivalents and held-to-maturity securities decreased $1,959,263
to $2,208,858 at December 31, 1995 from $4,168,121 at December 31, 1994.
Consequently, working capital decreased $1,562,020 to $2,155,767 at December 31,
1995 from $3,717,787 at December 31, 1994. The decreases were primarily
attributable to the net loss incurred in 1995.
The Company expects that its working capital, together with revenue from
operations, will be sufficient to meet liquidity and capital requirements
through 1996. It may be necessary for the Company to raise additional funds in
1996 in order to accelerate the commercialization of the Intelligent Surface
Technology and the remarketing of Mannequin(R). Longer term cash requirements
are dictated by a number of external factors, which include, among others, the
Company's ability to introduce new competitive products and services, and
license its Intelligent Surface Technology for additional applications.
The Company has no material commitments for any future capital
expenditures.
Accounts receivable, net of the allowance for doubtful accounts, increased
to $135,995 at December 31, 1995, from $119,855 at December 31, 1994. Three
customers comprised 83% of the balance at December 31, 1995.
Prepaid expenses and other current assets increased slightly to $233,585 at
December 31, 1995 from $230,480 at December 31, 1994. Other current assets
principally include profits and expenses for services rendered but are not yet
billable.
Accounts payable, accrued expenses and sundry liabilities decreased to
$422,671 at December 31, 1995 from $700,669 at December 31, 1994. The decrease
resulted primarily from the Company's performance in 1995 which satisfied a
significant portion of the accruals made in 1994 relating to the downsizing of
the ergonomic workplace assessment services, accruals for services to be
provided in excess of revenue received or to be received, accruals for
professional fees in connection with the filing of the Company's Form SB-2 and
Form S-3 Registration Statements and accruals related to written off
investments.
In April, 1995, the Company agreed to exchange a shareholder's investment
in one of the Company's subsidiaries for 100,000 common shares of the Company.
The investor had purchased shares of the subsidiary in 1993 for $100,000,
resulting in the recording of deferred revenue. As a result of the exchange
agreement, the deferred revenue was converted into the Company's common stock
($1,000) and paid-in-surplus ($99,000) accounts.
The Company's net revenue was $752,077 in 1995. The Company does not
anticipate any royalty revenue in 1996 associated with its current licensing
agreements. The Company believes that commercialization of its Intelligent
Surface Technology through the licensing agreements will commence in 1997 and
continue in subsequent years. Revenue will be generated in 1996 through product
ergonomic consulting services, ergonomic workplace assessments and revenue that
may result if the Company is successful in licensing its Intelligent Surface
Technology for additional applications.
Six Months Ended June 30, 1996 Compared to Six Months Ended June 30, 1995
Results of Continuing Operations
Net revenue is derived from services rendered and the sale of products that
are adjunct to services, generally pursuant to fixed price contracts with terms
of less than one year. The Company's policy is to recognize revenue when
services are rendered or when the related products are shipped.
Direct costs, that include salaries, equipment purchases for contracts,
consulting fees and certain other costs, may fluctuate from period to period.
21
<PAGE>
Factors influencing fluctuations include the nature and volume of services
provided to individual customers which affect contract pricing, the Company's
success in estimating contract costs (principally professional time), the timing
of hiring new professionals who may require training before gaining certain
efficiencies and customer demands.
The following is a summary of net revenue, direct costs, and gross profit
for the periods indicated.
Three Months Ended June 30 Six Months Ended June 30
1996 1995 1996 1995
Net Revenue..... $108,226 $299,631 $210,721 $414,396
Direct Costs.... 4,543 194,020 49,288 388,163
-------- -------- -------- --------
Gross Profit.... $103,683 $105,611 $161,433 $ 26,233
Gross Profit %.. 96% 35% 77% 6%
Net revenue decreased by $191,405, to $108,226, during the three months
ended June 30, 1996, and by $203,675, to $210,721, for the six months ended June
30, 1996, as compared to the same periods in 1995. The decrease was partly due
to a decline of $82,500 in Intelligent Surface Technology revenue which, in
1995, included $95,000 relating to the completion of several deliverables for
two of our licensees.. Also contributing to the decrease was a decline in
Ergonomic Consulting Services revenue, mostly due to delays in the start date of
certain projects. These projects are expected to begin in the third quarter.
Direct costs decreased by $189,477 and $338,875 for the three months and
six months ended June 30, 1996, respectively, as compared to the same periods in
1995. The decrease was primarily due to a more favorable mix of internal versus
outside resources in 1996 versus 1995, and the elimination of a reserve
established in 1994.
As a result of the above, gross profit remained virtually unchanged for the
quarter ended June 30, 1996 as compared with the same period in 1995, despite
the shortfall in revenue in the current period, and increased by $135,200 for
the six months ended June 30, 1996, as compared to the comparable period in
1995.
Selling, general and administrative expenses increased by $111,485 for the
three months ended June 30, 1996, as compared to the same period in 1995, and
increased by $251,454 for the six months ended June 30, 1996, as compared with
the same period in 1995. This increase was primarily attributable to a growth in
salaries, benefits and related expenses, as a result of the addition of sales
and marketing positions. Also contributing to the increase were recruiting,
legal, consulting and severance costs which were one-time in nature.
Research, development and engineering costs decreased by $27,910 to
$19,333, for the three months ended June 30, 1996, and by $62,846 to $46,560 for
the six months ended June 30, 1996, from the same periods in 1995. This was
primarily due to projects in 1995 relating to Intelligent Surface Technology,
which have been completed, as well as the capitalization of software development
costs in 1996.
Interest and other income decreased by $30,580 for the three months ended
June 30, 1996, as compared to the three months ended June 30, 1995. Interest and
other income decreased by $59,579 for the six months ended June 30, 1996, as
compared to the six months ended June 30, 1995. This was due to a decrease in
assets available for investment.
Net loss, as a result of the above, for the three months ended June 30,
1996, was $466,587, as compared to a net loss of $350,504 for the comparable
period in 1995. Net loss for the six months ended June 30, 1996 was $918,908, as
compared to a net loss of $805,921 for the same period in 1995.
22
<PAGE>
There was no tax benefit for the three months and six months ended June 30,
1996 and the three months and six months ended June 30, 1995, due to losses
which have increased the future availability of the net operating loss
carryforward which has been offset by valuation allowances.
Liquidity and Capital Resources
Cash, cash equivalents and marketable securities were $1,604,224 as of June
30, 1996, compared to $2,208,858 as of December 31, 1995. Working capital was
$1,195,806 as of June 30, 1996, compared to $2,155,767 as of December 31, 1995.
The decrease of $959,961 or 44.5% in working capital was primarily attributable
to the net loss incurred in the six months ended June 30, 1996.
The Company expects that its working capital, together with revenue from
operations will be more than sufficient to meet any liquidity and capital
requirements for the remainder of 1996. While the Company is considering whether
to seek additional capital from a private placement of its securities in order
to accelerate the development of various current technologies, it has not made
any agreement or arrangement for such a transaction, has not determined the
specific nature of the securities it might offer (i.e., stock, warrants, notes
or a combination) and can make no assurances as to whether a proposed financing
will be attempted or, if attempted, will be successful, or the ultimate result
of such a financing.
The Company has no material commitments for any future capital
expenditures.
Forward-Looking Statements
Information set forth in this Prospectus regarding the Company's plans for
future operations constitutes "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Any forward-looking statements
should be considered in light of the factors set forth in the "Risk Factors"
section of this Prospectus.
BUSINESS
General
BCAM International, Inc. (the "Company") is a software technology company,
specializing in ergonomic (human factor) solutions for individuals, government,
and for major corporations. The Company completed, in early 1996, its
restructuring by focusing on (I) accelerating the development and
commercialization of the Company's Intelligent Surface Technology ("IST"), (II)
continuing its development of proprietary software, which consists of the
intelligent part of "IST", and Mannequin(R), the EARLY(R) process and
Back-to-Work(TM) Technology, (III) building its ergonomic consulting services
business, which consists of Ergonomic Product Assessment and Redesign, and
Ergonomic Workplace Assessment and (IV) emphasizing a strategy of broadening and
strengthening business relationships such as joint ventures, partnerships,
licenses and other alliances. In addition, the Company established a
collaborative research and development relationship with the State University of
New York at Stony Brook, with plans to establish additional relationships with
other universities, government laboratories, and other subcontractors.
The Company continues to believe that its ergonomic consulting services was
and still is the engine that drives new product ideas and with it, the potential
of royalty income, as well as new product and service offerings.
During the course of the Company's performance of ergonomic product and
workplace assessment services, the Company from time to time develops certain
know-how based upon data from its consulting services which it is able to embody
into proprietary technologies. When this occurs, and it is believed that the
technology is a significant enhancement from the existing technology, the
Company files for patent protection under the laws of the United States and, if
warranted, internationally.
23
<PAGE>
The Restructured Businesses of the Company
(I) Intelligent Surface Technology
Since 1991, the Company has developed and patented its Intelligent Surface
Technology. BCAM's Intelligent Surface Technology empowers surfaces to
automatically measure any part of the body touching that surface and then, in
real time, adjust themselves to conform to that user's body to provide the
ultimate in comfort and fit. Such a surface is considered an intelligent surface
because it is able to learn about the user and recognize patterns of the user's
activities through its sophisticated proprietary software. The Company has
identified applications for this technology in the primary areas of seating,
footwear and bedding. In addition, the technology can be used for handtools,
exercise equipment, helmets, etc.
Current Licensees
The Company's current clients who are expected to use the Company's
Intelligent Surface Technology in their products are as follows:
Textron. McCord Winn Textron, Inc. ("Textron") signed a Development and
License Agreement with the Company in March 1993 (amended in October 1993 and
May 1996) whereby the Company granted an exclusive worldwide license to Textron,
to use the "IST" patents and know-how in the manufacture, use and sale of seats
and seating components for the transportation industry, wheelchairs, office
furniture applications, and hospital beds.
In 1996, Textron informed BCAM that Textron expects certain 1998 model
automobiles to be introduced in the fall of 1997, to incorporate "IST" in the
design of drivers' seats. Textron is obligated to pay the Company a royalty for
use of the Company's technology in the sale of the systems which is expected to
commence in 1997.
Reebok. In January 1994, the Company and Reebok signed a world-wide
exclusive licensing and development agreement for the use of "IST" footwear. In
addition, Reebok has a right of first refusal to obtain exclusive licenses to
use "IST" on athletic, sport and fitness equipment fields of use. The fields of
medical equipment and orthopedic devices are specifically excluded from the
Reebok license.
BCAM and Reebok are continuing to work closely in developing the
application of the Company's Intelligent Surface Technology, which is expected
to be introduced in Reebok's footwear products in due course.
Lumex. The agreement signed in September 1994 between the Company and
Lumex, Inc. was terminated in April 1996. The fields relinquished by Lumex cover
operating room tables, medical rockers and medical procedure chairs.
Potential New Licensees
The Company has identified several fields that can benefit from its
technologies and ergonomic design expertise. BCAM is in advanced discussions
with a recliner company, an office furniture company for seating products, an
airline for its first class seat, a wheelchair company, a hospital bedding
company, a company which manufactures operating room tables, a medical footwear
company, a tool company which manufacturers jackhammers and a hand tool company.
It is actively pursuing the leading companies within these fields in order to
increase the number of licensees and generate additional revenue.
Sealy. In August, 1996, the Company signed an agreement with Sealy, Inc. to
utilize BCAM's "IST", computer software, know-how and expertise towards
development of new Sealy products. Specifically, Sealy has an option agreement
to "IST" for its adjustable bed and a right of first refusal as applied to all
bedding products (excluding medical and adjustable bedding applications).
24
<PAGE>
Marketing Strategy
In order for the Company to obtain new licensees, the Company's marketing
strategy has focused on identifying organizations that:
- Are large,
- Are financially strong,
- Have marketing presence, and
- Have the financial resources to commercialize the technology.
The Company will offer the "IST" technology to organizations that meet the
above criteria and will assist that organization in commercializing the
technology.
Technology Strategy
In order for the Company to protect its current licensees and add new
licensees, the Company is continuing to improve its technology by:
- Growing its portfolio of patents in Intelligent Surface Technology.
- Developing one or more key components in the Intelligent Surface
Technology system, such as a microvalve, self-generating power supply
and intelligent switch.
- Enhancing its application engineering development capability.
Patents for "IST"
During 1995 and 1996, the Company substantially broadened and strengthened
its intellectual property related to Intelligent Surface Technology, both
domestically and internationally. During, 1996, the United States Patent Office
informed the Company that it has allowed three patents, and the European Patent
Office informed the Company that it had allowed one patent. The European patent
is the Company's first patent outside of the United States. BCAM now has seven
patents (three issued and four allowed) and four pending patents.
The new patent allowances have enabled the Company to broaden its licensing
capabilities, both domestically and internationally. The newly allowed claims
cover a broader range of uses of "IST", especially for medical uses.
(II) The Company's Proprietary Software
In addition to the "IST" software, the Company's other software development
efforts have always been focused in areas that support the Company's Ergonomic
Consulting services. Since 1989, the Company has developed, marketed,
maintained, and continuously upgraded two proprietary software packages;
Mannequin(R) and EARLY(R). Recently, the Company has been identifying, testing,
validating, and modifying software technology for use in the Worker's
Compensation area of "Back-to-Work(TM)".
Mannequin(R)
The Company intends to re-introduce and market its proprietary Mannequin(R)
software in the near future. The software, is a PC-based three-dimensional
scaleable humanoid, is compatible with CAD and other graphic programs, and has
motion capture capabilities useful for graphical illustrations and motion
analysis. Ten thousand (10,000) packages were sold between 1992 and 1994. Many
universities, design organizations and government agencies, including NASA, are
current users. The results of a successful beta test of the new version of
Mannequin(R), and preliminary market survey confirmed that a substantial market
exists, especially among CAD users and industrial designers.
25
<PAGE>
Mannequin(R), enables the user to render three-dimensional scaleable
humanoid figures on a PC. The humanoid can walk, bend and grasp objects, and the
user can calculate the force and strength of muscles involved in the motion, as
well as determine the "vision cone".
The Company is currently developing a marketing plan to relaunch
Mannequin(R).
EARLY(R)
The Company's EARLY(R) process (Ergonomic Assessment of Risk and Liability)
allows the ergonomist to integrate videotapes of tasks with the assistance of
sophisticated software to identify risk of Cumulative Trauma Disorders and
determine opportunities for ergonomic intervention in order to fit the workplace
better to the workers' capabilities. Currently, the Company's EARLY(R) process
is marketed on a service retail basis to industrial companies and governments,
and wholesale to insurance companies. See Marketing of Ergonomic Consulting
Services.
Back-to-Work(TM) Technology
The Company is currently completing the testing and validation of a
diagnostic technology which will, in a non-invasive way, measure the severity of
back injury of an individual who is already on Workers' Compensation, or an
individual who has filed a claim to be on Workers' Compensation. This diagnostic
analysis combines the measurement of the range of motion, with strength
calculation, in order to assess the functional capabilities of an individual.
This objective, non-invasive, analysis should identify malingerers, and provide
doctors for employers and doctors for insurance companies with the necessary
information on all employees that are claiming Workers' Compensation. In
addition, medical providers can use this information to prescribe treatment
protocol, monitor progress of treatment and determine proper back-to-work
procedures. The Company intends to market this as a service to insurance
companies and other third-party administrators ("TPA").
The Company's testing and validating of a Back-to-Work(TM) Technology,
along with the necessary modifications, is expected to be completed in the
fourth quarter of 1996. BCAM then plans to work with Risk Enterprise Management
("REM"), a 75% owned subsidiary of Zurich Companies, to perform a pilot study
during the fourth quarter of 1996, using a group of REM's managed care
providers. If the pilot study is successful, the Company expects to roll out its
new Back-to-Work diagnostic technology in early 1997. Several other large
insurance companies have also been approached, and have expressed interest in
this diagnostic technology. See Marketing of Ergonomic Consulting Services.
(III) Ergonomic Consulting Services
BCAM's Consulting Services are grouped in two categories: Ergonomic Product
Assessment and Redesign, and Ergonomic Workplace Assessment. Recent changes in
the Company's consulting service involve a new pricing policy which includes a
fee plus on-going future revenues (see also Recent Pricing Policy).
Ergonomic Product Assessment and Redesign
The Company performs comprehensive subjective and objective ergonomic
testing on products that quantifies the product's relationship in terms of
comfort, fit, usability and user performance of a product to human users. This
knowledge is used by product developers, manufacturers and industrial design
firms to improve existing products and/or develop new ones. In essence, BCAM
serves as the "User's Representative" communicating user needs in terms that
engineers and industrial designers can apply in the design of their products.
This analysis provides substantial guidance and a strong foundation to the
design process.
26
<PAGE>
(1)BCAM's Standard Ergonomic Product Assessment & Redesign Services
(a) Expert Review
This consists of a product evaluation which reviews ergonomic factors
(comfort, fit, usability and user performance) to determine the ergonomic
strengths and weaknesses of a product. This is performed by BCAM's ergonomists,
frequently supplemented by human subject testing at any time during a
development cycle or life cycle, to enable the evaluation of products in
accordance with theoretical ergonomic principles and BCAM's scientific
expertise.
(b) Best-In-Class (B-I-C)
This test compares the client's product to competing products on a
multitude of factors, in order to identify, from an ergonomic point of view, the
ergonomic benefits of each feature compared, to competing products corresponding
features.
This "Best-In-Class" ergonomic assessment provides a rank ordering of all
products and their features based upon comfort, fit, usability and user
performance, all from a user point of view.
(2)BCAM's Customized Full Product Development Services
Customized Full Product Development Programs are also available and widely
used by companies to complement their traditional design process. This
customized process, shaped to a client's requirement, typically begins with BCAM
providing basic ergonomic guidelines or specifications for consideration during
concept development through user testing and final product acceptance testing.
BCAM acts as a design team member during the client's design cycle.
Ergonomic Workplace Assessment
Some estimate workers' compensation will cost U.S. employers approximately
$100 billion in 1996. It is also estimated that more than 2.5 million people
will develop musculoskeletal disorders in 1996, and according to OSHA, each year
over $20 billion dollars will be spent on repetitive stress injuries (or
Cumulative Traumatic Disorders). Many of these injuries will involve lost duty
time for recuperation, reassignment of injured workers to other jobs, in
addition to medical treatment costs, thus escalating total workers' compensation
costs.
BCAM provides Ergonomic Workplace Assessment services to industrial
companies, government, and insurance companies, to reduce musculoskeletal
injuries, through its proprietary EARLY(R) services and custom tailored
consulting services. Other benefits are the potential for improved productivity,
enhanced product and service quality.
(1)EARLY(R) - Managing ergonomic risk to reduce workers' compensation costs.
EARLY(R) is a unique laboratory service for the analysis of a company's
ergonomic health using the latest proprietary computer-assisted software for
biomechanical analysis. EARLY(R) allows for the prediction of musculoskeletal
injury likelihood and the development of cost-effective solutions to reduce the
risk factors related to Work Related Musculoskeletal Disorders (WMSDs) with
emphasis on Cumulative Trauma Disorders.
EARLY(R) consists of a three-phase process: data collection, laboratory
analysis and solution(s). The data required includes a short videotape of the
task being performed, an employee musculoskeletal stress questionnaire and
historical injury and illness data. The laboratory analysis is performed by
highly skilled ergonomists using proprietary, computerized biomechanical
modeling techniques at BCAM's laboratories. The
27
<PAGE>
report will provide a recommendation from a data-base of standard
solutions, and if no standard solution is identified, BCAM, if asked, will
develop a customized solution.
Benefits of EARLY(R):
- Reduces workers' compensation costs
- Helps prevent work related musculoskeletal disorders
- Assists in compliance with OSHA, NIOSH, and ADA regulations
- Increases productivity and improves quality of life
- Provides practical ergonomic engineering and off-the-shelf
product solutions
- Organizes job rotation schedule
(2)Customized Total Ergonomic Quality Program
Customized analyses, not typically available as part of standard EARLY(R),
are provided as customized services including, unique recommendations which are
beyond EARLY(R)'s database of standard solutions, implementation assistance,
long-term monitoring and follow-up.
Marketing of Ergonomic Consulting Services
- Ergonomics, human factors, originated in academia and was only recently
popularized by industry. As a result, the sales cycle is long and, since the
service is also intangible, the Company's emphasis is on building long-term
relationships with major organizations.
- The company is marketing and promoting its Ergonomic Consulting Services
with the traditional methods which is through referrals from existing clients,
publishing articles, speaking at seminars and conducting industry specific
seminars.
- In addition to the above approaches to market the professional consulting
services, the Company is also using a wider scope methodology such as: attending
and exhibiting at trade shows, utilizing direct marketing techniques, building a
highly experienced and professional sales team, and is advertising in selected
trade publications, including on its Internet web site.
Recent Pricing Policy
During 1995, BCAM changed its pricing practices in its consulting business.
Previously, BCAM charged only a consulting fee per project. The Company's new
pricing formula calls for, in addition to a consulting fee, a royalty which may
be earned when BCAM's ergonomic product redesign change recommendations are
commercialized or a percentage of cost savings when major ergonomic workplace
assessment recommendations are implemented.
The following are some examples of the new pricing practice:
- LILCO and BCAM will work together to market a "Lift Assist" for a
Jackhammer, for which BCAM provided design recommendations as part of its
workplace assessment. BCAM will share in the proceeds from an income stream in
the future.
- Remington Arms, pursuant to a Best-In-Class assessment by BCAM, was
provided redesign recommendations related to Remington's .22 caliber rifles. The
contract signed with Remington states that if BCAM's recommendations are
incorporated into their product, royalties will be paid to BCAM.
28
<PAGE>
(IV) Business Relationship Strategy
During 1995 and 1996, the Company focused on building long-term
relationships with major organizations as a key part of its marketing strategy.
The Company's objective is to grow its revenue base by obtaining repeat business
from its clients (which the Company has already started accomplishing in 1996)
and thus generate recurring revenue from all clients.
The following are some examples, other than the "IST" licensing
relationship, where repeat business has occurred or is imminent:
- In March, 1996, the Company entered into a long-term relationship with
REM to provide EARLY(R) service. Later in the year, the relationship broadened
to include both prevention, EARLY(R) service and a pilot of custom-tailored
offering(s) of REM with BCAM's participation, and Back-to-Work(TM) (refer to
"Back-to-Work(TM) Technology" above).
- Multiple contracts with a major airline relating to the interior redesign
of the plane such as seating. In addition, BCAM identified causes and then made
recommendations for the redesign of food service carts on airplanes,
specifically to reduce repetitive stress injuries.
- Multiple contracts with the Long Island Lighting Company ("LILCO") for
Workplace Assessments, Product Assessments and Redesign and a project whereby
LILCO and BCAM will work together to market a "Lift Assist" for Jackhammers.
BCAM will receive a royalty fee for all sales of the product.
- After completing a Product Assessment and Redesign assignment for Stanley
Tools, a division of The Stanley Works, BCAM received additional Product
Assessment and Redesign assignments from other divisions of Stanley Works, and
more are expected.
- Frisby Technology, Inc. ("Frisby"), a leading technology company
established to develop, manage and commercialize innovative dual use and
environmental remediation technologies, and BCAM entered into a Business
Referral Agreement. In the agreement, BCAM has the exclusive right to refer
customers to Frisby relating to the following products: Bedding, Recliners and
heat stress reduction products for workers at utilities. As of September 1996,
LILCO awarded a grant to Frisby and BCAM to develop "cool" gloves and "cool"
sleeves to reduce heat stress for linemen.
Research and Development
The Company's research and development is focused on enhancing and
commercializing the Company's core technologies. The Company attempts to
minimize spending on research, therefore, the Company typically will try to
acquire the rights to use an existing technology, if available, rather than
spend money and effort to invent a new technology. The Company will, however,
fund research for technology, when the needed technology is not available. For
example, in the case of certain components (i.e., a self-generating power supply
and an "intelligent" switch) which are necessary to employ an IST system for
handtools and footwear applications, the Company is seeking to acquire the
rights to technology to manufacture such components instead of trying to invent
those technologies. However, in the case of other control components (i.e., the
microvalve that will control the "air pressure"), the Company is devoting
resources to develop that technology in order to be in a better position to
exploit the commercial opportunities of IST in a miniaturized environment. In
the area of development, the Company is focusing on software and application
engineering. Further software developments include "IST", Mannequin(R),
Back-to-Work(TM), and fully automating the EARLY(R) process. In addition, other
development efforts include application engineering for the commercialization of
"IST" and for BCAM's technology, needed to retrofit existing products in the
market, for other ergonomic products.
The Company uses its internal resources and subcontractors, as needed, in
its research and development activities. For example, the Company has
established a collaborative research and development relationship with the State
University of New York at Stony Brook, and plans to establish additional
relationships with other universities, and government laboratories, as
necessary.
29
<PAGE>
Competition
Management of the Company believes that its unique technologies,
proprietary software, methodologies and know-how give it a significant
competitive advantage.
Although there may be similar systems to BCAM's Intelligent Surface
Technology, the Company believes that its patents and know-how protect its
technology from competition.
The Company believes that Mannequin(R) is the only software package of its
kind that will process on a PC with a minimum of resources, i.e., 4 MG memory.
Therefore, Mannequin(R) has significant economic advantages over all other
competing software of its kind.
Although there are many competing sources for similar services to the
Company's offerings, the Company believes its EARLY(R) process, with the
accompanying proprietary software provides significant advantages in cost, and
proven solutions in its data base, to its clients.
There are many sources of product design services, especially internal
designers of organizations. However, the Company believes that its unique
technology, proprietary software, know-how and methodologies, developed over the
last 12 years, which are continuously updated, provide significant advantages to
BCAM's clients over other alternatives in cost, quality and faster turnaround,
thus reducing the design cycle.
Government Regulation
The Company's present and currently proposed activities are not generally
subject to government regulation in the United States or other countries.
While the Company cannot predict the extent to which it may be affected by
legislative or other regulatory developments, it does believe that the current
policies of OSHA encourage the use of the Company's services. The Company is
further of the view that if OSHA continues to focus on ergonomic issues, it will
result in both industry and the general public becoming more aware of the need
for ergonomic services and products. Focus is also occurring at the FDA to
encourage more human factor engineering in the design of medical devices.
The costs and effects of complying with environmental laws by the Company
are not material.
Proprietary Information
The Company has obtained three patents (United States) and four notices of
allowances (three U.S. and one European) and has filed four additional United
States patent applications relating to its Intelligent Surface Technology. Two
of the pending patents are of special significance. One is a pending software
patent filed prior to the June 22, 1995 GATT Treaty, which when and if issued,
will have a 17 year life. The second is for a critical component needed to
miniaturize the application of the Intelligent Surface Technology. Such
miniaturization will allow the Company to a) accelerate the commercialization of
many applications, b) enter the very large and expanding medical footwear market
with applications for diabetics, arthritics and the aging population, and c)
provide applications to other industries, such as the hand tool industry. The
Company also has five U.S. patents in fields other than in Intelligent Surface
Technology.
The Company protects its proprietary written material, know-how, computer
software and technology which it has or may develop, through the use of United
States copyrights, common-law trade secret protection, trademarks and service
marks, and contractual arrangements. In addition, the Company enters into
confidentiality arrangements with its employees, consultants and customers, and
implements various measures to maintain "trade secret" protection for its
products.
30
<PAGE>
Employees
As of September 30, 1996, the Company had 11 employees and four part-time
positions. The functions include five in technical staff, three in sales and
marketing, and three senior management members, with the rest being accounting
and administrative staff. In addition, the Company established a collaborative
research & development relationship with the State University of New York at
Stony Brook, with plans to establish additional relationships with other
universities, government laboratories, and other sub-contractors.
Properties
Since 1990, the Company has leased office space at 1800 Walt Whitman Road,
Melville, New York. The Company's lease expires on March 31, 2000. The current
annualized lease rate for this space is approximately $138,000, which is subject
to annual increases. The facility, which contains approximately 8,400 square
feet, includes biomechanics research laboratories and a comprehensive ergonomic
library as well as offices. The laboratories are used both for testing and for
the redesign of products. The facilities are believed to be adequate for the
Company's operations into the foreseeable future.
Legal Proceedings
There are no material legal proceedings pending against the Company.
Suppliers
The Company provides services, and the materials it uses in its business
may be obtained from numerous suppliers.
Forward-Looking Statements
Information set forth in this Prospectus regarding the Company's plans for
future operations constitutes "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Any forward-looking statements
should be considered in light of the factors set forth in the "Risk Factors"
section of this Prospectus.
MANAGEMENT
Directors and Executive Officers
The current directors and executive officers of the Company are as follows:
Name Age Position With Company
Michael Strauss 54 Chairman, President, Chief Executive Officer,
Chief Operating Officer and Director
Robert Wong 55 Vice Chairman, Chief Technology Officer,
Interim Chief Financial Officer, Treasurer
and Director
David J. West 49 Vice President - Sales and Marketing
Norman M. Friedland 49 Secretary
Julian H. Cherubini 60 Director
Joel L. Gold 55 Director
Glenn F. Santmire 54 Director
31
<PAGE>
Michael Strauss became the Company's President and Chief Operating Officer
effective January 2, 1995 and its Chairman of the Board and Chief Executive
Officer on February 16, 1995. From 1991 to December 31, 1994, Mr. Strauss was
President and Chief Operating Officer of Colorado Prime Corp., a home food
service company providing home delivery of high quality, custom designed food
programs to retail customers. From 1984 to 1991, he was Chairman and Chief
Executive Officer of Capital Credit Corporation, a subsidiary of Union
Corporation, a New York Stock Exchange Company. Capital Credit Corporation
provides receivables management and consumer debt collection services to
corporations in the financial services, telecommunications, health care and
related businesses. On June 18, 1992, Mr. Strauss and his agents and employees
at Capital Credit Corporation consented to a final judgment of permanent
injunction enjoining Mr. Strauss from violating Section 10(b) of the Securities
Exchange Act of 1934 (the "Exchange Act") and Rules 10b-5 and 13b2-1 of Sections
3(a) and 13(b)(2)(A) of the Exchange Act and Rules 12b-20 and 13a-13 promulgated
thereunder. Senior managers at Capital Credit Corporation were also permanently
enjoined as provided above. Prior to his tenure at Union Corporation, Mr.
Strauss was employed by American Express Company in various senior management
positions including Executive Vice President of the Financial Services Division
of Shearson Lehman Brothers, Executive Vice President of Travel Related
Services, and President of American Express Canada, Inc. Mr. Strauss has a BBA
from the City University of New York and an MBA from the Baruch School-City
University of New York.
In February, 1995, Robert Wong was appointed Vice Chairman of the Board and
Chief Technology Officer, after having become a director in February of 1994.
Since September, 1996, Mr. Wong is also serving as interim Chief Financial
Officer and Treasurer. Previously, from February 1994 through February 1995, Mr.
Wong worked as a representative for the Prudential Insurance Company, and was a
private investor from 1989 to February 1995. Over the previous 27 years, Mr.
Wong was founder and president of several technology companies and president of
several subsidiaries of Coordinated Apparel, Inc. Mr. Wong has an SB in
Electrical Engineering and also an SB in Industrial Management from
Massachusetts Institute of Technology.
In August, 1995, David J. West was appointed Vice President of Sales and
Marketing. Prior to joining the Company, from November 1993 to September 1995,
he was a Senior Marketing Executive for AIL Systems. From September 1992 to
October 1993 he was Vice President of Sales and Marketing for Miltope and from
September 1990 to September 1992 he was Director of Sales and Marketing for
Barco Chromatics. Mr. West holds an MBA degree from Southern Illinois
University.
In September, 1996, Norman M. Friedland was appointed Corporate Secretary.
Since 1994, Mr. Friedland has been counsel to the law firm of Ruskin, Moscou,
Evans & Faltischek, P.C., the Company's general counsel, and prior to that was
in the private practice of law.
In September, 1996, Allan Tepper, VP of Finance & Administration and Chief
Financial Officer, resigned to pursue other interests.
Julian H. Cherubini is the President and Chief Executive Officer of AliMed,
Inc., a company that manufactures and distributes a broad range of products for
orthopedic rehabilitation, diagnostic imaging, operating rooms, occupational
medicine and ergonomics. Mr. Cherubini founded AliMed, Inc. in 1970 and has
served as its President and Chief Executive Officer since its inception. Mr.
Cherubini holds a BS Degree in Metallurgy from the Massachusetts Institute of
Technology and a Masters Degree in Materials and Radiochemistry from the
University of Texas at Oak Ridge.
Joel L. Gold was elected a Director in February 1994. In April 1996, Mr.
Gold became Executive Vice President of L.T. Lawrence Co., an investment banking
firm. From April 1995 to April 1996, Mr. Gold was a managing director and head
of investment banking at Fechtor & Detwiler. From 1993 to 1995, Mr. Gold was a
managing director at Furman Selz Incorporated, an investment banking firm. Prior
to joining Furman Selz, from 1991 to 1993, he was a managing director at Bear
Sterns & Co., an investment banking firm. Previously,
32
<PAGE>
Mr. Gold was a managing director at Drexel Burnham Lambert for nineteen
years. He is currently a member of the Board of Directors of MSA Realty Corp.,
Action Industries, Inc., Concord Camera, William Greenberg, Jr. Desserts and
Cakes, Inc., Sterling Vision, Inc. and Life Medical Sciences. Mr. Gold has a law
degree from New York University and an MBA from Columbia Business School.
Glenn F. Santmire was appointed a director in October 1995. Since 1995 he
has been employed by Unisys Corporation as Group Vice President of the Worldwide
Services-Market Sector Group. From 1994 to 1995 he was President of GFS
Associates, Inc., a consulting firm which he founded. From 1992 to 1994 Mr.
Santmire was a Senior Vice President at Mastercard International and from 1990
to 1992 he was President of Enhanced Telephone Services, Inc., a subsidiary of
Citibank. Mr. Santmire possesses both a BA and an MBA degree from New York
University as well as a law degree from George Washington University School of
Law.
Lawrence N. Cohen became a director in May 1994. Mr. Cohen did not stand
for re-election and his term expired June 18, 1996. Mr. Cohen retired in June
1994 as Chairman of the Board, President and Chief Executive Officer of Lumex,
Inc., a leading developer, manufacturer and marketer of healthcare, fitness and
consumer products with revenues in excess of $100 million. Mr. Cohen had held
these positions at Lumex since 1986 and had been with Lumex since 1966 in other
key positions including Division President, Treasurer, Corporate Secretary and
Corporate Controller.
Committees
The Board of Directors had established three committees, two of which
currently exist. The members serve for one year terms and are appointed by the
Board of Directors.
The Executive Committee, which was created on June 16, 1994, was disbanded
by vote of the Board of Directors on April 24, 1995.
The Compensation/Stock Option Committee, chaired by Glenn Santmire, was
created on June 16, 1994. It replaced the Company's Stock Option Committee that
was responsible for administering the Company's stock option plans, including
the determination of recipients of grants thereunder, whether a grant will
consist of Incentive Stock Options ("ISOs") or Non-Qualified Options ("NQOs")
and the number of shares to be subject to such options. The Stock Option and
Compensation Committee held one meeting during 1994, one meeting in 1995, and no
meetings for the six months ending June 30, 1996. This committee has the
responsibilities of administering the stock option plans and by adding
compensation as an additional area, the committee now provides the Company with
additional managerial resources in providing compensation guidelines for
salaries, benefits, pension plans and other applicable areas. This committee
consists of three directors. The present members are Messrs. Santmire, Gold and
Cherubini.
The Audit Committee, chaired by Joel Gold, which held one meeting in 1994
and two meetings in 1995 and one meeting in the six months ended June 30, 1996
reviews issues relating to the Company's existing system of internal controls
and consults with the Company's independent auditors with regard to the adequacy
of these systems. The Audit Committee is also responsible for reviewing the
Company's audited financial statements and reports to the Board of Directors
regarding same. The Audit Committee consists of three directors. The present
members are Messrs. Gold, Santmire and Cherubini.
Executive Compensation
The table set forth below shows information concerning the compensation for
services in all capacities during the years indicated paid to or earned by (i)
the Company's Chief Executive Officer and (ii) each executive officer of the
Company (other than the Chief Executive) whose annual compensation exceeded
$100,000 during 1995.
33
<PAGE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term
Annual Compensation Compensation Awards
Bonus Other Annual Options All Other
Name and Principal Position Year Salary ($) ($) Compensation ($) (#) Compensation ($)
<S> <C> <C> <C> <C> <C> <C>
Michael Strauss (1) 1995 $200,000 - $7,743 1,000,000 -
Chairman, President, 1994 - - - - -
Chief Executive 1993 - - - - -
Officer and Chief
Operating Officer
</TABLE>
(1) Mr. Strauss became employed by the Company as its President and Chief
Operating Officer on January 2, 1995 at an annual salary of $200,000.
<TABLE>
<CAPTION>
Option Grants in Total
Individual Grants
Number of Securities % of Total Options
Underlying Options Granted to
Granted (#) Employees in Fiscal Exercise of Base
Name Year Price ($/SH)(10) Expiration Date
<S> <C> <C> <C> <C>
Michael Strauss 300,000 (1) 15.94% $1.0313 1/03/05
Chairman, President 200,000 (2) 10.63 0.9219 2/16/05
& Chief Executive 500,000 (3) 26.57 1.0469 7/03/05
Officer
Robert P. Wong 7,500 (4) N/A 1.6800 7/21/04
Vice Chairman , 25,000(5) 1.33 0.9219 2/16/05
Chief Technology 175,000 (6) 9.30 0.9219 2/16/05
Officer & Chief 25,000 (7) 1.33 1.0313 6/22/05
Financial Officer 267,500 (8) 14.22 1.0469 7/3/05
David West 100,000 (9) 5.31 1.1719 8/11/05
Vice President,
Sales & Marketing
</TABLE>
- ----------------------------
1. Options vest and granted in 1995 as follows: 100,000 shares on 1/3/96;
100,000 shares on 1/3/97; 50,000 shares on 1/3/98; and 50,000 shares on 1/3/99.
2. Options vest and granted in 1995 as follows: 50,000 shares on 2/16/96;
50,000 shares on 2/16/97; 50,000 shares on 2/16/98; and 50,000 shares on
2/16/99.
3. Options vest and granted in 1995 as follows: 125,000 shares on 7/3/96;
125,000 shares on 7/3/97; 125,000 shares on 7/3/98; and 125,000 shares on
7/3/99.
4. Options vest and granted in 1994 as follows: 7,500 shares on 7/21/94.
5. Options vest and granted in 1995 as follows: 10,000 shares on 8/16/95;
7,500 shares on 2/16/96; and 7,500 shares on 2/16/97.
6. Options vested and granted in 1995 as follows: 43,750 shares on 2/16/96;
43,750 shares on 2/16/97; 43,750 shares on 2/16/98 and 43,750 shares on 2/16/99.
7. Options vest and granted in 1995 as follows: 10,000 shares on 12/22/95;
7,500 shares on 6/22/96; and 7,500 shares on 6/22/97.
34
<PAGE>
8. Options vest and granted in 1995 as follows: 66,875 shares on 7/3/96;
66,875 shares on 7/3/97; 66,875 shares on 7/3/98; and 66,875 shares on 7/3/99.
9. Options vest and granted in 1995 as follows: 25,000 shares on 8/11/96;
25,000 shares on 8/11/97; 25,000 shares on 8/11/98; and 25,000 shares on
8/11/99.
10. Fair market value based upon price of $1.34 at close of trading on
NASDAQ Small Cap Market, September 30, 1996.
<TABLE>
<CAPTION>
Aggregated Option Exercises in Last Fiscal Year and Current Option Values
Number of Securities
Underlying Unexercised Value of Unexercised
Aggregated Option Options at September 30, In-the-Money Options at
Exercises in 1995 1996 (#) September 30, 1996 (9)
Shares Acquired Value
Name on Exercise (#) Realized ($) Exercisable/Unexercisable Exercisable/Unexercisable
<S> <C> <C> <C> <C>
Michael Strauss ____ ____ 275,000/725,000 $88,413/$234,368
Chairman, President &
Chief Executive
Officer
Robert P. Wong ____ ____ 153,125/376,875 $50,612/$119,130
Vice Chairman , Chief
Technology Officer &
Chief Financial
Officer
David West ____ ____ 25,000/75,000 $4,203/$12,608
Vice President, Sales
& Marketing
</TABLE>
There were no options or stock appreciation rights granted or exercised or
long term incentive plan payments during the year ending December 31, 1995 to
the persons set forth in the Summary Compensation Table.
Michael Strauss
Mr. Michael Strauss became the President and Chief Operating Officer of the
Company effective January 2, 1995 pursuant to an employment agreement dated
October 13, 1994 and amended on February 16, 1995. The Company is currently
negotiating a new employment agreement with Mr. Strauss to replace the amended
employment agreement, which expired on January 1, 1996. Mr. Strauss receives a
base salary at a rate of $200,000 per annum. Pursuant to the employment
agreement, Mr. Strauss received, on January 3, 1995, options to purchase 300,000
shares at an exercise price of $1.0313, on February 16, 1995, options to
purchase 200,000 shares at an exercise price of $0.9219, and, on July 3, 1995,
options to purchase 500,000 shares at an exercise price of $1.04069. Mr. Strauss
is also entitled to participate in the Company's benefit plans and to receive an
allowance for the cost of an automobile. On February 16, 1995 the employment
agreement was amended to employ Mr. Strauss as the Chief Executive Officer of
the Company and Chairman of the Board of Directors. The employment agreement
terminates upon death or long-term or permanent disability of Mr. Strauss. The
Company may terminate Mr. Strauss' employment for "Cause" which is defined as
(i) being convicted of a felony, (ii) a material breach of or failure to perform
under the employment agreement, or (iii) intentional dishonesty in the
performance of his duties under the employment agreement. The Company may also
terminate Mr. Strauss without cause on thirty days prior written notice. Upon
termination without cause, Mr. Strauss receives all salary and other
compensation to date of termination, plus severance for six months. Upon
termination on death or disability, Mr. Strauss receives all salary and other
compensation to date of termination. Upon termination for "Cause", Mr. Strauss
receives all salary and other compensation except any earned but unpaid bonus.
The employment agreement contains a covenant by which Mr. Strauss agreed not to
disclose any of the Company's confidential information, nor use any of its
property at any time, except as required in the conduct of his duties. Mr.
Strauss further agreed to assign to the Company all inventions and works of
authorship made, discovered, or conceived by Mr. Strauss during the term of
employment and agrees to assist the Company in perfecting its rights to such
property. In addition, Mr. Strauss has agreed not to compete with the Company
35
<PAGE>
for a period of 12 months from that date of termination, or such shorter
period as determined by the Company. The employment agreement also prevents Mr.
Strauss from (i) soliciting business or engaging in business of the type
conducted by the Company from any person, firm or entity which was a customer of
the Company at any time within three years preceding his termination or a
prospective customer, (ii) inducing any such customers to reduce their business
with the Company, (iii) soliciting or attempting to solicit any employees of the
Company to leave the employ of the Company, (iv) offering or causing to be
offered employment to any person who was employed by the Company at any time
during the three years prior to his termination of employment.
Stock Options-Stock Option Plans
The Board of Directors has approved and adopted the 1995 Plan. Pursuant to
the 1995 Plan, the Company will be permitted to issue ISOs and NQOs to
employees, directors or consultants of the Company (ISOs and NQOs are
hereinafter collectively referred to as "Options"). ISOs under the 1995 Plan are
intended to qualify for the tax treatment accorded under Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"). NQOs are intended to be
Options which do not qualify for the tax treatment accorded under Section 422 of
the Code. The Board of Directors believes the 1995 Plan will assist the Company
in attracting and retaining the services of competent employees, directors and
consultants. The 1995 Plan will replace all prior option plans and no further
options will be granted under the prior option plans.
Under the Code, generally, there will be no tax consequences from the grant
or exercise of an ISO under the 1995 Plan. An employee holding (i) an ISO at
least two years from the date of grant and (ii) the Common Stock issued on
exercise for at least one year after the exercise, will have long term capital
gain or loss income tax treatment for the gain or loss recognized on the sale of
the Common Stock. The difference between the fair market value of the Common
Stock at the time the ISO is exercised and the exercise price will be an "item
of adjustment" under Code Section 56(b)(3) for purposes of the Alternative
Minimum Tax under Code Section 55. If an employee disposes of the Common Stock
without meeting these holding period requirements, the employee will realize
ordinary income equal to the difference between the lesser of the fair market
value of the Common Stock on the date of exercise and the exercise price or the
amount realized over the adjusted basis and capital gain treatment for any
excess realized, and the Company will be entitled to a corresponding income tax
deduction, in an amount equal to the ordinary income realized by the employee.
When an employee is entitled to capital gain treatment on the sale of the Common
Stock, there is no taxable event to the Company. The employee also must remain a
Company employee from the time the ISO was granted until three (3) months before
the date of actual exercise, except that disabled employee or a deceased
employee's representative may exercise an ISO twelve (12) months after
termination of employment.
Under the Code, generally, there will be no tax consequences from the grant
of a NQO under the 1995 Plan. An employee, director or consultant holding a NQO
shall be deemed to receive compensation upon exercise of the NQO in an amount
equal to the excess, if any, of the fair market value of the Common Stock issued
on exercise over the exercise price. The employee, director or consultant will
realize ordinary income, and the Company will be entitled to a corresponding
income tax deduction, in an amount equal to such excess. Such income constitutes
"wages" subject to the withholding requirements of the Code. The basis of the
Common Stock acquired pursuant to the NQO will be increased by the amount of
taxable income attributable to the exercise. All gain or loss on the sale of the
Common Stock will be capital gain or loss.
The foregoing is based upon the current Federal tax laws and regulations
and is not a complete description of the tax aspects of the 1995 Plan. In
addition, each optionee may be subject to state and local taxes.
All employees, directors and consultants of the Company, any subsidiary or
any parent of the Company are eligible to participate in the 1995 Plan.
36
<PAGE>
Currently, three officers, three non-officer directors, and all other
employees are eligible to participate. The Board of Directors anticipates that
the number of eligible employees, directors and consultants may increase with
the growth of the Company.
The 1995 Plan is administered by the Board of Directors of the Company,
which to the extent it shall determine may delegate its powers with respect to
the administration of the 1995 Plan to a committee (the "Committee") consisting
of not less than three members, who shall be directors of the Company. To the
extent permitted under the express provisions of the 1995 Plan, the Board of
Directors shall have authority to determine which employees, directors or
consultants are eligible to receive Options, the number of shares covered by
each grant of an Option, and otherwise to interpret and administer the 1995
Plan. The Board of Directors may at any time terminate the 1995 Plan and may,
under certain circumstances, amend the 1995 Plan, provided that no amendment may
materially increase the maximum number of shares subject to the 1995 Plan,
materially increase the maximum benefits accruing under the 1995 Plan,
materially modify the requirements for eligibility, make any change requiring
shareholder approval under the Code or the 1934 Act, or change the terms of an
outstanding Option without the consent of the optionee.
Under the 1995 Plan, ISOs to purchase shares of the Company's Common Stock
shall not be granted with an exercise price less than 100 percent of the fair
market value of the Common Stock on the date the ISO is granted; provided,
however, than an employee that owns more than ten (10%) percent of the voting
power of all classes of the Company's Common Stock shall not be granted an ISO
with an exercise price of less than 110% percent of the fair market value of the
Common Stock on the date of the grant. The option price per share with respect
to each NQO granted under the 1995 Plan shall be determined by the Board of
Directors. The employee, director or consultant shall pay for the Common Stock
acquired on exercise of Options under the 1995 Plan by delivering a check
payable to the order of the Company, or cash, a promissory note, or shares of
Common Stock having a fair market value on the date of delivery equal to
aggregate exercise price for such number of Option shares and any income tax
withholding due. In no event shall the optionee have any right or status as a
shareholder prior to the issuance of the Option shares.
Options under the 1995 Plan shall have a term of not more than ten (10)
years; provided, however, that in no event shall any ISO granted to a person
then owning more than ten (10%) percent of the voting power of all classes of
the Company's Common Stock be exercisable more than five (5) years after the
date the Option is granted. Except for provisions requiring acceleration of
vesting, no Option shall vest or be first exercisable prior to six months from
the date of grant. Any Option granted to an employee under the 1995 Plan shall
terminate three (3) months after termination of employment, except as may be
extended by the Board. Any Option granted to a consultant or non-employee
director shall terminate twelve (12) months after he ceases to be a consultant
or non-employee director, except as may be extended by the Board. Any Option
granted under the 1995 Plan shall terminate (i) on the earlier of the expiration
of the Option or twelve (12) months after the date on which the optionee ceases
to be an employee, a non-employee director, or a consultant if such termination
results from the optionee's permanent and total disability; and (ii) on the
earlier of the expiration of the Option or twelve (12) months after the
optionee's death, if the optionee was an employee, non-employee director or
consultant at death, during which period the optionee's executors or
administrators may exercise any Option not exercised by the optionee during his
lifetime. If the optionee's death occurs within three (3) months after
termination as an employee, a non-employee director or a consultant, the Option
may be exercised until the earlier of twelve (12) months following the date of
the optionee's death or the expiration of the Option. The aggregate fair market
value, determined at the time the ISO is granted, of the Common Stock with
respect to which ISOs are exercisable for the first time by an employee in any
calendar year under the 1995 Plan may not exceed $100,000. Subject to the
foregoing and to the specific limitations set out in the 1995 Plan, any Option
granted pursuant to the 1995 Plan shall contain provisions established by the
Board of Directors setting forth the manner of exercise of such Option.
Pursuant to the terms of the 1995 Plan, the number of shares covered by an
Option and the Option price per share (as well as the maximum number of shares
as to which Options may be granted to any one individual) are subject to
adjustment for stock dividends, stock splits, mergers, consolidations, and other
similar events. Otherwise, the maximum number of shares that can be issued under
the 1995 Plan is 2,000,000.
37
<PAGE>
In the event of a change of control, all Options become fully vested.
Change of control is deemed to occur when (i) any group becomes the owner of at
least 20% of the total voting power of all classes of capital stock of the
Company entitled to vote in an election, (ii) the current directors shall cease
to constitute a majority of the board, (iii) the shareholders approve a certain
plan of liquidation or merger or consolidation of the Company where the
Company's current shareholders do not hold at least a majority of common stock
of the surviving corporation or the Board of Directors immediately prior to the
merger or consolidation would not constitute a majority of the Board of
Directors of the surviving corporation, or the shareholders approve an agreement
providing for the sale or other disposition of substantially all of the
Company's assets.
Unless sooner terminated in accordance with its terms, the 1995 Plan will
expire on the date ten (10) years after the date of its adoption by the Board of
Directors and no Option may be granted after that date.
In 1989, the directors of the Company adopted and the stockholders of the
Company approved the adoption of the 1989 Plan. In 1992, the Board of Directors
adopted and the stockholders approved the adoption of an amendment to the Plan
to (a) increase the total number of shares with respect to which options may be
granted by 500,000 to 1,565,957, (b) permit the granting of NQOs at a price per
share less than the fair market value of the Company's Common Stock on the date
of grant, (c) permit options to be exercised up to two years after termination
of employment under certain circumstances, and (d) make certain other changes
necessary to bring the 1989 Plan into compliance with Rule 16b-3 under Section
16 of the 1934 Act ("Rule 16b-3"). The purpose of the 1989 Plan was to enable
the Company to attract and encourage key employees, including officers and
consultants, to contribute to the success of the Company by granting such
employees ISOs and/or NQOs and by granting NQOs to such consultants. The 1989
Plan provides for the granting of options to purchase shares of the Company's
Common Stock at a price per share not less than the fair market value on the
date of grant, provided that NQOs may be granted at less than the fair market
value of the Common Stock on the date of grant. No option may be outstanding for
more than ten years after its grant.
The 1989 Plan is administered by the Board of Directors or a committee of
not less than two or more directors appointed by the Board of Directors (the
"Committee"). Members of the Board who are not employees of the Company are not
eligible to participate in the 1989 Plan. The Board (or the Committee) will
determine, among other things, the recipients of grants, whether a grant will
consist of ISOs or NQOs or a combination thereof, and the number of shares to be
subject to such options.
Upon exercise of an option, the holder must make payment of the full
exercise price. Such payment may be made in cash or check or, if authorized by
the Board of Directors, by promissory note or in shares of the Company's Common
Stock, or in a combination of the above. Generally, options may be exercised
while the recipient is an employee of the Company and within 3 months after
termination of employment. In the event of a termination of employment due to
the death or permanent disability of an employee, options may be exercised up to
twelve months following the date of termination (but in no event after the
scheduled expiration date of the option).
The 1989 Plan may be terminated at any time by the Board of Directors,
which may also amend the 1989 Plan, except that without stockholder approval the
Board may not increase the number of shares subject to the 1989 Plan or change
the class of persons eligible to receive options under the 1989 Plan, or adopt
any other amendment which would require stockholder approval under Rule 16b-3.
The 1989 Plan contains various provisions imposing certain additional
requirements regarding, for example, administration of the 1989 Plan and
amendments required to comply with Rule 16b-3.
Pursuant to the 1995 Plan, the Board of Directors has granted options to
acquire an aggregate of 1,626,500 shares of Common Stock of the Company (net of
cancellations). The Board of Directors intends such options to be ISOs to the
extent such is allowable under the Code. Any such options granted as ISOs which
exceed such limitation shall be characterized as NQOs. The Board of Directors
has also granted NQOs to acquire an aggregate of 192,500 shares of Common Stock
(net of cancellations) pursuant to the 1995 Plan to various officers and
directors and consultants.
38
<PAGE>
Pursuant to the 1989 Plan, the Board of Directors has granted ISOs to
acquire 39,500 shares of Common Stock of the Company (net of cancellations). In
addition, the Board of Directors has granted NQOs to acquire an aggregate of
400,000 shares of Common Stock of the Company (net of cancellations) to a
consultant. The Board of Directors has also granted NQOs to acquire an aggregate
of 100,000 shares of Common Stock (net of cancellations) pursuant to the
Non-Statutory Plan to various officers and directors.
All outstanding options are exercisable at prices ranging from $0.922 to
$3.219 per share. The exercise prices of all outstanding options were determined
by the Board to be not less than the fair market value of the Common Stock as of
the date of grant. The options all expire not more than ten years after the date
of grant and by their terms become void if any of the recipients violate any
restrictive covenant or confidentiality agreement executed by them with respect
to the Company.
Director Compensation
Formerly, Directors received no cash compensation for their services as
directors, but were reimbursed for expenses actually incurred by them with
respect to attendance at Board of Directors meetings. However, effective July 1,
1995, non-employee Directors will receive $5,000 per year (paid on a quarterly
basis) and $500 for every meeting attended. Prior to July 1, 1995, the Company
had compensated non-employee directors solely through the issuance of NQOs
pursuant to the Non-Statutory Plan, which has expired. As of December 1, 1995,
options to purchase 100,000 shares of Common Stock under the Non-Statutory Plan
remain outstanding. Non-employee directors are currently issued NQOs under the
1995 Plan. Accordingly, the Board has issued NQOs (exercisable during a ten-year
term which options vest over a two-year period) to each of Messrs. Gold, Wong,
Cohen, Cherubini and Santmire to purchase an aggregate of 192,500 shares of
Common Stock at exercise prices ranging from $.922 to $1.680 per share, which
was determined by the Board to be not less than the fair market value thereof on
the date of grant.
39
<PAGE>
PRINCIPAL STOCKHOLDERS
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of September 30, 1996, based
on information obtained from the records of the Company with respect to the
beneficial ownership of shares of Common Stock of the Company by (i) each person
known by the Company to be owners of more than five percent of the outstanding
shares of Common Stock, (ii) each director and nominee and certain executive
officers, and (iii) all officers and directors as a group.
<TABLE>
<CAPTION>
Common Stock
Amount and Nature Percentage of Common
Name and Address of Beneficial Owner1 of Beneficial Ownership2 Stock Owned
<S> <C> <C>
Michael Strauss 275,000 3 1.7%
Robert P. Wong 153,125 4 *
D0avid West 25,000 5 *
Joel L. Gold 92,500 6 *
Julian H. Cherubini 17,500 7 *
Glenn F. Santmire 17,500 7 *
All officers and directors as a group (6 persons) 580,625 3,4,5,6,7 3.5%
</TABLE>
1. All addresses are c/o BCAM International, Inc., 1800 Walt Whitman Road,
Melville, New York 11747.
2. The Company believes that all persons named in the table have sole
voting and investment power with respect to all shares of Common Stock
beneficially owned by them.
3. Includes options to purchase 275,000 shares of Common Stock exercisable
within 60 days of the date hereof. Does not include options to purchase 725,000
shares of Common Stock not exercisable within 60 days of the date hereof.
4. Includes options to purchase 153,125 shares of Common Stock exercisable
within 60 days of the date hereof. Does not include options to purchase 346,875
shares of Common Stock not exercisable within 60 days of the date hereof.
5. Includes options to purchase 25,000 shares of Common Stock exercisable
within 60 days of the date hereof. Does not include options to purchase 75,000
shares of Common Stock not exercisable within 60 days of the date hereof.
6. Includes options to purchase 42,500 shares of Common Stock exercisable
within 60 days of the date hereof. Does not include options to purchase 15,000
shares of Common Stock not exercisable within 60 days of the date hereof.
7. Includes options to purchase 17,500 shares of Common Stock exercisable
within 60 days of the date hereof. Does not include options to purchase 7,500
shares of Common Stock not exercisable within 60 days of the date hereof.
* less than 1%
40
<PAGE>
DESCRIPTION OF SECURITIES
Common Stock
In June 1995, the Company authorized an increase in its authorized Common
Stock from 20,000,000 shares, $.01 par value per share, to 40,000,000 shares,
$.01 par value per share. The holders of outstanding shares of Common Stock are
entitled to receive dividends out of assets legally available therefor at such
time and in such amounts as the Board of Directors may from time to time
determine. See "Dividend Policy." Each stockholder is entitled to one vote per
share of Common Stock held by him. Under the Company's Restated Certificate of
Incorporation the Common Stock is not subject to redemption. See "Certain
Transactions-Redemption." Upon liquidation, dissolution or winding up of the
Company and following provision for the liquidation preference of all
outstanding preferred stock, the assets legally available for distribution to
the holders of Common Stock are distributable ratably among the holders of the
outstanding Common Stock. All outstanding shares of Common Stock are, and the
shares of Common Stock issuable upon exercise of the Warrants will upon
issuance, be fully paid and non-assessable. In September 1989, the Company
authorized and adopted a Restated Certificate of Incorporation which provided
that the Company's Common Stock is not entitled to any preemptive rights. The
Company has received from each of its Pre-IPO Stockholders waivers of any
preemptive rights such stockholders may have been entitled to with respect to
prior issuances of securities by the Company.
Warrants
Class A, Class B and Class E Warrants.
The Class A, B, and E Warrants have been issued pursuant to a warrant
agreement, dated January 17, 1990 (as amended, the "Warrant Agreement"), among
the Company, the Underwriter and North American Transfer Co., as assignee from
American Stock Transfer & Trust Company, warrant agent (the "Warrant Agent"),
and are evidenced by warrant certificates in registered form. All Class A
Warrants were exercised or redeemed, except those issued to the Underwriter in
conjunction with the Company's 1990 public offering, prior to the date hereof.
Warrant Amendments
On January 5, 1995, the Company extended the expiration date of the
Company's Class A Warrants, Class B Warrants, Class E Warrants, the
Underwriter's Option and the Finder's Option from January 16, 1995 to January
17, 1997 and amended the exercise price of the Class B Warrants as set forth in
the table below.
Each Class A Warrant initially entitled the registered holder thereof to
purchase one share of Common Stock and one Class B Warrant at a price of $2.00,
subject to adjustment, at any time from January 17, 1991 until the close of
business on January 16, 1995, unless previously redeemed. Pursuant to the terms
of the Company's Discounted Warrant Plan, each Class A Warrant entitled the
registered holder thereof to purchase one share of Common Stock and one Class E
Warrant at a price of $1.50, subject to adjustment, at any time during the Class
A Limited Exercise Period, unless previously redeemed. In October of 1991, the
Board of Directors of the Company approved the "Discounted Warrant Plan",
providing for (a) a reduction during the Class A Limited Exercise Period in the
exercise price from $2.00 to the discounted price of $1.50 per share of Common
Stock, and (b) the issuance to each holder who exercises a Class A Warrant
during the Class A Limited Exercise Period, of a Class E Warrant, in lieu of a
Class B Warrant, which has the same terms and conditions as the Class B
Warrants, except that the price of each Class E Warrant which is exercised prior
to its expiration date (currently January 17, 1997) is at the discounted price
of $1.25 per share of Common Stock, compared to $2.69, through December 13, 1996
and $3.33 thereafter per share (as adjusted), for the Class B Warrants. The
Class A Limited Exercise Period was the 70-day period ending on February 19,
1992. In November of 1991, the Board of Directors of the Company amended the
Warrant Agreement to give effect to the Discounted Warrant Plan. In December of
1993, all Class A Warrants, except for the Class A Warrants which are part of
the Underwriter's Unit Purchase Option, were exercised or redeemed.
41
<PAGE>
As provided initially in the Warrant Agreement, each Class B Warrant
entitled the holder thereof to purchase one share of Common Stock at exercise
prices, ranging from $3.33 to $4.67 per share, subject to adjustment, at any
time commencing upon issuance of the Class B Warrants until the close of
business on the expiration date (January 16, 1995), unless previously redeemed.
The Class B Warrants are subject to redemption by the Company at any time on or
after the date the Class A Warrants are redeemed, on not less than 30 days'
prior written notice, at $.03 per Warrant, if (i) the average closing bid price
of the Common Stock exceeds the applicable average closing bid price for any
period of 30 consecutive business days ending within 15 days prior to the date
of the notice of redemption and (ii) the Company has in effect a current
prospectus covering the Common Stock issuable upon exercise of the Class B
Warrants.
The exercise price of the Class A, B, and E Warrants and the number and
kind of shares of Common Stock or other securities and property to be obtained
upon the exercise of those Warrants are subject to adjustment in certain
circumstances, including a stock split of, or stock dividend on, or a
subdivision, combination or recapitalization of, the Common Stock or sale of
Common Stock at less than the market price of the Common Stock, provided that no
adjustment shall be made unless and until the adjustment, or the aggregate of
successive adjustments, would exceed $.25 per share. Additionally, an adjustment
would be made upon the sale of all or substantially all of the assets of the
Company so as to enable those Warrant holders to purchase the kind and number of
shares of stock or other securities or property (including cash) receivable in
such event by a holder of the number of shares of Common Stock that might
otherwise have been purchased upon exercise of such Warrant. No adjustment for
previously paid cash dividends, if any, will be made upon exercise of those
Warrants.
After giving effect to the foregoing provisions for adjustment resulting
from the issuance of certain securities and the amendments to the Class A, B and
E Warrants, the exercise prices for the Class A and B Warrants have been
adjusted to the prices set forth in the table below, and the number of shares to
be obtained upon the exercise of the Class A and Class B Warrants has been
increased from one share to one and two-tenths (1.2) shares; provided, that, the
application of the foregoing provisions for adjustment upon the issuance of
Class E Warrants has not resulted in a further adjustment in the exercise prices
of the Class B Warrants because the amount of the adjustment has not exceeded
$.25 per share.
The current exercise prices for the Class A and Class B Warrants are as
follows:
Exercise Price
Warrants and Period (per share, as adjusted)
Class A $1.72
Class B
From December 13, 1996 $2.69
From December 14, 1996 to January 17, 1997 $3.23
The Warrants do not confer upon the holder any voting or any other rights
of a stockholder of the Company. Upon notice to the Warrant holders, the Company
has the right to reduce the exercise price or extend the expiration date of the
Warrants.
The Warrants may be exercised upon surrender of the Warrant certificate on
or prior to the respective expiration date (or earlier redemption date) of such
Warrants at the offices of the Warrant Agent, with the form of "Election to
Purchase" on the reverse side of the Warrant certificate duly completed and
executed, accompanied by payment of the full exercise price (by certified check
payable to the order of the Warrant Agent) for the number of Warrants being
exercised.
The terms of the Class E Warrants are identical to those of the Class B
Warrants, excluding the adjusted exercise prices set forth above and the
42
<PAGE>
adjusted conversion ratio, provided that, pursuant to the terms of the Company's
Discounted Warrant Plan, each Class E Warrant entitles the registered holder
thereof to purchase one and one-tenth (1.1) shares of Common Stock at $1.25 per
share, subject to adjustment, at any time prior to its expiration on January 17,
1997.
Class D Warrants
The Class D Warrants have been issued pursuant to the Securities Purchase
Agreement in connection with the 1991 Private Placement, and are evidenced by
warrant certificates in registered form. The Class D Warrant holders are
entitled to certain rights and benefits set forth in the Securities Purchase
Agreement, including a right of first refusal and certain registration rights.
As originally issued, each Class D Warrant entitles the registered holder
thereof to purchase one share of Common Stock at a price of $2.00 per share,
subject to adjustment, at any time from June 25, 1991 through the close of
business on June 25, 1996 extended to January 17, 1997.
The exercise price of the Class D Warrants and the number and kind of
shares of Common Stock or other securities and property to be obtained upon the
exercise of the Class D Warrants are subject to adjustment in certain
circumstances, including a stock split of, or stock dividend on, or a
subdivision, combination or recapitalization of, the Common Stock or sale of
Common Stock at less than the exercise price of the Class D Warrants.
Additionally, the Company will insure that upon any capital reorganization,
reclassification, consolidation, merger or sale of all or substantially all of
the assets of the Company, Class D Warrant holders will be able to purchase the
number of shares of stock or other securities or assets receivable in such event
by a holder of the number of shares that might otherwise have been purchased
upon exercise of such Warrant.
After giving effect to the foregoing provisions for adjustment, the
exercise price has been adjusted to $.875 per share of Common Stock, and the
number of shares to be obtained upon the exercise of the Class D Warrants has
been increased from one share to approximately two and twenty-nine hundredths
(2.29) shares.
The Class D Warrants are not subject to redemption by the Company.
The Class D Warrants may be exercised at any time prior to the expiration
date, upon surrender of the warrant certificate at the office of the Company or
the Warrant Agent, together with a completed exercise agreement, accompanied by
payment of the full exercise price for the number of Class D Warrants being
exercised.
The Class D Warrants do not confer upon the holder any voting or any other
rights of a stockholder of the Company. Upon notice to the Class D Warrant
holders, the Company has the right to reduce the exercise price or extend the
expiration date of the Class D Warrants.
Class C Warrants
Each Class C Warrant entitles the holder thereof to purchase from the
Company one share of its Common Stock at a price of $1.00 per share, subject to
adjustment at any time until January 17, 1997.
The terms of the Class C Warrants are substantially identical to those of
the Class D Warrants except for the exercise price and except that the Class C
Warrants have not been issued pursuant to the Securities Purchase Agreement and,
accordingly, are not entitled to any of the benefits thereof, including a right
of first refusal or any registration rights.
After giving effect to the provisions for adjustment of the exercise price
of the Class C Warrants and the number of shares of Common Stock to be obtained
upon the exercise of the Class C Warrants, the exercise price has been adjusted
to $.875 per share of Common Stock and the number of shares to be obtained upon
the exercise of the Class C Warrants has been increased from one share to
approximately one and fourteen hundredths (1.14) shares.
43
<PAGE>
Acquisition Preferred Stock
The Company is authorized to issue 750,000 shares of its Acquisition
Preferred Stock, $.01 par value, none of which are presently issued and
outstanding. The Acquisition Preferred Stock is only permitted to be issued as
consideration pursuant to (i) a statutory merger or consolidation as to which
the Company is the surviving entity, (ii) the acquisition by the Company of
substantially all the assets or business of another entity or (iii) the
acquisition by the Company of 50% or more of the voting securities of another
entity. The Acquisition Preferred Stock is issuable from time to time in one or
more series. The Board of Directors is authorized to fix, before issuance, (i)
the voting powers, if any, and (ii) the designations, preferences and any other
rights, qualifications, limitations and restrictions applicable to each series
of Acquisition Preferred Stock, including, without limitation, dividend rates
and conditions, dividend preferences, conversion and redemption rights and
liquidation preferences. The Board of Directors may without approval of the
holders of the Common Stock issue the Acquisition Preferred Stock with voting
and conversion rights which may adversely affect the rights, including voting
rights, of the holders of the Common Stock.
8% Preferred Stock
The Company is authorized to issue 15,000 shares of its 8% Preferred Stock,
$10.00 par value, none of which are issued and outstanding. Holders of 8%
Preferred Stock do not have any voting rights.
Holders of shares of 8% Preferred Stock are entitled to cumulative cash
dividends at an annual rate of $.80 per share, payable quarterly, as and when
declared by the Board of Directors, before any dividend may be paid or declared
on the Common Stock. The Company may at any time, and within five years after
issuance must, redeem the 8% Preferred Stock, at $10.00 per share, together with
accrued and unpaid dividends, if any. In the event of the liquidation or winding
up of the Company, holders of the 8% Preferred Stock will be entitled to receive
$10.00 per share, together with all accrued and unpaid dividends, before any
amounts may be paid in respect of the Company's Common Stock.
Transfer Agent and Warrant Agent
North American Transfer Co., Freeport, New York is the Company's transfer
and warrant agent.
Business Combination Provisions
New York law regulates "business combinations," a term covering a broad
range of transactions, between "resident domestic corporations" (as defined,
which term would include the Company) and an interested stockholder, which is
defined as any person beneficially owning, directly or indirectly, 20% or more
of the outstanding voting stock of the resident domestic corporation or any
affiliate or associate of such owner. However, if the interested stockholder has
owned at least 5% of such outstanding voting stock at all times from October 31,
1985 to the date at which he or it first attains 20% ownership (the "Stock
Acquisition Date"), the proposed business combination is exempt from this
statute. Under the statute, a resident domestic corporation may not engage in
any business combination with any interested stockholder unless (a) if the
business combination is to occur within five years of the date the stockholder
acquired 20% or more ownership, either the business combination or the stock
acquisition must have been previously approved by the board of directors, or (b)
the business combination is approved by a majority of outstanding voting shares
(not including those shares owned by the interested stockholder), which approval
may not be effectively given until approximately five years after the interested
stockholder's Stock Acquisition Date, or (c) the consideration paid to the
non-interested stockholders must meet certain stringent conditions imposed by
the statute. The restrictions imposed by the statute will not apply to a
corporation which amends its by-laws by the affirmative vote of a majority of
its outstanding voting stock (not including those shares held by the interested
stockholders) to "elect out" of the statute; provided that such amendment will
not be effective for 18 months after such vote and will not apply to any
business combination where the Stock Acquisition Date is on or prior to the date
of the amendment.
At this time, the Company will not seek to "elect out" of the statute and,
therefore, the restrictions imposed by the statute will apply to the Company.
44
<PAGE>
The Company does not presently anticipate participating in any business
combination or similar transaction covered by the "business combination" statute
in the foreseeable future and is not actively considering or discussing any such
transaction.
SHARES ELIGIBLE FOR FUTURE SALE
Upon issuance of all shares of Common Stock registered hereby, the Company
will have 18,215,157 shares of Common Stock outstanding all of which are freely
tradeable.
With respect to an aggregate of 1,958,500 of Common Stock that could be
issued upon the exercise of options granted to employees and certain
consultants, such stock is also expected to be freely tradeable upon the
exercise of the options. There can, however, be no assurance that such options
will be exercised on the dates on which such exercises and sales will occur.
PLAN OF DISTRIBUTION
The securities registered hereby and described in this prospectus may be
sold by the owner from time to time through dealers or brokers in transactions
on NASDAQ Over-The-Counter market (Small Cap) at prices then prevailing, or
directly to one or more purchasers in negotiated transactions at negotiated
prices, or in a combination thereof. The Company is not aware of any agreements
or arrangements on the part of any person concerning the sale of any of the
securities registered hereby. The Company, at the request of any person
intending to sell any of the securities registered hereby, will deliver copies
of this prospectus, at no cost or charge, to such persons.
LEGAL MATTERS
The validity of the securities offered hereby will be passed upon for the
Company by Ruskin, Moscou, Evens & Faltischek, P.C., Mineola, New York.
45
<PAGE>
EXPERTS
The consolidated financial statements of BCAM International, Inc. at
December 31, 1995 and for each of the two years in the period then ended,
appearing or incorporated herein by reference in this Prospectus and
Registration Statement, have been audited by Ernst & Young LLP, independent
auditors, as set forth in their reports thereon appearing elsewhere herein or
incorporated herein by reference and in the Registration Statement, and are
included in reliance upon such reports given upon the authority of such firm as
experts in accounting and auditing.
46
<PAGE>
BCAM INTERNATIONAL, INC.
Index of Financial Statements
Condensed Consolidated Balance Sheet--June 30, 1996 (Unaudited)............48
Condensed Consolidated Statements of Operations - Three Months
and Six Months Ended June 30, 1996 and 1995 (Unaudited)....................49
Condensed Consolidated Statements of Cash Flows - Six Months Ended
June 30, 1996 and 1995 (Unaudited).........................................50
Notes to Condensed Consolidated Financial Statements - June 30, 1996
(Unaudited)................................................................51
Condensed Consolidated Balance Sheet - December 31, 1995...................52
Condensed Consolidated Statements of Operations - Year Ended
December 31, 1995 and 1994.................................................53
Condensed Consolidated Statements of Cash Flows -Year Ended
December 31, 1995 and 1994.................................................54
Notes to Condensed Consolidated Financial Statements - December 31, 1995...55
47
<PAGE>
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
BCAM International, Inc.
Condensed Consolidated Balance Sheet (Unaudited)
June 30, 1996
<S> <C>
Assets
Current Assets:
Cash and cash equivalents $ 1,604,224
Accounts receivable, less allowance for doubtful accounts of $11,245 157,845
Prepaid expenses and other current assets 117,375
-------------
Total current assets 1,879,444
Property, plant, and equipment, at cost:
Furniture and fixtures 220,318
Equipment 587,511
Leasehold improvements 50,519
-------------
858,348
Less accumulated depreciation and amortization (627,481)
-------------
230,867
Other assets, principally patents (net of accumulated amortization of $189,709) 229,903
-------------
Total assets $ 2,340,214
=============
Liabilities and shareholders' equity
Current liabilities:
Accounts payable $ 107,246
Notes payable, at prime 400,000
Accrued expenses and other current liabilities 176,392
-------------
Total current liabilities 683,638
Other liabilities 12,550
Commitments and contingencies -
Acquisition preferred stock, par value $.01 per share:
Authorized 750,000 shares, no shares issued or outstanding -
Common shareholders' equity:
Common Stock, par value $.01 per share; authorized 40,000,000 shares,
15,640,415 shares issued and 14,877,233 shares outstanding 156,404
Paid-in surplus 14,992,780
Deficit (12,606,058)
-------------
2,543,126
Less 763,182 treasury shares (899,100)
-------------
1,644,026
-------------
Total liabilities and shareholders' equity $ 2,340,214
=============
</TABLE>
See acompanying notes
48
<PAGE>
<TABLE>
<CAPTION>
BCAM International, Inc.
Condensed Consolidated Statements of Operations (Unaudited)
Three months ended June 30 Six months ended June 30
1996 1995 1996 1996
<S> <C> <C> <C> <C>
Net Revenue $ 108,226 $ 299,631 $ 210,721 $ 414,396
Costs and expenses:
Direct costs of revenue 4,543 194,020 49,288 388,163
Selling, general and administrative 567,659 456,174 1,075,315 823,861
Research, development and engineering 19,333 47,243 46,560 109,406
----------- ----------- ----------- -----------
Total operating expenses 591,535 697,437 1,171,163 1,321,430
----------- ----------- ----------- -----------
Net loss from operations (483,309) (397,806) (960,442) (907,034)
Interst and other income 16,722 47,302 41,534 101,113
----------- ----------- ----------- -----------
Net loss $ (466,587) $ (350,504) $ (918,908) $ (805,921)
=========== =========== =========== ===========
Net loss per share $ (0.03) $ (0.02) $ (0.06) $ (0.05)
=========== =========== =========== ===========
Weighted average number of common
shares outstanding 14,859,211 14,798,991 14,858,222 14,778,227
=========== =========== =========== ===========
</TABLE>
See accompanying notes
49
<PAGE>
<TABLE>
<CAPTION>
BCAM International, Inc.
Condensed Consolidated Statements of Cash Flows (Unaudited)
Six Months ended June 30
1996 1995
<S> <C> <C>
Operating activities
Net loss $ (918,908) $ (805,921)
Reconsoliation of net cash provided by (used in) operating activities:
Depreceiation and amortization 72,840 84,911
Accrued interest on held to maturity securities 7,172 (90,601)
Changes in operating assets and liabilities:
Accounts receivable (21,850) (236,916)
Prepaid expenses and other current assets 116,210 109,643
Other assets (77,821) (7,107)
Accounts payable, accrued expenses and sundry liabilities (139,033) (176,842)
Other liabilities 4,707 (33,162)
---------- -----------
Net cash (used in) operating activities (956,683) (1,155,995)
---------- -----------
Investing activities
Purchase of property, plant and equipment - (3,386)
Proceeds from sale of equipment - 1,200
Purchase of held to maturity securities - (1,299,782)
Proceeds from sale of held to maturity securities 1,500,000 1,818,000
---------- -----------
Net cash provided by investing activities 1,500,000 516,032
---------- -----------
Financing activities
Net proceeds from short-term debt 400,000 -
Net proceeds from sale of common stock and exercise of options 18,440 -
Payment of stock registration and issuance costs (59,219) (77,234)
---------- -----------
Net cash provided by (used in) financing activities 359,221 77,234
---------- -----------
Increase (decrease) in cash and cash equivalents 902,538 (717,197)
Cash and cash equivalents at beginning of period 701,686 1,040,101
---------- -----------
Cash and cash equivalents at end of period $1,604,224 $ 322,904
========== ===========
</TABLE>
See accompanying notes
50
<PAGE>
BCAM International, Inc.
("the Company")
Notes to Condensed Consolidated Financial Statements
(Unaudited)
June 30, 1996
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-QSB.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three-month and six-month periods ended June 30, 1996
are not necessarily indicative of the results that may be expected for the year
ending December 31, 1996. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's annual
report on Form 10-KSB for the year ended December 31, 1995.
2. Per Share Data
Net loss per share has been computed on the basis of the weighted average
number of common shares outstanding for each of the periods presented. Common
share equivalents have been excluded since their effect is anti-dilutive.
3. Income Taxes
The Company accounts for income taxes in accordance with Financial
Accounting Standards Board ("FASB") Statement No. 109, "Accounting for Income
Taxes". The Company has not reflected a benefit for income taxes in the
accompanying Condensed Consolidated Statements of Operations for the three
months and six months ended June 30, 1996 and the three months and six months
ended June 30, 1995, since the future availability of net operating loss
carryforwards have been offset in full by valuation allowances in accordance
with FASB Statement No. 109.
4. Reclassifications
Certain reclassifications have been made to the consolidated financial
statements for the three months and six months ended June 30, 1995 in order to
conform to the classifications used in the current period.
51
<PAGE>
<TABLE>
<CAPTION>
BCAM International, Inc.
(formerly Biomechanics Corporation of America)
Consolidated Balance Sheet
December 31, 1995
<S> <C>
Assets
Current assets:
Cash and cash equivalents $ 701,686
Held-to-maturity securities 1,507,172
Accounts receivable - trade, less allowance for doubtful accounts of $38,326
135,995
Prepaid expenses and other current assets 233,585
-------------------
Total current assets 2,578,438 Property, plant and equipment, at cost:
Furniture and fixtures 220,318
Equipment 587,511
Leasehold improvements 50,519
-------------------
858,348
Less accumulated depreciation and amortization 584,371
-------------------
273,977
Other assets, principally patents (net of accumulated amortization of $159,979)
181,812
-------------------
Total assets $ 3,034,227
===================
Liabilities and shareholders' equity Current liabilities:
Accounts payable $ 52,382
Accrued expenses and sundry liabilities 370,289
-------------------
Total current liabilities 422,671
Other liabilities 7,843
Commitments and contingencies -
Acquisition preferred stock, par value $.01 per share - authorized 750,000
shares, no shares issued or outstanding -
Common shareholders' equity:
Common stock, par value $.01 per share - authorized 40,000,000 shares, 15,620,415
shares issued and 14,857,233 shares outstanding 156,204
Paid-in surplus 15,033,759
Deficit (11,687,150)
-------------------
3,502,813
Less 763,182 treasury shares (899,100)
-------------------
2,603,713
===================
Total liabilities and shareholders' equity $ 3,034,227
===================
</TABLE>
See accompanying notes.
52
<PAGE>
<TABLE>
<CAPTION>
BCAM International, Inc.
(formerly Biomechanics Corporation of America)
Consolidated Statements of Operations
Year ended December 31
1995 1994
--------------------------------------
<S> <C> <C>
Net revenue $ 752,077 $ 1,138,304
Interest and other income 174,613 154,636
--------------------------------------
926,690 1,292,940
--------------------------------------
Costs and expenses:
Direct costs of revenue 556,586 1,140,698
Selling, general and administrative 1,918,817 2,339,225
Research and development 140,767 120,470
Loss on investments - 81,500
--------------------------------------
2,616,170 3,681,893
======================================
Net loss $ (1,689,480) $(2,388,953)
======================================
Net loss per share $ (.11) $ (.16)
======================================
Weighted average number of common shares and common equivalent
shares outstanding 14,818,055 14,681,530
======================================
</TABLE>
See accompanying notes.
53
<PAGE>
<TABLE>
<CAPTION>
BCAM International, Inc.
(formerly Biomechanics Corporation of America)
Consolidated Statements of Cash Flows
Year ended December 31
1995 1994
------------------------------------
<S> <C> <C>
Operating activities
Net loss $(1,689,480) $ (2,388,953)
Adjustments to reconcile net loss to net cash used in operating
activities:
Provision for doubtful accounts 34,726 -
Depreciation and amortization 167,127 143,879
Amortization of premium on held-to-maturity securities - 9,966
Interest accretion on held-to-maturity securities (114,370) (110,736)
Loss on sale of available-for-sale securities - 61,612
Changes in operating assets and liabilities:
Accounts receivable (50,866) 65,114
Prepaid expenses and other current assets (3,105) 42,364
Other assets (49,492) (149,404)
Accounts payable, accrued expenses and sundry liabilities
(277,998) 563,467
Other liabilities (26,888) (24,990)
------------------------------------
Net cash used in operating activities (2,010,346) (1,787,681)
------------------------------------
Investing activities
Purchases of property, plant and equipment (5,188) (88,749)
Proceeds from sale of equipment 1,200 1,050
Purchases of available-for-sale securities - (167,820)
Purchases of held-to-maturity securities (2,799,782) (4,161,884)
Proceeds from sale of available-for-sale securities - 2,312,686
Proceeds from sale of held-to-maturity securities 4,535,000 3,211,000
------------------------------------
Net cash provided by investing activities 1,731,230 1,106,283
------------------------------------
Financing activities
Net proceeds from sale of common stock and exercise of warrants
- 85,112
Net proceeds from exercise of stock options - 68,475
Payment of stock registration and issuance costs (59,299) (173,268)
Redemption of convertible preferred stock - (16,473)
------------------------------------
Net cash used in financing activities (59,299) (36,154)
------------------------------------
Decrease in cash and cash equivalents (338,415) (717,552)
Cash and cash equivalents at beginning of year 1,040,101 1,757,653
====================================
Cash and cash equivalents at end of year $ 701,686 $ 1,040,101
====================================
</TABLE>
See accompanying notes
54
<PAGE>
1. Description of Business and Principles of Consolidation
Biomechanics Corporation of America was organized in 1984 to provide a
broad range of consulting services using the principles of ergonomics and
biomechanics. These principles combine elements of engineering and physical
medicine in the design of products, tools and manufacturing processes which are
suited to be more compatible with the human body. As part of its consulting
services, the company utilizes computer analysis and certain proprietary
technology to quantify forces acting on the human body as it engages in
particular activities. Management has decided to concentrate its business on
integrating its patented Intelligent Surface Technology to develop and license
intelligent products. The company also provides product analysis and redesign,
and ergonomic workplace risk assessment services.
On June 22, 1995, the company's shareholders approved a change of the name
of the corporation to BCAM International, Inc.
The consolidated financial statements include the accounts of BCAM
International, Inc. and its subsidiaries, BCA Services, Inc. (formerly ErgoRisk
Services, Inc.), ErgoRisk Services, Inc. (Canada), which was acquired in
December 1994, and BCAM Technologies, Inc. (formerly BCA Associates, Inc.),
which was formed in December 1992, (collectively referred to as the "Company").
BCA Services, Inc. was established in December 1993 to directly focus on
providing comprehensive ergonomic laboratory assessment services to U.S.
manufacturing and service industries for measuring the potential risk of
musculoskeletal injury. ErgoRisk Services, Inc. (Canada) was purchased for
$65,000 to effectively terminate a joint venture, and was subsequently written
off. The operations of BCAM Technologies, Inc., which were not significant, were
terminated in December 1993.
2. Summary of Significant Accounting Policies
Cash Equivalents
The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents. Cash and cash
equivalents at December 31, 1995 consist of demand and money market accounts
with U.S. banks ($48,263) and a money market account with a U.S. investment
institution ($653,423).
Held-to-Maturity Securities
Management determines the appropriate classifications of debt securities at
the time of purchase and reevaluates such designation as of each balance sheet
date. The Company has classified $1,507,172 of securities as "held-to-maturity
securities" at December 31, 1995. Debt securities are classified as
held-to-maturity when the Company has the positive intent and ability to hold
the securities to maturity and such securities are stated at amortized cost.
Interest and dividends are included in interest and other income. Realized
gains and losses, and declines in value, if they are judged to be other than
temporary, are also included in interest and other income. For the year ended
December 31, 1995, there was no decline in value of such securities.
55
<PAGE>
2. Summary of Significant Accounting Policies (continued)
At December 31, 1995, the held-to-maturity securities are Federal Farm Credit
Bank Securities and are contractually due to mature within one year. There are
no unrealized gains or losses related to such securities.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and footnotes. Actual
results could differ from those estimates.
Revenue
Revenue is recognized when products are shipped or as services are rendered, no
significant obligations remain outstanding and collection of the accounts
receivable, in management's estimation, is deemed probable.
Property, Plant and Equipment
Depreciation is computed using the straight-line method at rates based on the
estimated useful lives of the related assets. The estimated useful lives for
furniture and fixtures is 10 years and equipment is 7 years. Leasehold
improvements are amortized over the lease term or estimated useful life of the
improvements, whichever is shorter.
Patents
Patents, which are initially capitalized at cost, are being amortized by the
straight-line method over the estimated useful lives of the underlying patents.
Research and Development
Research and development costs are charged to operations in the period incurred.
Income Taxes
The Company accounts for income taxes using Financial Accounting Standards Board
("FASB") Statement No. 109, "Accounting for Income Taxes." At December 31, 1995,
the Company has net operating loss carryforwards of approximately $12,143,000
for income tax purposes, expiring through 2010.
At December 31, 1995 and 1994, deferred tax assets approximating $4,129,000 and
$3,546,000, respectively, arising from the future availability of net operating
loss carryforwards have been offset in full by valuation allowances in
accordance with FASB Statement No. 109.
Net Loss Per Share
Net loss per share has been computed on the basis of the weighted average number
of common shares outstanding. Common stock equivalents have been excluded
because their effect is antidilutive.
56
<PAGE>
2. Summary of Significant Accounting Policies (continued)
Future Accounting Policy Changes
The FASB has issued Statement No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," which requires
impairment losses to be recorded on long-lived assets used in operations when
indicators of impairment are present and the undiscounted cash flows estimated
to be generated by those assets are less than the assets' carrying amount. The
Company will adopt Statement No. 121 in 1996 and, based on current
circumstances, does not believe the effect of adoption will be material.
In 1995, the FASB also issued Statement No. 123, "Accounting for
Stock-Based Compensation," which requires all companies to either recognize
expense for stock-based awards based on their fair market value on the date of
grant, or provide proforma disclosures of the effects "as if" the company had
recognized the stock-based compensation expense. As provided by this new
accounting pronouncement, the Company will adopt the new rules in 1996; however,
management has not yet estimated the potential impact, if any, that these
changes will have on the Company's operating results and financial position.
3. Convertible Preferred Stock
In November 1989, the Company issued 2,250,000 shares of convertible
preferred stock in the form of a stock dividend on a pro rata basis to holders
of common stock. Immediately following issuance, 602,680 of such shares were
redeemed by the Company pursuant to a redemption agreement with certain common
shareholders.
The holders of the convertible preferred stock had the right to vote, along
with the holders of the common stock, on any and all matters which stockholders
may vote, and had a nominal noncumulative dividend right entitling them to
receive a dividend in the amount of $.0001 per share before any dividends may be
paid or declared upon any shares of the Company's common stock. Shares of
convertible preferred stock were nontransferable and were subject to mandatory
redemption on April 15, 1994 (if such shares were not previously converted into
common stock), effective as of January 1, 1994, at $.01 per share. The
convertible preferred stock was convertible into common stock at various rates
and times, if certain pretax earnings were achieved. Since the pretax earnings
were not achieved the convertible preferred stock issued was redeemed effective
January 1, 1994, for a total of $16,473.
4. Acquisition Preferred Stock
The Company is authorized to issue 750,000 shares of its acquisition
preferred stock, $.01 par value, none of which are presently issued and
outstanding. The acquisition preferred stock is only permitted to be issued as
consideration pursuant to (i) a statutory merger or consolidation as to which
the Company is the surviving entity, (ii) the acquisition by the Company of
substantially all the assets or business of another entity or (iii) the
acquisition by the Company of 50% or more of the voting securities of another
entity. The acquisition preferred stock is issuable from time to time in one or
more series. Subject to prior liquidation rights of the convertible preferred
stock, the Board of Directors is authorized to fix, before issuance, the voting
powers, if any, the designations, preferences and any other rights,
qualifications, limitations and restrictions applicable to each series of
acquisition preferred stock, including, without limitation, dividend rates and
conditions, dividend preferences, conversion and redemption rights and
liquidation preferences.
57
<PAGE>
5. Common Shareholders' Equity
On January 24, 1990, the Company issued and sold 1,100,000 units for $4.00
per unit in connection with a public offering. The net proceeds, after
accounting for direct expenses of the offering, were approximately $3,397,000.
On February 26, 1990, the underwriter issued and sold an additional 165,000
units at $4.00 per unit resulting from the exercise of the overallotment option
and the Company received net proceeds of $574,200. Each unit consists of three
shares of common stock and two Class A warrants. Each Class A warrant is
exercisable to purchase one share of common stock and one Class B warrant at a
price of $2.00, subject to adjustment, commencing one year from the date of the
Prospectus (January 17, 1990) until January 17, 1997 (extended from January 16,
1995) subject, in certain circumstances, to earlier redemption by the Company.
As a result of the dilutive effects of private placements (see Note 8) and the
Discounted Warrant Plan (see below), the number of shares issuable under and the
exercise price of the Company's Class B warrants, which may be exercised
commencing upon issuance until January 17, 1997 (extended from January 16,
1995), have been adjusted such that each Class B warrant, as adjusted, entitles
the holder to purchase one and two tenths (1.2) shares (originally one share) of
Common stock at an adjusted price that varies from $2.69 to $3.23 (originally
$3.33 to $4.67) per share. As a result of the issuance of approximately
1,717,000 Class E warrants pursuant to the Discounted Warrant Plan, each Class A
warrant remaining unexercised entitles the holder thereof to purchase one and
two-tenth (1.2) (originally one share) shares of common stock and one Class B
warrant at an adjusted price per share, subject to further adjustment, of $1.72.
Since the Company has satisfied the condition of redemption, namely the closing
bid price of common stock of the Company exceeding $2.67 for a period of 30
consecutive business days, the remaining Class A Warrants were called effective
November 19, 1993. The Company extended the redemption date to December 20, 1993
and 807,659 Class A Warrants were exercised resulting in the issuance of 969,191
shares of common stock and 807,659 Class B Warrants exercisable to purchase
969,191 shares of common stock and receipt by the Company of net proceeds of
$1,667,008.
In connection with the public offering, the Company sold 110,000 Unit
Purchase Options (the "Unit Options") to the underwriter and a finder on January
24, 1990 for a nominal consideration. The units purchasable upon exercise of the
Unit Options are identical to the units sold in the public offering, except that
the warrants included therein are not redeemable. The Unit Options are
exercisable at 130% of the public offering price subject to certain antidilution
adjustments. The Unit Options are exercisable during the five-year period
(originally three-years) commencing two years from the date of the public
offering, expiring January 17, 1997. As a result of the dilutive effects of the
private placement, the number of Unit Options has been increased to 127,547 and
the unit price adjusted to $4.35 per unit (originally $5.20 per unit). Pursuant
to a settlement agreement certain Unit Purchase Option holders surrendered for
exercise in full 30,369 units in a cashless transaction that provided them with
85,674 shares of common stock representing the excess of the fair market value
of the common stock and Class A warrants, over the exercise price of the Unit.
At December 31, 1995, there were 97,178 units (underwriter) and 1,568 units
(finder) outstanding.
In October 1991, the Board of Directors of the Company approved a
Discounted Warrant Plan, providing for 1) a reduction in the price of each Class
A warrant which was exercised during the Class A Limited Exercise Period
(expired in 1992) from $2.00 to the discounted price of $1.50 per share of
common stock, and 2) the issuance to each holder who exercised a discounted
Class A warrant during the Class A Limited Exercise Period, a Class E warrant,
in lieu of a Class B warrant, which has the same terms and conditions as the
Class B warrants, except that the price of each Class E warrant was reduced to
the discounted price of $1.25 per share of common stock until the expiration
date on January 17, 1997 (extended from January 16, 1995).
58
<PAGE>
5. Common Shareholders' Equity (continued)
Pursuant to the Discounted Warrant Plan, approximately 1,717,000 Class A
warrants were exercised resulting in the issuance of approximately 1,717,000
shares of common stock and 1,717,000 Class E warrants exercisable to purchase
approximately 1,888,700 shares of common stock and the receipt by the Company of
net proceeds of approximately $2,500,000. During the year ended December 31,
1993, 1,022,825 Class E warrants were exercised resulting in an issuance of
1,125,109 shares of common stock and receipt by the Company of net proceeds of
$1,406,464. In connection with the exercise of the E warrants, options to
purchase 38,508 unregistered shares of common stock exercisable at prices
ranging from $3.31 through $3.44 per share were issued to two registered
brokerage houses, as an inducement for their exercise of the aforementioned
Class E warrants. The options are exercisable for 18 months from the dates of
exercise of the Class E warrants (October 1993). In addition, through December
31, 1992, 202,588 Class E warrants were exercised resulting in the issuance of
approximately 223,000 shares of common stock and the receipt by the Company of
net proceeds of approximately $280,000. In connection with the Discounted
Warrant Plan, the Board of Directors issued in 1992 an aggregate of 166,154
restricted shares of common stock of the Company to two registered brokers, in
full payment of the compensation due them for soliciting the exercise of the
Class A warrants.
In June 1991, Class D warrants exercisable over a five-year term to
purchase 176,250 shares of common stock at $2.00 per share and Class C warrants
exercisable over a five and one-half year term (originally five-year term) to
purchase 200,000 shares of common stock at $1.00 per share were issued in
connection with the private placement (see Note 8). As a result of the exercise
of Class E warrants and pursuant to provisions for adjustment of the exercise
price of the Company's Class D warrants, each Class D warrant entitles the
holder to purchase approximately two and three-tenths (2.3) (originally one
share) shares of common stock at an adjusted price per share, subject to further
adjustment, of approximately $.88 per share and each Class C warrant to purchase
228,571 (originally 200,000) shares of common stock at $.88 per share. Through
December 31, 1995, 173,750 Class D warrants have been exercised resulting in an
issuance of 397,143 shares of common stock and the receipt by the Company of
$347,500 and 63,334 Class C warrants have been exercised resulting in an
issuance of 72,334 shares of common stock and the receipt by the Company of
$63,344.
Effective June 22, 1995, the Company's shareholders voted to increase the
number of authorized common stock from 20 million shares to 40 million shares.
Common shares reserved for future issuance as of December 31, 1995 are as
follows:
Units sold in public offering in 1990:
Class B warrants 969,191
Class E warrants 540,745
Third party options (Note 6) 405,000
Unit Options 766,083
1989 Stock Option Plan (Note 452,000
1989 Nonstatutory Plan (Note 100,000
1995 Stock Option Plan 2,000,000
Warrants issued in private placement in 1991 (Note 8):
Class C warrants 156,189
Class D warrants 5,714
---------
5,394,922
=========
59
<PAGE>
6. Stock Options
In June 1995, the shareholders of the Company approved the adoption of the
1995 Stock Option Plan (the "1995 Plan"). The 1995 Plan provides for the
granting of incentive stock options ("ISOs") and/or nonqualified stock options
to employees, directors or consultants of the Company to purchase an aggregate
of 2,000,000 shares of the Company's common stock. The option price per share
for ISOs granted under the 1995 Plan shall not be less than the fair market
value of the Company's common stock on the date of grant. Furthermore, the
option price per share shall be determined by the Board of Directors. Options
vest based on certain provisions related principally to future services. Options
are exercisable over various periods up to ten years from the date of grant. No
option may be granted under the 1995 Plan after June 2005. At December 31, 1995,
there were 67,500 shares available for granting of future options. The 1995 Plan
replaced all prior option plans and no further options will be granted under the
prior option plans.
In 1989, the shareholders of the Company approved the adoption of a 1989
Stock Option Plan (the "1989 Plan"). The 1989 Plan provided for the granting of
incentive stock options and/or nonqualified stock options to key employees and
consultants to purchase shares of the Company's common stock at a price per
share not less than the fair market value on the date of grant. In 1992, the
Plan was amended to (a) increase the number of shares to 1,565,957, (b) permit
the granting of nonqualified stock options at a price per share less than the
fair market value of the Company's common stock on the date of grant and (c)
permit options to be exercised up to two years after termination of employment
under certain circumstances. Options vest based on certain provisions related
principally to future services. Options are exercisable over various periods up
to six years from the date of grant. Pursuant to the terms of the 1995 Plan, no
options may be granted under the 1989 Plan subsequent to June 22, 1995.
In 1989, the Company also adopted a Nonstatutory Stock Option Plan (the
"1989 Nonstatutory Plan") for directors. Under the 1989 Nonstatutory Plan, the
Company could grant options for the purchase of an aggregate of 355,000 shares
of common stock at not less than fair market value at the date of grant. The
options expire at various dates. Pursuant to the terms of the 1995 Plan, no
options may be granted under the 1989 Nonstatutory Plan subsequent to June 22,
1995.
Option activity during each of the two years ended December 31, 1995 for
the 1989 Plan and the 1989 Nonstatutory Plan is summarized as follows:
<TABLE>
<CAPTION>
1989 Plan 1989 Nonstatutory Plan
Shares Under Option Shares Under Option
----------------------------------------------------------------
Option price Number of Shares Option price per Number of
per share share shares
----------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at January 1, 1994 786,008 115,000
Granted $1.63 to $3.47 265,000 $1.68 to $2.56 98,333
Exercised $1.10 to $1.50 (48,000) $1.13 (7,500)
Cancelled/expired $1.31 to $3.19 (15,000) $1.13 (15,000)
--------- ---------
Balance at December 31,1994 988,008 190,833
Granted $.92 119,000 -
Cancelled/expired $ .92 to $3.47 (655,008) $1.13 to $2.56 (90,833)
========= =========
Balance at December 31,1995 452,000 100,000
========= =========
</TABLE>
60
<PAGE>
6. Stock Options (continued)
Option activity during the year ended December 31, 1995 for the 1995 Plan is
summarized as follows:
1995 Plan
Shares Under Option
--------------------------------
Option price per Number of
share shares
--------------------------------
Balance at January 1, 1995 -
Granted $.92 to $1.68 1,962,500
Cancelled/expired $.92 (30,000)
----------
Balance at December 31,1995 1,932,500
==========
In addition, during 1995, the Company granted 300,000 fully vested
nonstatutory stock options at fair market value to a third party, which are
exercisable for a period of eighteen months at a price of $1.05 per share, and
5,000 nonstatutory stock options at fair market value to a third party, which
vest ratably over four years and are exercisable for a period of five years at a
price of $1.52 per share. Further, in 1994 the Company granted 100,000
nonstatutory stock options at fair market value to a third party, which vest
ratably over two years and are exercisable for a period of five years at a price
of $1.69 per share. At December 31, 1995, all of the 405,000 options are
outstanding.
7. Leases
In May 1995, the Company renewed its office lease for a term extending from
April 1, 1995 through March 31, 2000. Additionally, the Company has entered into
various operating leases for equipment. Future minimum payments under
noncancellable operating leases for years ending December 31 are as follows:
1996 $180,123
1997 186,006
1998 192,030
1999 194,303
2000 49,022
--------
$801,484
========
Rent expense in 1995 and 1994, under all operating leases, was
approximately $179,000 and $185,000, respectively.
8. Private Placements
On June 25, 1991, the Company completed a private placement, for which D.H.
Blair and Co. Inc. ("Blair") acted as placement agent, of $1,762,500 of its
securities, consisting of $1,101,562 of Senior Secured Convertible Promissory
Notes (the "Notes") convertible into Common Stock at $1.00 per share, 660,937
shares of common stock at $1.00 per share and 176,250 Class D warrants
exercisable over a five-year term at $.88 per share (originally $2.00 per share)
for 402,731 shares (originally 176,250 shares) of common stock. These securities
had been sold pursuant to a Securities Purchase Agreement among the Company, the
purchasers and Blair as purchasers' representative (the "Purchase Agreement"),
in a total of 35.25 Units of
61
<PAGE>
8. Private Placements (continued)
$50,000 each, consisting of a $31,250 Note, 18,750 shares of common stock
and 5,000 Class D warrants. The Company paid Blair a fee of $176,250 and
expenses of $56,750 and issued to Blair, Class C warrants exercisable over a
five-year term to purchase 228,571 shares (originally 200,000 shares) of common
stock at $.88 (originally $1.00 per share). All of the Notes were converted or
redeemed in 1992.
During the period commencing in June 1993 and ending in September 1993, the
Company completed four separate private placements ("Private Placements"), of an
aggregate of 1,843,873 shares of the Company's common stock at prices ranging
from $1.10 to $1.15 per share for net proceeds of $2,039,925. The Company paid
commissions in the amount of $35,075 to an individual, granted 100,000 shares of
unregistered common stock and options to purchase an additional 425,000 shares
of common stock at prices ranging from $1.31 to $3.47 per share, in
consideration of services rendered in connection with the Private Placements.
9. Deferred Revenue
On December 27, 1993, the Company sold 100,000 shares (2.4% interest) of
its subsidiary BCA Services, Inc. to Polaris Partners for the sum of $100,000
resulting in the Company recording such amount as deferred revenue. Pursuant to
an exchange agreement dated April 6, 1995, the Company agreed to exchange the
100,000 shares of BCA Services, Inc. for 100,000 shares of BCAM International,
Inc., at which time $99,000 of the deferred revenue was credited to paid-in
surplus and $1,000 was credited to common stock.
10. Significant Customers
The Company generated a significant percentage of its revenue from a small
number of customers, as summarized below:
1995 1994
- ------------------------------------------------------------------------------
% of Net % of Net Revenue
Customer Revenue Revenue Revenue
- ------------------------------------------------------------------------------
A $ 217,000 29% $ - -
B 87,000 12% - -
C 84,000 11% 194,000 17%
D 78,000 10% - -
E 35,000 5% 669,000 59%
F 12,000 2% 100,000 9%
At December 31, 1995, three customers accounted for approximately 83% of the
Company's gross accounts receivable. Consistent with industry standards,
receivables are generally payable within 90 to 120 days and collateral is not
required.
62
EXHIBIT I
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated February 27, 1996, in the Post-Effective Amendment
No. 12 on Form SB-2 to the Registration Statement (Form S-1 No. 33-47612) and
related Prospectus of BCAm International, Inc.
Melville, New York
October 21, 1996 /s/Ernst & Young LLP
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000856143
<NAME> BCAM International, Inc.
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1.000
<CASH> 1,604,224
<SECURITIES> 0
<RECEIVABLES> 169,090
<ALLOWANCES> 11,245
<INVENTORY> 0
<CURRENT-ASSETS> 1,879,444
<PP&E> 858,348
<DEPRECIATION> 627,481
<TOTAL-ASSETS> 2,340,214
<CURRENT-LIABILITIES> 683,638
<BONDS> 0
0
0
<COMMON> 156,404
<OTHER-SE> 1,487,622
<TOTAL-LIABILITY-AND-EQUITY> 2,340,214
<SALES> 0
<TOTAL-REVENUES> 210,721
<CGS> 0
<TOTAL-COSTS> 49,288
<OTHER-EXPENSES> 1,121,875
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (918,908)
<INCOME-TAX> 0
<INCOME-CONTINUING> (918,908)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (918,908)
<EPS-PRIMARY> (0.06)
<EPS-DILUTED> (0.06)
</TABLE>
