As filed with the Securities and Exchange Commission on January 26, 1996
Registration No.: 33-47612
================================================================================
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
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POST-EFFECTIVE AMENDMENT NO. 7 ON FORM SB-2
to
FORM S-1
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
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BCAM INTERNATIONAL, INC.
(Name of small business issuer in its charter)
<TABLE>
<CAPTION>
<S> <C> <C>
New York 8911 13-3228375
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
1800 Walt Whitman Road
Melville, New York 11747
(516) 752-3550
(Address and telephone number of principal executive offices
and principal place of business)
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Mr. Michael Strauss, Chairman of the Board
1800 Walt Whitman Road, Melville, New York 11747
(516) 752-3550
(Name, address and telephone number of agent for service)
Copy to:
Barry R. Shapiro, Esq.
Rivkin, Radler & Kremer
EAB Plaza
Uniondale, New York 11556
(516) 357-3000
Approximate date of proposed sale to the public: From time to time after this
Post-Effective Amendment No. 7 on Form SB-2 to Form S-1
Registration Statement becomes effective.
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. |_|
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. |_|
(cover continued on next page)
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<PAGE>
Pursuant to Rule 429 under the Securities Act of 1933, the prospectus included
as a part of this Registration Statement also relates to securities of the
Registrant covered by an earlier Registration Statement (File No. 33-38204)
filed on Form S-1 and declared effective on February 11, 1991 (the "1991
Registration Statement"). This Registration Statement constitutes Post-Effective
Amendment No. 11 to the 1991 Registration Statement.
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 Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
<PAGE>
BCAM INTERNATIONAL, INC.
Cross-Reference Sheet showing the
locations in the Prospectus of the Items on Form SB-2.
1. Front of Registration
Statement and Outside Front
Cover of Prospectus......................... Outside Front Cover
2 Inside Front and Outside Back
Cover Pages of Prospectus .................. Inside Front and Outside Back
Covers
3. Summary Information and Risk Prospectus Risk
Summary; Factors ........................... Prospectus Summary; Risk
Factors; The Company
4. Use of Proceeds ............................. Use of Proceeds
5. Determination of Offering Price ............. Not Applicable
6. Dilution .................................... Dilution
7. Selling Security Holders .................... Selling Security Holders
8. Plan of Distribution ........................ Plan of Distribution
9. Legal Proceedings ........................... Business
10. Directors, Executive Officers,
Promoters and Control Persons .............. Management
11. Security Ownership of Certain
Beneficial Owners and
Management ................................. Principal Stockholders
12. Description of Securities ................... Outside Front Cover; Inside
Front Cover; Prospectus
Summary; 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 ...................................... Certain Transactions
16. Description of Business ..................... The Company; Risk Factors;
Management's Discussion and
Analysis of Financial
Condition and Results of
Operation; Business
<PAGE>
17. Management's Discussion and
Analysis or Plan of
Operation .................................. Management's Discussion and
Analysis of Financial
Condition and Results of
Operations
18. Description of Property ..................... Business
19. Certain Relationships and Related
Transactions ............................... Principal Stockholders and
Certain Transactions
20. Market for Common Equity and
Related Stockholder Matters ................ Market for Company's Common
Equity, Class A Warrants and
Related Stockholders Matters
and Dividends
21. Executive Compensation ...................... Management
22. Financial Statements ........................ Financial Statements
23. Changes In and Disagreements With
Accountants on Accounting and
Financial Disclosure ....................... Not Applicable
<PAGE>
PROSPECTUS
BCAM INTERNATIONAL, INC.
1,795,316 Shares of Common Stock
402,857 Shares of Common Stock Issuable Upon Exercise
of Class D Common Stock Purchase Warrants
Finder's Unit Purchase Option to purchase 2,981 Units
(including 8,943 Shares of Common Stock;
and 5,962 Redeemable Class A Warrants; 7,154 Shares of Common Stock
and 5,962 Redeemable Class B Warrants Issuable Upon Exercise of
the Redeemable Class A Warrants; and 7,154 Shares of
Common Stock Issuable Upon Exercise of the Redeemable
Class B Warrants)
Of the securities to which this Prospectus relates (See "Description of
Securities") 104,251 shares of common stock (consisting of 81,000 treasury
shares and 23,251 shares issuable under the Finder's Option defined below) may
be offered by BCAM International, Inc. (the "Company") and the remaining
securities are being offered for the respective accounts of the Selling Security
Holders (see "Selling Security Holders"). All such securities were or may be
issued in or as part of the following transactions:
(a) 984,379 shares of common stock, $.01 par value (the "Common Stock") that
were issued upon the conversion of $984,379 face amount of Senior Secured
Convertible Promissory Notes (the "Notes") originally issued in a private
placement on June 25, 1991 (the "1991 Private Placement") as more fully
described under "Recent Events - 1991 Private Placement."
(b) 660,937 shares of Common Stock that were issued in the 1991 Private
Placement.
(c) 69,000 shares of Common Stock held as treasury shares that were issued to
employees of the Company.
(d) 81,000 shares of Common Stock held as treasury shares issuable by the
Company.
(e) 402,857 shares of Common Stock that are issuable upon the exercise of Class
D Common Stock Purchase Warrants ("Class D Warrants") which were issued in the
1991 Private Placement.
(f) A Finder's Unit Purchase Option (the "Finder's Option") issued by the
Company to NRC Resources Group, Inc. ("NRC"); and 2,981, as adjusted (2,825
initially), Units ("Units"), which are issuable upon exercise of the Finder's
Option, at a price per Unit of $4.35, as adjusted ($4.59 initially), subject to
further adjustment, at any time until January 17, 1997. The Units, after
adjustment pursuant to antidilution provisions, consisted of a total of 8,943
shares of Common Stock of the Company and 5,962 Redeemable Class A Warrants
("Class A Warrants"); and 7,154 shares of Common Stock and 5,962 Redeemable
Class B Warrants ("Class B Warrants") issuable upon the exercise of the 5,962
<PAGE>
Class A Warrants; and 7,154 shares of Common Stock issuable upon the exercise of
the 5,962 Class B Warrants. The Units were issued to NRC in connection with the
Company's initial public offering ("IPO"). Each Unit consisted of three shares
of Common Stock and two Class A Warrants. Each Class A Warrant entitles the
registered holder thereof to purchase one and two tenths (1.2) shares of Common
Stock and one Class B Warrant, at an adjusted price of $1.72. The Class A
Warrants, except for the Class A Warrants issuable under the Underwriter's Unit
Purchase Option (as defined below), were redeemed or exercised prior to the date
hereof. Each Class B Warrant entitles the registered holder thereof to purchase
one and two-tenths (1.2) shares of Common Stock at an adjusted price per share,
subject to further adjustment, commencing upon issuance, of $2.69 (originally
$3.33) for the period terminating on December 13, 1996, $3.23 (originally $4.00)
for the period commencing December 14, 1996, until January 17, 1997. The Class B
and Class E Warrants, as were the Class A Warrants (Class A and Class B
Warrants, together with the Class D and Class E Warrants described below, are
collectively referred to as the "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 Company's Common Stock exceeds certain amounts per
share, and for certain periods, as provided in the Class B and Class E Warrants.
See "Description of Securities - Warrants."
NRC has exercised the Finder's Option to the extent of 1,413 Units.
Upon exercise it received 4,239 shares of Common Stock and 2,826 Class A
Warrants. NRC has exercised its Class A Warrants and received 3,391 shares of
Common Stock and 2,826 Class B Warrants which are exercisable for 3,391 shares
of Common Stock. NRC holds the balance of the Finder's Option giving it the
right to purchase 1,568 Units which consist of 4,704 shares of Common Stock.
The securities to which this Prospectus relates include the Finder's
Option, the Units, the Common Stock, Class A Warrants and Class B Warrants
included within the Units and the Common Stock issued and issuable upon exercise
of such Class A and Class B Warrants (constituting, in the aggregate, 5,962
Class A Warrants, 5,962 Class B Warrants and 23,251 shares of Common Stock).
The Company is not aware of any underwriting arrangements with respect
to the sale of the securities to which this Prospectus relates and it is
anticipated that such securities will be traded from time to time on the Boston
Stock Exchange and quoted in the NASDAQ Small Cap Market at prices then
prevailing.
The Company will receive proceeds from any exercise of the Finder's
Option and the Warrants described above but will not receive proceeds from the
issuance of Treasury Shares to employees or from the sale of the securities
offered by the Selling Security Holders. See "Use of Proceeds." The Company will
bear all expenses incident to the registration and qualification of securities
to which this Prospectus relates.
This Prospectus also relates to 324,000 shares of Common Stock that
have been issued to directors, officers, employees and consultants of the
Company upon the exercise of certain stock options granted by the Company;
807,659 Class B Warrants and the remaining 491,588 Class E Warrants; and a total
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<PAGE>
of 2,857,814 shares of Common Stock issued or issuable upon exercise of such
Class B and Class E Warrants, all of which have been previously registered
pursuant to a Registration Statement on Form S-1 (File No. 33-38204) declared
effective on February 11, 1991.
The representative average of the high and low bid quotations of the
Company's Common Stock on December 1, 1995, as reported on NASDAQ Small Cap
Market, was $0.984 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 OR ANY STATE SECURITIES COMMISSION NOR HAS
THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The date of this Prospectus is ____________, 1996.
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<PAGE>
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 representations if given or made must not be relied
upon as being authorized by the Company. 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
(the "Commission") in accordance with the 1934 Act. Such reports, proxy
statements and other information can be inspected and copied at public reference
facilities maintained by the Commission at Judiciary Plaza, 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549; and at its regional offices at 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661, and at 7 World Trade
Center, Suite 1300, New York, New York 10048. Copies of such materials can also
be obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. 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 Commission a Registration Statement (the
"Registration Statement") (which term includes any amendments thereto) under the
Securities Act of 1933, as amended (the "1933 Act"), with respect to the
securities offered hereby. This Prospectus does not contain all the information
set forth in the Registration Statement and the exhibits and schedules thereto.
The Registration Statement and the exhibits and schedules thereto filed by the
Company with the Commission may be inspected 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.
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. As set forth above, the Company
files periodic reports and other information with the Commission. Prior to
making any decision relating to the Company's securities, investors are hereby
advised to consult such reports, which can be obtained as set forth above, in
order to obtain the most recent publicly available financial and other
information with respect to the Company.
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<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. Except as otherwise indicated, all share
and per share information in this Prospectus has been adjusted to reflect the
3.7899-for-one stock split effected in November 1989.
THE COMPANY
BCAM International, Inc. (the "Company"), a New York corporation
(formerly Biomechanics Corporation of America prior to a name change effected on
June 22, 1995), and its subsidiaries, BCAM Technologies, Inc. (formerly BCA
Associates, Inc.), and BCA Services, Inc. (formerly ErgoRisk Services, Inc.),
provide a broad range of consulting services, primarily to manufacturing
companies, using principles of ergonomics and biomechanics. These principles
combine elements of engineering and physical medicine in the design and redesign
of customer products, tools and manufacturing processes which are better suited
to or 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.
Following the discontinuance of the operations of its HumanCAD Division in
February 1993, the Company has been concentrating its business on integrating
its patented intelligent surface technology ("Intelligent Surface Technology")
to develop and license intelligent products. See "Recent Events - Discontinuance
of HumanCAD Division."
The services provided by the Company and its subsidiaries consist of
(i) intelligent product services, (ii) ergonomic workplace assessment services
by its subsidiary, BCA Services, Inc., and (iii) traditional ergonomic
consulting services. These services presently account for substantially all
revenues generated by the Company, and generally are provided under fixed price
contracts.
The Company was incorporated as a New York corporation in 1984. The
Company's offices are located at 1800 Walt Whitman Road, Melville, New York
11747. The Company's telephone number is (516) 752-3550.
RECENT EVENTS
Joint Venture
In August of 1995, BCA Services, Inc., a wholly owned subsidiary of the
Company, entered into a joint venture with Sandler Occupational Medicine
Associates, Inc. The purpose of the joint venture is to market, promote and
sell ergonomic and medical consulting services with respect to the prevention
and management of treatment of Cumulative Trauma Disorder.
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<PAGE>
Certificate of Incorporation Amendments
Effective June 22, 1995, by vote of the Board of Directors, followed by
a vote of the holders of a majority of the total outstanding shares of the
Company, the Company amended its certificate of incorporation to (i) change its
name from Biomechanics Corporation of America to BCAM International, Inc. and
(ii) increase the amount of shares of Common Stock the Company is authorized to
issue from 20,000,000 to 40,000,000.
Chairman and Chief Executive Officer
On February 9, 1995, Dr. Clifford M. Gross, the Company's Chairman of
the Board and Chief Executive Officer, resigned his positions with the Company
effective February 16, 1995 in order to pursue other interests. Dr. Gross
remains a consultant to the Company. At the Board meeting on February 16, 1995,
upon recommendation of the Executive Committee of the Board of Directors,
Michael Strauss was elected Chairman of the Board of Directors and appointed
Chief Executive Officer. Previously, on October 13, 1994, the Company had
entered into an employment agreement with Mr. Strauss to employ him as the
Company's President and Chief Operating Officer effective January 2, 1995. This
agreement was amended effective February 16, 1995 to reflect Mr. Strauss's
additional positions.
From 1991 to December 31, 1994, Mr. Strauss, age 53, was President and
Chief Operating Officer of Colorado Prime Corp., a national home food service
company providing home delivery of high quality, custom designed food programs
to retail customers. Previously, from 1984 through 1991, he held the positions
of Chairman and Chief Executive Officer of Capital Credit Corporation, a
subsidiary of Union Corporation, a Delaware corporation listed on the New York
Stock Exchange ("Capital Credit"). Capital Credit 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, without admitting or denying the allegations of a
complaint by the Commission with respect to the alleged activities of Mr.
Strauss and his agents and employees at Capital Credit, consented to a final
judgment of permanent injunction enjoining Mr. Strauss from violating Section
10(b) of the 1934 Act and Rules 10b-5 and 13b2-1 of Sections 13(a) and
13(b)(2)(A) of the 1934 Act and Rules 12b-20 and 13a-13 promulgated thereunder.
Mr. Strauss paid a fine in the sum of $50,000. Senior managers at Capital Credit
were also permanently enjoined as provided above. Prior to his tenure at Capital
Credit, Mr. Strauss had a twelve year career with American Express Company in
various positions including Executive Vice President of the Financial Services
Division of Shearson Lehman Brothers, Executive Vice President of the Travel
Services and Credit Card Divisions and President of American Express Canada,
Inc.
The Executive Committee also recommended the appointment of Robert
Wong, a current director, as Vice Chairman and Chief of Technology. 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 biomechanics technology, and therefore the Board does not believe
Dr. Gross's resignation will have a material adverse effect on the Company. See
"Risk Factors - Retention of Key Personnel; Limited Management Experience,"
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<PAGE>
"Management - Directors, Executive Officers and Significant Employees" and
"Executive Compensation - Cash Compensation of Executive Officers."
Warrant Amendments
On January 5, 1995, the Company extended the expiration date of the
Company's Class A Warrants, Class B Warrants and Class E Warrants, and certain
unit purchase options issued to D.H. Blair Holdings, Inc. (the "Underwriter's
Unit Purchase Option"), and the Finder's Option, from January 16, 1995 to
January 17, 1997, and amended the exercise price of the Class B Warrants. See
"Description of Securities."
BCA Services, Inc.
On December 21, 1994, the Company agreed to terminate its joint venture
with ErgoRisk Services, Inc. (Canada). Under the terms of the joint venture, BCA
Services, Inc. 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. On November 30, 1994, the
Company terminated the employment of the President of BCA Services, Inc. The
Chief Executive Officer of the Company acted as the President of BCA Services,
Inc. until January 2, 1995. Thereafter, Michael Strauss, then the Company's
President and Chief Operating Officer, managed the business of BCA Services,
Inc. until September 21, 1995, when Robert Wong, the Company's Vice Chairman and
Chief Technology Officer, was appointed President. The Company believes these
events will not have a material adverse effect on the Company. See "Management -
Directors, Executive Officers and Significant Employees."
Lumex Agreement
In September 1994, the Company signed a licensing agreement with Lumex,
Inc. ("Lumex"), granting Lumex an exclusive world-wide license with a right to
sublicense, manufacture, have manufactured, utilize and exploit the Company's
intelligent surface technology in the medical procedure equipment field of use,
excluding non-medical recliner chairs, wheel chairs, office chairs and seats,
hospital beds, transportation seats and fitness equipment.
Lumex paid $100,000 to the Company on the execution of the licensing
agreement. Lumex agreed to make royalty payments (a) equal to 5% of net sales of
all products sold by Lumex and (b) equal to the greater of (i) 50% of all
royalties received by Lumex pursuant to a sublicense agreement between Lumex and
a Lumex affiliate or a third party or (ii) 5% of net sales of products sold by
sub-licensees. To maintain exclusivity of the license, Lumex must pay minimum
royalties equal to $50,000 during the first year of the shipment of the product
and up to $200,000 in the fifth year. In years 6 through 15 the minimum royalty
increases by 5% a year to maintain the exclusive rights. The licensing agreement
terminates on the expiration of the last patent subject to the licensing
agreement, unless sooner terminated for breach of the licensing agreement or
insolvency of a party.
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<PAGE>
Reebok Agreement
In January 1994, the Company and Reebok International Ltd. ("Reebok")
signed a world-wide exclusive licensing and development agreement for the
footwear, athletic, sport and fitness equipment fields of use. Under the
agreement, Reebok has the exclusive right to sub-license, make, use, and sell
products and components thereof and to use the Company's proprietary information
relating to microprocessor-based interactive systems for controlling one or more
load bearing surfaces. The fields of medical equipment and orthopedic devices
are specifically excluded from the license.
Intelligent Seat Technology
On June 9, 1993, the Company was notified by Lear Siegler Seating
Corporation ("Lear Seating") that Lear Seating was claiming co-inventor status
to the use of the Company's intelligent seat technology ("Intelligent Seat
Technology") in the production of automobile seats. On September 29, 1993, the
Company reached an agreement with Lear Seating and McCord Winn Textron, Inc.
("Textron") resolving such claim. As part of the agreement, Lear Seating will
receive a royalty-free license to use the Intelligent Seat Technology with its
own seats in exchange for withdrawing all claims of ownership of Intelligent
Seat Technology.
Discontinuance of HumanCAD Division
On February 23, 1993, the Board of Directors of the Company announced
its decision to discontinue the operations of its HumanCAD Division, the
principal activity of which was the development and sale, through distributors
or directly to end users, of software programs and other products, including its
Mannequin(TM) software programs, ErgoShow(TM) videotape and workbook and
Ergosense(TM) computer-based ergonomics training program, all of which will be
retained by the Company for internal use.
Private Placements
1993 Private Placements
During the period commencing June 1993 and ending September 1993, the
Company completed four separate private placements: two placements, each of
454,545 shares of Common Stock at $1.10 per share; one of 434,783 shares of
Common Stock at $1.15 per share; and one of 500,000 shares of Common Stock at
$1.15 per share through Sloan Securities Corp., a placement agent. These
placements resulted in the sale of, in the aggregate, 1,843,873 shares of Common
Stock, resulting in net proceeds to the Company of $2,039,925. According to the
private placement agreements, each purchaser could not transfer such shares
prior to July 1, 1994. In consideration of services rendered in connection with
the private placements, Strategic Growth International, Inc. ("Strategic
Growth") received 100,000 shares of unregistered Common Stock and options to
purchase 400,000 additional shares at prices ranging from $1.31 to $3.22, their
fair market value at date of grant. Of these, options to purchase 250,000 shares
have expired. In consideration of additional public relations services rendered
on a continuing basis, on July 3, 1995, the Company granted to Strategic Growth
options to purchase 300,000 additional shares at a price of $1.05 per share,
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<PAGE>
their fair market value at date of grant. In addition, the Company paid
commissions to an individual in the amount of $35,075 for his services in
connection with one of the private placements. The Company agreed in certain
circumstances to register the shares issued to the private placement purchasers
and Strategic Growth International, Inc. under the 1933 Act. The Company
received requests to register the above mentioned shares and the Company
registered such shares in February 1995.
1991 Private Placement
On June 25, 1991, the Company completed the 1991 Private Placement for
which D.H. Blair & Co., Inc. (the "Underwriter") acted as placement agent, of
$1,762,500 of the Company's securities, consisting of $1,101,562 of 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 $2.00 per share for 176,250 shares of Common Stock (the "Class D
Warrants"). These securities were sold pursuant to a securities purchase
agreement among the Company, certain purchasers and the Underwriter as
purchasers' representative (the "Securities Purchase Agreement"), in a total of
35.25 Units (the "1991 Units") of $50,000 each, consisting of a $31,250 Note,
18,750 shares of Common Stock and 5,000 Class D Warrants.
As of December 31, 1992, the holders of approximately 91% of the
aggregate face value of the Notes had converted their Notes into Common Stock. A
total of 1,000,004 shares of Common Stock were issued as a result of this
conversion. Pursuant to the Securities Purchase Agreement, those Notes which
were not converted were prepaid in full out of the proceeds of the Discounted
Warrant Plan described below, in the aggregate principal amount of $101,558.
Accrued interest also was paid to the date of conversion with respect to the
converted Notes and to the date of prepayment with respect to the remaining
Notes, in an aggregate amount of approximately $66,000.
After giving effect to the exercise of Class E Warrants following the
Discounted Warrant Plan and to the issuance of certain stock options at a market
value exercise price below the exercise price of the Class D Warrants, pursuant
to the provisions for adjustment of the exercise price of the Class D Warrants
as set forth in the Securities Purchase Agreement, each Class D Warrant entitles
the holder to purchase approximately two and twenty-nine hundredths (2.29)
shares of Common Stock (402,857 in the aggregate) at an adjusted price, subject
to further adjustment, of $.875 per share.
Discounted Warrant Plan
In October, 1991, the Board of Directors of the Company approved a plan
(the "Discounted Warrant Plan") providing for (a) a reduction in the price of
each Class A Warrant which was exercised during the Class A Limited Exercise
Period (hereafter defined) from $2.00 to the discounted price of $1.50 per share
of Common Stock, and (b) the issuance to each holder who exercised 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 exercise price of each Class E Warrant is at the
discounted price of $1.25 per share of Common Stock, compared to $2.69, through
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<PAGE>
December 13, 1996 and $3.23 thereafter, per share, for the Class B Warrants. The
Class A Limited Exercise Period was the 70-day period ended on February 19,
1992.
Pursuant to the Discounted Warrant Plan, the Company issued and sold
1,716,930 shares of Common Stock, and issued a like number of Class E Warrants,
upon the exercise of Class A Warrants at $1.50 per share. During 1992, the
Company issued and sold 222,769 shares of Common Stock upon the exercise of
202,517 Class E Warrants at $1.25 per share. The aggregate net proceeds of such
issuances was approximately $2.8 million. During 1993 the Company issued and
sold 1,125,109 shares of Common Stock upon the exercise of 1,022,825 Class E
Warrants at an exercise price of $1.25 per share. The aggregate net proceeds of
such issuances was approximately $1,400,000.
In 1992, the Company issued an aggregate of 166,154 shares of its
Common Stock to two brokers associated with the Underwriter, for their services
in soliciting the exercise of the Class A Warrants at the discounted price.
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<PAGE>
THE OFFERING
Securities Offered: 1,795,316 shares of Common Stock and an additional
402,857 shares of Common Stock issuable upon
exercise of the Class D Warrants.
The Finder's Option; 2,981 Units purchasable upon
exercise of the Finder's Option; 8,943 shares of
Common Stock and 5,962 Class A Warrants comprising
the Units; 7,154 shares of Common Stock and 5,962
Class B Warrants issuable upon exercise of the
Class A Warrants; and 7,154 shares of Common Stock
issuable upon exercise of the Class B Warrants.
Shares of Common Stock Outstanding
Before Offering: 14,857,233 (1) (2) (3) (4) (5)
Shares of Common Stock Outstanding
After Offering: 14,948,651 (2) (3) (4) (5) (6)
- --------------------
(1) Does not include (i) 81,000 treasury shares reserved for future
issuance, and (ii) 5,714 shares of Common Stock issuable upon exercise
of the remaining Class D Warrants.
(2) Does not include 682,182 shares of Common Stock which were repurchased
by the Company. See "Certain Transactions - Redemption".
(3) Does not include (i) shares of Common Stock issuable under options to
acquire an aggregate of 452,000 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 1,932,500 shares (net of cancellations and
exercises) have been granted. See "Management-Stock Options-Stock
Option Plans" and "Management-Director Compensation."
(4) Does not include (a) 156,189 shares, as adjusted, of Common Stock
issuable upon exercise of the Class C Warrants issued to the
Underwriter in connection with the 1991 Private Placement, (b) 766,083
shares of Common Stock issuable upon exercise of the balance of the
Underwriter's Unit Purchase Option and the balance of the Finder's
Option, and upon the exercise of all Warrants (excluding 3,763 shares
of Common Stock issuable upon the exercise of 3,136 Class A Warrants
that were redeemed in 1993) included therein or obtained upon exercise
of such Warrants, and (c) 969,191 shares of Common Stock issuable upon
exercise of the remaining Class B Warrants and 540,745 shares of Common
- 11 -
<PAGE>
Stock issuable upon exercise of the remaining Class E Warrants. See
"Recent Events - 1991 Private Placement."
(5) Does include 3,391 shares of Common Stock that were issued upon the
exercise of 2,826 Class A Warrants by the Finder's Option holder.
(6) Includes the issuance of (i) 5,714 shares issuable upon exercise of the
remaining Class D Warrants, (ii) 81,000 treasury shares reserved for
future issuance, and (iii) 4,704 shares of Common Stock issuable upon
exercise of the balance of the Finder's Option, excluding the remaining
shares issuable upon the exercise of all Warrants included therein or
obtained upon exercise of such Warrants.
Use of proceeds: The Company may receive proceeds from the exercise of the
Finder's Option and the Class D Warrants, which will be
used for general working capital. The Company did not
receive any proceeds from the issuance of shares of
Common Stock upon the conversion of $984,379 face amount
of the Notes. The Company will not receive any proceeds
from the issuance of 81,000 treasury shares or sales of
securities by the Selling Security Holders. 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
- 12 -
<PAGE>
RISK FACTORS
An investment in the securities offered hereby is speculative
in nature, involves a high degree of risk, and should not be made by any
investor who cannot afford the loss of his entire investment. Each prospective
purchaser should carefully consider the following risks, as well as others
described elsewhere in this Prospectus, before making an investment.
1. LIMITED OPERATING HISTORY; LOSSES; ACCUMULATED DEFICIT.
Although the Company was formed in 1984, it did not commence providing
consulting services on a significant basis until 1986. The Company reported a
net loss of $1,243,960 for the nine-month period ended September 30, 1995 and of
$2,388,953 for the fiscal year ended December 31, 1994. For the fiscal year
ended December 31, 1993, the Company reported a net loss of $595,012. At
September 30, 1995, the Company had an accumulated deficit of $11,241,630. The
Company's operations are subject to numerous risks associated with the
establishment and development of a new business. Current levels of revenue from
licensing its technology and the reduction of revenue from the Company's
ergonomic workplace assessment and traditional ergonomic consulting services
have contributed to the Company's current losses. The historic losses will
continue until the Company increases the sales of these services and the
licensing of its technology. The Company is reviewing its sales and marketing
plans and working with existing licensees to expedite product development in
order to expedite the opportunities to receive revenue. There can be no
assurance that sales or licensing revenue will be materially increased so as to
cause the Company to operate at a profit. The Company expects ordinary expenses
of approximately $200,000 a month for fiscal 1996. This amount is the minimum
fixed cost required to service the Company's existing contracts. The costs are
fixed costs and until the Company can increase its revenue to such levels, it
will continue to operate at a loss.
Pursuant to the Securities Purchase Agreement, the Company
sold securities consisting of: $1,101,562 of 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 $2.00 per share
for 176,250 shares of Common Stock. A total of 35.25 of these 1991 Units were
sold at $50,000 each, consisting of one $31,250 Note, 18,750 shares of Common
Stock and 5,000 Class D Warrants. The Securities Purchase Agreement contains
covenants, which survived the conversion and prepayment of the Notes, (i) to
register the securities issued pursuant to the Securities Purchase Agreement and
(ii) to maintain a minimum net worth equal to the lesser of (i) the minimum net
worth requirements of NASDAQ in order to maintain the listing of the Common
Stock or (ii) $500,000. See "Risk Factors -- Future Sales of Common Stock." As
of December 31, 1992, the holders of approximately 91% of the aggregate face
value of the Notes had converted their Notes into Common Stock. A total of
1,000,004 shares of Common Stock were issued as a result of this conversion.
Pursuant to the Securities Purchase Agreement, those Notes which were not
converted were prepaid in full in 1992. Since the Notes have been paid in full,
if the Company breached the covenants there would be no liability except to
register the securities and use its best efforts to maintain the minimum net
worth required. The Company currently meets the minimum net worth covenant;
however, if the Company
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<PAGE>
continues to sustain losses, at some point in the future, it will breach this
covenant. The breach of this covenant could have a material adverse effect on
the market price of the Common Stock.
2. NO ESTABLISHED MARKETS. The Company's products and services
are not widely used at this time and the Company must educate its customers and
potential customers as to the value of its services and technology. There can be
no assurance the Company's clients or potential clients will find ergonomic
consulting services or products of the type provided or proposed to be provided
by the Company desirable or of economic value.
3. RISKS OF EXPANSION. The Company has incurred and continues
to incur significant costs to attract and retain qualified management personnel,
engineers, scientists and ergonomists, and for marketing and promotional
activities. The Company's expenses may exceed its revenues until such time, if
ever, as the volume and profitability of its business increase to the extent
necessary to offset these expenses. The Company may also incur increased
expenses related to services performed for particular clients prior to receipt
of any fees from such clients and, accordingly, may experience further decreases
in its available cash during the early stages of expansion.
4. DEPENDENCE ON MAJOR CUSTOMERS. During the fiscal year ended
December 31, 1993, Textron and U.S. Surgical Corp. accounted for 44% and 6%,
respectively, and 50%, in the aggregate, of the Company's net revenue. 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 28.9%, 11.6% and 11.2%
respectively, and 51.7%, in the aggregate, of the Company's net revenue. Since
the Company is often retained to consult with respect to particular problems or
to present seminars or training sessions, it is typically retained by a client
for a limited period of time and the Company's services may not be needed after
the completion of such assignment. No assurance can be given that the Company
will continue to be retained by any of its major clients beyond the current
project or that such clients will retain the Company for any future services.
5. EFFECT OF STATE OF ECONOMY. The market for the Company's
services may be adversely affected by a recession or other economic downturn.
The services provided by the Company are usually new services not previously
budgeted by potential customers. During an economic recession, such services may
be considered discretionary and delays in commencing ergonomic programs are
possible. In addition, clients currently using the Company's services could
decide to reduce their commitment for future use of such services as the economy
worsens or the market for their products and services is reduced.
6. 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.
- 14 -
<PAGE>
7. FIXED PRICE CONTRACTS. The 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 man hours that will be required to
provide the services. To the extent that the Company underestimates the man
hours that will be required, the Company could realize a loss on any particular
contract or contracts. In addition, in certain circumstances, the Company may
seek to establish a relationship with a particular client by offering to provide
services based upon an hourly rate which does not reflect the full cost to the
Company of providing these services. With respect to any contracts entered into
at such hourly rates, the Company will have additional exposure to losses.
8. 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 research and development costs. The commercial rights to any
products developed as a result of such efforts typically belong to the Company's
clients and not the Company. Although the Company believes that it otherwise
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.
9. LACK OF PATENT PROTECTION; RELIANCE ON TRADE SECRET AND
COPYRIGHT PROTECTION. Although the Company has obtained eight United States
patents and has filed seven additional United States patent applications, there
can be no assurance that its software programs are entitled to patent protection
or that the claims in the pending patent applications otherwise 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 patents or other rights owned by others. If
patents do not issue from present or future patent applications, the Company may
be subject to greater competition.
With the exception of two of its training manuals which were
developed for the U.S. Department of Labor and are not copyrightable, the
Company's training manuals and materials and its principal proprietary software
programs have been copyrighted by the Company and accordingly, are protected to
the extent provided under United States copyright laws. 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
contractual 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
- 15 -
<PAGE>
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, training materials 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.
10. 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. The
Company cannot predict the extent to which it may be affected by legislative and
other regulatory developments under the Occupational Safety and Health Act
("OSHA") or otherwise.
11. RETENTION OF KEY PERSONNEL; LIMITED MANAGEMENT EXPERIENCE.
There can be no assurance that the Company will be able to retain the services
of its key 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 9, 1995, Dr. Clifford M. Gross, the Company's Chairman of the Board of
Directors and Chief Executive Officer, resigned his positions with the Company
effective February 16, 1995 in order to pursue other interests. Dr. Gross is a
consultant to the Company. 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. On February 16, 1995,
Robert Wong, a current director, was appointed Vice Chairman and Chief of
Technology. 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 technology, and, therefore, the Board does
not believe Dr. Gross's resignation will have a material adverse effect on the
Company. During the past three years six other directors have resigned. See
"Directors and Executive Officers."
12. COMPETITION. Other companies or agencies may, in the
future, engage in the development of particular services that are competitive
with the Company's services. The Company expects that increased competition from
a wide variety of sources is likely if the Company is successful in expanding
the market for its services and if ergonomics becomes accepted as a means of
promoting economic efficiency. It is likely that some competitors will have
significantly greater financial, technical and other resources than the Company.
Many of the large industrial companies that form the primary market for the
Company's services may also seek to develop or have already developed their own
ergonomic programs. To the extent that the Company provides training programs or
manuals to any of such clients, the need by such clients
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<PAGE>
of the Company's consulting services may decline. Similar services may also be
supplied by universities, hospitals or insurance companies, government agencies
or other entities, many of which may have substantially greater financial and
other resources than the Company.
13. 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, with a combined single limit of $5,000,000.
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.
14. IMMEDIATE AND SUBSTANTIAL DILUTION. Purchasers of the
Common Stock offered hereby will incur an immediate dilution of approximately
$0.685 per share, upon exercise of the Class D Warrants, and $1.26 per share,
upon exercise of the Finder's Option, in net tangible book value at September
30, 1995, from the exercise price of the Class D Warrants or the Finders'
Option, respectively. See "Dilution."
15. CONTROL BY PRE-IPO STOCKHOLDERS. The stockholders who
acquired their shares prior to the IPO, including Dr. Clifford M. Gross and
members of his family ("Pre-IPO Stockholders") beneficially own 958,008 shares
of Common Stock, or approximately 6.4% of the outstanding Common Stock of the
Company, based upon their most recent filings with the Commission. Since the
holders of Common Stock do not have cumulative voting rights, the Pre-IPO
Stockholders are in a position to substantially influence the election of all of
the directors of the Company and to control the Company's affairs. See
"Principal Stockholders." Subsequent to the issuance of the Common Stock, the
exercise of the remaining Class D Warrants, and the exercise of the balance of
the Finder's Option and all Warrants in connection therewith and assuming no
exercise of any other options or warrants, the Pre- IPO Stockholders will
beneficially own 6.4% of all outstanding shares of voting stock, before any
exercise of the Class C Warrants issued in the 1991 Private Placement and the
Underwriter's Unit Purchase Option. See "Recent Events - 1991 Private Placement"
and "Recent Events - Discounted Warrant Plan."
16. OUTSTANDING OPTIONS. As of December 1, 1995, 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) and
the 81,000 treasury shares that may be issued, the Company had outstanding
807,659 Class B Warrants, in turn 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,
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. The
Company has also granted options under certain stock option plans to purchase an
aggregate of 2,484,500 additional shares of its Common Stock (net of exercises
and cancellations, of which
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<PAGE>
options for 25,000 shares were granted prior to the IPO) at exercise prices
ranging from $0.922 to $3.219 per share. Of these, the Company has granted to
its non-management directors options to purchase an aggregate of 262,500 shares
of its Common Stock at exercise prices ranging from $0.922 to $1.688 per share.
In addition, the Company has granted, to certain consultants, outside of stock
option plans, options to purchase an aggregate of 305,000 shares of Common Stock
at exercise prices ranging from $1.047 to $1.516 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.
See "Management-Stock Options-Stock Option Plans," "Shares Eligible for Future
Sale," "Management-Director Compensation," "Recent Events - 1991 Private
Placement" and "Recent Events Discounted Warrant Plan."
17. FUTURE SALES OF COMMON STOCK. All the Company's shares of
Common Stock currently outstanding and owned by its Pre-IPO Shareholders and
other affiliates of the Company are "restricted securities" as that term is
defined in Rule 144 under the 1933 Act, and under certain circumstances may be
sold without registration pursuant to that Rule. In general, under Rule 144, a
person who has satisfied a two-year holding period may, under certain
circumstances, sell within any three month period a number of shares of Common
Stock which does not exceed the greater of 1% of the then outstanding shares of
Common Stock or the average weekly trading volume in such shares during the four
calendar weeks prior to such sale. Rule 144 also permits, under certain
circumstances, the sale of shares without any quantity or other limitation by a
person who is not an affiliate of the Company and who has satisfied a three-year
holding period. All of such outstanding shares have satisfied the Rule 144
two-year holding period requirement and, accordingly, are eligible for sale at
any time subject to certain quantitative limitations of Rule 144. Any
substantial sale of restricted securities pursuant to Rule 144 may have a
material adverse effect on the market price of the Common Stock. 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. Although the Company currently meets these
requirements, in the event the Company continues to sustain losses, at some
point in the future, it will 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."
18. MARKET OVERHANG. Future sales under Rule 144 or otherwise
of the outstanding Common Stock could depress the market price of the Company's
Common Stock. Further, the options and warrants presently outstanding could
further adversely affect the market for the Common Stock and any sale of the
Common Stock acquired pursuant to such options and warrants could depress the
market price of the Common Stock.
19. NON-REGISTRATION IN CERTAIN JURISDICTIONS OF SHARES
UNDERLYING THE WARRANTS. The Class A Warrants are detachable from the Units and
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<PAGE>
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" and "Recent
Events-Discounted Warrant Plan."
20. 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 COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
The Common Stock, Class B and Class E Warrants of the Company are
quoted in the NASDAQ Small Cap Market under the symbols BCAM, BCAML, and BCAMZ,
respectively. The Common Stock is also traded on the Boston Stock Exchange under
the symbol BAM.
The following table sets forth the high and low closing bid quotations
for the Common Stock as reported by NASDAQ and the Boston Stock Exchange for
each calendar quarter during 1993, 1994, and 1995. The NASDAQ Small Cap Market
quotations reflect inter-dealer prices without retail markup, markdown or
commission and do not necessarily represent actual transactions.
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<PAGE>
COMMON STOCK - NASDAQ
1993 HIGH BID LOW BID
- ---- -------- -------
First Quarter 1 1/2 11/16
Second Quarter 1 15/32 1 3/16
Third Quarter 3 3/4 1 7/32
Fourth Quarter 3 3/16 2 3/8
1994
- ----
First Quarter 3 7/16 2 9/32
Second Quarter 2 7/16 1 5/16
Third Quarter 2 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
COMMON STOCK - BOSTON STOCK EXCHANGE
1993 HIGH BID LOW BID
- ---- -------- -------
First Quarter 1 1/8 1
Second Quarter 1 7/16 11/32
Third Quarter 4 1 3/16
Fourth Quarter 3 19/36 2 5/8
1994
- ----
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
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<PAGE>
COMMON EQUITY HOLDERS
There were approximately 416 record holders of the Company's Common
Stock as of December 1, 1995.
DILUTION
As of September 30, 1995, the net tangible book value per share of the
Company's Common Stock was $0.19. "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 D Warrants at an exercise
price of $.875 per share, and from the exercise of the balance of Finder's
Option at an exercise price of $1.45 per share, and to the issuance of 81,000
treasury shares, in each case net of expenses of the offering, and assuming no
exercise of the Warrants included within the Finder's Option or any other
outstanding warrants or options, the pro forma net tangible book value per share
of Common Stock as of September 30, 1995, would have been $0.19. This would
result in dilution to purchasers of Common Stock upon the exercise of the Class
D Warrants and the Finder's Option, respectively (i.e., the difference between
the exercise price of the Class D Warrants and the Finder's Option,
respectively, and net tangible book value after the sale and issuance of such
Common Stock and treasury shares) of approximately $0.685 and $1.26 per share,
respectively.
The following table illustrates the per share dilution:
Class D Warrants Finder's Option
---------------- ---------------
Public offering price per
share of Common Stock
upon exercise of Class D
Warrants and Finder's
Option $0.875 $1.45(1)
Net tangible book value
per share at September
30, 1995 $0.19 $0.19
Net increase per share
attributable to the sale
by the Company of Common Stock
upon exercise of the Class D
Warrants and Finder's Option
and issuance of treasury shares 0 0
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<PAGE>
Pro forma net tangible book
value per share of Common
Stock after exercise of
Class D Warrants and Finder's
Option and issuance of treasury
shares $0.19(2) $0.19(2)
Dilution of net tangible
book value per share of
Common Stock to new
investors $0.685 $1.26
======= =====
- ----------
(1) Based upon the issuance of three shares for each Unit purchased upon
exercise of the Finder's Option, at an exercise price of $4.35 per
Unit.
(2) Based upon 14,948,651 outstanding shares of Common Stock.
After giving effect to the sale of Common Stock upon exercise of the
Class D Warrants at an exercise price of $.875 per share, the issuance of 81,000
treasury shares and the sale of Common Stock upon exercise of the Finder's
Option (but excluding any exercise of the Warrants included within the Finder's
Option), the Class D Warrant holders will own 402,857 shares, or 2.7% of the
outstanding Common Stock following such exercises and issuances, for which they
will have paid a total of $352,500, and the holder of the Finder's Option will
own 8,943 shares, or less than 1% of the outstanding Common Stock following such
exercises and issuances, for which it will have paid a total of $12,967.
USE OF PROCEEDS
The Company will derive proceeds from any exercise of the Class D
Warrants and the Finder's Option offered hereby. The Class D Warrants, the
Finder's Option and other outstanding options are exercisable over varying
periods of time ending not later than June 25, 1996 in the case of the Class D
Warrants, and January 17, 1997 in the case of the Finder's Option. Assuming the
exercise of all such Class D Warrants, at the exercise price of $.875, and the
Finder's Option (assuming no exercise of the Class A Warrants included therein
or Class B Warrants issuable upon exercise thereof) in full, of which there can
be no assurance, the maximum aggregate amount of such proceeds, after giving
effect to expenses of the offering estimated at approximately $25,000, is
estimated at approximately $340,000, of which $334,000 have been received as of
the date hereof. See "Dilution." If the Company were to receive the remaining
$6,000 in the next 12 months, it would be utilized as working capital.
The foregoing represents the Company's best estimate of its allocation
of the net proceeds from any exercise of the Class D Warrants and the Finder's
Option 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
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<PAGE>
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 or issue securities for
acquisitions, although the Company does not currently have any agreements or
understandings with respect to any planned acquisitions. See "Description of
Securities-Acquisition Preferred Stock."
CAPITALIZATION
The following table sets forth the capitalization of the Company at
September 30, 1995, as adjusted to reflect (a) the issuance and sale of the
balance of 5,714 shares of Common Stock upon exercise of the Class D Warrants at
$.875 per share; (b) the issuance of 81,000 treasury shares; and (c) the
issuance and sale of the balance of the 4,704 shares of Common Stock issuable
upon the exercise of the Finder's Option (excluding the exercise of the Class A
Warrants and the Class B Warrants thereunder).
September 30, 1995
-------------------------
Actual As Adjusted
------ -----------
Acquisition Preferred Stock, par value
$.01 per share, authorized 500,000
shares, no shares issued or outstanding -- --
Common Stockholders' Equity
Common Stock, $.01 par value; 40,000,000
shares authorized; 15,620,415 shares
issued and 14,857,233 outstanding;
15,630,833 shares issued and 14,948,651
outstanding, as adjusted(1) $156,204 $156,308
Paid-in surplus(2) 15,033,759 15,048,016
Deficit(2) (11,241,630) (11,358,270)
---------- ----------
3,948,333 3,846,054
Less:
Treasury shares (763,182 shares; 682,182,
as adjusted)(3) (899,100) (810,000)
---------- ----------
Common Stockholders' Equity $3,049,233 $3,036,054
========== ==========
Total Capitalization $3,049,233 $3,036,054
========== ==========
- ----------------
(1) Does not include the possible issuance of (i) approximately 757,988
shares of Common Stock, as adjusted, issuable upon exercise of the
Underwriter's Unit Purchase Option and the Warrants included therein;
(ii) 969,191 shares, as adjusted, issuable upon exercise of the Class B
Warrants, 156,189 shares issuable upon exercise of the Class C Warrants
or 540,745 shares, as adjusted, issuable upon exercise of the Class E
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<PAGE>
Warrants, or (iii) up to 2,789,500 shares of Common Stock issuable upon
the exercise of stock options currently outstanding. See "Agreements
with the Underwriter," "Management - Stock Options - Stock Option
Plans," "Management-Director Compensation" and "Recent Events -
Discounted Warrant Plan."
(2) Includes potential issuance of 81,000 treasury shares to employees for
services at an assumed market price of $1.44 estimated as of September
30, 1995.
(3) Adjusted figure does not include 81,000 treasury shares reserved for
issuance to employees.
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1994 COMPARED WITH YEAR ENDED DECEMBER 31, 1993
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 decreased by $922,477 in 1994 as compared to 1993. The
100% decrease in gross profit was primarily attributable to lower margin revenue
associated with a contract with IPTN, lower revenues from licensing fees of
intelligent products and lower revenues from ergonomic workplace assessments as
compared to the previous year. Direct cost also reflects a change in estimate,
resulting from additional work that the Company performed in 1995 on the Textron
contract and various accruals for losses to be incurred by the Company relating
to certain other contracts. A comparison of the two years is shown below:
Year Ended December 31,
--------------------------------
1994 1993
---- ----
Net Revenue $ 1,138,304 $ 1,381,507
Direct Costs 1,140,698 461,424
----------- -----------
Gross Profit (Loss) $ (2,394) $ 920,083
=========== ===========
Gross Profit Percentage -- 67%
=========== ===========
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. Revenue
decreased by $243,203 in 1994 as compared to 1993.
Net Revenues were comprised as follows:
Year Ended December 31,
-----------------------------
1994 1993
---- ----
Intelligent Products (1) $ 262,000 $ 604,500
Ergonomic product analysis 800,135 322,361
and redesign (2)
Ergonomic Workplace Risk 76,169 454,646
---------- ----------
Assessments (ErgoRisk) (3)
$1,138,304 $1,381,507
========== ==========
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<PAGE>
(1) Revenues from licensing and development fees of
intelligent products accounted for 23% of revenue in 1994 versus 44% in 1993 and
declined in total dollars by $342,500 in 1994 from the previous year. Fiscal
year 1994 revenue is attributable to the two licensing agreements signed in 1994
with Reebok for Intelligent Footwear and Athletic Sport and Fitness Equipment
and Lumex for Intelligent Medical Procedure Equipment, while the previous year's
revenue is related to Textron for the Intelligent Transportation Seat. Revenue
from intelligent products includes the up-front payments for licensing the
Intelligent Surface Technology as well as fees associated with the development
of the prototypes for the specific applications.
(2) Ergonomic product analysis and redesign provided 70% of
the Company's revenue in 1994 compared to 23% in 1993. The principal reason for
the $477,774 increase in 1994 from 1993 reflects a contract with IPTN for
$700,000, (the "IPTN Contract"), a significant portion of which was completed in
1994. Management believes that there is demand for ergonomic product improvement
and redesign services including comparative assessments of products and
prescribed redesign features to improve them.
(3) Ergonomic workplace assessments through BCA Services, Inc.
provided 7% of total revenue in 1994 compared to 33% of total revenue in 1993,
and total dollars declined by $378,477 in 1994 from 1993. The Company
established a new subsidiary, BCA Services, Inc., in December 1993 and hired
staff in 1994 to take full advantage of proposed federal legislation by OSHA for
stricter workplace safety standards which was anticipated to be released in
September 1994, in light of the statements made by the Clinton Administration in
November 1993. On March 21, 1995, OSHA released a draft of its ergonomic
protection standard and it will be open for public comments. The Company views
this as a positive step, although there can be no assurance that this draft
ergonomic protection standard or a modification of this standard will become
legislation. The Company was not as successful in selling the workplace
assessment services as it had been in 1993, resulting in a decision in the
fourth quarter to downsize BCA Services, Inc. and reduce expenses.
Direct costs increased by $679,274 in 1994 from 1993 reflecting: (1)
cost associated with the IPTN Contract which represented 47% of the total cost
of sales and reflects incremental third party expenses for products and
subcontracted services, (2) a change in estimate on the Textron licensing
agreement, whereby the Company recorded in 1994 approximately $149,000 of
additional costs to complete this contract and (3) various accruals for losses
of approximately $159,000 to be incurred by the Company relating to certain
other contracts, net of (4) a decrease in salaries and benefits of approximately
$121,000 in 1994 from 1993 as a result of increased use of subcontracting.
Selling, general and administrative expenses increased by $885,885 or
61%, from 1994 to 1993, primarily due to the Company preparing to sell ergonomic
workplace consulting services in anticipation of proposed federal legislation by
OSHA for stricter workplace safety standards. The increase was attributable to
the following areas: (1) 44% to salaries and benefits, recruiting and
relocation, (2) 19% to selling and marketing expenses and (3) the balance in
several areas including rent, insurance, reporting, exchange fees and
amortization.
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<PAGE>
The Company's research and development costs increased $63,262 in 1994,
reflecting efforts to improve existing Company technology, including making the
EARLY(R) report more accurate and useful, and the Company's ongoing efforts to
develop new technology. The Company filed eight new patents in 1994.
Interest expense was $0 in 1994, as compared to $4,343 in 1993. The
Company used its surplus cash to fund losses in 1994 and repaid all the
interest-bearing debts in 1993.
Interest and other income was $154,636 in 1994 compared to $59,395 in
1993. The $95,241 increase is primarily attributable to the higher cash position
in 1994 available for investment and higher interest rates.
The Company has accrued an additional $16,500 in 1994 for additional
write-offs for its terminated 33-1/3% partnership interest in the Ergonomic
Solutions Group. In 1993, the Company had written off $55,333 relating to the
termination.
On December 21, 1994, the Company agreed to terminate its joint venture
with ErgoRisk Services, Inc. (Canada). Under the terms of the joint venture
entered into on July 20, 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.
Net loss from operations for the year ended December 31, 1994 was
$2,388,953 compared to $595,012 for the year ended December 31, 1993. The
increased loss in 1994 is a result of the additional selling, general and
administrative expenses incurred, lower revenues from the previous year and
lower margin revenues mainly as a result of the IPTN Contract in 1994 as
compared to 1993.
There was no tax expense in 1994 and 1993 due to losses which have
increased the net operating loss carryforward.
NINE MONTHS ENDED SEPTEMBER 30, 1995 COMPARED
TO NINE MONTHS ENDED SEPTEMBER 30, 1994
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 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
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<PAGE>
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 Nine Months
Ended September 30, Ended September 30
------------------------- -------------------------
1995 1994 1995 1994
---- ---- ---- ----
Net revenue $ 158,485 $ 224,130 $ 572,881 $1,085,809
Direct costs
of revenue 131,478 136,851 558,125 677,514
---------- ---------- ----------
Gross Profit $ 27,007 $ 87,279 $ 14,756 $ 408,295
========== ========== ========== ==========
Gross Profit % 17% 39% 3% 38%
========== ========== ========== ==========
Net revenue decreased by $65,645, to $158,485, during the three months
ended September 30, 1995, as compared to the same period in 1994. The decrease
was primarily due to the revenue recognition of $52,000 in 1994 relating to the
IPTN Contract, whereas none was recognized in 1995. For the nine months ended
September 30, 1995, as compared to the same period in 1994, net revenue
decreased by $512,928, to $572,881. The decrease was primarily due to the
revenue recognition of $616,000 relating to IPTN in 1994, versus only $35,000 in
1995.
Direct costs decreased by $5,373, to $131,478, in the quarter ended
September 30, 1995, as compared to the same period in 1994. For the nine months
ended September 30, 1995, direct costs decreased by $119,389, to $558,125. The
decreases are primarily due to the reduction in sales, however, since the
Company maintains a fixed direct labor base, direct costs generally do not
decrease proportionately with net revenue decreases. Consequently, direct costs
for the quarter ended September 30, 1995 increased as a percentage of revenue to
83% from 61% for the same period in 1994. Similarly, for the nine months ended
September 30, 1995, direct costs increased to 97% from 62% for the same period
in 1994.
Gross profit, as a result of the above, decreased by $60,272 to $27,007
for the quarter ended September 30, 1995 from a gross profit of $87,279 for the
quarter ended September 30, 1994. Also as a result of the above, for the nine
months ended September 30, 1995, gross profit decreased by $393,539 to $14,756
from a gross profit of $408,295 for the nine-month period ended September 30,
1994.
Interest and other income decreased by $10,950 for the three months
ended September 30, 1995 compared to the three months ended September 30, 1994.
The decrease is due to a decrease in assets available for investment. Interest
and other income increased by $8,559 for the nine months ended September 30,
1995 compared to the nine months ended September 30, 1994. The increase is due
to a loss incurred on available-for-sale securities in the 1994 period,
partially offset by a decline in the interest earned due to a decrease in assets
available for investment.
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<PAGE>
Selling, general and administrative expenses decreased by $40,482 and
$114,947 for the three months and nine months ended September 30, 1995,
respectively, as compared to the same periods in 1994. These decreases are
primarily attributable to a reduction in salaries and benefits as a result of
the elimination of certain positions.
Net loss, as a result of the above, for the three months and nine
months ended September 30, 1995, was $438,039 and $1,243,960, respectively, as
compared to a net loss of $469,136 and $1,092,177 for the comparable periods in
1994.
There was no tax benefit for the three months and nine months ended
September 30, 1995 and 1994 due to losses which have increased the net operating
loss carryforward and which were offset by valuation allowances.
LIQUIDITY AND CAPITAL RESOURCES
Cash, cash equivalents and marketable securities were $4,168,121 as of
December 31, 1994, compared to $6,040,497 at December 31, 1993. In 1993, the
Company raised the majority of its working capital through private placements
and the exercise of warrants. Working capital was $3,717,787 as of December 31,
1994, compared to $6,261,108 at December 31, 1993. The working capital decrease
of $2,543,321 was primarily attributable to the losses incurred in 1994. Total
assets decreased to $5,087,892 at December 31, 1994 from $6,974,522 at December
31, 1993, primarily as a result of the aforementioned reduction in working
capital. Total liabilities increased to $835,400 in 1994 from $296,923 in 1993
primarily as a result of accruals made at December 31, 1994. The Company's
accumulated deficit at December 31, 1994 increased to $9,997,670 from $7,608,717
in 1993 as a result of the losses from operations.
Accounts receivable decreased to $119,855 at December 31, 1994, from
$184,969 at December 31, 1993. Two customers comprise 83% of the balance
including IPTN for approximately $91,000. The Company does not anticipate any
problems collecting these amounts.
Inventories decreased to $0 on December 31, 1994 from $10,042 at
December 31, 1993. Inventories had reflected software products which are no
longer part of the Company's business.
Prepaid expenses and other current assets decreased to $230,480 at
December 31, 1994 from $262,802 at December 31, 1993, due primarily to
prepayments of insurance and work performed and accrued but not billed, offset
by $171,375 of equipment that was purchased for the IPTN Contract in December
1993 that was not shipped at December 31, 1993 and was recorded as prepaid. This
was not applicable at December 31, 1994.
Other assets increased to $196,411 at December 31, 1994, from $93,899
at December 31, 1993, primarily reflecting the filings of new patents in 1994,
offset by amortization expenses associated with the patents.
Accounts payable, accrued expenses and sundry liabilities increased to
$700,669 at December 31, 1994 from $137,202 at December 31, 1993, due primarily
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<PAGE>
to the Company's accruals made at December 31, 1994 relating to downsizing 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.
As of December 31, 1994, deferred revenue remained at $100,000. The
Company exchanged a shareholder's investment in BCA Services, Inc. for 100,000
common shares of the Company. The investor had purchased 100,000 shares of its
BCA Services, Inc. subsidiary on December 27, 1993 for $100,000, resulting in
the recording of deferred revenue. The deferred revenue was converted into the
Company's common stock in 1995.
The Company's revenues decreased by $243,203 in 1994 to $1,138,304. For
1995, the Company did not realize any material royalty revenue associated with
its current licensing agreements. The Company believes that commercialization of
its Intelligent Surface Technology through the licensing agreements will
commence in 1996 and continue in subsequent years. Revenue was generated in 1995
through product ergonomic consulting services and ergonomic workplace
assessments.
Management's current objectives include: (1) working with its licensees
to speed up the process for commercialization of the Intelligent Surface
Technology, (2) increasing revenues from consulting services, and (3)
controlling expenses to maximize cash.
Cash, cash equivalents and marketable securities were $2,538,333 as of
September 30, 1995, compared to $4,168,121 as of December 31, 1994. Working
capital was $2,557,360 as of September 30, 1995, compared to $3,717,787 as of
December 31, 1994. The decrease of $1,160,427 or 31.2% in working capital was
primarily attributable to the use of working capital for the net loss incurred
in the nine months ended September 30, 1995. Further losses by the Company will
result in additional reductions of working capital.
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 next twelve months.
The Company has no material commitments for any future capital
expenditures.
For the next twelve months, the Company does not anticipate any
material royalty revenue associated with its current licensing agreements.
Revenue will be generated through product analysis and redesign services,
ergonomic workplace analysis and redesign services and revenue that may result
if the Company is successful in licensing its Intelligent Surface Technology for
additional applications.
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<PAGE>
RECENT EVENTS
JOINT VENTURE
In August of 1995, BCA Services, Inc., (formerly ErgoRisk Services,
Inc.) a wholly owned subsidiary of the Company, entered into a joint venture
with Sandler Occupational Medicine Associates, Inc. The purpose of the joint
venture is to market, promote and sell the ergonomic and medical consulting
services with respect to the prevention and treatment of Cumulative Trauma
Disorder.
CERTIFICATE OF INCORPORATION AMENDMENTS
Effective June 22, 1995, by vote of the Board of Directors, followed by
a vote of the holders of a majority of the total outstanding shares of the
corporation, the Company amended its certificate of incorporation to (i) change
its name from Biomechanics Corporation of America to BCAM International, Inc.
and (ii) increase the amount of shares of Common Stock the Company is authorized
to issue from 20,000,000 to 40,000,000.
CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER OF THE COMPANY
On February 9, 1995, Dr. Clifford M. Gross, the Company's Chairman of
the Board and Chief Executive Officer, resigned his positions with the Company
effective February 16, 1995 in order to pursue other interests. Dr. Gross is a
consultant to the Company. On February 16, 1995, the Board of Directors,
pursuant to the recommendation of the Executive Committee, elected Michael
Strauss Chairman of the Board of Directors and Chief Executive Officer.
Previously, on October 13, 1994, the Company had entered into an employment
agreement with Michael Strauss to employ him as the Company's President and
Chief Operating Officer effective January 2, 1995. The Executive Committee also
recommended the appointment of Robert Wong, a current director, as Vice Chairman
and Chief of Technology. 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 biomechanics technology, and
therefore the Board does not believe Dr. Gross's resignation will have a
material adverse effect on the Company. See "Risk Factors - Retention of Key
Personnel; Limited Management Experience", "Management - Directors, Executive
Officers and Significant Employees" and "Executive Compensation - Cash
Compensation of Executive Officers."
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. See
"Description of Securities."
BCA SERVICES, INC.
On December 21, 1994, the Company agreed to terminate its joint venture
with ErgoRisk Services, Inc. (Canada). Under the terms of the joint venture,
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<PAGE>
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. On November 30, 1994, the
Company terminated the employment of the President of BCA Services, Inc. Until
January 2, 1995, the Chief Executive Officer of the Company acted as the
President of BCA Services, Inc. Thereafter, Michael Strauss, then the Company's
President and Chief Operating Officer, managed the business of BCA Services,
Inc. until September 21, 1995, when Robert Wong, the Company's Vice Chairman and
Chief Technology Officer, was appointed President. The Company believes these
events will not have a material adverse effect on the Company. See "Management -
Directors, Executive Officers and Significant Employees."
LUMEX AGREEMENT
In September 1994, the Company signed a licensing agreement with Lumex
granting Lumex an exclusive world-wide license with a right to sublicense,
manufacture, have manufactured, utilize and exploit the Company's intelligent
surface technology in the medical procedure equipment field of use, excluding
non-medical recliner chairs, wheel chairs, office chairs and seats, hospital
beds, transportation seats and fitness equipment.
Lumex paid $100,000 to the Company on the execution of the licensing
agreement. Lumex agreed to make royalty payments (a) equal to 5% of net sales of
all products sold by Lumex and (b) equal to the greater of (i) 50% of all
royalties received by Lumex pursuant to a sublicense agreement between Lumex and
a Lumex affiliate or a third party or (ii) 5% of net sales of products sold by
sub-licenses. To maintain exclusivity of the license, Lumex must pay minimum
royalties equal to $50,000 during the first year of the shipment of the product
and up to $200,000 in the fifth year. In years 6 through 15 the minimum royalty
increases by 5% a year to maintain the exclusive rights. The licensing agreement
terminates on the expiration of the last patent subject to the licensing
agreement, unless sooner terminated for breach of the licensing agreement or
insolvency of a party.
REEBOK AGREEMENT
In January 1994, the Company and Reebok signed a world-wide exclusive
licensing and development agreement for the footwear, athletic, sport and
fitness equipment fields of use. Under the agreement, Reebok has the exclusive
right to sub-license, make, use, and sell products and components thereof and to
use the Company's proprietary information relating to microprocessor-based
interactive systems for controlling one or more load bearing surfaces. The
fields of medical equipment and orthopedic devices are specifically excluded
from the license.
INTELLIGENT SEAT TECHNOLOGY
On June 9, 1993, the Company was notified by Lear Seating that Lear
Seating was claiming co-inventor status to the use of the Company's Intelligent
Seat Technology in the production of automobile seats. On September 29, 1993,
the Company reached an agreement with Lear Seating and Textron resolving such
claim. As part of the agreement, Lear Seating will receive a royalty-free
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<PAGE>
license to use the Intelligent Seat Technology with its own seats in exchange
for withdrawing all claims of ownership of Intelligent Seat Technology.
DISCONTINUANCE OF HUMANCAD DIVISION
On February 23, 1993, the Board of Directors of the Company announced
its decision to discontinue the operations of its HumanCAD Division, the
principal activity of which was the development and sale, through distributors
or directly to end users, of software programs and other products, including its
Mannequin(TM) software programs, ErgoShow(TM) videotape and workbook and
Ergosense(TM) computer-based ergonomics training program, all of which will be
retained by the Company for internal use.
INITIAL PUBLIC OFFERING
In January and February of 1990, the Company issued and sold on a "firm
commitment" basis through the Underwriter 1,265,000 Units at a public offering
price of $4.00 per Unit, including 165,000 Units sold upon exercise by the
Underwriter of its "over-allotment" option. The net proceeds to the Company,
after underwriting discounts and expenses of the offering, were approximately
$3,965,000.
After giving effect to the exercise of 2,524,589 Class A Warrants and
the issuance of 1,716,930 Class E Warrants pursuant to the Discounted Warrant
Plan described below, pursuant to the provisions for adjustment of the exercise
price of the Class A and Class B Warrants and the number of shares of Common
Stock to be obtained upon exercise thereof, as set forth in the Warrant
Agreement pursuant to which such Class A and Class B Warrants were issued, there
are 807,659 Class B Warrants remaining unexercised as of December 1, 1995.
Pursuant to an Underwriting Agreement dated January 17, 1990 between the Company
and the Underwriter (the "Underwriting Agreement"), the Company sold to the
Underwriter, for nominal consideration, the Underwriter's Unit Purchase Option
to purchase up to 107,500 Units at $5.20 per Unit, subject to certain
anti-dilution adjustments which, as a result of private placements, have caused
such price to be reduced to $4.35 per Unit and the number of Units to be
increased to approximately 127,547. The Units purchasable upon exercise of the
Underwriter's Unit Purchase Option are identical to the Units sold in the IPO,
except that the underlying Warrants included therein are not redeemable. The
Underwriter's Unit Purchase Option is transferable and is exercisable through
January 17, 1997. As of December 1, 1995, 30,369 Units have been exercised. The
holders of the Underwriter's Unit Purchase Option have piggy-back registration
rights with respect to such option and the securities underlying such option.
PRIVATE PLACEMENTS
1993 PRIVATE PLACEMENTS
During the period commencing June 1993 and ending September 1993, the
Company completed four separate private placements: two placements, each of
454,545 shares of Common Stock at $1.10 per share; one of 434,783 shares of
Common Stock at $1.15 per share; and one of 500,000 shares of Common Stock at
$1.15 per share through Sloan Securities Corp., a placement agent. These
placements resulted in the sale of, in the aggregate, 1,843,873 shares of
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<PAGE>
Common Stock, resulting in net proceeds to the Company of $2,039,925. According
to the private placement agreements, each purchaser could not transfer such
shares prior to July 1, 1994. In consideration of services rendered in
connection with the private placements, Strategic Growth received 100,000 shares
of unregistered Common Stock and options to purchase 400,000 additional shares
at prices ranging from $1.31 to $3.22, their fair market value at date of grant.
Of these, options to purchase 250,000 shares have expired. In consideration of
additional public relations services rendered on a continuing basis, on July 3,
1995, the Company granted to Strategic Growth options to purchase 300,000
additional shares at a price of $1.05 per share, their fair market value at date
of grant. In addition, the Company paid commissions to an individual in the
amount of $35,075 for his services in connection with one of the private
placements. The Company agreed in certain circumstances to register the shares
issued to the private placement purchasers and Strategic Growth International,
Inc. under the 1933 Act. The Company received requests to register the above
mentioned shares and the Company registered such shares in February 1995.
1991 PRIVATE PLACEMENT
On June 25, 1991, the Company completed the 1991 Private Placement, for
which the Underwriter acted as placement agent, of $1,762,500 of the Company's
securities, consisting of $1,101,562 of 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 $2.00 per share
for 176,250 shares of Common Stock. A total of 35.25 of these 1991 Units were
sold pursuant to the Securities Purchase Agreement among the Company, certain
purchasers and the Underwriter as purchasers' representative, at $50,000 each,
consisting of a $31,250 Note, 18,750 shares of Common Stock and 5,000 Class D
Warrants.
The exercise price of the Class D Warrants is 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 then current exercise price of the Class D
Warrants.
After giving effect to the exercise of the Class E Warrants described
above and to the issuance of certain stock options at a market value exercise
price below the exercise price of the Class D Warrants, pursuant to the
foregoing provisions for adjustment of the exercise price of the Class D
Warrants as set forth in the Securities Purchase Agreement, each Class D Warrant
entitles the holder to purchase approximately two and twenty-nine hundredths
(2.29) shares of Common Stock at an adjusted price per share, subject to further
adjustment, of $.875 per share.
The Securities Purchase Agreement contains a covenant, which survived
the conversion and prepayment of the Notes, to maintain a minimum net worth
equal to the lesser of (i) the minimum net worth requirements of NASDAQ in order
to maintain the listing of its Common Stock (currently $1,000,000), or (ii)
$500,000. See "Risk Factors - Future Sales of Common Stock."
The Company has agreed to register under the 1933 Act, at any time
after June 25, 1991, at its expense on two occasions on Form S-1 or similar
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"long- form registrations" and on an unlimited number of Form S-3 or similar
"short- form registrations", the Common Stock issued, and the Common Stock
issuable upon conversion or exercise of the Notes and Class D Warrants issued,
in the 1991 Private Placement, at the request of at least 33 1/3% of the holders
of such securities. The Company has also agreed to certain "piggy-back"
registration rights for the holders of such securities. Since the Notes have
been paid in full, if the Company breached the covenants there would be no
liability except to register the securities and use its best efforts to maintain
the minimum net worth required by the Securities Purchase Agreement. See "Risk
Factors - Limited Operating History; Losses; Accumulated Deficit and Future Sale
of Common Stock," and "Agreements with the Underwriter."
The Company paid the Underwriter a fee of 10% of the aggregate proceeds
of the 1991 Unit sales, or $176,250, plus reimbursement for legal fees and
expenses aggregating approximately $56,750. Other expenses of the 1991 Private
Placement were approximately $50,000. The Company had also issued to the
Underwriter its Class C Warrants to purchase 228,571 shares, as adjusted, of
Common Stock at $.875 per share, as adjusted.
As of December 31, 1992, the holders of approximately 91% of the
aggregate face value of the Notes had converted their Notes into Common Stock. A
total of 1,000,004 shares of Common Stock were issued as a result of this
conversion. Pursuant to the Securities Purchase Agreement, those Notes which
were not converted were prepaid in full out of the proceeds of the Discounted
Warrant Plan described below, in the aggregate principal amount of $101,558.
Accrued interest was also paid to the date of conversion with respect to the
converted Notes and to the date of prepayment with respect to the remaining
Notes, in an aggregate amount of approximately $66,000.
DISCOUNTED WARRANT PLAN
In October 1991, the Board of Directors of the Company approved a
Discounted Warrant Plan, providing for (a) a reduction in the price of each
Class A Warrant which was exercised during the Class A Limited Exercise Period
from $2.00 to the discounted price of $1.50 per share of Common Stock, and (b)
the issuance to each holder who exercised 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
(originally January 16, 1995 and 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 $3.23 thereafter, per share, for the Class B Warrants. The
Class A Limited Exercise Period was the 70-day period ended on February 19,
1992.
The purpose of the Discounted Warrant Plan was to offer an inducement
to Class A Warrant holders to exercise their Class A Warrants, which at that
time did not expire until January 16, 1995, sooner than they otherwise might
elect, in order to raise capital for the Company which was needed to avoid a
default under the Securities Purchase Agreement and the Notes, to avoid the
delisting of the Common Stock by NASDAQ, and to increase working capital, fund
the development of new products and the marketing of new and existing products
and services and create a stronger capital base.
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Pursuant to the Discounted Warrant Plan, the Company issued and sold
1,716,930 shares of Common Stock, and issued a like number of Class E Warrants,
upon the exercise of Class A Warrants at $1.50 per share. In addition, during
1992 the Company issued and sold 222,769 shares of Common Stock upon the
exercise of 202,517 Class E Warrants at $1.25 per share. The aggregate net
proceeds of such issuances was approximately $2.8 million. During 1993 the
Company issued and sold 1,125,109 shares of Common Stock upon the exercise of
1,022,825 Class E Warrants at an exercise price of $1.25 per share. During 1994
and 1995, the Company issued and sold no shares of Common Stock upon the
exercise of Class E Warrants.
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BUSINESS
BCAM International, Inc., (formerly Biomechanics Corporation of America
prior to a name change effected June 22, 1995) (the "Company"), was organized in
1984 under the laws of the State of New York. The Company's subsidiaries, BCAM
Technologies, Inc. and BCA Services, Inc., were organized on January 28, 1993
and December 3, 1993, respectively, under the laws of the State of New York. The
Company's offices are located at 1800 Walt Whitman Road, Melville, New York
11747. The Company's telephone number is (516) 752-3550.
On February 23, 1993, the Board of Directors of the Company announced
its decision to discontinue the operations of its HumanCAD Division, whose
principal activity was the development and sale, through distributors or
directly to end users, of software programs and other products, all of which
will be retained by the Company for internal use. The Company completed the
discontinuance by December 31, 1993.
GENERAL
The Company and its subsidiaries provide a broad range of consulting
services primarily to manufacturing companies, using 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
better 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. In February 1993, the Company 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.
The services provided by the Company and its subsidiaries consist of
(I) intelligent product services, (II) ergonomic product analysis and redesign
and (III) ergonomic workplace risk assessments (BCA Services, Inc.). These
services presently account for substantially all revenues generated by Company,
and generally are provided under fixed price contracts.
(I) INTELLIGENT PRODUCTS SERVICES
During the course of the Company's performance of ergonomic product,
workplace analysis and redesign and ergonomic workplace assessment services, the
Company from time to time develops certain knowledge and data which it is able
to embody into proprietary technology. When this occurs and it is believed the
technology is a significant enhancement from the status quo, the Company files
for patent protection under the laws of the United States. See "Proprietary
Information."
Over the past several years, the Company has developed and patented its
Intelligent Surface Technology. Intelligent Surface Technology enables surfaces
to automatically adjust themselves to better fit the user by measuring body
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distribution and comfort and reshaping the surface in real time. The Company has
identified uses for this technology in the areas of seating and footwear.
The Company and Textron signed a Development and Licensing Agreement in
1993 (initial agreement signed in March 1993, later amended in October 1993)
whereby the Company granted an exclusive license to Textron, including the right
to sublicense, to use the patents and know-how in the manufacture, use and sale
of seats, and seating components for (a) the transportation industry, (b)
wheelchairs, (c) office furniture applications and (d) hospital beds. The
initial term of the license was set to expire on December 31, 1995, but has been
extended to January 31, 1996. Textron is entitled to renew the license for an
additional period commencing on February 1, 1996 and ending December 31, 2009
or, if later, the expiration of all patents still being used by Textron.
If Textron does not accrue a certain amount of minimum royalties for
sales of products incorporating Intelligent Seat Technology designed for the
transportation industry beginning calendar year 1996 and each subsequent
calendar year thereafter during the term of the Textron licensing agreement,
then the Company may convert the license granted to Textron into a non-exclusive
license, but only with respect to products designed for the transportation
industry.
On September 29, 1993, the Company reached an agreement with Lear
Seating and Textron resolving the claim made by Lear Seating on June 9, 1993
notifying the Company and claiming co-inventor status relating to the use of the
Intelligent Seat Technology in the production of automobile seats. As part of
the agreement, Lear Seating will receive a royalty-free license to use the
Intelligent Seat Technology only with its own seats in exchange for withdrawing
all claims of ownership of the Intelligent Seat Technology.
The Company and Textron have agreed to revise the Textron licensing
agreement in order to help expedite the commercialization of the applications
licensed to Textron. The Company reserved $149,000 in 1994, which represents the
estimated expenses of providing additional services to Textron.
In January 1994, the Company and Reebok signed a world-wide exclusive
licensing and development agreement for the footwear, athletic, sport and
fitness equipment fields of use. Under the Company patents, Reebok has the
exclusive right to sub-license, make, use, and sell products and components
thereof and to use the Company's proprietary information relating to
microprocessor-based interactive systems for controlling one or more load
bearing surfaces. The fields of medical equipment and orthopedic devices are
specifically excluded from the Reebok license.
In September 1994, the Company signed a licensing agreement with Lumex
granting Lumex an exclusive world-wide license with a right to sublicense,
manufacture, have manufactured, utilize and exploit the Company's Intelligent
Surface Technology in the medical procedure equipment field of use, excluding
non-medical recliner chairs, wheel chairs, office chairs and seats, hospital
beds, transportation seats and fitness equipment. The Lumex licensing agreement
terminates on the expiration of the last patent subject to the licensing
agreement, unless sooner terminated for breach of the licensing Agreement or
insolvency of a either party. Lumex paid the Company an up-front
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fee on the execution of the licensing agreement and will also make royalty
payments based on all products sold by Lumex or a sublicensee of Lumex. To
maintain exclusivity of the license, Lumex must pay minimum royalties starting
with the first year the product is shipped.
Revenue from Intelligent Products Services accounted for 23% of revenue
in 1994 versus 44% in 1993. The 1994 revenue was generated by the Reebok and
Lumex licensing agreements, while the 1993 revenue was from Textron.
INTELLIGENT INTERFACE
The Company's intelligent load bearing surface technology is
an interface that matches various man-made devices to each person's body.
Although the Company's intelligent load bearing surface technology adjusts the
surface based upon pressure, other intelligent surface technologies can be
developed that can adjust the surfaces based upon other factors of comfort.
In order for the Company to increase the number of licensees
and improve its technology, the Company is seeking to provide the following
products and services:
1. A growing portfolio of patents in intelligent interfaces.
2. One or more key components in the intelligent interface
system.
3. Application development capability.
4. Collaborative research & development, especially in the
quantitative measurement of comfort and fit for the
Company's licensees, with universities and other research
centers.
INTELLIGENT INTERFACE MARKET
The Company is seeking to identify markets that have not been
licensed and will then identify the largest companies in that application of the
intelligent interface market. The Company is also seeking to work with current
licensees to extend applications of intelligent interfaces to new sublicensees.
(II) ERGONOMIC PRODUCT CONSULTING SERVICES
ERGONOMIC PRODUCT ANALYSIS AND REDESIGN
The Company has also been retained by product manufacturers to
apply ergonomic analysis to the design and evaluation of their products under
development or developed. The Company utilizes its proprietary technology and
its laboratories and technical staff to analyze, improve and effect changes to
existing products and to product designs. The Company has been retained by
manufacturers of a wide range of products such as automobiles, automobile seats,
hand tools, furniture and other consumer products. Ergonomic assessments of
product, tool and human dimension features generally require extremely accurate
3-dimensional assessment of a product and its use, and are generally performed
in the Company's ergonomics research laboratories.
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The Company provides industrial customers services based on
its proprietary technologies, techniques and know-how, including:
* Collaborative research and development with universities and
industrial customers.
* Product assessment and product enhancement services that
will:
- Assess a customer's products
- Assess a customer's potential new products
- Assess a customer's products that will be used by the client
for its own internal purposes.
* New product design consulting services.
* Best-in-class studies - objective comparison of a client's
products to a competitor's similar products.
The Company has developed data acquisition systems and
laboratory procedures, which permit the Company to evaluate a wide range of
products including automobiles, footwear, hand tools, furniture and consumer
product packaging. Certain of these proprietary technologies have been developed
by the Company solely for use in performing its analysis and redesign services
and others are integrated with a customer's products or technology. The
Company's systems are generally portable, thereby allowing for both laboratory
and on-site applications. This provides the Company with flexibility in
selecting the most appropriate methodology for the required measurement task.
The more significant systems, currently used by the Company in performing
analysis and redesign service contracts, as well as for technology integration,
are described below:
COMPUTERIZED PRESSURE DISTRIBUTION SENSOR MAT is a system
which measures the pressure generated by human contact with specific
objects such as tools, furniture and other products. Company
technicians attach flexible sensors to a very thin tape-like material
or to larger mat arrays, which adhere and conform to the shape of an
object or the body's interface with a product. The circuits convert
skin contact pressures to electrical voltages which can be measured,
displayed and analyzed using the Company's proprietary software. The
Company utilizes these data to determine what portions of an object
receive more or less pressure during use. As a result, the Company can
determine specifically how and to what degree a user comes in contact
with the product and make recommendations for design improvements.
ERGOTRACK is a measurement tool which permits the recording
and display of static shapes and dimensions of objects, tools,
equipment and furniture. The system works by bouncing sonic waves off
the moving object and then converting such information into digital
form which is readable by a computer-automated-design ("CAD") system.
This system contains proprietary software designed and developed by the
Company which utilizes existing hardware. ErgoTrack permits the
Company's ergonomists to incorporate realistic digitized versions into
CAD design studies.
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COMPUTERIZED VIDEO DIGITIZING SYSTEM converts video images of
an employee performing tasks to digital data. This tool is utilized to
quantify the range and angle of particular motions during the
performance of a task, allowing the Company to analyze the forces and
to estimate the stress on various body parts.
DIGITAL ELECTROMYOGRAPHIC BIOFEEDBACK uses biofeedback in
conjunction with software designed and developed by the Company to
allow it to measure the muscle tension of an employee during the
performance of specific tasks. Electrodes from a biofeedback machine
are connected to specific muscles of an employee to record the
reactions of the muscle groups to given movements. Electromyographic
biofeedback is particularly useful where a company is experiencing
repeated employee injury as a result of the performance of particular
tasks.
WRIST STRESS MONITOR is a microprocessor based measurement
device used to measure muscle activities and wrist deviations
associated with using hand tools and tasks which require hand movements
and hand force exertions. This measurement system collects and stores
electromyographic responses of selected muscle groups and wrist
deviation data in real time. The data can be downloaded for cost data
analysis. This is a valuable tool for the Company in assessing various
hand tool designs and evaluating wrist stress experienced by computer
operators. In conjunction with the computerized biomechanical and
physiological measurements, the Company has utilized structured
interviews and questionnaires in the product evaluation processes. The
Company has developed various structured interview and questionnaire
protocols for different applications.
The Company views its provision of ergonomic product and
analysis and redesign services not only as a separate source of revenue, but
also as a potential source of data and ideas both for the development of
integrated customer products and for the modification and/or development of
existing or new systems.
Recent ergonomic product and workplace analysis and redesign
services include those performed for IPTN. Under a contract executed in August
1992, IPTN paid the Company an aggregate of $438,000 for the construction of an
ergonomic development and testing laboratory and for ergonomic assessment
services in connection with the design of a new aircraft. The IPTN Contract was
signed in December, 1993 for $700,000 and substantially completed in 1994.
Other services in 1994 were performed for companies such as
United Parcel Services, Reebok and Levi Strauss & Company.
Ergonomic product consulting services provided 70% of the
Company's revenue in 1994 (due mainly to the IPTN Contract) and 23% of the
revenue in 1993.
(III) ERGONOMIC WORKPLACE RISK ASSESSMENT SERVICES (BCA SERVICES, INC.)
The Company, through its subsidiary, BCA Services, Inc., provides
ergonomic services to evaluate the work method, work stations and tools
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utilized by employees in order to advise its clients on ways to improve
productivity, enhance product or service quality and reduce musculoskeletal
injuries.
Using computer-aided, biomechanical assessment devices, the Company
monitors and measures the amount of physical stress to an individual employee
caused by the performance of particular tasks and segregates the individual body
movements involved in the performance of such tasks. The Company may then
analyze the effects of the work performed on an employee's back, neck, wrist,
elbows, shoulder, knee joint, or cardiovascular system. In addition, the Company
can measure the physical relationship between equipment and tools used by
employees, and the reach and lifting requirements, working heights and range of
motion required for the use of such equipment. Following the completion of its
analysis of a particular process or method, the Company may make recommendations
to a client regarding the redesign of the workplace through engineering
retrofit, of certain tools or equipment used in the client's manufacturing
process, or of the methods used by a client in the manufacturing process.
Workplace ergonomic risk assessment services are provided through:
(1) ERGONOMIC ASSESSMENT OF RISK OR LIABILITY (EARLY(R))
In 1992, the Company developed a new ergonomics assessment
program to help industry meet OSHA guideline requirements and to provide for a
thoroughly objective and consistent workplace review which will support
cost-effective job modifications. It is called the EARLY(R) System and it is a
program that integrates a formal ergonomic and biomechanical risk factor
assessment with injury/illness data and employee feedback into a database that
ranks work stations by the likelihood of developing musculoskeletal injuries by
body part and operation. By utilizing client personnel or third party resellers
to collect the injury/illness data (after training by the Company), the Company
is able to reduce client costs substantially below those for a full ergonomic
workplace assessment.
The EARLY(R) System is the centerpiece for a full-service
industrial ergonomics program. As a result of the findings from the ergonomic
assessment performed within EARLY(R), a client receives:
* A summary of high, moderate and low risk-of-injury
operations.
* A prioritized listing of operations for ergonomic
intervention.
* A listing of each operation's risk by body part.
* Suggested ergonomic enhancements that can be made to address
identified risks.
* An action plan for ergonomic intervention.
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(2) TOTAL ERGONOMIC QUALITY(R) (TEQ)
The Company markets a service for preparing and implementing a
corporate TEQ plan to:
* Ergonomically analyze all jobs with biomechanical risk using
EARLY(R) or on-site ergonomic assessments.
* Propose engineering retrofit or redesign of risky
workplaces.
* Produce redesign of tools and work methodologies where
needed.
* Provide ergonomic and biomechanics training to management,
supervisory and other personnel.
* Develop an injury tracking and cost/benefit tracking system.
* Demonstrate a pro-active corporate ergonomics program in
anticipation of OSHA standards or visits for compliance.
In December 1993, the Company established BCA Services, Inc.
and contributed the EARLY(R) business in exchange for 4,200,000 shares of BCA
Services, Inc., $.01 par value per share common stock. The Company was the sole
shareholder of all the outstanding shares of BCA Services, Inc. at that time.
BCA Services, Inc. was created to take full advantage of proposed federal
legislation by OSHA for stricter workplace safety standards.
On December 27, 1993, the Company sold 100,000 shares of BCA
Services, Inc. to Polaris Partners, 1., L.P. for the sum of $100,000. On
February 16, 1995, the Company agreed to exchange the 100,000 shares of BCA
Services, Inc. common stock owned by Polaris Partners, 1., L.P. for 100,000
shares of the Company's Common Stock.
In April 1994, the Company recruited a president for BCA
Services, Inc. and in the subsequent months, recruited a sales and marketing
team to sell the EARLY(R) System. It was anticipated that OSHA ergonomic
legislation would be released in September 1994 and the team assembled would
take advantage of stricter workplace safety standards. Legislation was not
passed in 1994 and there was no indication from OSHA as to when legislation
might be passed. Legislation could have increased the demand for the Company's
workplace ergonomic risk assessment services. With no indication from OSHA as to
when legislation might be passed, the Company took steps to downsize BCA
Services, Inc. in the fourth quarter of 1994, changing the marketing direction
from a broad-based approach to a selective market approach.
On July 20, 1994, BCA Services, Inc. signed a joint venture
agreement to distribute its ergonomic services in Canada exclusively through
ErgoRisk Services, Inc. (Canada). On December 21, 1994, the Company agreed to
terminate its joint venture with ErgoRisk Services, Inc. (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
of ErgoRisk Services Inc. (Canada) for $65,000. The investment in ErgoRisk
Services, Inc. (Canada) was written off in 1994.
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Ergonomic workplace risk assessment services provided 7% of
the Company's revenues in 1994 and 33% of the revenues in 1993.
In the fourth quarter of 1992, the Company, through a
wholly-owned subsidiary, formed a general partnership with wholly-owned
subsidiaries of Goldsmiths, Inc. and Insurance Management Associates, Inc.
pursuant to which each party owned a 33-1/3% partnership interest in Ergonomic
Solutions Group. Ergonomic Solutions Group provided comprehensive ergonomics
risk assessment services and solutions (including training and products) in
North America to contract furniture manufacturers, designers, architects,
dealers and distributors and to insurance companies and brokers who focus on
workmen's compensation and other risk and liability programs. The Company had
granted to Ergonomic Solutions Group a non-exclusive license for the use of its
EARLY(R) System for consultations, studies, evaluations, tests, recommendations,
assessments and services within Kansas, Oklahoma, Colorado, Missouri and Texas.
The Company has also granted to Ergonomic Solutions Group an exclusive license
for the use of the EARLY(R) System for providing services relating to workplace
risks and liability or workers' compensation risk and insurance matters to
insurance companies and brokers and to the contract furniture industry
nationwide. Each party was obligated to participate in the initial funding of
Ergonomic Solutions Group, up to $4,000 per month during 1993. In lieu of
royalty payments or other fees for such licenses, Ergonomic Solutions Group was
required to utilize the Company's services in performing a minimum of 50
assessments per month at $80.00 per assessment. The Company did not receive a
significant number of assessments from Ergonomic Solutions Group in 1993. In
December 1993, it was decided by all partners to terminate the partnership. The
Company's investment in Ergonomics Solutions Group has been written-off. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
SALES AND MARKETING
The Company's strategy for its intelligent technology is to align with
strong partners who can commercialize the Company's technology in the
marketplace. This was the basis for signing licensing agreements with Textron,
Reebok and Lumex. The Company is seeking to increase the number of licensees of
its intelligent technology. The Company is seeking to identify all potential
applications in markets that have not been already licensed and then identify
the largest companies in that application market. The sales effort will be done
primarily by senior management.
The Company plans to market its product services in the following
manner:
1. It will match the strengths and know-how of the
Company to the needs of potential customers in any
industry where comfort is an important factor in the
marketing of the products or services.
2. Advertising in the appropriate trade publications.
3. Participating in selected trade shows.
4. Direct sales effort with experienced salespeople.
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During the fiscal year ended December 31, 1994, IPTN, Reebok and Lumex
accounted for 59%, 17% and 9% respectively, and, in the aggregate, 85% of net
revenue. During the fiscal year ended December 31, 1993, Textron, U.S. Surgical
Corp. and Long Island Lighting Co. accounted for 44%, 6% and 6% respectively,
and, in the aggregate, 56% of net revenue. Because the Company is often retained
to consult with respect to particular problems or to present particular seminars
or training sessions, it is usually retained for limited periods of time and may
not perform services pursuant to long-term contracts and its services may not
typically be needed by clients after the completion of particular assignments.
No assurance can be given that the Company will continue to be retained by any
of its major clients beyond the current period or that such clients will find
additional tasks to be performed by Company in the future.
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. Sales are not materially
affected by seasonal factors.
RESEARCH AND DEVELOPMENT
During 1994 and 1993 the Company did not make significant research and
development expenditures. In the area of intelligent product services, the
licensees may share in development costs through the payment of licensing fees.
COMPETITION
Although the Company believes that few other companies currently offer
a broad range of ergonomic consulting services, it may be expected that if the
Company is successful in developing its business, substantially larger companies
with significantly greater financial, technical and employee resources will
compete with the Company.
The Company believes that ergonomic services are provided by a number
of university research laboratories located both in the United States and
elsewhere in the world. In addition, business consultants now incorporate
ergonomic principles into their traditional practices and these consultants also
compete on a limited basis with the Company.
Hospitals and rehabilitation centers who have traditionally offered
services to local industry to rehabilitate injured workers also compete with the
Company. Some of these centers now seek to provide their clients with resources
for the prevention of occupational injuries.
Certain large corporations have now established ergonomic positions to
satisfy internal needs and have begun to incorporate ergonomic programs into
their ordinary health and safety activities. To the extent that the Company
provides training programs or manuals to any of such clients, the need of such
clients for the Company's consulting services may decline. In addition, many of
the larger insurance companies are offering ergonomic services to
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their customers as one possible method of reducing musculoskeletal injuries and
the claims that result therefrom.
To date, the Company has pursued as customers companies who establish
ergonomic programs for its services and products based upon their perceived
awareness of the benefits of ergonomics.
GOVERNMENT REGULATION
The Company's present and currently proposed activities are not
generally subject to 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 under new
legislation or regulations, be deemed to be "medical devices" or otherwise be
subject to regulation by the Federal Food and Drug Administration or similar
agencies. In the event that any product is subject to such governmental
regulation, the Company may be required to obtain the necessary approvals which
could delay or, in certain circumstances, prevent the introduction to the
marketplace of such product and result in significant additional expense.
The Company cannot predict the extent to which it may be affected by
legislative and other regulatory developments. However, it does believe that the
policies adopted by OSHA with respect to ergonomically related enforcement
activities at the workplace have affected and will continue to affect the demand
for its services.
In August 1992, OSHA announced that it would pursue the establishment
of an ergonomics standard. Pursuant to this decision, OSHA published an advance
notice of proposed rule making and announced that it would accept comments on an
ergonomics standard through February 1993. This action by OSHA was viewed by the
Company as a positive step toward the adoption of specific ergonomics
regulations.
In November 1993, the Clinton Administration stated that it planned on
proposing a workplace ergonomic standard within ten months. The proposal is
based on the increasing costs associated with workers' compensation claims
relating to ergonomic problems in the workplace. According to the Bureau of
Labor Statistics, "It is estimated that repetitive stress injuries make up more
than three-fifths of all occupational injuries."
On March 21, 1995, OSHA released a draft of its ergonomic protection
standard which will be open for public comments. The Company views this as a
positive step, although there can be no assurance that this draft ergonomic
protection standard or a modification of this standard will become legislation.
While the Company cannot predict the extent of OSHA's focus on
ergonomic-related issues, it does believe that 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, this will result in both
industry and the general public becoming more aware of the need for ergonomic
services and products.
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The costs and effects of complying with environmental laws by the
Company are not material.
PROPRIETARY INFORMATION
The Company intends to seek to protect its proprietary training
materials, computer software or technology which it has or may develop through
the use of United States patents or copyrights, common-law trade secret
protection, trademarks and service marks, and contractual arrangements. These
patent, copyright and trade secret laws generally do not protect the "ideas" or
"concepts" reflected in such products, materials or software. Accordingly, there
is no assurance that other competitors may not develop projects, materials or
software which can be utilized for similar training functions or which perform
functions similar or identical to the Company's proprietary products or
software.
Eight United States patents have been issued to the Company, including
three patents for its Intelligent Surface Technology. The Company has applied
for seven additional United States patents. However, there can be no assurance
that its software programs are entitled to patent protection or that the claims
in the pending patent applications otherwise will be issued as patents or that
any issued patents will provide the Company with significant competitive
advantages. Further, there is no assurance that challenges will not be
instituted against the enforceability of any patent 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 its infringement can be
substantial. Furthermore, there can be no assurances that others have not
independently developed or will not independently develop similar technologies
or distinctively patentable technologies duplicating the Company's technology or
that they will not design around the patentable aspects of the Company's
technology.
Certain of the Company's training manuals and materials, and its
principal proprietary software programs, have been copyrighted by the Company
and accordingly are protected to the extent provided by United States copyright
laws. Copyright protection is not available to two of the Company's training
programs: Principles of Ergonomics, and Back Injury Prevention. Both were
developed under contract with the Department of Labor and are therefore in the
public domain. The legal and factual issues arising in copyright litigation are
often both complex and unclear, and any attempt to enforce the Company's
copyright against infringement will face both the high cost of litigation and
the uncertainty of the result.
The Company believes that, except for the patents for its Intelligent
Seat Technology, none of its issued or pending patents or copyrights is material
to the Company's business or financial condition.
In some cases, the Company may rely on trade secrets to protect its
proprietary technology. There can be no assurances that trade secrets will be
developed and maintained, that secrecy obligations will be honored or that
others will not independently develop similar or superior technology. To the
extent that consultants, key employees or third parties apply technological
information independently developed by them or by others to Company projects,
- 47 -
<PAGE>
disputes may arise as to the ownership of such information, which may not be
resolved in favor of the Company.
The Company also relies and will continue to rely on intellectual
property and confidential disclosure arrangements with its employees, advisers,
consultants, suppliers of goods and services, and potential joint venture
partners and licensees. There can be no assurances that these arrangements will
be honored or that other companies will not acquire information which the
Company considers to be proprietary. Moreover, there can be no assurances that
other companies will not independently develop "know-how" comparable to or
superior to that of the Company.
POTENTIAL LIABILITY
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, with a combined
single limit of $5,000,000. There can be no assurance that the Company will be
able to maintain such coverage or obtain additional coverage, at a reasonable
cost or otherwise, or that the coverage 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
which is not covered by adequate insurance, such claim could have a material
adverse effect on the Company's financial condition.
EMPLOYEES
As of December 1, 1995, the Company had 13 full-time employees. The
Company believes that its growth will depend in large part on its ability to
attract and retain skilled professional and managerial employees, and intends to
hire such personnel as business and financial conditions warrant. The Company
identifies its professional and managerial candidates through various sources,
including advertising, use of professional recruiters and through its contacts
in the academic and business communities. The Company has been able, to date, to
attract and retain these skilled employees by offering competitive salaries and
benefits and by virtue of what it believes to be its status as one of the few
companies currently offering a broad range of ergonomic consulting services and
ergonomic produces and state-of-the-art technology and laboratory facilities.
While competition for such qualified persons has eased over the past year, there
is no assurance that the Company will be successful in recruiting or retaining
qualified professions and managerial personnel sufficient to enable it to expand
and develop its business to the extent contemplated. None of the Company's
employees is represented by a labor union. The Company believes its relationship
with its employees is satisfactory.
PROPERTIES
The Company has leased office space in Melville, New York since 1990.
The Company recently renewed the lease for an additional five-year term at an
average cost of approximately $18 per square foot. The office contains
approximately 10,000 square feet and is located at 1800 Walt Whitman Road,
Melville, New York. The facility includes four biomechanics research
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<PAGE>
laboratories which are used both for testing and the design of products, and is
believed to be adequate for the Company's operations.
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.
DIRECTORS AND EXECUTIVE OFFICERS
The current directors and executive officers of the Company are as
follows:
Name Age Position
- ---- --- --------
Michael Strauss 53 Chairman of the Board of Directors,
Chief Executive Officer, President and
Chief Operating Officer
Robert P. Wong 54 Director, Vice Chairman and Chief
Technology Officer
David West 48 Vice President, Marketing and Sales
Daniel Benjamin 42 Chief Financial Officer and Corporate
Secretary
Lawrence N. Cohen 63 Director
Joel L. Gold 54 Director
Julian H. Cherubini 60 Director
Glenn F. Santmire 54 Director
Michael Strauss was elected Chairman of the Board and Chief Executive
Officer of the Company on February 16, 1995. Mr. Strauss joined the Company on
January 2, 1995 as President and Chief Operating Officer, and as President of
BCA Services, Inc. From 1991 to December 1994, Mr. Strauss was President and
Chief Operating Officer of Colorado Prime Corp., a national home food service
company providing home delivery of high quality, custom-designed food programs
to retail customers. Previously, from 1984 through 1991, he held the positions
of Chairman and Chief Executive officer of Capital Credit, a subsidiary of Union
Corporation, a Delaware corporation listed on the New York Stock Exchange
company. Capital Credit provides receivables management and consumer debt
collection services to corporations in the financial services,
telecommunications, healthcare and related businesses. On June 18, 1992, Mr.
Strauss, without admitting or denying the allegations of a complaint by the
Commission with respect to the alleged activities of Mr. Strauss and his agents
and employees at Capital Credit consented to a final judgment of permanent
injunction enjoining Mr. Strauss from violating Section 10(b) of the 1934 Act
and Rules 10b-5 and 13b2-1 of Sections 13 (a) and 13 (b) (2) (A) of the 1934 Act
and Rules 12b-20 and 13a-13 promulgated
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<PAGE>
thereunder. Other senior managers at Capital Credit were also permanently
enjoined as described above. Prior to his tenure at Capital Credit, Mr. Strauss
had a twelve year career with American Express Company in various senior
management positions including Executive Vice President of the Travel Services
and Credit Card Divisions and President of American Express Canada, Inc.
Robert P. Wong was appointed Vice Chairman and Chief Technology Officer
of the Company on February 16, 1995, after having become a director in February
1994. 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.
Lawrence N. Cohen became a director in May 1994. He 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.
Joel L. Gold became a director in February 1994. Effective April 1995,
he became the managing director and head of investment banking at the firm of
Fechtor & Detwiler. From 1992 to 1995, Mr. Gold was a managing director of
Furman Selz Incorporated, an investment banking firm. Mr. Gold had been at
Furman Selz since January 1992. Formerly, Mr. Gold had been a managing director
at Drexel Burnham Lambert for nineteen years. He is currently a member of the
Boards of Directors of Action Industries, Inc., Life Medical Sciences and
Concord Camera. Mr. Gold possesses a law degree from New York University and an
M.B.A. degree from Columbia Business School.
Julian H. Cherubini became a director in April 1995. He 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
B.S. degree in Metallurgy from the Massachusetts Institute of Technology and a
Masters Degree in Materials and Radiochemistry from the University of Tennessee
at Knoxville.
Glen F. Santmire became a director in October 1995. Since 1994, he has
been the President, World Wide Financial Line of Business, of Unisys
Corporation, a division of the Fortune 100 company which provides financial
services products for both financial institutions and retail clients. From 1992
to 1994, he was Senior Vice President for Remote Banking at MasterCard
International, and, for the four years prior to that, held senior positions with
divisions of Citibank, N.A. Mr. Santmire possesses both a B.A. and an M.B.A.
degree from New York University as well as a law degree from George Washington
University School of Law.
- 50 -
<PAGE>
Daniel Benjamin was appointed Chief Financial Officer and Corporate
Secretary of the Company on June 5, 1995. Prior to joining the Company, from
1994 to 1995, Mr. Benjamin had been Vice President of Finance, Treasurer and
Chief Financial Officer of Old Lyme Holding Corp., a New York property and
casualty insurance underwriter. Prior to that, he served in various senior
management positions during a seven-year career at Colorado Prime Corp. Mr.
Benjamin is a Certified Public Accountant.
David West was appointed Vice President of Marketing and Sales of the
Company on October 26, 1995 after having joined the Company in August 1995. From
1993 to 1995, Mr. West had served as the senior marketing manager for Eaton-AIL
Systems, a high-tech government electronics firm currently diversifying from
military to commercial applications. Prior to that, from 1992 to 1993, he held
the position of Vice President of Business Development for the Miltope
Corporation, a hardware manufacturer serving both commercial and government
markets. Mr. West holds an M.B.A. degree from Southern Illinois University.
Dr. Clifford M. Gross, the Company's Chairman of the Board and Chief
Executive Officer, resigned his positions with the Company on February 9, 1995,
effective February 16, 1995, in order to pursue other interests. Dr. Gross, the
founder of the Company, had been President (except for the periods from June 20,
1991 to January 1, 1993 and from January 2, 1995 to February 16, 1995), Chief
Executive Officer and Chairman of the Board of Directors from 1984 until his
resignation effective February 16, 1995. Formerly, Dr. Gross started programs in
ergonomics at the Hospital for Joint Diseases and The New York Institute of
Technology ("NYIT"). At NYIT Dr. Gross was Chairman of the Department of
Biomechanics from June 1984 through December 1985. Since 1986, Dr. Gross had
worked exclusively for the Company developing and marketing ergonomic products
and services.
Alan S. Pernick became a director of the Company in August 1989. Mr.
Pernick did not stand for re-election and his term expired on June 22, 1995. Mr.
Pernick is a certified public accountant and for the last 16 years, Mr. Pernick
has been the President and Chief Executive Officer of Center Laboratories, a
division of EM Industries, Inc. Center Laboratories is engaged in the
manufacture and sale of asthma and allergy-related products.
Desmond W. Bartlett became a director of the Company in October 1989.
Mr. Bartlett did not stand for re-election and his term expired on June 22,
1995. He has been, since August, 1991, Vice President of Raytheon Engineers and
Constructors, Inc. (formerly United Engineers and Constructors, Inc.), an
engineering and construction company. From 1989 to 1990, Mr. Bartlett was
President and Chief Operating Officer of Ambitech Engineering Corporation, a
full service engineering company located in Chicago, Illinois.
Chris Mallios, Chief Financial Officer and Corporate Secretary,
resigned his positions with the Company effective June 5, 1995. Mr. Mallios is a
certified public accountant and had become the company's Chief Financial Officer
on November 10, 1993. Prior to joining the Company, Mr. Mallios was the Vice
President of Finance and Chief Financial Officer for National Environmental
Testing, Inc., a national network of environmental testing laboratories. He also
worked in both public accounting with Touche, Ross & Company and internal audit
- 51 -
<PAGE>
with Penn Central Corporation for a combined period of nine years.
Gerald P. Krueger, Vice President of Technology and Research &
Development, resigned his position with the Company effective April 30, 1995.
Mr. Krueger, a certified professional ergonomist, had been the Company's Vice
President - Technology and Research & Development since July 11, 1994. Prior to
joining the Company, Dr. Krueger completed a twenty five year military career of
varied medical and ergonomic research assignments. Dr. Krueger was the Commander
and Scientific Technical Director of the U.S. Army Research Institute of
Environmental Medicine for the four years prior to joining the Company and for
two years prior to that was a Research Division Director of the U.S. Army
Research laboratory.
Arthur Fein resigned as a director of the Company effective April 11,
1994. The Board of Directors filled the vacancy created by this resignation by
appointing Lawrence N. Cohen as a director effective May 31, 1994.
Richard A. Lippe resigned as a director of the Company effective
January 17, 1994. Roger A. Jones resigned as a director of the Company effective
January 24, 1993. The Company filled the vacancies created by their resignations
by appointing Joel L. Gold and Robert P. Wong as directors effective February 7,
1994.
Terry A. Grant resigned from the Company and from his position as
President of BCA Services, Inc. as of November 30, 1994. Mr. Grant had joined
the Company on April 11,1994, serving as President of BCA Services, Inc. The
Company believes his departure will not have a material adverse effect on the
Company.
The Company's directors are elected by the Company's stockholders at
each annual meeting or, in the case of a vacancy, are appointed by the directors
then in office, to serve until the next annual meeting or until their successors
are elected and qualified. Officers are appointed by and serve at the discretion
of the Board of Directors.
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 Stock Option and Compensation Committee 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 and one meeting in 1995. 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
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<PAGE>
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. Cherubini, Gold and
Santmire.
The Audit Committee, which held one meeting in 1994 and two meetings in
1995, 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. Cherubini, Cohen and Santmire.
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
$100,000 during 1995.
- 53 -
<PAGE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG TERM
ANNUAL COMPENSATION COMPENSATION
--------------------------- ------------
OTHER ANNUAL SECURITIES
COMPENSATION UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) ($) OPTIONS(#) COMPENSATION($)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Michael Strauss(1) 1995 200,000 (2) 7,743(3) 1,000,000
Chairman, President &
Chief Executive Officer
Dr. Clifford M. Gross(4) 1995 150,000(6)
Chairman, President & 1994 150,000 10,584(5) 5,300(7)
Chief Executive Officer 1993 120,833 15,396(5) 5,460(7)
1992 153,365 24,167(5) 5,460(7)
Robert P. Wong(8) 1995 102,000 6,000(9) 492,500
Vice Chairman & Chief
Technology Officer
Daniel Benjamin 1995 95,000 6,000(10) 150,000
Chief Financial 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 $200,000.
(2) Effective February 16, 1995, when Mr. Strauss was elected to the positions
of Chairman of the Board of Directors and Chief Executive Officer, he
became eligible to receive a bonus which may be granted by the Board of
Directors of the Company in its sole discretion. However, the amount of
such bonus for fiscal year 1995 is not presently calculable.
(3) Reflects the cost to the Company of an automobile used by Mr. Strauss.
(4) Dr. Gross resigned from all positions effective February 16, 1995.
(5) Reflects the cost to the Company of automobiles used by Dr. Gross.
(6) Reflects consulting fees paid by the Company to Dr. Gross pursuant to an
agreement with the Company effective February 16, 1995.
(7) Reflects premiums paid by the Company on a term life insurance policy for
the benefit of Dr. Gross.
(8) Mr. Wong was elected Vice Chairman of the Board of Directors and Chief
Technology Officer on February 16, 1995.
(9) Reflects the cost to the Company, on an annualized basis, of an automobile
used by Mr. Wong.
(10) Reflects the cost to the Company, on an annualized basis, of an automobile
used by Mr. Benjamin.
- 54 -
<PAGE>
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
- -------------------------------------------------------------------------------------------------------------
NUMBER OF SECURITIES % OF TOTAL OPTIONS EXERCISE OR
UNDERLYING OPTIONS GRANTED TO EMPLOYEES IN BASE PRICE
NAME GRANTED (#) FISCAL YEAR ($/SH) EXPIRATION DATE
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Michael Strauss 300,000(1) 15.94% $1.03130 1/02/05
Chairman, President & 200,000(2) 10.63 0.92190 2/15/05
Chief Executive Officer 500,000(3) 26.57 1.04690 7/02/05
Robert P. Wong 175,000(4) 9.30 0.9219 2/15/05
Vice Chairman & Chief 25,000(5) 1.33 0.9219 2/15/05
Technology Officer 25,000(6) 1.33 1.0313 6/21/05
267,500(7) 14.22 1.0469 7/02/05
Dan Benjamin 100,000(8) 5.31 1.0313 6/21/05
Chief Financial Officer 50,000(9) 2.66 1.0469 7/02/05
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Aggregated Option Options at Fiscal In-the-Money Options at
Exercises in 1995 Year-End (#) Fiscal Year-End ($)(10)
SHARES ACQUIRED Value
NAME ON EXERCISE (#) Realized ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Michael Strauss ___ ___ 0/1,000,000 $0/$45,280
Chairman, President &
Chief Executive Officer
Robert P. Wong ___ ___ 27,500/472,500 $1,718/$31,355
Vice Chairman & Chief
Technology Officer
Daniel Benjamin 0/150,000 $0/$3,900
Chief Financial Officer
- --------
</TABLE>
(1) Options vest 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 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 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 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.
(5) Options vest 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 vest as follows: 10,000 shares on 12/22/95; 7,500 shares on 6/22/96;
and 7,500 shares on 6/22/97.
(7) Options vest 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.
(8) Options vest as follows: 25,000 shares on 6/22/96; 25,000 shares on 6/22/97;
25,000 shares on 6/22/98; and 25,000 shares on 6/22/99.
(9) Options vest as follows: 12,500 shares on 7/3/96; 12,500 shares on 7/3/97;
12,500 shares on 7/3/98; and 12,500 shares on 7/3/99.
(10)Fair market value based upon price of $1.06 at close of trading on NASDAQ
Small Cap Market, December 29, 1995.
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<PAGE>
There were no options or stock appreciation rights granted or exercised
or long term incentive plan payments during the year ending december 31, 1994 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 the effective date options to purchase
300,000 shares of the Company's Common Stock at an exercise price of $1.0313.
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
0fficer 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 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
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.
DR. CLIFFORD M. GROSS
On February 9, 1995, Dr. Clifford M. Gross, the Company's Chairman of
the Board and Chief Executive Officer, resigned his positions with the Company
effective February 16, 1995 in order to pursue other interests. Dr. Gross
remains a consultant to the Company. At the board meeting on February 16, 1995,
the Executive Committee of the Board of Directors recommended the appointment of
Michael Strauss, then the President and Chief Operating Officer, to the
additional positions of Chairman of the Board of Directors and Chief Executive
Officer. See "Risk Factors - Retention of Key Personnel;
- 56 -
<PAGE>
Limited Management Experience," "Recent Events - Chairman" and "Management -
Directors, Executive Officers and Significant Employees."
Pursuant to an employment agreement (which had been effective as of
January 1, 1989), Dr. Clifford M. Gross had agreed to serve as the Chairman of
the Board, President and Chief Executive Officer of the Company until December
31, 1992 with such agreement to be automatically renewed for additional one-year
periods unless either the Company or Dr. Gross provides written notice of
termination to the other no less than ninety days prior to the expiration of any
term. Dr. Gross relinquished his position as President upon the election of Mr.
Deutsch as President from June 20, 1991 to January 1, 1993. Dr. Gross once again
became the Company's president as of January 1, 1993 and served until January 2,
1995. Dr. Gross had been required under this agreement to devote substantially
all of his business time and energies on behalf of the Company and was entitled
to a base annual salary in the amount of $150,000. Dr. Gross was also entitled
to receive the use of two automobiles to be supplied by the Company and to
participate in all employee benefit plans made available by the Company to its
other executive officers. From the period from January 1, 1993 to October 15,
1993, Dr. Gross had agreed to a $20,000 reduction in his annual salary and to
the use of one rather than two automobiles which were to be supplied by the
Company. He also repaid a $25,000 salary advance in 1993 which had been advanced
to him in 1992. Subsequently, on October 15, 1993, his full compensation was
restored including the use of the second automobile supplied by the Company.
As of February 9, 1995, the Company and Dr. Gross entered into a
separation agreement in which the Company and Dr. Gross terminated the
employment agreement and granted certain mutual releases with respect thereto,
and the Company, Gross Associates, Inc., and Dr. Gross entered into a consulting
agreement providing for the engagement of Gross Associates, Inc. by the company.
Gross Associates, Inc. is required to provide consulting services through Dr.
Gross with respect to the Company's business. The consulting agreement has a
term that commences on February 16, 1995 and terminates on February 15, 1996.
The Company agreed to pay Gross Associates, Inc. the sum of $150,000 to be paid
in twelve (12) equal monthly installments, and reimbursement for pre-approved
expenses. During the term of this consulting agreement, Gross Associates, Inc.
and Gross (i) shall not solicit any employees of the Company, (ii) shall keep
all confidential information strictly confidential, (iii) shall deliver all
information relating to the Company to the Company upon the Company's written
request and at the termination of this consulting agreement, and (iv) shall not
compete, directly or indirectly, against the Company in any business in which
the Company is engaged or which the Company is pursuing on the date of the
consulting agreement. This consulting agreement terminates before February 15,
1996, upon a default by a party, the insolvency of the Company, and the death
and disability of Dr. Gross. Upon death or disability, Gross Associates, Inc. is
paid any amounts accrued as of the termination date.
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
- 57 -
<PAGE>
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.
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
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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
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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.
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.
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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 1,712,500 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 220,000 shares of Common Stock
(net of cancellations) pursuant to the 1995 Plan to various officers and
directors and consultants.
Pursuant to the 1989 Plan, the Board of Directors has granted ISOs to
acquire 581,500 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 264,167 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
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period) to each of Messrs. Gold, Wong, Cohen, Cherubini and Santmire to purchase
an aggregate of 220,000 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.
TREASURY STOCK
In connection with the closing of the IPO, the then-existing
stockholders of the Company, pursuant to an agreement with the Underwriter, have
caused to be placed in the Company's treasury, as treasury stock, 150,000
previously outstanding shares of Common Stock owned by them, to be used as
determined by the Company's Board of Directors for "restricted stock" issuances.
CONSULTANTS
NRC RESOURCES GROUP, INC.
Effective February 1, 1990, the Company and NRC entered into an
agreement (the "NRC Agreement") providing for NRC to render advisory and
consulting services to the Company in connection with its business, during the
period ending December 31, 1990. As sole compensation for these services, the
Company issued and delivered to NRC, following the effectiveness of the
Company's Registration Statement on Form S-1 (Registration No. 33-38204), in
February 1991, an aggregate of 32,600 shares of Common Stock which then were
sold pursuant to the NRC Agreement by NRC as a Selling Security Holder under
such Registration Statement, for aggregate net proceeds of $55,015.20, of which
$15.20 was remitted to the Company in cash.
INDEMNIFICATION OF DIRECTORS, OFFICERS AND AGENTS OF THE COMPANY
The New York Business Corporation Law permits a corporation through its
certificate of incorporation to prospectively eliminate or limit the personal
liability of its directors to the corporation or its stockholders for damages
for breach of fiduciary duty as a director, with certain exceptions. The
exceptions include acts or omissions in bad faith or which involve intentional
misconduct or knowing violations of law, improper declaration of dividends, and
transactions from which the director personally gained in fact a financial
profit or other advantage to which he was not legally entitled. The Company's
Restated Certificate of Incorporation exonerates its directors from personal
liability to the extent permitted by this statutory provision.
CERTAIN TRANSACTIONS
The following information has been adjusted to give effect to the
3.7899-for-1 stock split of the Company's Common Stock effected in November
1989.
REDEMPTION
Between October 1986 and April 1987, a group comprised of several
investors acquired 682,182 shares of Common Stock (625,333 shares from the
Company and 56,849 shares from Dr. Gross) in a private offering for an aggregate
purchase price of $599,400 (approximately $.88 per share). Pursuant to separate
Investment Agreements (the "Investment Agreements") entered into among each
investor, the Company and Dr. Gross (i) the Company
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and Dr. Gross agreed to enter into an employment agreement whereby Dr. Gross
would be employed for a period of five years, and was to receive an annual
salary of $65,000 with an annual end-of-year bonus of 20% of the Company's
pretax earnings in excess of $200,000, (ii) the Company agreed that within 60
days after receipt of a request from an investor, it would repurchase such
investor's Common Stock for a price equal to 80% of the book value per share of
Common Stock at that time, (iii) the Company and Dr. Gross agreed that during or
before October 1991, the Company would redeem 227,394 shares of Common Stock
owned by Dr. Gross at a price equal to the book value per share of Common Stock
at that time, (iv) Dr. Gross agreed to nominate and elect a seven-person Board
of Directors, including three persons designated by the investor group, and (v)
Dr. Gross agreed that he would not agree to a sale of all or a majority of the
outstanding shares of Common Stock of the Company or to the sale of the assets
of the Company on or before October 1991 unless each investor were to receive
for his shares of Common Stock $.88 per share plus 8% per annum on his
investment from the date of such investment until the purchase of each
investor's shares.
The Company entered into a certain redemption agreement with each of
such investors (the "Redemption Agreement") which provided for the redemption by
the Company of all Common Stock owned by such investors, as well as any other
securities received thereafter as a dividend thereon (which includes 602,680
shares of Convertible Preferred Stock received as a stock dividend in November
1989) for an aggregate of $810,000, $250,000 of which the Company paid upon the
closing of the IPO. The Company also paid interest on the $810,000 purchase
price, at the rate of 8% per annum, from October 1, 1989 through the date of the
IPO, in the amount of $20,594. The Company issued promissory notes providing for
the payment of an aggregate principal amount of $560,000 and interest calculated
at an annual rate of 8% percent, payable as follows:
(i) an aggregate of $176,726 per year, for a period of 44 months,
payable in monthly installments including principal and interest, commencing
February 1990; and
(ii) additional principal payments, within thirty-one days after the
end of any fiscal year (which will reduce the amount payable as described in (i)
above) during which the Company's net revenues exceed $2,500,000, of an amount
equal to 10% percent of such net revenues which exceed $2,500,000 until full
satisfaction of the notes.
As of September 1993, the promissory notes were paid in full.
Pursuant to the Redemption Agreement, the Company had agreed to
maintain a life insurance policy reserved to satisfy the obligations of the
Company to the note holders insuring the life of Dr. Gross having a face amount
equal to the aggregate outstanding principal balance of the promissory notes.
The promissory notes were also secured by a security interest in the shares
which were redeemed, which shares were subject to reissuance in the event of a
default by the Company in its payment obligation.
The investors, the Company and Dr. Gross further agreed to terminate
each of the Investment Agreements previously entered into among the Company,
each investor and Dr. Gross under which Dr. Gross had the right to receive a
bonus equal to 20% of the Company's pre-tax earnings in excess of $200,000, had
a $65,000 salary limitation and was obligated to have 227,394 shares of his
Common Stock redeemed by the Company in October, 1991 at the book value
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of such shares. The execution of the Redemption Agreement on behalf of the
Company and the increase in Dr. Gross' compensation to its then current level,
retroactive to January 1, 1989 and the subsequent increase in Dr. Gross' salary
in July 1990 (see "Management-Employment Agreements"), were approved and
ratified by the Board of Directors of the Company at special meetings held in
August 1989 and July 1990, respectively. In connection with the execution of the
Redemption Agreement, each of the three directors designated by the investor
group resigned as directors.
PRINCIPAL STOCKHOLDERS
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of December 1, 1995 based
on information obtained from the persons named below with respect to the
beneficial ownership of shares of Common Stock of the Company by (i) each person
known by the Company to be owners of more than five percent of the outstanding
shares of Common Stock, (ii) each director and nominee and certain executive
officers, and (iii) all officers and directors as a group.
Common Stock
-------------------------------------------
Amount and Nature Percentage of
Name and Address of of Beneficial Common Stock
Beneficial Owner(1) Ownership(2) Owned
- ------------------ ---------------- --------------
Clifford M. Gross 951,266(3) 6.40%
Elissa-Beth Gross 951,266(4) 6.40
Michael Strauss 0 0.00
Joel L. Gold 50,000 *
Robert P. Wong 0 0.00
Lawrence N. Cohen 0 0.00
Julian H. Cherubini 0 0.00
Glenn F. Santmire 0 0.00
All officers and directors as 50,000 *
a group (8 persons)
(1) 1800 Walt Whitman Road, Melville, NY 11747, with the exception of Clifford
and Elissa- Beth Gross, whose address is as follows: 773 Mainsail Drive,
Tampa, FL 33602
(2) Except as otherwise indicated, each owner has sole voting and investment
power of the shares owned.
(3) Includes 304,563 shares of Common Stock owned by his wife, Elissa-Beth
Gross. Dr. Gross disclaims beneficial ownership of Mrs. Gross' shares. Based
upon information set forth in Schedule 13G filed with the Commission.
(4) Includes 646,703 shares of Common Stock owned by her husband, Dr. Gross.
Mrs. Gross disclaims beneficial ownership of Dr. Gross' shares. Based upon
information set forth in Schedule 13G filed with the Commission.
- ---------------
(*)less than 1%
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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 described below, 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
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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.
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:
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WARRANTS AND PERIOD Exercise Price
(per share, as adjusted)
- --------------------------------------------------------------------------------
Class A $1.72
- -------
Class B $2.69
- -------
Until December 13, 1996
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
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.
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
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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.
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.
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
- 68 -
<PAGE>
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.
- 69 -
<PAGE>
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. 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 14,948,651 shares of Common Stock outstanding, assuming that
the Underwriter's Unit Purchase Option, the Class B Warrants, the Class C
Warrants and the Class E Warrants are not exercised. All of the 958,008 shares
of Common Stock currently outstanding and owned by the Pre-IPO Stockholders,
including an aggregate of 951,266 shares owned by Dr. Gross and members of his
family (See "Principal Stockholders"), are "restricted securities" within the
meaning of Rule 144, promulgated under the 1933 Act. All of such shares have
satisfied the two-year holding period requirement contained in Rule 144 and,
therefore, will be eligible for sale in the public market in reliance upon Rule
144.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated), holding shares of Common Stock that are
restricted, and an "affiliate", as that term is defined under the 1933 Act,
holding shares of Common Stock (whether or not "restricted"), is entitled to
sell, within any three-month period, a number of shares that does not exceed the
greater of (i) one percent of the then outstanding shares of Common Stock, or
(ii) the average weekly trading volume in the Common Stock during the four
calendar weeks preceding such sale; provided that, with respect to shares of
Common Stock that are "restricted securities," a minimum of two years has
elapsed between the later of the date of the acquisition of the shares from the
Company or from an "affiliate" and such sale. Sales under Rule 144 are also
subject to certain requirements as to the manner of sale, notice and the
availability of current public information about the Company. However, a person
who is not an affiliate and has owned such shares for at least three years is
entitled to sell such shares without regard to the volume or other requirements.
The holders of the Underwriter's Unit Purchase Option and shares of
Common Stock issued in the various private placements have demand and piggyback
registration rights with respect to such securities and the securities
underlying such securities.
Sales of substantial amounts of Common Stock in the public market under
Rule 144, pursuant to a registration statement or otherwise, could adversely
affect the prevailing market price of the Common Stock.
AGREEMENTS WITH THE UNDERWRITER
Pursuant to the Underwriting Agreement, the Company sold to the
Underwriter, for nominal consideration, the Underwriter's Unit Purchase Option
to purchase up to 107,500 Units at $5.20 per Unit, subject to certain
anti-dilution adjustments which, as a result of various private placements, have
caused such price to be reduced to $4.35 per Unit and the number of Units to be
increased to approximately 127,547. The Units purchasable upon exercise of the
Underwriter's Unit Purchase Option are identical to the Units
- 70 -
<PAGE>
sold in the IPO, except that the Warrants included therein are not redeemable by
the Company. The Underwriter's Unit Purchase Option is exercisable during the
period commencing January 17, 1992 and terminating on January 17, 1997. The
Underwriter's Unit Purchase Option was not transferable for two years from the
date of issuance except to officers of the Underwriter. For the life of the
Underwriter's Unit Purchase Option, the holder thereof is given the opportunity
to profit from a rise in the market price of the Common Stock of the Company
with a resulting dilution in the interest of other stockholders. The Company may
find it more difficult to raise additional equity capital if it should be needed
for the business of the Company while the Underwriter's Unit Purchase Option is
outstanding; and at any time when the holder of the Underwriter's Unit Purchase
Option might be expected to exercise it, the Company would probably be able to
obtain additional equity capital on terms more favorable than those provided in
the Underwriter's Unit Purchase Option. The Company has agreed to register under
the 1933 Act, at its expense on one occasion, and at the expense of the holder
on another occasion, the Underwriter's Unit Purchase Option and/or the
underlying securities at the request of the holder thereof. The Company has also
agreed to certain "piggy-back" registration rights for the holders of the
Underwriter's Unit Purchase Option and/or the underlying securities. See "Recent
Events - 1991 Private Placement" for a description of the compensation
arrangements between the Underwriter and the Company with respect to the 1991
Private Placement and "Description of Securities - Class C Warrants" for a
description of the Class C Warrants issued to the Underwriter in connection
therewith.
The Company also agreed to issue the Finder's Option to NRC to purchase
2,981 Units, as adjusted, on terms substantially identical to the Underwriter's
Unit Purchase Option, except that the holder of the Finder's Option is not
entitled to demand registration rights and the Warrants issuable under the
Finder's Option are redeemable. In addition, in connection with the IPO, the
Underwriter paid to NRC a finder's fee of $10,000. See "Management-Consultants."
The Underwriter is a market maker for the securities of the Company.
The Company has entered into an agreement with the Underwriter
providing for the payment of a fee to the Underwriter in the event the
Underwriter is responsible for a merger or other acquisition transaction to
which the Company is a party which agreement replaced a previous agreement
between the Company and the Underwriter pursuant to which no fees were paid.
The Company entered into a consulting agreement with the Underwriter
pursuant to which the Underwriter acted as the Company's investment banker
through December 31, 1990 for a fee of $38,000.
The Company will pay the Underwriter a fee of 4% of the aggregate
exercise price of each Class A, Class B or Class E Warrant exercised after
January 17, 1991 if (i) the market price of the Company's Common Stock on the
date the Warrant is exercised is greater than the then Warrant exercise price;
(ii) the exercise of the Warrant was solicited by a member of the National
Association of Securities Dealers, Inc.; (iii) the Warrant was not held in a
discretionary account; (iv) disclosure of compensation arrangements was made
both at the time of the IPO and at the time of exercise of the Warrant; and (v)
the solicitation of exercise of the Warrant was not in violation of Rule 10b-6
promulgated under the 1934 Act. The Company has
- 71 -
<PAGE>
agreed not to solicit the exercise of any Warrants other than through the
Underwriter.
The Company has agreed in principle with the Underwriter and a broker
associated with the Underwriter that the Underwriter and such broker will
solicit exercises of Class E Warrants and will receive a fee of 10% of the
aggregate exercise price of each Class E Warrant exercised during an agreed upon
period of time (currently anticipated to be a thirty-day period) in lieu of such
4% fee.
Under applicable rules and regulations under the 1934 Act, any person
engaged in a distribution of any of the securities offered hereby, including
without limitation, the Company and the Selling Security Holders, may not
simultaneously engage in market activities with respect to any of such
securities for a period of nine business days, or such other applicable periods
as Rule 10b-6 promulgated under the 1934 Act may provide, prior to the
commencement of such distribution, until the distribution, or in certain cases
the participation of the person in the distribution, has been completed. In
addition to and without limiting the foregoing, any person participating in such
distribution may be subject to applicable provisions of the 1934 Act and the
rules and regulations thereunder, including without limitation Rules 10b-6,
10b-6A or 10b-7, which provisions may limit the timing of purchases and sales of
any of the securities offered hereby. All of the foregoing may affect the
marketability of the securities offered hereby and the ability of any person to
engage in market making activities with respect to the securities offered
hereby.
Pursuant to the Securities Purchase Agreement, the Company sold
securities consisting of $1,101,562 of 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 $2.00 per share
for 176,250 shares of Common Stock. A total of 35.25 of these 1991 Units were
sold at $50,000 each, consisting of a $31,250 Note, 18,750 shares of Common
Stock and 5,000 Class D Warrants. The Securities Purchase Agreement contains
covenants, which survived the conversion and prepayment of the Notes, (i) to
register the securities issued pursuant to the Securities Purchase Agreement and
(ii) to maintain a minimum net worth equal to the lesser of (i) the minimum net
worth requirements of NASDAQ in order to maintain the listing of its Common
Stock or (ii) $500,000. See "Risk Factors -- Future Sales of Common Stock." As
of December 31, 1992, the holders of approximately 91% of the aggregate face
value of the Notes had converted their Notes into Common Stock. A total of
1,000,004 shares of Common Stock were issued as a result of this conversion.
Pursuant to the Securities Purchase Agreement, those Notes which were not
converted were prepaid in full in 1992. Since the Notes have been paid in full,
if the Company breached the covenants there would be no liability except to
register the securities and use its best efforts to maintain the minimum net
worth required. See "Recent Events - 1991 Private Placement" and "Risk Factors -
Limited Operating History; Losses; Accumulated Deficit and Future Sale of Common
Stock." The Company currently meets the minimum net worth covenant; however, if
the Company continues to sustain losses, at some point in the future, it will
breach this covenant. The breach of this covenant could have a material adverse
effect on the market price of the Common Stock.
The exercise prices and other terms of the Class D Warrants, the
Finder's Option and the Warrants included therein have been determined by
negotiation between the Company and the Underwriter and are not necessarily
- 72 -
<PAGE>
related to the Company's asset value, net worth or other established criteria of
value. Factors considered in determining the exercise price of the respective
Warrants and Finder's Option included the then present state of the Company's
development, the future prospects of the Company, an assessment of management,
the general condition of the securities markets and other factors deemed
relevant.
SELLING SECURITY HOLDERS
The following table sets forth certain information with respect to the
Selling Security Holders and their beneficial ownership of shares of Common
Stock as of December 1, 1995, including shares issuable upon the exercise of the
Class D Warrants and shares underlying stock options, warrants and convertible
securities which were immediately exercisable or convertible or which became
immediately exercisable or convertible within 60 days of the date hereof. The
amounts set forth below reflect adjustments made under relevant antidilution
provisions.
<TABLE>
<CAPTION>
Shares of Shares of
Common Stock Common Stock
Beneficially Beneficially
Name of Selling Security Owned Prior to Percentage of Shares to be Owned After Percentage of
Holder Offering(1) Class Owned sold Offering(1) Class Owned
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Walter Absil 30,179 * 30,179 --- ---
Jose Banaag 5,000 * 5,000 --- ---
James H. Barber, Jr. 194,229(2) 1.32 61,429 132,800(2) *
Isaac Berman 61,429 * 61,429 --- ---
Steven Berman 30,714 * 30,714 --- ---
Edward D. Burger 30,714 * 30,714 --- ---
Jim D. Burrow 33,107 * 15,357 17,750 *
Nancy Chervin 1,000 * 1,000 --- ---
Harry D. Cohen 30,714 * 30,714 --- ---
Kevin Costello 68,612 * 5,000 63,612 *
David Deutsch 237,973 1.62 76,786 161,187 1.09
Donna Dressel 2,000 * 2,000 --- ---
Arthur Fein 140,000 * 40,000 100,000 *
Denis Fortin 61,429 * 61,429 --- ---
Henry A. Fredericks 132,929 * 61,429 71,500 *
Amy Fuchs 68,612 * 5,000 63,612 *
Joseph Giamanco 30,714 * 30,714 --- ---
Ravindra Goonetilleke 3,000 * 3,000 --- ---
Daniel L. Gorman 30,714 * 30,714 --- ---
Leo Guthart 30,714 * 30,714 --- ---
Robert P. Hauptfuhrer 61,429 * 61,429 --- ---
Herbert B. Hirsch 90,429 * 61,429 29,000 *
The Revocable Inter Vivos 65,429 * 61,429 4,000 *
Trust of Carlynne L.
Holmes dated February
19, 1987 - Carlynne L.
Holmes, Trustee
F. Donald Hudson 61,429 * 61,429 --- ---
Eric Joss 7,678 * 7,678 --- ---
Ivan F. Katz 15,357 * 15,357 --- ---
Hersch Klaff 7,678 * 7,678 --- ---
Victor Kaufman 30,714 * 30,714 --- ---
James C. Klouda 122,857 * 122,857 --- ---
Marlene R. Krauss, M.D. 30,179 * 30,179 --- ---
Donald B. Kuspit and Judith C. 35,357 * 15,357 20,000 *
Kuspit - JTWROS
Kenneth Lazar 30,714 * 30,714 --- ---
Michael Librizzi 15,357 * 15,357 --- ---
George Lionikis, Sr. 61,429 * 61,429 --- ---
Neil Lowenbraun and Elizabeth 61,429 * 61,429 --- ---
Gordon - JTWROS
Karl G. Mangold and Janet L. 61,429 * 61,429 --- ---
Mangold, JTWROS
James T. McMillan, II 30,714 * 30,714 --- ---
Melvin Miller 124,143 * 92,143 32,000 *
Chandra Nair 3,000 * 3,000 --- ---
NRC(3) 23,251 * 23,251
</TABLE>
- 73 -
<PAGE>
<TABLE>
<CAPTION>
Shares of Shares of
Common Stock Common Stock
Beneficially Beneficially
Name of Selling Security Owned Prior to Percentage of Shares to be Owned After Percentage of
Holder Offering(1) Class Owned sold Offering(1) Class Owned
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
John V. Parker 122,857 * 122,857 --- ---
Richard L. Quackenbush 30,714 * 30,714 --- ---
John J. Reilly, M.D. 30,714 * 30,714 --- ---
George P. Rutland 61,429 * 61,429 --- ---
Bernard R. Schiel 19,357 * 15,357 4,000 *
Gail Schneider 30,714 * 30,714 --- ---
Terrace W. Schwab 21,544 * 7,544 14,000 *
Lynda Silberstein 15,357 * 15,357 --- ---
Melvin Spielman 61,429 * 61,429 --- ---
Dr. Thomas Stelmack 37,357 * 15,357 22,000 *
Ava Stern 41,000 * 5,000 36,000 *
Vidalia Internal Medicine, 111,429 * 61,429 50,000 *
P.C., Profit Sharing
Plan dated May 15, 1989
James Barber, Jr. and
Ron Smith, M.D.,
Trustees
Gerald Waldman 15,357 * 15,357 --- ---
Mr. Chamer Wei 61,429 * 61,429 --- ---
Robert Weiner 30,714 * 30,714 --- ---
Edward W. Weingartner 52,589 * 15,089 37,500 *
M. Dale Williams 30,714 * 30,714 --- ---
Robert I. Williams 30,714 * 30,714 --- ---
</TABLE>
- -------------------
(1) Based on Company records and information furnished by the Selling Security
Holders. Except as otherwise noted, each person named in the table has sole
voting and investment power with respect to all shares of Common Stock
shown as beneficially owned by him or it.
(2) Includes 108,000 shares owned by Vidalia Internal Medicine, P.C., Profit
SharIng Plan dated 5/15/89 held indirectly by Mr. Barber as co-trustee.
(3) Includes the Finder's Option, which was exercisable for 2,981 Units,
consisting of 8,943 shares of Common Stock and 5,962 Class A Warrants,
which in turn are exercisable to purchase 7,154 shares of Common Stock and
5,962 Class B Warrants, which in turn are exercisable to purchase 7,154
shares of Common Stock issued under the Class B Warrants. Each of the
Finder's Option and the Units, Class A Warrants, Class B Warrants and
underlying Common Stock beneficially owned by NRC is being offered for
resale pursuant to this Prospectus. NRC has exercised the Finder's Option
for 1,413 Units and has an option to purchase 1,568 Units which consist of
4,704 shares of Common Stock.
- -------------------
(*) less than 1%.
David Deutsch, a former director, President and Chief Operating
Officer, and Chief Financial Officer, resigned as a director, officer and
employee of the Company, effective January 1, 1993.
Arthur Fein, a former director, Executive Vice President-Operations and
Finance, Executive Vice President, and Chief Financial Officer and Treasurer,
resigned as a director on April 11, 1994 and as an officer and employee
effective April 17, 1992.
Amy Fuchs, a former Vice President-Administration, resigned this
position in January 1992 and is presently employed in the sales and marketing
areas.
Ava Stern, a former Vice President-Corporate Communications,
consultant, and regional sales manager, resigned from the Company effective
March 31, 1992.
The following Selling Security Holders have been employees of the
Company during the respective periods shown below:
- 74 -
<PAGE>
Name Period of Service
---- -----------------
Jose Banaag 1/89 - 1/92
Nancy Chervin 6/90 - 12/92
Kevin Costello 1/86 - 11/93
Donna Dressel 4/90 - 3/92
Ravindra Goonetilleke 1/90 - 9/91
Chandra Nair 3/89 - 11/93
For a description of the relationships between NRC and the Company, see
"Management - Consultants - NRC Resources Group, Inc." For a description of the
relationships between the Underwriter and the Company, see "Agreements with the
Underwriter."
No other Selling Security Holder has had any position, office or other
material relationship with the Company, or its affiliates within the past three
years.
PLAN OF DISTRIBUTION
The shares of Common Stock and the Finder's Option (including for the
purposes hereof, the Units covered thereby and the shares of Common Stock and
Warrants comprising the Units or issuable upon exercise of such Warrants)
offered by the Selling Security Holders were issued to the Selling Security
Holders in connection with the IPO, the 1991 Private Placement or from the
treasury, as the case may be. In connection therewith, the Company agreed, under
certain circumstances, to register these securities. All costs, expenses and
fees in connection with the registration of the shares of Common Stock and
Finder's Option offered hereby will be borne by the Company. Brokerage
commissions, if any, attributable to the sale of the shares and the Finder's
Option will be borne by the Selling Security Holders.
The Selling Security Holders have advised the Company that sales of the
shares and the Finder's Option may be effected from time to time in transactions
(which may include block transactions) on the Boston Stock Exchange, in the
over-the-counter market, in negotiated transactions, through the writing of
options on the shares or the Finder's Option, or a combination of such methods
of sale, at fixed prices which may be changed, at market prices prevailing at
the time of sale or negotiated prices. The Selling Security Holders may effect
such transactions by selling shares or the Finder's Option directly to
purchasers or to or through broker-dealers which may act as agents or
principals. Such broker-dealers may receive compensation in the form of
discounts, concessions or commissions from the Selling Security Holders and/or
the purchasers of shares or the Finder's Option for whom such broker-dealers may
act as agents or to whom they sell as principal, or both (which compensation as
to a particular broker-dealer might be in excess of customary commissions). The
Selling Security Holders and any broker-dealers that act in connection with the
sale of the shares or the Finder's Option might be deemed to be "underwriters"
within the meaning of Section 2(11) of the 1933 Act and any commission received
by them and any profit on the resale of the shares or the Finder's Option as
principals might be deemed to be underwriting discounts and commissions under
the 1933 Act. Sales of the shares or the Finder's Option may be made either
pursuant to the Registration Statement of which this Prospectus is a part or
pursuant to Rule 144 under the 1933 Act.
- 75 -
<PAGE>
The Selling Security Holders may agree to indemnify any agent, or
broker-dealer that participates in transactions involving sales of the shares or
the Finder's Option against certain liabilities, including liabilities arising
under the 1933 Act. The Company and the Selling Security Holders may agree to
indemnify each other and certain other persons against certain liabilities in
connection with the offering of shares or the Finder's Option, including
liabilities arising under the 1933 Act.
LEGAL MATTERS
Certain legal matters with respect to the securities offered hereby
will be passed upon for the Company by Rivkin, Radler & Kremer, Uniondale, New
York.
EXPERTS
The consolidated balance sheet of BCAM International, Inc. (formerly
Biomechanics Corporation of America) as of December 31, 1994 and the related
consolidated statements of operations, common shareholders' equity and cash
flows for each of the two years in the period ended December 31, 1994, appearing
in this Prospectus and in the Registration Statement have been audited by Ernst
& Young LLP, independent auditors, as set forth in their report thereon
appearing elsewhere herein and in the Registration Statement, and are included
in reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
- 76 -
<PAGE>
BCAM INTERNATIONAL, INC.
Index of Financial Statements
Page
----
Condensed Consolidated Balance Sheet--September 30, 1995 (Unaudited)........F-2
Condensed Consolidated Statements of Operations - Three Months
and Nine Months Ended September 30, 1995 and 1994 (Unaudited)............F-3
Condensed Consolidated Statements of Cash Flows - Nine Months Ended
September 30, 1995 and 1994 (Unaudited)..................................F-4
Notes to Condensed Consolidated Financial Statements - September 30, 1995
(Unaudited)..............................................................F-5
Report of Independent Auditors..............................................F-6
Consolidated Balance Sheet--December 31, 1994 ..............................F-7
Consolidated Statements of Operations - Year Ended
December 31, 1994 and 1993...............................................F-8
Consolidated Statements of Common Shareholders'
Equity.................................................................. F-9
Consolidated Statements of Cash Flows - Year Ended
December 31, 1994 and 1993...............................................F-10
Notes to Condensed Consolidated Financial Statements - December 31, 1994....F-12
F-1
<PAGE>
<TABLE>
<CAPTION>
BCAM International, Inc.
Condensed Consolidated Balance Sheet (Unaudited)
September 30, 1995
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 2,538,333
Accounts receivable, less allowance for doubtful accounts of $3,326 315,074
Prepaid expenses and other current assets 93,794
--------------------
Total current assets 2,947,201
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 (558,790)
--------------------
299,558
Other assets, principally patents (net of accumulated amortization of $144,538) 197,805
--------------------
Total assets $ 3,444,564
====================
Liabilities and shareholders' equity
Current liabilities:
Accounts payable $ 12,996
Accrued expenses and other current liabilities 376,845
--------------------
Total current liabilities 389,841
Other liabilities 5,490
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 (11,241,630)
--------------------
3,948,333
Less 763,182 treasury shares (899,100)
--------------------
3,049,233
--------------------
Total liabilities and shareholders' equity $ 3,444,564
====================
See notes to condensed consolidated financial statements (unaudited).
</TABLE>
F-2
<PAGE>
<TABLE>
<CAPTION>
BCAM International, Inc.
Condensed Consolidated Statements of Operations (Unaudited)
Three months ended September 30 Nine months ended September 30
---------------------------------------- --------------------------------------
1995 1994 1995 1994
------------------ ------------------ ------------------ ----------------
<S> <C> <C> <C> <C>
Net revenue $ 158,485 $ 224,130 $ 572,881 $ 1,085,809
Interest and other income 40,707 51,657 141,820 133,261
------------------ ------------------ ------------------ ----------------
199,192 275,787 714,701 1,219,070
------------------ ------------------ ------------------ ----------------
Costs and expenses:
Direct costs of revenue 131,478 136,851 558,125 677,514
Selling, general and administrative 505,753 546,235 1,396,769 1,511,716
Research and development - 61,837 3,767 122,017
------------------ ------------------ ------------------ ----------------
637,231 744,923 1,958,661 2,311,247
------------------ ------------------ ------------------ ----------------
Net (loss) $ (438,039) $ (469,136) $ (1,243,960) $ (1,092,177)
================== ================== ================== ================
Net (loss) per share $ (0.03) $ (0.03) $ (0.08) $ (0.07)
================== ================== ================== ================
Weighted average number of common
shares outstanding 14,857,233 14,670,466 14,804,852 14,660,855
================== ================== ================== ================
See notes to condensed consolidated financial statements (unaudited).
</TABLE>
F-3
<PAGE>
<TABLE>
<CAPTION>
BCAM International, Inc.
Condensed Consolidated Statements of Cash Flows (Unaudited)
Nine months ended September 30
---------------------------------------------
1995 1994
-------------------- ------------------
<S> <C> <C>
Operating activities
Net (loss) $ (1,243,960) $ (1,092,177)
Adjustments to reconcile net (loss) to net cash (used in)
operating activities
Depreciation and amortization 126,105 103,149
Amortization of premium on held to maturity securities - 7,510
Accrued interest on held to maturity securities (107,198) (44,046)
Loss on sale of available for sale securities - 5,992
Issuance of common shares in lieu of compensation - 29,117
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (195,219) 128,413
Decrease (increase) in prepaid expenses and other
current assets 136,686 (71,697)
(Increase) in other assets (32,109) (135,448)
(Decrease) increase in accounts payable, accrued
expenses and other current liabilities (310,828) 53,142
(Decrease) in other liabilities (29,241) (16,804)
-------------------- ------------------
Net cash (used in) operating activities (1,655,764) (1,032,849)
-------------------- ------------------
Investing activities
Purchase of property, plant and equipment (5,188) (69,814)
Purchase of available for sale securities - (143,298)
Purchase of held to maturity securities (1,299,782) (4,161,884)
Proceeds from available for sale securities - 2,281,331
Proceeds from held to maturity securities 4,535,000 2,179,161
Proceeds from sale of equipment 1,200 1,050
-------------------- ------------------
Net cash provided by investing activities 3,231,230 86,546
-------------------- ------------------
Financing activities
Net proceeds from sale of common stock and exercise of
warrants - 90,255
Redemption of convertible preferred stock - (16,473)
Payment of registration and issuance costs (77,234) (29,644)
-------------------- ------------------
Net cash (used in) provided by financing activities (77,234) 44,138
-------------------- ------------------
Increase (decrease) in cash and cash equivalents 1,498,232 (902,165)
Cash and cash equivalents at beginning of period 1,040,101 1,757,653
==================== ==================
Cash and cash equivalents at end of period $ 2,538,333 $ 855,488
==================== ==================
See notes to condensed consolidated financial statements (unaudited).
</TABLE>
F-4
<PAGE>
BCAM International, Inc.
("the Company")
Notes to Condensed Consolidated Financial Statements
(Unaudited)
September 30, 1995
1. Basis of Presentation
On June 22, 1995, the Company's shareholders approved a change of the
name of the corporation from Biomechanics Corporation of America to BCAM
International, Inc.
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
nine-month periods ended September 30, 1995 are not necessarily indicative
of the results that may be expected for the year ending December-31, 1995.
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, 1994.
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 nine months ended September 30, 1995 and 1994 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. Significant Customers
During the three months ended September 30, 1995, two customers
accounted for approximately $67,000 and $32,000, or 62% of net revenue.
During the three months ended September 30, 1994, three customers accounted
for approximately $100,000, $53,000 and $50,000 or 90% of net revenue.
During the nine months ended September 30, 1995, two customers
accounted for $151,000 and $84,000, or 41% of net revenue. During the nine
months ended September 30, 1994, two customers accounted for approximately
$616,000 and $175,000 or 73% of net revenue.
F-5
<PAGE>
ERNST & YOUNG LLP
REPORT OF INDEPENDENT AUDITORS
Shareholders and Board of Directors
Biomechanics Corporation of America
We have audited the accompanying consolidated balance sheet of Biomechanics
Corporation of America as of December 31, 1994, and the related consolidated
statements of operations, shareholders' equity and cash flows for each of the
two years in the period ended December 31, 1994. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Biomechanics Corporation of America at December 31, 1994, and the consolidated
results of their operations and their cash flows for each of the two years in
the period ended December 31, 1994, in conformity with generally accepted
accounting principles.
/s/ Ernst & Young LLP
Melville, New York
March 21, 1995
F-6
<PAGE>
BIOMECHANICS CORPORATION OF AMERICA
Consolidated Balance Sheet
December 31, 1994
ASSETS
Current assets:
Cash and cash equivalents $ 1,040,101
Held-to-maturity securities (Notes 2 and 3) 3,128,020
Accounts receivable - trade, less allowance for doubtful
accounts of $3,600 119,855
Prepaid expenses and other current assets 230,480
-----------
Total current assets 4,518,456
Property, plant, and equipment, at cost:
Furniture and fixtures 220,020
Equipment 585,564
Leasehold improvements 50,319
-----------
855,903
Less accumulated depreciation and amortization 482,878
-----------
373,025
Other assets, principally patents (net of
accumulated amortization of $95,888) 196,411
-----------
Total assets $ 5,087,892
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 125,288
Accrued expenses and sundry liabilities 575,381
Deferred revenue (Note 12) 100,000
-----------
Total current liabilities 800,669
Other liabilities 34,731
Commitments and contingencies (Notes 4 and 9) --
Acquisition preferred stock, par value
$.01 per share - authorized 750,000
shares, no shares issued or outstanding (Note 6) --
Common shareholders' equity (Notes 7, 8 and 10)
Common stock, par value $.01 per share - authorized
20,000,000 shares, 15,520,415 shares issued and
14,757,233 shares outstanding 155,204
Paid-in surplus 14,994,058
Deficit (9,997,670)
-----------
5,151,592
Less 763,182 treasury shares (899,100)
-----------
4,252,492
-----------
Total liabilities and shareholders' equity $ 5,087,892
===========
See accompanying notes.
F-7
<PAGE>
BIOMECHANICS CORPORATION OF AMERICA
Consolidated Statements of Operations
YEAR ENDED DECEMBER 31,
1994 1993
-----------------------------
Net revenue $ 1,138,304 $ 1,381,507
Interest and other income 154,636 59,395
-----------------------------
1,292,940 1,440,902
-----------------------------
Costs and expenses:
Direct costs of revenues (Note 11) 1,140,698 461,424
Selling, general and administrative 2,339,225 1,453,340
Research and development 120,470 57,208
Interest expense -- 4,343
Loss on investments (Note 1) 81,500 59,599
-----------------------------
3,681,893 2,035,914
-----------------------------
Net (loss) $ (2,388,953) $ (595,012)
=============================
Net (loss) per share $ (.16) $ (.05)
=============================
Weighted average number of common shares
and common equivalent shares outstanding 14,681,530 10,949,876
=============================
See accompanying notes.
F-8
<PAGE>
BIOMECHANICS CORPORATION OF AMERICA
Consolidated Statements of Common Shareholders' Equity
<TABLE>
<CAPTION>
COMMON STOCK $.01 PAR
VALUE SHARES
---------------------- PAID-IN HELD IN
SHARES AMOUNT SURPLUS (DEFICIT) SUBTOTAL TREASURY TOTAL
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1992 10,207,882 $ 102,079 $ 8,977,126 $(7,013,705) $ 2,065,500 $(899,100) $ 1,166,400
Shares issued in connection
with Private Placements (Note 10) 1,943,873 19,439 2,020,486 -- 2,039,925 -- 2,039,925
Exercise of Finders Option (Note 8) 85,674 857 (857) -- -- -- --
Exercise of common stock
warrants (Note 7) 2,491,443 24,913 3,396,058 -- 3,420,971 -- 3,420,971
Exercise of stock options 638,167 6,382 742,618 -- 749,000 -- 749,000
Shares issued in lieu of compensation 5,000 50 6,650 -- 6,700 -- 6,700
Registration and issuance costs -- -- (126,858) -- (126,858) -- (126,858)
Net (loss) -- -- -- (595,012) (595,012) -- (595,012)
------------------------------------------------------------------------------------------
Balance at December 31, 1993 15,372,039 153,720 15,015,223 (7,608,717) 7,560,226 (899,100) 6,661,126
Shares issued in connection with
private placements 16,870 169 16,584 -- 16,753 -- 16,753
Exercise of finders options (Note 7) 4,239 42 6,104 -- 6,146 -- 6,146
Exercise of common stock warrants
(Note 7) 71,767 718 61,495 -- 62,213 -- 62,213
Exercise of stock options (Note 8) 55,500 555 67,920 -- 68,475 -- 68,475
Registration and issuance costs -- -- (173,268) -- (173,268) -- (173,268)
Net (loss) -- -- -- (2,388,953) (2,388,953) -- (2,388,953)
------------------------------------------------------------------------------------------
Balance at December 31, 1994 15,520,41 $ 155,204 $ 14,994,058 $(9,997,670) $ 5,151,592 $(899,100) $ 4,252,492
==========================================================================================
</TABLE>
See accompanying notes
F-9
<PAGE>
BIOMECHANICS CORPORATION OF AMERICA
Consolidated Statements of Cash Flows
YEAR ENDED DECEMBER 31
1994 1993
--------------------------
OPERATING ACTIVITIES
Net (loss) $(2,388,953) $ (595,012)
Adjustments to reconcile net loss
to net cash used in operating activities:
Depreciation and amortization 143,879 124,532
Amortization of premium/(discount)
on held-to-maturity securities 9,966 2,065
Accrued interest on held-to-maturity
securities (1994) or marketable
securities (1993) (110,736) (11,553)
Common stock issued in lieu of
cash compensation -- 6,700
Loss on sale of available-for-sale securities 61,612 --
Changes in operating assets and
liabilities:
Decrease in accounts receivable 65,114 32,980
Decrease (increase) in prepaid expenses,
inventories and other current assets 42,364 (123,264)
(Increase) in other assets (149,404) (21,026)
Increase (decrease) in accounts
payable, accrued expenses and sundry
liabilities 563,467 (172,140)
Increase in deferred revenue -- 71,725
(Decrease) in other liabilities (24,990) (12,168)
--------------------------
Net cash (used in) operating activities (1,787,681) (697,161)
--------------------------
INVESTING ACTIVITIES
Purchases of property, plant, and equipment (88,749) (41,424)
Proceeds from sale of equipment 1,050 1,300
Purchases of available-for-sale securities (167,820) --
Purchases of held-to-maturity securities (4,161,884) --
Proceeds from sale of available-for-sale
securities 2,312,686 --
Proceeds from sale of held-to-maturity
securities 3,211,000
Purchases of marketable securities -- (4,276,991)
--------------------------
Net cash provided by/(used in) by
investing activities 1,106,283 (4,317,115)
--------------------------
F-10
<PAGE>
BIOMECHANICS CORPORATION OF AMERICA
Consolidated Statements of Cash Flows (continued)
YEAR ENDED DECEMBER 31,
1994 1993
--------------------------
FINANCING ACTIVITIES
Net proceeds from sale of common stock
and exercise of warrants $ 85,112 $3,420,972
Net proceeds from private placement -- 2,039,925
Net proceeds from exercise of stock
options 68,475 749,000
Payment of stock registration and
issuance costs (173,268) (126,858)
Redemption of convertible preferred
stock (Note 5) (16,473) --
Principal payments on long-term debt
and capital lease obligations -- (128,232)
--------------------------
Net cash (used in)/provided by financing
activities (36,154) 5,954,807
(Decrease) increase in cash and cash
equivalents (717,552) 940,531
Cash and cash equivalents at beginning
of year 1,757,653 817,122
--------------------------
Cash and cash equivalents at end of year $1,040,101 $1,757,653
==========================
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid $ -- $ 4,000
==========================
See accompanying notes.
F-11
<PAGE>
BIOMECHANICS CORPORATION OF AMERICA
Notes to Consolidated Financial Statements
December 31, 1994
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. In February 1993, the Company 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.
The consolidated financial statements include the accounts of Biomechanics
Corporation of America and its subsidiaries, ErgoRisk Services, Inc., formerly
ErgoLab, Inc., BCA Associates, Inc. which was formed in December 1992, and
ErgoRisk Services, Inc. (Canada) which was acquired in December 1994
(collectively referred to as, the "Company"). The operations of BCA Associates
Inc., which were not significant, were terminated in December 1993 and its
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.
ErgoRisk Services, Inc. was established in December 1993 to directly focus on
providing comprehensive ergonomic laboratory assessment services, to U.S.
manufacturing and service industries for measuring the potential risk of
muscoloskeltal injury. The subsidiary had no activity in 1993 as these services
were provided directly by Biomechanics Corporation of America. Operations for
ErgoRisk Services, Inc. commenced in 1994.
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, 1994 consist of demand and money market accounts with U.S. banks
($209,780) and a money market account with a U.S. investment institution
($830,321).
F-12
<PAGE>
BIOMECHANICS CORPORATION OF AMERICA
Notes to Consolidated Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 $3,128,020 of securities as "held-to-maturity
securities" at December 31, 1994. 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 period ended
December 31, 1994 there was no decline in value of such securities.
Available-for-sale securities (none at December 31, 1994) are stated at fair
value, with the unrealized gains and losses reported as a separate component of
shareholders' equity. For the year ended December 31, 1994, there was a net
realized loss of approximately $62,000, determined on a specific identifiable
basis applicable to available-for-sale securities, which has been netted with
interest and other income in the accompanying statement of operations.
At December 31, 1994, all held-to-maturity securities are U.S. Government
Treasury Securities and are contractually due to mature within one year. There
are no unrealized gains or losses related to such securities.
REVENUES
Revenues are recognized when products are shipped or as services are rendered,
and no significant obligations remain outstanding and collection of the accounts
receivable are deemed probable by management.
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 life 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 are being amortized by the straight-line method over the estimated
useful lives of the patents.
RESEARCH AND DEVELOPMENT
Research and development costs are charged to operations as incurred.
F-13
<PAGE>
BIOMECHANICS CORPORATION OF AMERICA
Notes to Consolidated Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES
The Company accounts for income taxes using Financial Accounting Standards Board
("FASB") Statement No. 109, "Accounting for Income Taxes". At December 31, 1994,
the Company has net operating loss carryforwards of approximately $10,428,000
for income tax purposes, expiring through 2009.
At December 31, 1994 and 1993, deferred tax assets approximating $3,546,000 and
$2,890,000, 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.
3. ACCOUNTING CHANGE
In May 1993, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 115, "Accounting for Certain
Investments in Debt and Equity Securities," effective for fiscal years beginning
after December 15, 1993. The Company has adopted the provisions of the new
standard for investments held as of or acquired after January 1, 1994. In
accordance with the statement prior period financial statements have not been
restated to reflect the change in accounting principle. There was no cumulative
effect of adopting SFAS No. 115 on the 1994 net loss or shareholders' equity at
January 1, 1994.
4. LETTER OF CREDIT
The Company has a $35,000 letter of credit outstanding with a bank at December
31, 1994.
5. 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.
F-14
<PAGE>
BIOMECHANICS CORPORATION OF AMERICA
Notes to Consolidated Financial Statements (continued)
5. CONVERTIBLE PREFERRED STOCK (CONTINUED)
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.
6. 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.
7. COMMON SHAREHOLDERS' EQUITY
(a) 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 10) and the Discounted
Warrant Plan (see Note 7(d)), 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.
(b) 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
F-15
<PAGE>
BIOMECHANICS CORPORATION OF AMERICA
Notes to Consolidated Financial Statements (continued)
7. COMMON SHAREHOLDERS' EQUITY (CONTINUED)
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, 1994,
there were 97,178 units (underwriter) and 1,568 units (finder) outstanding.
(c) The Company issued 5,000 shares of common stock in 1993 for consulting
services provided by a third party.
(d) 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).
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.
F-16
<PAGE>
BIOMECHANICS CORPORATION OF AMERICA
Notes to Consolidated Financial Statements (continued)
7. COMMON SHAREHOLDERS' EQUITY (CONTINUED)
(e) 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 10). 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, 1994, 173,750 Class D
warrants have been exercised resulting in an issuance of 397,143 shares of
common stock and the receipt of 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 of the Company of $63,344.
(f) Common shares reserved for future issuance as of December 31, 1994 are as
follows:
NUMBER OF
SHARES
---------
Units sold in public offering in 1990:
Class B warrants 969,191
Class E warrants 540,745
Third party options (Note 8) 100,000
Unit Options 766,083
1989 Stock Option Plan (Note 8) 1,036,457
Nonstatutory Stock Options (Note 8) 190,833
Warrants issued in private placement in 1991 (Note 10):
Class C warrants 156,189
Class D warrants 5,714
---------
3,765,212
=========
8. STOCK OPTIONS
In 1989, the shareholders of the Company approved the adoption of a 1989 Stock
Option Plan (the "Plan"). The Plan provides for the granting of incentive stock
options ("options") and/or nonqualified stock options to key employees and
F-17
<PAGE>
BIOMECHANICS CORPORATION OF AMERICA
Notes to Consolidated Financial Statements (continued)
8. STOCK OPTIONS (CONTINUED)
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 date of grant. No option may be granted under the Plan after
August 1999, and no option may be outstanding for more than ten years after its
grant. At December 31, 1994 there were 48,449 shares available for granting of
future options.
In 1989 the Company adopted a Nonstatutory Stock Option Plan ("Nonstatutory
Plan") for directors. Under the Nonstatutory Plan, the Company can 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. At December 31, 1994, there were no shares available for granting of
future options.
Option activity during each of the two years ended December 31, 1994 are
summarized as follows:
<TABLE>
<CAPTION>
STOCK OPTION PLAN NONSTATUTORY PLAN
SHARES UNDER OPTION SHARES UNDER OPTION
----------------------------------------------------------------
OPTION PRICE NUMBER OF OPTION PRICE NUMBER OF
PER SHARE SHARES PER SHARE SHARES
----------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at December 31, 1992: 1,184,000 295,000
Granted $ .88 to $3.44 921,508 --
Exercised $1.10 to $1.75 (481,500) $1.10 to $1.50 (156,667)
Cancelled/expired $1.00 to $2.00 (838,000) $1.13 to $1.50 (23,333)
--------- -------
Balance at December 31, 1993: 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
</TABLE>
In addition, the Company granted 100,000 nonstatutory stock options at fair
market value to a third party in 1994 all of which are outstanding at December
31, 1994. The options, which vest ratably over two years, are exercisable for a
period of five years at a price of $1.69 per share.
9. LEASES
The Company has an operating lease for office space expiring November 30, 1995.
The lease provides the Company with the option to cancel any time after three
years (June 1993). On January 30, 1995, the Company informed the landlord that
it will cancel its lease effective July 31, 1995. The Company is currently
negotiating for a new lease.
Rent expense in 1994 and 1993, under all operating leases, was approximately
$185,000 and $133,000, respectively.
10. PRIVATE PLACEMENT
On June 25, 1991, the Company completed a private placement, for which D.H.
Blair and Co. Inc. ("Blair") acted as placement agent, of $1,762,500 of its
securities, consisting of $1,101,562 of Senior Secured Convertible Promissory
Notes (the "Notes") convertible into Common Stock at $1.00 per share, 660,937
shares of Common Stock at $1.00 per share and 176,250 Class D warrants
exercisable over a five-year term at $.88 per share (originally $2.00 per share)
for 402,731 shares (originally 176,250 shares) of Common Stock. These securities
had been sold pursuant to a Securities Purchase Agreement among the Company, the
purchasers and Blair as Purchasers' Representative (the "Purchase Agreement"),
in a total of 35.25 Units of $50,000 each, consisting of a $31,250 Note, 18,750
shares of Common Stock and 5,000 Class D warrants. The Company paid Blair a fee
of $176,250 and expenses of $56,750 and issued to Blair, Class C warrants
exercisable over a five-year term to purchase 228,571 shares (originally 200,000
shares) of Common Stock at $.88 (originally $1.00 per share). All of the Notes
were converted or redeemed in 1992.
During the period commencing in June 1993 and ending in September 1993, the
Company completed four separate private placements ("Private Placements"), of an
aggregate of 1,843,873 shares of the Company's common stock at prices ranging
from $1.10 to $1.15 per 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.
F-18
<PAGE>
BIOMECHANICS CORPORATION OF AMERICA
Notes to Consolidated Financial Statements (continued)
11. FOURTH QUARTER ADJUSTMENTS (UNAUDITED)
During the fourth quarter of 1994, the Company charged "direct costs of
revenues" in the accompanying consolidated statement of operations for
approximately $308,000 ($.02 per share) for changes in estimates to complete
certain contracts principally related to the Company's Intelligent Products
Services, including approximately $149,000 relating to a pending revision to a
licensing and development agreement with McCord Winn Textron.
12. DEFERRED REVENUE
On December 27, 1993, the Company sold 100,000 shares (2.4% interest) of its
subsidiary ErgoRisk Inc. ("ErgoRisk") to Polaris Partners for the sum of
$100,000 resulting in the Company recording such amount as deferred revenue. The
Company has agreed to convert the 100,000 shares of ErgoRisk into 100,000 shares
of Biomechanics Corporation of America in 1995, at which time the $100,000 of
deferred revenue will be credited to paid-in surplus.
13. SIGNIFICANT CUSTOMERS
The Company generated a significant percentage of its revenues from a small
number of customers as summarized below:
1994 1993
------------------------------------------------------
% OF NET % OF NET
CUSTOMER SALES REVENUES SALES REVENUES
-----------------------------------------------------------------
A $ -- -- $604,000 44%
B 669,000 59% -- --
C -- -- 83,000 6%
D 194,000 17% -- --
E 100,000 9% -- --
<PAGE>
TABLE OF CONTENTS
PAGE
Available Information............................................ 4
Prospectus Summary............................................... 5
The Company...................................................... 5
Risk Factors..................................................... 13
Dividend Policy.................................................. 19
Market for Company's Common
Equity and Related Stockholder
Matters........................................................ 19
Dilution......................................................... 21
Use of Proceeds.................................................. 22
Capitalization................................................... 23
Management's Discussion and
Analysis of Financial
Condition and Results
of Operations.................................................. 25
Recent Events.................................................... 31
Business......................................................... 37
Directors and Executive Officers................................. 49
Certain Transactions............................................. 62
Principal Stockholders........................................... 64
Description of Securities........................................ 64
Shares Eligible for Future Sale.................................. 70
Agreements with the Underwriter.................................. 70
Selling Security Holders........................................ 73
Plan of Distribution............................................. 75
Legal Matters.................................................... 76
Experts.......................................................... 76
Index of Financial Statements.................................... F-I
BCAM INTERNATIONAL, INC.
1,795,316 Shares of Common Stock
402,857 Shares of Common Stock
Issuable Upon Exercise of Class D
Common Stock Purchase Warrants
Finder's Unit Purchase Option to
Purchase 2,981 Units (including
8,943 Shares of Common Stock and
5,962 Redeemable Class A Warrants;
7,154 Shares of Common Stock and
5,962 Redeemable Class B Warrants
Issuable upon Exercise of
Redeemable Class A Warrants; and
7,154 Shares of Common Stock
Issuable upon Exercise of
Redeemable Class B Warrants).
____________________
PROSPECTUS
____________________
JANUARY __, 1996
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Sections 721 through 725 of the New York Business Corporation Law
provide that New York corporations shall have the power, under specified
circumstances, to indemnify their directors, officers, employees and agents in
connection with actions, suits or proceedings brought against them by a third
party or in the right of the corporation by reason of the fact that they were or
are such directors, officers, employees or agents, against expenses incurred in
such actions, suits or proceedings. Article Seventh of the Company's Restated
Certificate of Incorporation provides for indemnification of directors and
officers of the Company generally in accordance with New York law.
Section 721 of the New York Business Corporation Law permits a
corporation to enter into agreements with its directors and officers providing
for indemnification for actions, suits or proceedings brought against them by a
third party or in the right of the corporation, by reason of the fact that they
were or are such directors or officers, against expenses incurred in such
actions, suits or proceedings, provided, however, that no such indemnification
may be provided if a judgment or other final adjudication adverse to the
director or officer establishes that his acts were committed in bad faith or
were the result of active and deliberate dishonesty and were material to the
cause of action so adjudicated, or that he personally gained in fact a financial
profit or other advantage to which he was not legally entitled. Pursuant to such
authority, the Company has entered into an agreement with each of its current
directors indemnifying them to the maximum extent permitted by Section 721. The
agreement provides for the indemnification of these individuals against any and
all civil or criminal actions or proceedings brought as a result of such
individual being a director or officer of the Company and any judgments and
amounts paid in settlement costs and expenses, including reasonable attorneys
fees. No indemnification may be made, however, if a judgment or final
adjudication establishes that the individual committed acts in bad faith or with
deliberate dishonesty and were material to the cause of action so adjudicated,
or that he personally gained financial profit or other advantage to which he was
not legally entitled. Such indemnification shall be made only by the Board
acting with a quorum consisting of directors who are not parties to the action
in question, or by independent legal counsel, or by the stockholders and in all
cases only after a finding that the applicable standard of conduct has been met.
Under Section 722(a), the corporation may indemnify any director or
officer in any action (other than an action by or in the right of the
corporation) brought against him by reason of the fact that he, his testator or
intestate was a director or officer of the corporation, or served another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise in any capacity at the request of the corporation. Indemnification
may be given for judgments, fines, amounts paid in settlement and reasonable
expenses, including attorney's fees, if such director or officer is shown to
have acted in good faith, in furtherance of a purpose believed to be in the best
interests of the corporation, and, in the case of a criminal action or
proceeding, to have had no reason to believe such conduct was unlawful.
II-1
<PAGE>
Section 722(c) of the New York Business Corporation Law provides for
permissive indemnification by the corporation of directors and officers, sued by
or in the right of the corporation, against reasonable expenses including
attorney's fees unless the director or officer is found to have breached his
duty to the corporation under Section 717 or Section 715(h) of the Business
Corporation Law, respectively. Amounts paid under this section may not include
amounts paid in settlement of a threatened or pending action and expenses
incurred in defense of a threatened action or settlement of a pending action
without court approval.
Indemnification may be by court order under Section 724 or by approval
of the corporation in the manner set forth in the statute. Under Section 723(a),
success on the merits or otherwise entitles the director or officer to
indemnification under Section 722. If not wholly successful, indemnification
shall be made by the corporation only if a quorum of the board, not including
parties to the action, finds that the standards of Section 722 have been met. If
a quorum cannot be obtained, approval may be by the board upon (i) the opinion
of independent legal counsel or (ii) a determination by the stockholders that
the standards of conduct have been met by the director or officer. Expenses may
be paid in advance if authorized by one of the methods discussed above. Under
Section 724, if the corporation fails to provide indemnification, the director
or officer may apply to the court and may receive indemnification to the extent
authorized under Section 722. Expenses may also be advanced if the court finds
the defendant director or officer to have raised genuine issues of fact or law.
Expenses advanced must be repaid to the corporation if (i) the director or
officer has not met the applicable standard which entitles him to
indemnification or (ii) if he has been paid in excess of the amount to which he
is entitled. Indemnification may not be made if it is inconsistent with the
corporation's certificate, by-laws, board resolutions or agreements or a
condition imposed by the court in approving a settlement.
The New York Business Corporation Law permits a corporation through its
certificate of incorporation to prospectively eliminate or limit the personal
liability of its directors to the corporation or its stockholders for damages
for breach of fiduciary duty as a director, with certain exceptions. The
exceptions include acts or omissions in bad faith or which involve intentional
misconduct or knowing violations of law, improper declaration of dividends, and
transactions from which the director personally gained in fact a financial
profit or other advantage to which he was not legally entitled. The Company's
Restated Certificate of Incorporation exonerates its directors from personal
liability to the extent permitted by this statutory provision.
Insofar as indemnification for liabilities arising under the 1933 Act
may be permitted to directors, officers or persons controlling the Company
pursuant to the foregoing provisions, the Company has been informed that, in the
opinion of the Commission, such indemnification is against public policy as
expressed in the 1933 Act and is therefore unenforceable.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses in connection with this offering are as follows:
Accounting fees and expenses.............................................$ 3,000
Legal fees and expenses..................................................$10,000
Printing and Miscellaneous expenses......................................$ 5,000
-------
TOTAL....................................................................$18,000
=======
II-2
<PAGE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
In 1993 the Company granted options to purchase up to 650,000 shares of
Common Stock at exercise prices ranging from $.875 to $3.22 per share to
Strategic Growth International Inc. in consideration for public relations
services rendered and to be rendered to the Company and other services. On July
1, 1995 options to purchase 250,000 shares of Common Stock expired. The Company
then issued options to purchase up to 300,000 shares of Common Stock at $1.047
per share, the market price in July 3, 1995, the date of grant.
During the period commencing June 1993 and ending September 1993, the
Company completed private placements of 1,843,873 shares of Common Stock at
prices ranging from $1.10 to $1.15 per share. See "Recent Events - 1993
Private Placements."
In October 1993, the Company granted non-qualified stock options to
purchase (i) 26,029 shares of Common Stock at $3.31 per share to R.A. Mackie &
Co., L.P. and (ii) 6,747 shares of Common Stock at $3.31 per share and 5,732
shares of Common Stock at $3.44 per share to Allen & Co., Inc. The options have
terms of 18 months and were issued at the market value of the Common Stock on
the date of grant. The holders have "piggy-back" registration rights under
certain circumstances with respect to the shares of Common Stock issuable under
the options.
No underwriter was engaged in connection with the foregoing sales of
securities. Such sales were made in reliance upon exemptions from the
registration provisions of the 1933 Act set forth in Sections 4(2) and 3(b)
thereof as transactions by an issuer not involving any public offering and/or as
an exempt limited offering. The Company has reason to believe that all of the
foregoing purchasers were familiar with or had access to information concerning
the operations and financial condition of the Company, and each of those
individuals acquiring securities in exchange for cash considerations represented
that he was acquiring the shares for investment and not with a view to the
distribution thereof. At the time of issuance, all of the foregoing shares of
Common Stock were deemed to be restricted securities for purposes of the 1933
Act and the certificates representing such shares bore legends to that effect.
ITEM 27. EXHIBITS.
3.1 Restated Certificate of Incorporation(1)
3.2 Restated and Amended By-Laws(1)
3.3 Amendment to Certificate of Incorporation(11)
4.1 Underwriter's Unit Purchase Option(4)
4.2 Finder's Unit Purchase Option(4)
4.3 Warrant Agreement(4)
4.4 Form of Senior Secured Convertible Promissory Note(5)
4.5 Form of Class C Common Stock Purchase Warrant(5)
4.6 Form of Class D Common Stock Purchase Warrant(5)
4.7 Revised Form of Amendment No. 1 to Warrant Agreement(7)
4.8 Revised Form of Class E Common Stock Purchase Warrant(7)
5.1 Opinion of Rivkin, Radler & Kremer (12)
II-3
<PAGE>
10.1 Stock Redemption Agreement(1)
10.2 1989 Stock Option Plan(1)
10.3 Employment Agreement with Dr. Clifford M. Gross(1)
10.4 Employment Agreement with Arthur Fein (1)
10.5 Bridge Warrant(1)
10.6 Bridge Note and Related Loan Agreement(1)
10.7 Consulting Agreement with Lear Siegler Seating Corporation(1)
10.8 Extension Agreement to Redemption Agreement (Exhibit 10.1)
10.9 Consulting Agreement dated August 1, 1988 with NRC Resources Group,
Inc.(1)
10.10 General Release of NRC Resources Group, Inc.(1)
10.11 Mortgage Note and Related Loan Agreement and Mortgage and Security
Agreement(1)
10.12 Second Extension Agreement to Redemption Agreement(4)
10.13 Merger and Acquisition Agreement with D.H. Blair & Co., Inc.(4)
10.14 1989 Nonstatutory Stock Option Plan(2)
10.15 Consulting Agreement with D.H. Blair & Co., Inc.(4)
10.16 Consulting Agreement with Steelcase, Inc.(2)
10.17 License and Manufacturing Agreement with MicroComputer Accessories,
Inc.(4)
10.18 Employment Agreement with Cynthia Roth(4)
10.19 Employment Agreement with Kenneth Goodman(4) 10.20 Form of Employment
Agreement with Ava Stern(4)
10.21 Form of Employment Agreement with William Sirois(4)
10.22 Lease Of Premises at 1800 Walt Whitman Road, Melville, New York(4)
10.23 Consulting Agreement dated as of February 1, 1990 with NRC Resources
Group, Inc.(4)
10.24 Underwriting Agreement (for IPO) with D.H. Blair & Co., Inc.(4)
10.25 Securities Purchase Agreement dated June 25, 1991 among the Company,
the Purchasers and D.H. Blair & Co., Inc.(5)
10.26 Security Agreement dated as of June 25, 1991 between the Company and
D.H. Blair & Co., Inc., as Purchasers' Representative(5)
10.29 Employment Agreement dated as of June 20, 1991 between David A.
Deutsch and the Company(5)
10.30 Letter of Understanding between Kenneth A. Goodman and the Company(5)
10.31 Employment Agreement dated as of August 1, 1991 between Joel Sher and
the Company(5)
10.32 Amendment to 1989 Stock Option Plan(5)
10.33 Distributor Agreement with Techexport, Inc.(3)
10.34 Partnership Agreement dated December 28, 1992 for Ergonomics Solutions
Group (ESG)(8)
10.35 License Agreement dated December 28, 1992, between the Company and
ESG(8)
10.36 Development and Licensing Agreement dated March 5, 1993 between the
Company and McCord Winn Textron, Inc.(8)
10.37 Agreement dated August 22, 1992 between the Company and PT Industries
Pesawat Terbang Nusantra (IPTN)(8)
10.38 Further Amendments to 1989 Stock Option Plan(8)
10.39 Amendment to Development and Licensing Agreement dated October 27, 1993
between the Company and McCord Winn Textron(9)
10.40 Investors Consulting Agreement with Strategic Growth International
Inc.(9)
10.41 Agreement dated December 22, 1993 between the Company and PT Industries
Pesawat Terbang Nusantra (IPTN)(9)
10.42 Agreement dated September 29, 1993 between the Company, McCord Winn
Textron, Inc. and Lear Seating Company(9)
II-4
<PAGE>
10.43 Development and Licensing Agreement dated January 4, 1994 between the
Company and Reebok International Ltd.(9)
10.44 License Agreement dated September 28, 1994 between the Company and
Lumex, Inc.(10)
10.45 Employment Agreement dated October 13, 1994 between Michael Strauss and
the Company(10)
10.46 1995 Stock Option Plan(11)
10.47 Amendment to Employment Agreement dated February 16, 1995 between the
Company and Michael Strauss(11)
24.1 Consent of Rivkin, Radler & Kremer - included in Exhibit 5.1(12)
24.2 Consent of Ernst & Young LLP(12)
25.1 Power of Attorney executed by Robert P. Wong(12)
25.2 Power of Attorney executed by Julian H. Cherubini(12)
25.3 Power of Attorney executed by Lawrence N. Cohen(12)
25.4 Power of Attorney executed by Joel L. Gold(12)
25.5 Power of Attorney executed by Glenn F. Santmire(12)
- -------
(1) Filed as an Exhibit to Registrant's Registration Statement on Form S-18
(file no. 33-31282) and incorporated herein by reference thereto.
(2) Filed as an Exhibit to Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1989 (file no. 0-18109) and incorporated
herein by reference thereto.
(3) Filed as part of Item 14 of the Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1991 (file no. 0-18109) and
incorporated herein by reference thereto.
(4) Filed as an Exhibit to Registrant's Registration Statement on Form S-1
(file no. 33-38204) and incorporated herein by reference thereto.
(5) Filed as an Exhibit to Post-Effective Amendment No. 1 to Registrant's
Registration Statement on Form S-1 (file no. 33-38204) and incorporated
herein by reference thereto.
(6) Filed as an Exhibit To Post-Effective Amendment No. 2 to Registrant's
Registration Statement on Form S-1 (file no. 33-38204) and incorporated
herein by reference thereto.
(7) Filed as an Exhibit to Post-Effective Amendment No. 3 to Registrant's
Registration Statement on Form S-1 (file no. 33-38204) and incorporated
herein by reference thereto.
(8) Filed as an Exhibit to Registrant's Annual Report on Form 10-KSB for the
fiscal year ended December 31, 1992 (file no. 0-18109) and incorporated
herein by reference thereto.
(9) Filed as an Exhibit to Registrant's Annual Report on Form 10-KSB for the
fiscal year ended December 31, 1993 (file no. 0-18109) and incorporated
by reference thereto.
(10) Filed as an Exhibit to Registrant's Form 10-QSB/A filed December 5,
1994 amending the Form 10-QSB for the quarterly period ended September
30, 1994 (file no. 0-18109) and incorporated by reference thereto.
(11) Filed as an Exhibit to Registrant's Form 10-QSB/A for the quarterly
period ended September 30, 1995 (file no. 0-18109) and incorporated by
reference thereto.
(12) Filed herewith.
ITEM 28. UNDERTAKINGS.
Undertakings Required by Regulation S-B, Item 512 (a):
II-5
<PAGE>
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i)to include any prospectus required by Section 10(a) (3)
of the 1933 Act;
(ii)to reflect in the prospectus any facts or events which,
individually or together represent a fundamental change in the
information set forth in the registration statement; and
(iii) to include any additional or changed material
information on the plan of distribution.
(2) That, for determining liability under the 1933 Act, each such
post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering.
(3) To file a post-effective amendment to remove from registration any
of the securities being registered which remain unsold at the termination of the
offering.
Undertaking Required by Regulation S-B, Item 512 (e):
Insofar as indemnification for liabilities arising under the 1933 Act
may be permitted to directors, officers, and controlling persons of the small
business issuer pursuant to the foregoing provisions, or otherwise, the small
business issuer has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the 1933 Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the small business issuer of
expenses incurred or paid by a director, officer or controlling person of the
small business issuer in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the small business issuer will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the 1933 Act
and will be governed by the final adjudication of such issue.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Post-Effective Amendment No. 7 on Form SB-2 to
Form S-1 Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized in the County of Suffolk, State of New York, on the
26th day of January, 1996.
BCAM INTERNATIONAL, INC.
By:/s/ Michael Strauss
--------------------------------------------------
Michael Strauss
Chairman of the Board, President and Chief
Executive Officer
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
- --------- ----- ----
PRINCIPAL EXECUTIVE OFFICER:
/s/ Michael Strauss
- ---------------------------- Chairman of the Board, January 26, 1996
Michael Strauss President, Chief
Executive Officer and
Director
PRINCIPAL FINANCIAL OFFICER: Chief Financial Officer January 26, 1996
/s/ Daniel Benjamin
- ----------------------------
Daniel Benjamin
ADDITIONAL DIRECTORS:
*
- ---------------------------- Director, Vice Chairman January 26, 1996
Robert P. Wong and Chief Technology
Officer
*
- ---------------------------- Julian H. Cherubini January 26, 1996
Director
*
- ---------------------------- Lawrence N. Cohen January 26, 1996
Director
*
- ---------------------------- Joel L. Gold January 26, 1996
Director
*
- ----------------------------
Director Glenn F. Santmire January 26, 1996
*Michael Strauss, by signing his name hereto, signs this document on
behalf of each of the persons indicated by an asterisk above pursuant to powers
of attorney duly executed by such person and filed herewith as exhibits to this
Post-Effective Amendment No. 7 on Form SB-2 to Form S-1 Registration Statement.
/s/ Michael Strauss
--------------------
Michael Strauss
Attorney-in-Fact
II-8
<PAGE>
EXHIBIT INDEX
Exhibit Description Page No.
5.1 Opinion of Rivkin, Radler & Kremer E-1
24.1 Consent of Rivkin, Radler & Kremer E-1
(included in Exhibit 5.1)
24.2 Consent of Ernst & Young LLP E-2
25.1 Power of Attorney executed by Robert P. E-3
Wong
25.2 Power of Attorney executed by Julian H. E-4
Cherubini
25.3 Power of Attorney executed by Lawrence N. E-5
Cohen
25.4 Power of Attorney executed by Joel L. Gold E-6
25.5 Power of Attorney executed by Glenn F. E-7
Santmire
<PAGE>
EXHIBIT 5.1
RIVKIN, RADLER & KREMER
EAB Plaza
Uniondale, NY 11556-0111
January 22, 1996
BCAM International, Inc.
1800 Walt Whitman Road
Melville, New York 11747
Gentlemen:
You have requested our opinion in connection with Post- Effective
Amendment No. 7 on Form SB-2 to Form S-1 to be filed by BCAM International, Inc.
(the "Company") with the Securities and Exchange Commission pursuant to the
Securities Act of 1933, as amended, (the "Act"), regarding registration under
the Act of certain securities (the "Securities") for sale by the Company and by
certain Selling Shareholders named therein.
As counsel for the Company, we have examined such records, documents
and questions of law as we have deemed appropriate for the purposes of this
opinion and, on the basis thereof, advise you that in our opinion all the
Securities which are currently outstanding are, and which are issuable upon the
due and proper exercise of Securities will be, legally issued and fully paid and
non-assessable.
We hereby consent to the filing of this opinion as an Exhibit to the
Registration Statement and to the reference to this firm in the Prospectus under
the caption "Legal Matters."
Very truly yours,
/s/ Rivkin, Radler & Kremer
E-1
<PAGE>
EXHIBIT 24.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated March 21, 1995, in the Post-Effective Amendment No. 7 on
Form SB-2 to the Registration Statement (Form S-1 No. 33-47612) and related
Prospectus of BCAM International, Inc. (formerly Biomechanics Corporation of
America).
/s/ ERNST & YOUNG LLP
Melville, New York
January 22, 1996
E-2
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EXHIBIT 25.1
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints Michael Strauss his true and lawful attorney-in-fact
and agent, with full power of substitution, for him and in his name, place and
stead; in any and all capacities, in connection with the BCAM International Inc.
(the "Company") Registration Statement on Form SB-2 under the Securities Act of
1933, as amended, including, without limiting the generality of the foregoing,
to sign the Registration Statement in the name and on behalf of the Company or
on behalf of the undersigned as a director or officer of the Company, and any
amendments (including post-effective amendments) to the Registration Statement
and any instrument, contract, document or other writing of or in connection with
the Registration Statement or amendments thereto and to file the same, with all
exhibits thereto, and other documents in connection therewith, including this
power of attorney with the Securities and Exchange Commission and any applicable
securities exchange or securities self-regulatory body, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has signed these presents
this 19th day of January, 1996.
/s/ Robert F. Wong
E-3
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EXHIBIT 25.2
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints Michael Strauss his true and lawful attorney-in-fact
and agent, with full power of substitution, for him and in his name, place and
stead; in any and all capacities, in connection with the BCAM International Inc.
(the "Company") Registration Statement on Form SB-2 under the Securities Act of
1933, as amended, including, without limiting the generality of the foregoing,
to sign the Registration Statement in the name and on behalf of the Company or
on behalf of the undersigned as a director or officer of the Company, and any
amendments (including post-effective amendments) to the Registration Statement
and any instrument, contract, document or other writing of or in connection with
the Registration Statement or amendments thereto and to file the same, with all
exhibits thereto, and other documents in connection therewith, including this
power of attorney with the Securities and Exchange Commission and any applicable
securities exchange or securities self-regulatory body, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has signed these presents
this 22nd day of January, 1996.
/s/ Julian H. Cherubini
E-4
<PAGE>
EXHIBIT 25.3
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints Michael Strauss his true and lawful attorney-in-fact
and agent, with full power of substitution, for him and in his name, place and
stead; in any and all capacities, in connection with the BCAM International Inc.
(the "Company") Registration Statement on Form SB-2 under the Securities Act of
1933, as amended, including, without limiting the generality of the foregoing,
to sign the Registration Statement in the name and on behalf of the Company or
on behalf of the undersigned as a director or officer of the Company, and any
amendments (including post-effective amendments) to the Registration Statement
and any instrument, contract, document or other writing of or in connection with
the Registration Statement or amendments thereto and to file the same, with all
exhibits thereto, and other documents in connection therewith, including this
power of attorney with the Securities and Exchange Commission and any applicable
securities exchange or securities self-regulatory body, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has signed these presents
this 16th day of January, 1996.
/s/ Lawrence N. Cohen
E-5
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EXHIBIT 25.4
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints Michael Strauss his true and lawful attorney-in-fact
and agent, with full power of substitution, for him and in his name, place and
stead; in any and all capacities, in connection with the BCAM International Inc.
(the "Company") Registration Statement on Form SB-2 under the Securities Act of
1933, as amended, including, without limiting the generality of the foregoing,
to sign the Registration Statement in the name and on behalf of the Company or
on behalf of the undersigned as a director or officer of the Company, and any
amendments (including post-effective amendments) to the Registration Statement
and any instrument, contract, document or other writing of or in connection with
the Registration Statement or amendments thereto and to file the same, with all
exhibits thereto, and other documents in connection therewith, including this
power of attorney with the Securities and Exchange Commission and any applicable
securities exchange or securities self-regulatory body, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has signed these presents
this 19th day of January, 1996.
/s/ Joel L. Gold
E-6
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EXHIBIT 25.5
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints Michael Strauss his true and lawful attorney-in-fact
and agent, with full power of substitution, for him and in his name, place and
stead; in any and all capacities, in connection with the BCAM International Inc.
(the "Company") Registration Statement on Form SB-2 under the Securities Act of
1933, as amended, including, without limiting the generality of the foregoing,
to sign the Registration Statement in the name and on behalf of the Company or
on behalf of the undersigned as a director or officer of the Company, and any
amendments (including post-effective amendments) to the Registration Statement
and any instrument, contract, document or other writing of or in connection with
the Registration Statement or amendments thereto and to file the same, with all
exhibits thereto, and other documents in connection therewith, including this
power of attorney with the Securities and Exchange Commission and any applicable
securities exchange or securities self-regulatory body, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has signed these presents
this 18th day of January, 1996.
/s/ Glenn F. Santmire
E-7
