SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
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[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT
For the transition period from _________ to ___________
Commission file number 0-18109
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BCAM INTERNATIONAL, INC.
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(Exact name of small business issuer as specified in its charter)
New York 13-3228375
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1800 Walt Whitman Road, Melville, New York 11747
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(Address of principal executive offices)
(516) 752-3550
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(Issuer's telephone number)
Not applicable
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(Former name, former address and former fiscal year, if changed since
last report.)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes X No ___
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes ___ No ___
State the number of shares outstanding of each of the issuer's classes of
common equity as of the latest practicable date: 15,954,733
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Transitional Small Business Disclosure Format (check one): Yes ____ No X
FORM 10-QSB
BCAM INTERNATIONAL, INC.
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Condensed Consolidated Balance Sheet--June 30, 1997 (Unaudited)................3
Condensed Consolidated Statements of Operations - Three Months
and Six Months ended June 30, 1997 and 1996 (Unaudited).....................4
Condensed Consolidated Statements of Cash Flows - Six Months Ended
June 30, 1997 and 1996 (Unaudited)..........................................5
Notes to Condensed Consolidated Financial Statements - June 30, 1997
(Unaudited).................................................................6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.........................................8
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.....................................11
SIGNATURES....................................................................12
INDEX OF EXHIBITS.............................................................13
2
BCAM INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
JUNE 30, 1997
Current assets:
Cash and cash equivalents $ 240,964
Accounts receivable, less allowance for doubtful accounts of $11,245 73,796
Inventory 26,158
Prepaid expenses and other current assets 719,725
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Total current assets 1,060,643
Property, plant, and equipment, at cost:
Furniture and fixtures 220,318
Equipment 586,421
Leasehold improvements 50,519
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857,258
Less accumulated depreciation and amortization (695,725)
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161,533
Other assets, principally patents and capitalized software
(net of accumulated amortization of $103,600) 337,190
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Total assets $ 1,559,366
==================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 203,715
Accrued expenses and other current liabilities 190,343
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Total current liabilities 394,058
Other liabilities 4,289
Commitments and contingencies -
Acquisition preferred stock, par value $.01 per share:
Authorized 750,000 shares, no shares issued or outstanding -
Common shareholders' equity:
Common stock, par value $.01 per share; authorized 40,000,000 shares,
16,717,915 shares issued and 15,954,733 shares outstanding 167,179
Paid-in surplus 16,002,908
Deficit (14,109,968)
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2,060,119
Less 763,182 treasury shares (899,100)
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1,161,019
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Total liabilities and shareholders' equity $ 1,559,366
==================
See accompanying notes
3
BCAM INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
THREE MONTHS ENDED JUNE 30 SIX MONTHS ENDED JUNE 30
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1997 1996 1997 1996
--------------- ------------------ --------------- ---------------
Net revenue $ 215,861 108,226 $ 287,232 $ 210,721
Costs and expenses:
Direct costs of revenue 71,178 4,543 150,349 49,288
Selling, general and administrative 618,091 567,659 1,027,026 1,075,315
Research, development and engineering 22,368 19,333 30,477 46,560
--------------- ------------------ --------------- ---------------
Total operating expenses 711,637 591,535 1,207,852 1,171,163
--------------- ------------------ --------------- ---------------
Net loss from operations (495,776) (483,309) (920,620) (960,442)
Interest income, net 5,339 16,722 11,942 41,534
--------------- ------------------ --------------- ---------------
Net loss $ (490,437) $ (466,587) $ (908,678) $ (918,908)
=============== ================== =============== ===============
Net loss per share $ (0.03) $ (0.03) $ (0.06) $ (0.06)
=============== ================== =============== ===============
Weighted average number of common
shares outstanding 15,954,733 14,859,211 15,682,634 14,858,222
=============== ================== =============== ===============
See accompanying notes
4
BCAM INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
SIX MONTHS ENDED JUNE 30
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1997 1996
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OPERATING ACTIVITIES
Net loss $ (908,678) $ (918,908)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation 33,984 72,840
Amortization 12,837 -
Accrued interest on held to maturity securities - 7,172
Changes in operating assets and liabilities:
Accounts receivable (51,259) (21,850)
Inventory (26,158) -
Prepaid expenses and other current assets (386,248) 116,210
Other assets (121,492) (77,821)
Accounts payable, accrued expenses and sundry liabilities 108,993 (139,033)
Other liabilities - 4,707
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Net cash (used in) operating activities (1,338,021) (956,683)
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INVESTING ACTIVITIES
Loss from sale of equipment 3,331 -
Proceeds from sale of equipment 3,000 -
Purchase of equipment (8,060) -
Proceeds from sale of held to maturity securities - 1,500,000
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Net cash (used in) provided by investing activities (1,729) 1,500,000
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FINANCING ACTIVITIES
Net proceeds from short-term debt - 400,000
Net proceeds from sale of common stock 1,075,000 -
Net proceeds from exercise of options - 18,440
Payment of stock registration and issuance costs (20,630) (59,219)
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Net cash provided by financing activities 1,054,370 359,221
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(Decrease) increase in cash and cash equivalents (285,380) 902,538
Cash and cash equivalents at beginning of period 526,344 701,686
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Cash and cash equivalents at end of period $ 240,964 $ 1,604,224
================== =================
See accompanying notes
5
BCAM International, Inc.
BCAM INTERNATIONAL, INC.
("THE COMPANY")
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 1997
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-QSB.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three-month and six-month period ended June 30, 1997
are not necessarily indicative of the results that may be expected for the year
ending December 31, 1997. 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, 1996.
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
stock equivalents have been excluded since their effect is antidilutive.
3. INCOME TAXES
The Company accounts for income taxes in accordance with Financial
Accounting Standards Board ("FASB") Statement No. 109, "Accounting for Income
Taxes". The Company has not reflected a benefit for income taxes in the
accompanying Condensed Consolidated Statements of Operations for the three
months and six months ended June 30, 1997 and the three months and six months
ended June 30, 1996, 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. PRIVATE PLACEMENT
On January 15, 1997, the Company offered a minimum of 400,000 units, each
consisting of one share of the Company's common stock and a non-redeemable Class
AA warrant which entitled the holder to purchase one share of the Company's
Common Stock at a price of $1.10 per share, until March 31, 1999. The proceeds
were to be used for the advancement of various technologies as well as for
working capital. The offering was completed on March 28, 1997, and the Company
sold 1,075,000 units for $1,075,000. On May 14, 1997 the Company changed the
conversion price of the Class AA warrants from $1.10 per share to $ .65 per
share and extended the expiration date from March 31, 1999 to March 31, 2002.
6
5. STOCK PURCHASE AGREEMENT
On March 19, 1997 the Company entered into an agreement with Drew Shoe
Corporation ("Drew") to purchase all of the common stock of Drew for
approximately $5,000,000. This commitment is contingent upon the Company
obtaining the necessary financing to fund the purchase. The Company does not
have any obligations under this agreement should management be unable to obtain
this financing.
6. SUBSEQUENT EVENTS
On July 24, 1997, the Company completed an offering of 150 shares of
Redeemable Convertible Preferred Stock in BCA Services Inc.(a wholly owned
subsidiary of BCAM International, Inc.), the proceeds of which were used for
working capital purposes. The first tranche was in the amount of $500,000 and 50
Redeemable Convertible Preferred Stock Shares were issued. Two additional
tranches of $500,000 each are available to the Company to draw down on, one up
to sixty(60) days after the Company's registration statement is declared
effective, and another one up to sixty(60) days after the second tranche is
drawn down.
On July 23, 1997, the Company reached an agreement with Drew to extend the
deadline for the closing of the Drew Shoe Acquisition, as outlined in the
Purchase Agreement, from March 28, 1997 to September 15, 1997, for $25,000 for
each of the two partners, with the total of $50,000 to be credited to the
purchase price at the closing.
The Company is in process of arranging the funding for the acquisition of
Drew and, in conjunction with this effort, the following has occurred:
On July 8, 1997 (modified on August 11, 1997), the Company received a
commitment from Coleman and Company to work to consummate a private placement
offer for a minimum of $3.5 Million and a maximum of $5.0 Million in Convertible
and Redeemable Acquisition Preferred Stock, the shares of which will be
convertible into shares of the Company's Common Stock. In conjunction with this
equity funding, the Company expects that a group, including its largest
shareholder, will purchase $1.0M of additional Preferred Stock, under
substantially the same terms and conditions as the Coleman offer, bringing the
total of the expected funding to between $4.5M to $6.0M. The proceeds are
expected to be used for the acquisition of Drew and other working capital needs.
On June 18, 1997, the Company received a commitment letter from Coast
Business Credit to provide up to $6.5M in asset-based financing under a
revolving line of credit to be secured by substantially all of the assets of
Drew and to be guaranteed by BCAM International. The proceeds are expected to be
used for the acquisition of Drew and for operating capital for Drew.
7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
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FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
The June 30, 1997 Form 10-QSB represents the second quarterly report after
the Form 10-KSB and Form 10-KSB/A for the year ended December 31, 1996. The
10-QSB should be read in conjunction with the aforementioned document, and
represents a comparison between the quarter ended June 30, 1997 and the quarter
ended June 30, 1996.
RESULTS OF OPERATIONS
Net revenue is recognized when products are shipped, or is based on the
percentage of completion method as costs are incurred. No significant
obligations remain outstanding and collection of the accounts receivable, in
management's estimation, is deemed probable.
Net revenue increased by $107,635, to $215,861, during the three months
ended June 30, 1997, as compared to the same period in 1996. The increase was
due to $47,828 of revenue from sales of the HumanCAD(R) division's MQPro(TM)
software, which was launched in April 1997, an increase in Product Assessment
and Redesign revenue of $39,535, and an increase of $22,500 in Intelligent
Surface Technology ("IST") revenue. Net revenue increased by $76,511, to
$287,232, during the six months ended June 30, 1997, as compared to the same
period in 1996. The increase was primarily due to $54,876 of revenue from sales
of MQPro(TM) software.
Direct costs include salaries, product costs, equipment purchases for
contracts, consulting fees and certain other costs. Gross profit may fluctuate
from period to period. Factors influencing fluctuations include the nature and
volume of services provided to individual customers which affect contract
pricing, the Company's success in estimating contract costs (principally
professional time), the timing of hiring new professionals, who may require
training before gaining experience, efficiencies and meeting customer demands.
Direct costs in total increased by $66,635, to $71,178, in the quarter
ended June 30, 1997, and by $101,061, to $150,349, in the six months ended June
30, 1997, as compared to the same periods in 1996. The first six months of 1996
reflect lower direct costs because of a credit of $148,960, due to the
elimination of a reserve no longer deemed necessary. Excluding this
non-recurring item, direct costs were $18,575 lower in the three months ended
June 30 and $47,899 lower in the six months ended June 30 than the comparable
periods in 1996.
8
As a result of the above, gross profit, as set forth in the table below,
increased by $41,000 for the quarter ended June 30, 1997, and decreased by
$24,550 for the six months ended June 30, 1997, as compared to the comparable
periods in 1996.
Three Months Ended June 30 Six Months Ended June 30
1997 1996 1997 1996
Net revenue $215,861 $108,226 $287,232 $210,721
Direct costs 71,178 4,543 150,349 49,288
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Gross profit $144,683 $103,683 $136,883 $161,433
Gross profit % 67% 96% 48% 77%
Selling, general and administrative expenses increased by $50,432, to
$618,091, for the three months ended June 30, 1997, and decreased by $48,289, to
$1,027,026, for the six months ended June 30, 1997, as compared to the same
periods in 1996. Included in these figures were $252,675 of costs in the six
months ended June 30, 1997, of which $212,512 was incurred in the second
quarter, in connection with the launch of the HumanCAD(R) division's MQPro(TM)
software. Offsetting this was a reduction in expenses relating to the Company's
Ergonomic Consulting Services business of $162,080 in the three months ended
June 30 and $300,964 in the six months ended June 30, primarily in the areas of
legal costs, salaries and benefits, consulting costs, reporting and exchange
fees and insurance premiums.
Research, development and engineering costs increased by $3,035 for the
quarter ended June 30, 1997 and decreased by $16,083 for the six months ended
June 30, 1997 from the same periods in 1996.
Net interest income decreased by $11,383 for the three months ended June
30, 1997, and by $29,592 for the six months ended June 30, 1997, compared to the
periods ended June 30, 1996. This was due to a decrease in assets available for
investment.
Net loss, as a result of the above, for the three months and six months
ended June 30, 1997, was $490,437 and $908,678, respectively, as compared to a
net loss of $466,587 and $918,908 for the comparable period in 1996.
There was no tax benefit for the three months or six months ended June 30,
1997 and the three months or six months ended June 30, 1996. Losses which have
increased the future availability of the net operating loss carryforward have
been offset by valuation allowances.
9
LIQUIDITY AND CAPITAL RESOURCES
Cash, cash equivalents and held-to-maturity securities were $240,964 as of
June 30, 1997, compared to $526,344 as of December 31, 1996. Net cash used in
operating activities, mainly to cover the net loss, was $1,338,021 for the six
month period ended June 30, 1997. Financing activities, primarily the proceeds
from a private placement completed on March 28, 1997 provided $1,054,370 in cash
for the six month period ended June 30, 1997.
Working capital was $666,585 as of June 30, 1997, compared to $597,293 as
of December 31, 1996. The increase of $69,292 or 11.6% in working capital was
primarily attributable to the proceeds from the private placement, reduced by
the net loss incurred in the six months ended June 30, 1997.
The Company expects that its working capital, together with revenue from
operations, and the proceeds from future private placements, will be more than
sufficient to meet any liquidity and capital requirements for the remainder of
1997.
On March 19, 1997, the Company entered into an agreement with the owners of
Drew Shoe Corporation ("Drew") whereby, the Company will purchase all of the
Common Stock of Drew for approximately $5,000,000 subject to financing. Drew, of
Lancaster Ohio, is a 125 year-old leading designer, manufacturer and distributor
of medical footwear and orthotic products. Drew represents an opportunistic and
synergistic vehicle for the Company to incorporate IST into medical footwear and
orthotic products, for diabetics, arthritics, and the aging population.
The Company has committed to spend $230,000 during the remainder of 1997
for the development of the Microvalve, which is a necessary component relating
to certain applications of the IST.
.
PREPAID EXPENSES AND OTHER CURRENT ASSETs
Prepaid Expenses and Other Current Assets were $719,725 compared with
$333,477 on December 31, 1996. During the six month period the Company
accelerated (1) its acquisition related activities and (2) its marketing
activities related to the launching of MQPro on March 10, 1997. The impact of
the launch related activities, including marketing and product packaging,
occurred primarily in the second quarter of the Company's fiscal year. On March
28, 1997, the Company signed a Stock Purchase Agreement to acquire Drew Shoe.
Spending associated with the acquisition is expected to be included in the
balance sheet of the subsidiary and amortized, beginning the month after the
acquisition is concluded. Should the acquisition not occur, expenses associated
with the acquisition will be expensed in the third quarter of the current fiscal
year. Expenses associated with the launching of MQPro are being amortized over
the remainder of the current fiscal year.
10
PART II. OTHER INFORMATION
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
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(A) EXHIBITS.
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10.53 Employment Agreement dated January 1, 1997, between
Michael Strauss and the Company
10.54 Employment Agreement dated January 1, 1997, between
Robert Wong and the Company
10.55 Consulting Agreement dated April 7, 1997, between
Masthead Management and the Company
27 Financial Data Schedule
(B) REPORTS ON FORM 8-K
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No reports were filed on Form 8-K during the six month period
ended June 30, 1997.
11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BCAM INTERNATIONAL, INC.
Dated: August 11, 1997 By: /s/ Michael Strauss
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Michael Strauss
Chairman of the Board of Directors
Chief Executive Officer
Dated: August 11, 1997 By: /s/ Robert P. Wong
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Robert P. Wong
Vice Chairman of the Board of Directors
Chief Technology Officer
Acting Chief Financial Officer
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INDEX OF EXHIBITS
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Exhibit No. Exhibit
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10.53 Employment Agreement dated January 1, 1997, between
Michael Strauss and the Company
10.54 Employment Agreement dated January 1, 1997, between
Robert Wong and the Company
10.55 Consulting Agreement dated April 7, 1997, between
Masthead Management and the Company
27 Financial Data Schedule
13