U.S. SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                   FORM 10-KSB

                                  ANNUAL REPORT
                     PURSUANT TO SECTION 13 OR 15 (d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended                        Commission File Number: 0-18109
   December 31, 1998

         Exact name of small business issuer as specified in its charter

                            BCAM INTERNATIONAL, INC.

State or other jurisdiction of                    IRS Employer
incorporation or organization:                    Identification No.: 13-3228375
          New York

                     Address of principal executive offices:

                             1800 Walt Whitman Road,
                            Melville, New York 11747
                                 (516) 752-3550

Securities registered under Section   Name of each exchange on which registered:
12(b) of the Exchange Act:            The Over the Counter Bulletin Board
Common Stock, $.01 par value

         Securities registered under Section 12(g) of the Exchange Act:
         --------------------------------------------------------------
                          Common Stock, $.01 par value

      Check whether the registrant (1) filed all reports to be filed by Section
13 or 15 (d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes |X| No |_| 

      Check if disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of the registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB |_|.

      Registrant's revenues for its most recent fiscal year were approximately
$2,000.

      The aggregate market value of the registrant's common stock held by
non-affiliates as of March 23, 1999, was approximately $1,300,000 based on the
average closing price of such stock on March 23, 1999, as reported by the Over
the Counter Bulletin Board.

      The number of shares outstanding of the registrant's common stock as of
March 23, 1999, was 23,251,116.

                    DOCUMENTS INCORPORATED BY REFERENCE: None

Transitional Small Business Disclosure Format (check one): Yes |_|; No |X|
<PAGE>

                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS

      BCAM International Inc. (formerly Biomechanics Corporation of America
prior to a name change effected June 22, 1995), was organized in 1984 under the
laws of the State of New York.

GENERAL

BCAM International, Inc. and subsidiaries (the "Company") has been primarily a
software, technology and consulting company, specializing in providing ergonomic
solutions (human factors engineering) to individuals, corporations and
government. The Company's revenues had historically been derived primarily from
ergonomic consulting services. Through a series of actions over the past
eighteen months, including the acquisition of Drew Shoe Corporation ("Drew"),
subsequent disposition of approximately 66.7% of Drew (and the disposition of
the remaining approximately 33.3% subsequent to December 31, 1998 in March 1999)
and certain other restructuring activities (which are summarized in the
following paragraph and described in more detail in Notes 3 and 5 to the
Consolidated Financial Statements), the Company is now a technology pioneer in
the field of Intelligent Surface Technology ("IST") blending biomechanics and
ergonomics with innovative electronic systems and software.

      The acquisition and restructuring activity over the past eighteen months
has included the following. On September 22, 1997, the Company acquired Drew
Shoe Corporation ("Drew") as described in Note 4 to Consolidated Financial
Statements. Drew is a manufacturer, marketer and distributor of medical
footwear. The purchase of Drew was financed principally by the issuance of
10%/13% Convertible Notes and Warrants. In December 1997 the Board of Directors
of the Company decided to sell the operations of the Ergonomic Consulting
Services Business ("ECSD") due to the inability of that business to generate
operating profits for the Company as discussed further in Note 7 to the
Consolidated Financial Statements. In February 1998, the Board of Directors of
the Company decided to discontinue the HumanCAD Systems Operations ("HCAD") as a
result of the lack of available financing, on acceptable terms to the Company,
to further the necessary business development activities of that division as
discussed further in Note 7 to the Consolidated Financial Statements. In April
1998 the Company restructured the 10%/13% Convertible Notes which included
granting a 10% interest in the common stock of Drew (and also 10% of the common
stock of BCAM Technologies, Inc., later renamed ISTX, Inc.) to the noteholders
as further discussed in Note 5 to the Consolidated Financial Statements. In
October 1998, the Company sold 56.7% of Drew to the holder of the 10%/13%
Convertible Notes and agreed to sell its remaining 33.3% interest in the common
stock of Drew subject to approval of the shareholders as discussed further in
Note 3 to the Consolidated Financial Statements. In March 1999 the shareholders
of the Company approved the sale of the Company's remaining ownership in Drew.

      The Company's principal subsidiary consists of BCAM Technologies, Inc.
(principally IST and related technologies).

      The Company has or has had at varying times collaborative research and
development relationships with the State University of New York at Stony Brook
and with MCNC (see below) which the Company believes provide valuable resources
in strengthening the Company's technologies.

      The Company's present business is described below.

INTELLIGENT SURFACE TECHNOLOGY ("IST")

      Intelligent Surface Technology (IST) is a family of technologies that is
ultimately expected to be able to convert products such as seats, beds, shoes
and other products to dynamic, more user-friendly products meeting the specific
needs of individuals. The Company's patented technology is designed to empower
such product surfaces with the ability to sense and respond to individuals in
order to maximize comfort, fit, and user performance while minimizing fatigue
and stress. A product surface is considered "intelligent" because it is able to
learn about the user and recognize patterns of the user's movements through the
Company's sophisticated proprietary software. By calculating a user's weight and
using the calculated weight as a function in determining comfort and fit, an IST
surface can be adjusted and optimized on a real time basis to conform to a
user's body specifications and needs. The Company's current IST technology is
"adaptive" rather than "intelligent". The Company's strategy has been to license
such technology to companies that can develop products that can exploit this
technology.
<PAGE>

      Adaptive surface technology is based on the original nine patents and
several pending patents developed by the Company. An adaptive system can control
the pressure between a product's surface and its user to improve comfort and
fit. It is suitable for products, such as seats, since currently the system
supports eight adjusting zones.

      The adaptive system is divided into several elements including electronic
control circuitry, software, sensors, a valve assembly, bladders, a pump, and a
user interface. Typically, a seat product is fitted with various size and shape
air bladders according to ergonomic principles. The air bladders are connected
to a control module, which is embedded in the product and houses the
electronics, sensors, and valves.

      Since comfort and fit are dynamic human properties, as they are constantly
changing over time, the adaptive system adjusts every couple of minutes to
achieve a time-averaged comfort load over the length of time spent in the seat.
The adaptive system can be adjusted to the specific needs of a product in order
to provide activity-based feedback and adjustment, including the provision for
intelligent massage.

      On September 9, 1997, the Company announced that the 1998 Cadillac STS
would offer, as an option, a driver and passenger seat utilizing the Company's
IST adaptive technology through a license agreement with McCord Winn Textron
Inc. ("Textron"), a subsidiary of Textron Inc. In 1998, the Company was advised
by Textron that this feature would be available also in the Cadillac SLS. These
are presently the only products to utilize IST in the marketplace and revenues
earned to date have been immaterial.

      The Company has had a variety of discussions with companies about the
possible license of IST for use in consumer seating and other products. It is
the Company's present opinion, based upon such discussions, that the potential
widespread use of IST into consumer and other products is likely to be dependent
upon the successful development of a smaller and less expensive application of
the IST technology which the Company refers to as "NT" or "ISTX" (see below).

      The NT platform development is focused on miniaturizing the IST system and
inventing a new method to develop applications for incorporating the IST
technology into products. With NT, costs and power consumption would be reduced
and noise levels will be decreased. The Company recently completed a prototype
of a Micro Electronic Mechanical System ("MEMS") microvalve that the Company
believes would enable the miniaturization of the Intelligent Surface system. The
new microvalve is smaller, lighter, lower cost, and uses considerably less power
than traditional pneumatic valves.

      The Company believes that miniaturization would enable it to provide a
superior user-friendly product surface by allowing for an increased number of
adjustable zones. This would provide an increased level of IST benefits, and
costs would be significantly reduced permitting new market opportunities.

      The next evolutionary step for IST is the transition from the adaptive
system to a "discrete" MEMS system. The NT system would employ Artificial
Intelligence and MEMS micro-components.

      In order to miniaturize and lower the cost of IST applications, the
Company and MCNC (founded in 1980 as the Microelectronics Center of North
Carolina and now known simply as MCNC) have completed an alpha prototype of a
microvalve component to control air flow in the IST system. A beta or production
ready version of the MCNC microvalve would be the subject of further development
about which the Company and MCNC have entered into a non-binding letter of
intent. Such further development will likely be dependent upon the Company
obtaining the financial resources or entering into a strategic transaction which
would permit the Company to fund such further development. Such further
development would involve costs of MCNC as well as costs of the Company to
define protocols, integrate systems and coordinate applications, among other
things. The Company believes that the MCNC microvalve will facilitate the
commercialization of the Company's IST technology into smaller and less
expensive systems. The Company presently does not have the financial resources
to go forward with such further development. Separate from the MCNC
collaboration, the Company has created a design for and patented a proprietary
microvalve that may be useful in IST technology.

      As indicated in the accompanying consolidated financial statements, as of
December 31, 1998, the Company had negative working capital of approximately
($1,327,000), negative net worth of approximately ($1,136,000), losses from
continuing operations of approximately ($3,148,000), no material revenues and a
development agenda for IST which requires additional financing. Losses from
continuing operations have continued since December 31, 1998. These factors,
among others, indicate that the Company is in need of significant additional
financing and/or a strategic business arrangement in order to continue its
operations in the 
<PAGE>

1999 year. See "Consolidated Financial Statements" and "Management's Discussion
and Analysis or Plan of Operations".

      There can be no assurances that management's plans described in the
preceding paragraphs and elsewhere in this report will be realized. These
factors, among others, indicate that the Company may be unable to continue
operations as a going concern.

Current Licensees

      Textron. The Company and McCord Winn Textron Inc., ("Textron") a
subsidiary of Textron Inc. signed a Development and License Agreement in March
1993, amended in October 1993 and August 1996, whereby the Company granted an
exclusive worldwide license to Textron to use the IST patents and know-how in
the manufacture, use and sale of seats, and seating components for the
transportation industry, wheelchairs, office furniture applications and hospital
beds.

      In September 1997, Textron began selling an IST system for use in an
automobile seat which is incorporated, as optional equipment, in the driver and
front passenger seat for the 1998 Cadillac Seville STS model. In 1998, the
Company was advised by Textron that this feature would be available also in the
Cadillac SLS. Textron is obligated to pay the Company a royalty, after deduction
of an agreed upon credit ($150,000) over four or more years, for the use of the
Company's technology in the sale of the systems. There were no revenues in the
1997 financial statements from the sales of Textron and such royalty revenues
were not material in 1998 and are not anticipated to be material in 1999.
Royalty revenues in 1998 were negatively impacted by strikes by workers at
various General Motors facilities.

      The August 1996 amendment obligated Textron to pay royalties to the
Company through December 31, 1999, for any products designed using the Company's
IST. After January 1, 2000, Textron shall be obligated to pay the Company
royalties only for any products designed which actually incorporate IST patents
and know-how transmitted to Textron by the Company after May 31, 1996. The
Company has disclosed to Textron that it has received four patents and one
"Notice of Allowance" after May 31, 1996. 

      Reebok. In January 1994, the Company and Reebok International Ltd.
("Reebok") signed a world-wide exclusive licensing and development agreement for
the use of IST for certain footwear. In addition, Reebok has a right of first
refusal to obtain exclusive licenses to use IST on athletic, sport and fitness
equipment fields of use. The fields of medical equipment and orthopedic devices
are specifically excluded from the Reebok license. No revenue has been realized
in 1998 or 1997 from this license and no revenue is presently anticipated for
1999.

      Sealy. In August 1996, the Company signed an agreement with Sealy, Inc. in
which Sealy, Inc. has the option to license IST for its adjustable bed and a
right of first refusal as applied to all bedding products (excluding medical
bedding applications). No revenue has been received in either 1998 or 1997 from
this option and right of first refusal. There is currently no material activity
under this option or first refusal agreement and no revenue is currently
anticipated for 1999. 

DISCONTINUED OPERATIONS

      The following former businesses of the Company have been recently
discontinued.

      Drew Shoe Corporation ("Drew")

      Drew Shoe is a designer, manufacturer, marketer and distributor of medical
footwear headquartered in Lancaster, Ohio. Drew has a 60,000 square foot
manufacturing and a 40,000 square foot distribution and executive office
facility in Lancaster, Ohio. Additionally, Drew operates retail medical footwear
stores in various areas of the United States. Drew Shoe had annual revenues of
approximately $15 million in 1998 and 1997. Revenues from the wholesale division
were in excess of approximately 70% in each of 1998 and 1997. Drew has been in
business for many years and was primarily a comfort shoe manufacturer and
distributor until 1992, when it shifted its focus to medical footwear. Medical
footwear had been a small portion of the Company's business prior to 1992.
Approximately 60% or more of Drew Shoe's sales are of women's shoes.

      Drew was discontinued pursuant to a plan approved by the Board of
Directors in October 1998 as discussed in greater detail in Item 5 - Recent
Sales of Unregistered Securities (iii) and (iv), Item 3 - Litigation and 
<PAGE>

Note 3 to Consolidated Financial Statements

      Proprietary HumanCAD Software Development ("HCAD")

      Since 1989, the Company has developed, marketed, maintained, and
periodically upgraded its Mannequin Pro(TM) software product. MannequinPro(TM)
is a human modeling program that enables the user to render 3-dimensional
scalable humanoid figures on a personal computer (PC). These figures can be
articulated into any position and then can be viewed from any angle, distance or
perspective. The result of that view can be printed, plotted or exported to
other graphics software for further enhancement of the image. The figures can
walk, bend, reach and grasp objects. A user can test the functionality of the
design of almost anything used by humans. In 1997, the Company formed HumanCAD
Systems, Inc. in order to make new investments in the development and marketing
of the Mannequin Pro series of products. In December 1997, the Company received
a preliminary commitment for certain financing of the planned development and
marketing activities of HumanCAD in 1998. The Company took an additional
facility in Waterloo, Canada and hired additional sales and marketing and
development personnel subsequent to that time. In late February 1998, the
Company was advised by the potential funding source that it would no longer be
interested in going forward with the planned financing. The Company then
determined to seek alternative value for its investment in these software
products and substantially curtailed its development and marketing efforts. The
operations of HumanCAD are considered a discontinued operation in the
accompanying consolidated financial statements with a measurement date of
February 1998. After efforts to realize alternative value were not successful,
in October 1998, the Company's HumanCAD Systems Inc. subsidiary filed an
assignment in bankruptcy under the laws of the Province of Ontario, Canada
(where it had been incorporated) and Fuller Landau Ltd., 151 Bloor St. West,
Toronto, Canada, was appointed receiver and trustee. See also Item 3 - Legal
Proceedings.

      Ergonomic Consulting Services Division ("ECSD")

      Until February 9, 1998, the Company had provided ergonomic consulting
services in two areas: (i) Ergonomic Product Assessment and Redesign, and
Ergonomic Workplace Assessment and (ii) Software Based Consulting Services,
tailored to the implementation and use of the HumanCAD(R) line of ergonomic
software products. Prior to the acquisition of Drew, Ergonomic Consulting
Services represented the majority of revenues (over 75%) in 1997 and 1996. On
February 9, 1998, this business was sold to a third party in exchange for 7.5%
of revenues under contracts in process assumed by the third party plus a lesser
royalty on certain defined possible future revenues. Royalties from the
purchasers of ECSD have not been material and are not anticipated to be material
in the future. 

In Ergonomic Product Assessment and Redesign services, the Company performed
comprehensive subjective and objective ergonomic testing on products that
quantifies the product's relationship in terms of comfort, fit, useability and
user performance to humans. This knowledge was used by product developers,
manufacturers and industrial design firms to improve existing products and/or to
develop new ones. In Ergonomic Workplace Assessment services, the Company
provided industrial companies, government, and insurance companies with advice
on how to reduce musculoskeletal injuries, through its proprietary EARLY(R)
(Ergonomic Assessment of Risk and Liability) services and other consulting
services. 

SALES AND MARKETING

Marketing Strategy for Licensing IST

The Company's marketing strategy for IST has historically focused on identifying
organizations that: 

      o     Are large,

      o     Are financially strong,

      o     Have marketing presence, and

      o     Have the financial resources to commercialize the technology

The Company is prepared to license the IST technology to organizations that meet
the above criteria and plans to assist those organizations in commercializing
the technology. The Company currently believes, however, that significant new
license opportunities will be limited by the size and cost considerations
related to the current IST 
<PAGE>

systems and a planned development program to reduce the size and cost of such
systems. 

Research and Development

      It is the Company's present opinion that the potential widespread use of
IST into consumer and other products is likely to be dependent upon the
successful development of a smaller and less expensive application of the IST
technology.

      In order to miniaturize and lower the cost of IST applications, the
Company and MCNC (founded in 1980 as the Microelectronics Center of North
Carolina and now known simply as MCNC) have completed an alpha prototype of a
microvalve component to control air flow in the IST system. A beta or production
ready version of the MCNC microvalve would be the subject of further development
about which the Company and MCNC have entered into a non-binding letter of
intent. Such further development will be dependent upon the Company obtaining
the financial resources or entering into a strategic transaction which would
permit the Company to fund such further development. Such further development
would involve costs of MCNC as well as costs of the Company to define protocols,
integrate systems and coordinate applications, among other things. Such
investments, if made, would necessarily have to be followed by investments in
integration for specific applications and then in marketing and sales, among
other matters. The Company presently does not have the financial resources to go
forward with such further development. Separate from the MCNC collaboration, the
Company has created a design for and patented a proprietary microvalve that may
be useful in IST technology.

      The Company uses its internal resources and subcontractors, as needed, in
its research and development activities. For example, the Company has
periodically established collaborative research and development relationships
with the State University of New York at Stony Brook, MCNC and the New Jersey
Institute of Technology. 

Competition

      Although there may be similar systems to the Company's IST, the Company
believes that its patents and know-how are helpful to protect its technology
from competition. The Company is aware of one entity, ACI/Rostra which Textron
has asserted to have infringed upon the Company's IST technology. The Company
and Textron are pursuing this matter with ACI/Rostra. 

Suppliers

      The materials used in the Company's business may be obtained from numerous
suppliers, except for the proprietary "microvalve" which is envisioned to become
an integral part of the IST system going forward. The Company believes that its
relationships with its vendors are satisfactory, however, financial constraints
could impede such relationships at any time. 

Government Regulation

      The Company's present and proposed activities are not generally subject to
government regulation in the United States or other countries. The costs and
effects of complying with environmental laws by the Company are not material.

Proprietary Information

      The Company attempts to protect its intellectual property through patent
applications. The Company has obtained nine patents and has filed various
additional United States patent applications relating to its IST. One of the
patents filed is potentially significant since it represents one possible
approach for a critical component (microvalve) needed to miniaturize the
application of the IST.

Major Customers

IST

      The only present customer for IST 1998 is Textron. See above. 
<PAGE>

The "Year 2000" issue

At the Company's corporate office, its information systems are principally
utilized for general accounting and administration. During 1998, the Company
upgraded such system and currently believes it to be Year 2000 compliant. The
Company does not have a current point of view on the status of Year 2000
compliance at Drew because its remaining ownership interest was disposed in
1999.

Employees

      As of January 1, 1999, the Company had approximately 6 employees,
including approximately one person devoted to technology, 3 corporate
administrative employees (including 2 who are part-time) and 2 executive
officers (one of whom devotes a portion of his business time to the Company and
the other of whom has indicated his intent to terminate his full time employment
with the Company after April 1999).

      The Company has been able to attract and retain skilled employees by
offering competitive salaries and benefits. The Company believes that its
relationship with its employees is good however, the Company's ability to retain
its employees, given its current financial condition, is uncertain.

Forward-Looking Statements

      Information set forth in this Form 10-KSB regarding the Company's plans
for future operations constitutes "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. Any forward-looking
statements should be considered in light of the factors set forth in the
"Factors That May Affect Future Results" section of this Form 10-KSB.

ITEM 2. DESCRIPTION OF PROPERTY

      Since 1990, the Company has leased office space at 1800 Walt Whitman Road,
Melville, New York. The Company's lease, as amended, expires on March 31, 2001.
The current annualized lease rate for this space is approximately $75,000, which
is subject to annual increases. The facility contains approximately 4,200 square
feet of office space.

ITEM 3. LEGAL PROCEEDINGS

      In January 1998, Ulin & Holland Incorporated ("U & H") filed suit against
the Company's then subsidiary, Drew, in United States District Court for the
District of Massachusetts. The suit alleges that U & H was retained in 1992 by
Drew pursuant to which U & H alleges that it is due a fee of not less than
$297,000 in connection with the Company's acquisition of Drew. Drew disputes
this claim. U & H has named the Company as a defendant in this lawsuit.
Subsequent to the Company's divestiture of the majority ownership of Drew, Drew
is responsible for the defense of this matter. In March 1999, the Company was
notified that it is no longer a defendant in that lawsuit.

      On or about February 22, 1999, a shareholder derivative action was filed
in United States District Court for the Eastern District of New York in
connection with certain transactions culminating in the sale by the Company to
Impleo, LLC of the Company's interest in Drew. The complaint names all of the
Company's current directors and several former members of the Board as
defendants as well as Impleo, LLC and certain related entities and individuals
(collectively, the "Defendants"). The allegations contained in the complaint
challenge the Defendants' actions in connection with certain transactions,
including but not limited to, (i) the April 14, 1998 restructuring of certain
convertible notes; (ii) the October 1998 sale of 56.7% of Drew to Impleo, LLC;
and (iii) the proposed sale to Impleo, LLC of the Company's remaining 33.3%
interest in the Drew. In addition to seeking recovery on behalf of the Company
for certain allegedly wrongful acts on the part of the Defendants, the complaint
seeks, among other things, to enjoin or set aside any shareholder vote in
connection with a proxy statement filed with the SEC on or about February 1,
1999 pursuant to which the Company received shareholder approval to sell its
remaining 33.3% interest in Drew and to block or rescind the sale of any
interests in Drew to Impleo, LLC. The current Directors deny the allegations
concerning any allegedly wrongful actions.
<PAGE>

      In October 1998, the Company's HumanCAD Systems Inc. subsidiary filed an
assignment in bankruptcy under the laws of the Province of Ontario, Canada and
Fuller Landau Ltd., 151 Bloor St. West, Toronto, Canada, was appointed receiver
and trustee. Certain creditors of the HumanCAD operations have filed or
threatened to file claims against the Company for the debts of HumanCAD. One
such action was filed by Miller Freeman, Inc. in the Civil Court of City of New
York in the amount of approximately $18,000. The Company intends to vigorously
defend itself in such action, however its ability to do so may be limited by its
financial resources which are currently inadequate (See Consolidated Financial
Statements, Report of Independent Public Accountants and Management's Discussion
and Analysis or Plan of Operations).

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

      At a March 4, 1999 Special Meeting of Shareholders, the following matter
was brought for a vote of the shareholders:

                Proposal                    Votes For    Votes Against   Abstain
--------------------------------------------------------------------------------
1. Proposal to sell the Company's          15,748,202       253,240       7,850
remaining 33.3% common stock interest 
in Drew Shoe Corporation to the holder 
of the Company's 10/13% Convertible 
Notes

      The proposal required a vote of 66.7% of the shareholders for passage and
the proposal was passed by a vote of approximately 67.7% of the 23,251,116
shares outstanding on January 27, 1999, the date of record.

                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

      The Common Stock of the Company was quoted primarily on the NASDAQ
SmallCap Market under the symbol BCAM until October 15, 1998. Subsequent to
October 15, 1998, the Company's common stock has been traded primarily on the
Over the Counter Bulletin Board ("OTC Bulletin Board"). The Company's Common
Stock has also been traded on the Boston Stock Exchange under the symbol BAM. In
November 1998, the Boston Stock Exchange advised the Company that it would
commence a process of delisting the Company's Common Stock from the Boston Stock
Exchange.

      The following table sets forth the high and low closing bid quotations for
the Common Stock as reported by The NASDAQ SmallCap market through October 15,
1998 and the OTC Bulletin Board thereafter. The NASDAQ SmallCap market and OTC
Bulletin Board quotations reflect inter-dealer prices without retail markup,
markdown or commission and do not necessarily represent actual transactions.

                            NASDAQ/OTC Bulletin Board

1998                              High Bid                        Low Bid
----                              --------                        -------
First Quarter                     1 17/32                         1
Second Quarter                    1 19/32                         7/8
Third Quarter                     1 1/16                          7/32
Fourth Quarter                    1/4                             1/16

1997                              High Bid                        Low Bid
----                              --------                        -------
First Quarter                     1 3/8                           27/32
Second Quarter                    1 1/8                           11/16
Third Quarter                     1 7/8                           23/32
Fourth Quarter                    1 31/32                          1
<PAGE>

Holders

      There were approximately 352 record holders of the Company's Common Stock
as of February 28, 1999. 

The Company has paid no cash dividends on its Common Stock since its inception
and does not anticipate paying cash dividends on its Common Stock in the
foreseeable future. 

Recent Sales of Unregistered Securities

      (i) Sale of common stock and warrants ($1,075,000) - Between January 15
and March 28, 1997, in consideration for $1,075,000, the Company sold to
accredited investors an aggregate of 1,075,000 shares of Common Stock at $1.00
per share, and 1,075,000 Non-Redeemable Class AA Warrants to purchase an
additional 1,075,000 shares of Common Stock at an exercise price of $.65 per
share exercisable through March 31, 2002.

      The purchasers of the securities are set forth in the following table:

                                            Common shares    Common shares under
  Name of purchaser        Amount paid         issuable            warrants
  -----------------        -----------         --------            --------
621 Partners               $  260,000          260,000             260,000
Appleton Associates           120,000          120,000             120,000
R. Weil & Associates          320,000          320,000             320,000
Karen Weil                    100,000          100,000             100,000
David Latter                   25,000           25,000              25,000
Howard Weingrow                50,000           50,000              50,000
Peter Orr                      50,000           50,000              50,000
Joseph Offenberger             25,000           25,000              25,000
David Schultz                  25,000           25,000              25,000
Howard Seiberman               50,000           50,000              50,000
Joseph Schueller               50,000           50,000              50,000
                           ----------        ---------           ---------
                           $1,075,000        1,075,000           1,075,000
                           ==========        =========           =========

      Kirr Marbach & Company, LLC ("Kirr Marbach") is a general partner of 621
Partners, Appleton Associates and R. Weil & Associates which in the aggregate
are entitled to receive, or to direct the receipt of, dividends from, and the
proceeds from sale of, all of the shares beneficially owned by Kirr Marbach.

      The Registrant claims exemption from registration of this placement by
virtue of Section 4(2) of the Securities Act of 1933.

      (ii) Convertible Preferred stock of BCA Services, Inc. ("BCA"), a
subsidiary of the Registrant ($1,200,000) - On July 22, 1997 BCA Services, Inc.
("BCA"), previously a wholly-owned subsidiary of the Company, commenced an
Offering (the "Offering") to sell up to 150 shares of BCA's Convertible
Preferred Stock (the "Preferred Stock") for a total consideration of $1.5
million in a private offering to accredited investors.

      The Preferred Stock was convertible into shares of the Company's Common
Stock ("Common Stock") at a price equal to 70% of the average closing bid price
of the Common Stock over a three day trading period ending on the day preceding
the conversion date (the "Variable Conversion Price"). The Conversion Price
could not be greater than 100% of the Variable Conversion Price on the first
closing date (the "Fixed Conversion Price"). The Fixed Conversion price was
$0.6563. In July and September 1997, the Company sold 100 shares ($1,000,000) of
Convertible Preferred stock to Austost Anstalt Schaan ($500,000) and UFH
Endowment LTD. ($500,000). Between November 1997 and March 1998, all of the
Convertible Preferred stock issued was converted into common stock of the
Company.

      In addition, purchasers of the Convertible Preferred stock received
Non-Redeemable Class BB Warrants to purchase 50,000 shares of Common Stock,
exercisable at $0.7219. The warrants have a term of five years and the Common
Stock underlying the warrants contains registration rights.

      On September 18, 1997, BCA closed a separate offering of its Preferred
Stock plus warrants for $200,000 on similar terms and conditions as the Offering
(excluding the existing fixed conversion feature and certain fees).
<PAGE>

As a result of this offering, 20 shares of Preferred Stock (convertible into the
Company's Common Stock at a maximum price of $0.9331 per share) were issued,
along with Non-Redeemable Class CC Warrants to purchase up to 10,000 shares of
Common Stock (at $1.0264 per share). The purchasers of the securities were
Arcadia Mutual Fund, which purchased 15 shares of Preferred Stock and warrants
to purchase 7,500 shares of the Company's Common Stock, and David Morgenstern,
who purchased 5 shares of Preferred Stock and warrants to purchase 2,500 shares
of the Company's Common Stock. All of the Convertible Preferred Stock issued in
this offering was converted to Common Stock of the Company at an average price
of approximately $0.79 per share prior to December 31, 1997. The Registrant
claims exemption from registration of this placement by virtue of Section 4(2)
of the Securities Act of 1933.

      The two private placements of BCA preferred stock were made with the
assistance of a placement agent, Corporate Capital Management, who charged a
commission of 8% in fees and 2% in expenses plus warrants to purchase up to
50,000 shares of Common Stock of the Registrant at approximately $0.66 per
share, for five years for the first offering and 6% in fees and no warrants for
the second offering.

      In response to positions recently taken by the Securities and Exchange
Commission, Emerging Issues Task Force Statement D-60 has been issued which
requires specific accounting for securities issued which are convertible into
common stock at a value which is "beneficial" at the date of issuance (such as
the preferred stock described above and the 10%/13% Convertible Notes and
Warrants described below). This accounting has resulted in significant charges
to operations in connection with these financings as further described in Notes
5 and 6 to the Consolidated Financial Statements.

      (iii) 10%/13% Convertible Notes and Warrants ($6,000,000) (also see (iv))-
In order to fund the acquisition of Drew and provide working capital to the
Company, On September 19, 1997, the Company issued subordinated convertible
notes to eight investors in the aggregate amount of $6,000,000 (the "Convertible
Notes"). The Convertible Notes are due, as amended in April 1998 (see "Debt
Restructuring" below), on April 16, 1999 unless at any time after September 19,
1998, they are converted, at $.80 per share into 7,500,000 shares of Common
Stock of the Company. The conversion feature is subject to antidilution in
certain circumstances including the issuance of Common Stock and warrants in
1998 and related "repricings" discussed below. The Convertible Notes bear an
interest rate of 10%, payable semi-annually, but the Company, at its discretion,
could pay interest in the form of its Convertible Notes in which case the annual
interest rate becomes 13% with semi-annual compounding. The Convertible Notes
required the Company to maintain compliance with certain financial covenants
including maintenance of minimum levels of interest coverage and net worth (as
defined).

      In addition, the Company issued to the noteholders Non-Redeemable Class DD
Warrants to purchase, as amended in April 1998, 2,000,000 shares of common
stock, exercisable at $1.75 per share (subject to antidilution provisions) at
any time prior to September 19, 2002.

      The market value of the Company's common stock on the Nasdaq SmallCap
market on the date of the transaction was approximately $1.50 per share.

The purchasers of the securities are set forth in the following table:

                                            Common shares       Common shares 
    Name of purchaser       Amount paid        issuable        under warrants
    -----------------       ----------        ---------        --------------
Impleo, LLC ("Impleo")      $5,000,000         6,250,000          2,000,000
621 Partners                   150,000          187,500              60,000
R. Weil & Associates           155,000          193,750              62,000
David M. Kirr                  165,000          206,250              66,000
Terry B. Marbach               165,000          206,250              66,000
Gregg T. Summerville           165,000          206,250              66,000
Ralph Weil                     100,000          125,000              40,000
Joseph Schueller               100,000          125,000              40,000
                            ----------        ---------           ---------
                            $6,000,000        7,500,000           2,400,000
                            ==========        =========           =========

      Kirr Marbach & Company, LLC, a registered investment advisor, is the
managing general partner of 621 Partners, Appleton Associates and R. Weil &
Associates, and together with Messrs. Kirr, Marbach and 
<PAGE>

Summerville may be deemed to constitute a group within the meaning of Regulation
13D-G.

      The private placement of convertible notes and warrants to Impleo, LLC was
made with the assistance of an investment banker, Josephberg Grosz and Company,
who charged a cash fee of 6% ($300,000) of proceeds plus 187,500 shares of
common stock, and warrants to purchase 500,000 shares of common stock, at $0.80
per share, of the Registrant. The remaining $1,000,000 of proceeds was not
subject to a commission.

      The Registrant claims exemption from registration of this placement by
virtue of Section 4(2) of the Securities Act of 1933. In response to positions
recently taken by the Securities and Exchange Commission, Emerging Issues Task
Force Statement D-60 has been issued which requires accounting for securities
issued which are convertible into common stock at a value which is "beneficial"
at the date of issuance (such as the preferred stock and the 10%/13% Convertible
Notes and Warrants described above). This accounting resulted in significant
charges to operations in connection with these financings as further described
in Notes 5 and 6 to Consolidated Financial Statements. The Company also has,
under generally accepted accounting principles, recorded approximately
$1,872,000 as the estimated value of the detachable warrants issued in
connection with the Convertible Notes. Reference is made to Note 5 of the
Consolidated Financial Statements of the Company.

      See item (iv) below regarding the restructuring and retirement of the
10%/13% Convertible Notes and Warrants.

      (iv) April 1998 and October 1998 Debt Restructurings -

      April 1998 Restructuring - Effective April 14, 1998 the Company and the
holders of the 10%/13% Convertible Notes and related warrants entered into a
First Amendment (and related Stock Pledge Agreement and Security Agreement) of
the September 1997 Note Purchase Agreement in order to restructure the
obligation. The key elements of the restructuring are as follows: (1) waiving of
the Company's violations of the financial covenants at December 31, 1997 (as
well as certain other breaches of the agreement), (2) eliminating the financial
covenants through April 16, 1999, (3) securing the obligation with a pledge of
all of the assets of the Company (excluding the assets of Drew Shoe which are
already pledged to a bank), including the stock of the Company's subsidiaries,
(4) accelerating the maturity date for the obligation from September 19, 2002 to
April 16, 1999, (5) cancellation of Class DD warrants to purchase 400,000 shares
of common stock of the Company, (6) issuance to the holders of a total of 10% of
the common shares of the Company's subsidiaries Drew and BCAM Technologies, Inc.
The restructuring resulted in significant charges to operations in 1998
including: (i) approximately $1,651,000 to write-off a portion of debt discount
and financing costs related to the shortened period to maturity of the
obligations and (ii) an extraordinary item of approximately $552,000
representing the approximate value of the 10% interest in subsidiaries that was
given up.

      October 1998 Restructuring - After attempting to refinance the 10%/13%
Convertible Notes in an increasingly challenging financial markets environment
in mid 1998, the Company came to believe that it could not meet its obligations
represented by the Notes upon their maturity in April 1999. Therefore, on
October 2, 1998, the Board of Directors approved a plan to dispose of the
Company's majority interest in Drew (the "Plan") in order to facilitate the
redemption and cancellation of a portion of the obligations represented by the
Notes. Pursuant to the Plan, on October 23, 1998, the Company, entered into a
Stock Purchase and Restructure Agreement between the Company and Impleo, and
sold 56.7% of the outstanding shares of Drew to Impleo in exchange for the
redemption and cancellation of approximately $3,780,000 of the outstanding
principal amount of the Notes. Concurrently with this transaction, Impleo, which
initially owned $5,000,000 principal amount of Notes, purchased the remaining
$1,000,000 principal amount (plus accrued interest) of Notes, thereby making it
the sole holder of Notes. After this transaction, the remaining principal
balance on the Notes was approximately $2,220,000 plus an additional
approximately $805,000 of pay-in-kind interest and approximately $155,000 of
accrued interest as of December 31, 1998. The Notes are secured by all of the
assets of the Company and had a maturity date in April 1999. As a further
condition of the sale of the Drew shares to, and the redemption of the Notes
from Impleo, Michael Strauss, the Chairman, President and Chief Executive
Officer of the Company, has become the Chief Executive Officer of Drew. Mr.
Strauss will continue to serve the Company as its Chairman, President and Chief
Executive Officer and entered into a new employment agreement with the Company
under which his compensation from the Company has been reduced.

      In connection with the transactions set forth in the Plan, the Company has
been released from its guarantee of approximately $3.8 million of secured
obligations of Drew to its commercial bank lender.
<PAGE>

      Separately, the Company and Drew, under the Plan, have reached agreement
with the sellers of Drew to the Company in 1997 to: (i) cancel an employment
contract and enter into a severance agreement with the former president of Drew
(to be funded by Drew), (ii) cancel approximately $200,000 of notes payable by
the Company to the former owners of Drew, (iii) forgive certain purchase price
adjustments due to the Company from the former owners of Drew and(iv) the
retention, by Drew, of certain contingent liabilities in connection with the
Ulin & Holland litigation discussed in Item 3 - Legal Proceedings.

      Concurrently with the execution of the Stock Purchase and Restructure
Agreement, the Company and Impleo entered into a Second Amendment to the
September 1997 Note Purchase agreement which eliminates the requirement for
Impleo to have representation on the Company's Board of Directors which
constituted at least twenty-five (25%) percent of the Board, among other
matters. Separately, on October 23, 1998, the Company entered into the Purchase
Agreement with Impleo pursuant to which it agreed to sell the remaining 33.3% of
Drew Shoe to Impleo in exchange for the cancellation of the then remaining
principal amount of Notes ($2,220,000) together with paid-in-kind and accrued
interest thereon and Warrants to purchase 740,000 shares of the common stock of
the Company. Because the sale of the Company's remaining interest in Drew
constituted a disposition of a significant asset of the Company, the proposed
transaction was conditioned on receipt of approval by the Company's
shareholders. Such approval was received at a Special Meeting of Shareholders on
March 4, 1999.

      Impleo is an affiliate of Wexford Management, LLP.

      (v) Sale of Common Stock, subject to "repricing", and Warrants (April
1998) - Beginning on April 14, 1998, the Company commenced a private offering of
its common stock and warrants. The offering generated aggregate proceeds of
$2,000,000 for the purchase of 1,980,198 shares, subject to "repricing" as
described below, of common stock of the Company and warrants to purchase 250,000
shares of common stock at $2.05 for three years by seven accredited investors.
The Company agreed to and did register such shares for resale.

      The Company agreed that the number of shares issuable to these investors
would be "repriced" pursuant to a schedule initially in two $300,000 increments
and then in seven $200,000 increments on nine occasions commencing with the
effectiveness of a registration statement covering the shares (declared
effective August 13, 1998) and again 60 days later and then in 30 day intervals.
On such dates, the investor would have received the additional number of shares,
if any, that result from the difference between the number of shares actually
issued and the number of shares which would have been issued using a 23%
discount to the market price, as defined, at that time. The operation of this
provision would have resulted in significantly greater number of shares being
issued. The Company agreed not to issue certain financings and has paid a
placement agent a 6.5% fee in connection with the transaction.

      In August 1998, 436,047 shares were issued in connection with the
"repricing" provisions and very significant additional shares (estimated to be
in excess of 5,000,000 shares) would be required to be issued in the October,
November and December 1998 "repricing" dates.

      On December 24, 1998, the Company and the investors agreed to amend the
subscription agreement with respect to "repricing". The December 24, 1998
amendment has four principal effects as follows: (i) the August, October,
November and December 1998 "repricings" are eliminated in favor of new
"repricings" which began on January 1, 1999, (ii) the discount from market used
to measure the "repricings" was increased from 23% to 27% (iii) a ceiling price
was established of $0.75 per share and (iv) certain penalties under the
agreement were waived. Under the amended agreement, the investors, at their
option, may reprice up 12 1/2% of the amount invested (an aggregate of $250,000
based upon the original $2,000,000 invested in April 1998) on the first of each
month beginning with January 1, 1999. Any amounts not "repriced" in any month
may be carried over to any future month without limitation.

      In connection with the amendment, the Company, issued additional shares on
January 27, 1999 to the investors to bring the total shares from 1,980,198
originally invested up to 2,666,667 shares (inclusive of the 436,047 shares
issued in August 1998 as discussed in the second preceding paragraph) based upon
the $0.75 ceiling price in the amendment.

      Additionally, these investors requested a "repricing" of $190,000 of the
offering in January 1999 which resulted in the issuance to them of an additional
2,259,827 shares on January 27, 1999. Of the total dollar amount of the
offering, only this $190,000 of the $2,000,000 proceeds of the offering has been
"repriced" leaving 
<PAGE>

$1,810,000 still to be "repriced" at the holders option. The "repricing" of this
amount ($1,810,000) at market prices for the Company's stock in March 1999 would
result in a very significant number of additional shares being issued and in a
change of control of the Company to these investors. The Company is in
discussions with the representatives of the investors to restructure the
"repricing" provisions in light of the very significant effects which would
result at current prices of the Company's common stock.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

Except for the historical information contained herein, the following discussion
contains forward looking statements that involve risk and uncertainties. The
Company's actual results could differ materially from those discussed herein.
Factors that could cause or contribute to such differences include, but are not
limited to, those discussed below in Factors That May Affect Future Results

      Overview

      BCAM International, Inc. and subsidiaries (the "Company") has been
primarily a software, technology and consulting company, specializing in
providing ergonomic solutions (human factors engineering) to individuals,
corporations and government. The Company's revenues had historically been
derived primarily from ergonomic consulting services. Through a series of
actions over the past eighteen months, including the acquisition of Drew,
subsequent disposition of approximately 66.7% of Drew (and the disposition of
the remaining approximately 33.3% subsequent to December 31, 1998 in March 1999)
and certain other restructuring activities (which are summarized in the
following paragraph and described in more detail in Notes 3 and 5 to the
Consolidated Financial Statements), the Company is now a technology pioneer in
the field of Intelligent Surface Technology ("IST") blending biomechanics and
ergonomics with innovative electronic systems and software.

      The acquisition and restructuring activity over the past eighteen months
has included the following. On September 22, 1997, the Company acquired Drew as
described in Note 4 and 5. Drew is a manufacturer, marketer and distributor of
medical footwear. The purchase of Drew was financed principally by the issuance
of 10%/13% Convertible Notes and Warrants. In December 1997 the Board of
Directors of the Company decided to sell the operations of the Ergonomic
Consulting Services Division ("ECSD") due to the inability of that business to
generate operating profits for the Company as discussed further in Note 7 to the
Consolidated Financial Statements. In February 1998, the Board of Directors of
the Company decided to discontinue the HumanCAD Systems Operations ("HCAD") as a
result of the lack of available financing, on acceptable terms to the Company,
to further the necessary business development activities of that division as
discussed further in Note 7 to the Consolidated Financial Statements. In April
1998, the Company restructured the 10%/13% Convertible Notes which included
granting a 10% interest in the common stock of Drew (and also 10% of the common
stock of BCAM Technologies, Inc.) to the noteholders as further discussed in
Note 5 to the Consolidated Financial Statements. In October 1998, the Company
sold 56.7% of Drew to the holder of the 10%/13% Convertible Notes and agreed to
sell its remaining 33.3% interest in the common stock of Drew subject to
approval of the shareholders as discussed further in Note 3 to the Consolidated
Financial Statements. In March 1999, the shareholders of the Company approved
the sale of the Company's remaining ownership in Drew. The Company expects to
report a non-cash gain from the disposal of Drew in the first quarter of 1999.

      Results of Operations

      Results of operations for the years ended December 31, 1998 and 1997 were
significantly impacted by restructuring developments including: (1) the Plan to
sell the Company's interest in Drew to the holders of the 10%/13% Convertible
Notes ("Notes") in exchange for redemption of the Notes and related interest
(see Note 3 to Consolidated Financial Statements), (2) the sale of the ECSD and
the discontinuance of the HCAD operations, (3) a charge to compensation expense
for certain options granted during 1997 which were at exercise prices below the
market value when approved by the shareholders in February 1998, (4) charges and
extraordinary item related to the April 1998 restructuring of the Company's
Notes and (5) charges and costs related to the financing to acquire Drew during
September 1997 and other financing during the year.

      Discontinued operations - As discussed in greater detail in Notes 3 and 7
to the Consolidated Financial Statements, the Company has recorded the
operations of Drew, ECSD and HCAD as discontinued operations. Operations of
these discontinued businesses in the year ended December 31, 1998 (including
provisions for losses on discontinuance of HCAD of approximately $250,000 in
1998) resulted in losses of approximately $7,644,000 
<PAGE>

and $3,497,000 including very substantial non-cash charges. Such non-cash
charges included charges for the beneficial conversion feature of certain
convertible notes pursuant to Emerging Issues Task Force Statement # D-60 of
approximately $4,509,000 and $1,635,000, respectively, for the years ended
December 31, 1998 and 1997 as well as a one time non-cash write-off of
approximately $1,651,000 in 1998 related to the April 1998 debt restructuring
and a charge for approximately $286,000 for the compensatory element of stock
options granted in 1997 and approved by the shareholders in February 1998.
Additionally, in the year ended December 31, 1998, the following charges and
costs related to the Drew acquisition are included in results of discontinued
operations: (i) amortization of debt discount and deferred finance costs of
approximately $453,000 and (ii) interest on convertible notes of $822,000. The
reader is referred for further information regarding the losses generated from
these discontinued operations to Notes 3 and 7 to the Consolidated Financial
Statements. Losses from discontinued operations in the year ended December 31,
1997 were approximately $3,497,000 including non-cash charges related to
Emerging Issues Task Force Statement # D-60 of approximately $1,651,000.
Additionally, in the year ended December 31, 1997, certain charges and costs
related to the Drew acquisition are similarly included in results of
discontinued operations including: (i) costs of financings which the Company
chose not to complete of approximately $130,000, (ii) amortization of debt
discount and deferred finance costs of approximately $170,000 and (iii) accrual
for interest and all other of approximately $313,000. The reduced losses from
discontinued operations in 1997 reflect the fact that Drew was only included in
the 1997 results for the period from September 22, 1997 to December 31, 1997.

      These businesses were discontinued because, among other things,: (1) the
Company could not service and/or refinance the debt related to the acquisition
of Drew, (2) ECSD did not generate operating profits for the Company and (3)
HCAD required capital which the Company could not obtain on favorable terms.

      Ongoing selling, general and administrative costs - Selling, general and
administrative costs increased from approximately $1,544,000 in the year ended
December 31, 1997 to approximately $1,884,000 in the year ended December 31,
1998 reflecting increased management and other costs associated with the
Company's business plans for 1998. Such costs have been decreasing since
approximately the third quarter of 1998 as the completion of the plan to sell
Drew reduces the need for certain management and administrative personnel and
facilities. The Company's plan is to further reduce such costs in 1999 as the
sale of Drew is completed.

      Research and development costs - In the year ended December 31, 1998,
research and development costs consist principally of costs associated with the
Company's development of an alpha prototype of a "microvalve" in collaboration
with a third party, MCNC, for potential use in its "ISTX" technology. Such costs
and related development expenditures increased by approximately $179,000 to
approximately $459,000, for the year ended December 31, 1998 due to the stage of
development activities at the time.

      Minority interest charge - The Company recorded a non-cash charge of
approximately $788,000 to minority interests during 1997. This charge reflects
the accounting for the beneficial conversion feature of subsidiary preferred
stock issued during 1997. Such accounting, in accordance with EITF Statement
D-60 is described in Notes 5 and 6 to the Consolidated Financial Statements.

      License revenues - License revenues consist principally of revenues
received from IST products and have not been significant to date. One Company
licensee, Textron, has launched a new product, in September 1997, utilizing IST
in an automobile seat. Annually, the Company must first deduct a credit due to
Textron before earning any revenues in that year. In 1998, royalty revenue was
adversely affected by the strike at various General Motors facilities in the
summer of 1998. To date, earned revenues have not materially exceeded the
credit.

      Liquidity and Capital Resources

      As indicated in the accompanying Consolidated Financial Statements, as of
December 31, 1998, the Company had negative working capital of approximately
($1,327,000) and negative net worth of approximately ($1,136,000), losses from
continuing operations of approximately ($3,148,000) and no material revenues in
1998, and a development agenda which requires additional financing. Losses from
continuing operations have continued since December 31, 1998. These factors,
among others, indicate that the Company is in need of significant additional
financing and/or a strategic business arrangement in order to continue its
operations in the 1999 fiscal year. The Company believes that its cash resources
at December 31, 1998 are sufficient to fund its operations for approximately
four months, assuming the cooperation of its creditors, after which (or sooner
if certain creditor
<PAGE>

cooperation is not received) it will be required to raise additional capital or
enter into a strategic business arrangement in order to continue its planned
operations.

      The Company's plans include undertaking a development program to
miniaturize and lower the cost of IST applications in the belief that the result
will be a more marketable product than the current IST application. The
development and subsequent marketing is a multi-year project. In order to
miniaturize and lower the cost of IST applications, the Company and MCNC
(founded in 1980 as the Microelectronics Center of North Carolina and now known
simply as MCNC) have completed an alpha prototype of a microvalve component to
control air flow in the IST system. A beta (production ready) version of the
MCNC microvalve would be the subject of further development about which the
Company and MCNC have entered into a non-binding letter of intent. The Company's
ability to perform such further development will be dependent upon the Company
obtaining the financial resources or entering into a strategic transaction which
would provide the Company the resources to perform such development. Such
further development would involve costs of MCNC as well as costs of the Company.
Beyond development, the Company would require capital to commercialize, market
and sell. The Company's plans are to raise financing or enter into a strategic
transaction in order to proceed with the development program. The Company
believes it must generate approximately between Three to Five Million
($3,000,000 - $5,000,000) in new investment to continue to enhance/develop its
technologies. In the absence of additional financing or a strategic business
arrangement, the Company does not have the financial resources to go forward
with such further development and its operations would be materially adversely
affected and it may not be able to continue as a going concern.

      There can be no assurances that management's plans described in the
preceding paragraphs will be realized. These factors, among others, indicate
that the Company may be unable to continue operations as a going concern.

      In March 1999, the Company received approval of the Company's shareholders
to sell the remaining 33.3% of Drew to the holders of the Company's Convertible
Notes. As such, the Convertible Notes are being retired in 1999. In February
1999, the Company advised the holders of its 8% unsecured notes that it had
passed on the payment of principal and interest in January 1999 and would be
unable to make any further payments until a financial or strategic transaction
was concluded. At March 31, 1999, approximately $25,000 of principal payments
plus interest are in arrears.

      The reader is directed to Item 5 - Recent Sales of Unregistered Securities
and to Notes 3, 5 and 6 of Notes to Consolidated Financial Statements for a
discussion of financing activities in 1997 and 1998 and related restructurings
including the recent retirement of the Convertible Notes in exchange for the
sale of the Company's remaining interest in Drew. Also see Item 3 - LEGAL
PROCEEDINGS.

      The Year 2000 Issue

      At the Company's corporate office, information systems are principally
utilized for general accounting and administration. During 1998, the Company
upgraded such system and currently believes it to be Year 2000 compliant. The
Company does not have a current point of view on the status of Year 2000
compliance at Drew because its remaining ownership interest was disposed in
1999.

                     Factors That May Affect Future Results

      The Company's future operating results are dependent on the Company's
        ability to: (i) obtain sufficient capital or a strategic business
       arrangement , which is required immediately, to fund its continued
        operations including its development and commercialization plans,
      (ii) pay its debts including significant payments to trade creditors
          and noteholders which are presently overdue, (iii) successful
        completion of development of a lower cost and smaller version of
       IST (iv) successful business development and marketing efforts to,
          assuming completion of the development effort in (iii) above,
      increase the number of licensees, and the commercialization of IST by
          its licensees, (v) successfully develop the "Microvalve" and
           integrate it into IST, (vi) general economic conditions and
              conditions in the financial and technology markets.
<PAGE>

ITEM 7. FINANCIAL STATEMENTS

                          Index to Financial Statements

BCAM International, Inc. and subsidiaries (the "Company"):

       Report of Independent Public Accountants - J.H. Cohn LLP..........

       Report of Independent Auditors - Ernst & Young LLP................

       Consolidated balance sheet--December 31, 1998.....................

       Consolidated statements of operations --Years
       ended December 31, 1998 and 1997..................................

       Consolidated statements of common shareholders'
       equity (deficiency)--Years ended December 31, 1998 and 1997.......

       Consolidated statements of cash flows--
       Years ended December 31, 1998 and 1997............................

       Notes to consolidated financial statements........................
<PAGE>

                    Report of Independent Public Accountants

To the Board of Directors and Shareholders
BCAM International, Inc.

We have audited the consolidated balance sheet of BCAM International, Inc. and
Subsidiaries as of December 31, 1998, and the related consolidated statements of
operations, common shareholders' equity (deficiency) and cash flows for the year
then ended. 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 audit. We did not audit the financial statements of Drew
Shoe Corporation ("Drew"), a 33.3%-owned investee as of December 31, 1998. The
investment in Drew was reflected in the accompanying consolidated financial
statements at equity with a carrying value of $1,954,000 and classified as net
assets of minority investment in discontinued operations, and the equity in
Drew's net loss of $6,841,000 in 1998 has been classified as loss from
discontinued operations (see Note 3). Those statements were audited by other
auditors whose report has been furnished to us and our opinion, insofar as it
relates to the amounts included for Drew, is based on the report of the other
auditors.

We conducted our audit 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 audit and the report of the other auditors provide a
reasonable basis for our opinion.

In our opinion, based upon our audit and the report of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of BCAM International, Inc. and
Subsidiaries as of December 31, 1998, and their results of operations and cash
flows for the year then ended, in conformity with generally accepted accounting
principles.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company had substantial working capital and
shareholders' deficiencies at December 31, 1998 and substantial losses for the
year ended December 31, 1998. These matters raise substantial doubt about the
Company's ability to continue as a going concern. Management's plans in regard
to these matters are also described in Note 1. The financial statements do not
include any adjustments relating to the recoverability and classification of
reported asset amounts or the amounts and classification of liabilities that
might result from the outcome of this uncertainty.


                                                               /s/ J.H. COHN LLP

Roseland, New Jersey
March 29, 1999
<PAGE>

                         Report of Independent Auditors

To the Shareholders and Board of Directors of
BCAM International, Inc.

We have audited the accompanying consolidated statements of operations,
shareholders' equity and cash flows of BCAM International, Inc. and subsidiaries
for the year ended December 31, 1997. 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 audit. 

We conducted our audit 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 audit provides a reasonable basis for our opinion. 

Since the date of completion of our audit of the accompanying consolidated
statements of operations, shareholders' equity and cash flows and initial
issuance of our report dated April 20, 1998, the Company has incurred operating
losses and has a working capital deficiency. In addition, as discussed in Notes
3 and 5, the Company has been unable to refinance its convertible notes and has
disposed of its majority interest in Drew Shoe Corporation ("Drew") and Drew has
been notified by its bank of pending defaults under its loan agreements. These
circumstances adversely affect the Company's current consolidated results of
operations and liquidity, and could potentially result in the Company being
unable to pay its debt obligations. 

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated results of their operations
and their cash flows for the year ended December 31, 1997, in conformity with
generally accepted accounting principles.


                                                           /s/ Ernst & Young LLP

Melville, New York 
April 20, 1998, except for Note 
3 as to which the date is
October 23, 1998 (with respect to the 
sale of Drew) and December 10, 1998
(with respect to the pending debt default
of Drew).
<PAGE>

                    BCAM International, Inc. and Subsidiaries
                           Consolidated Balance Sheet
                                December 31, 1998

<TABLE>
<S>                                                                         <C>         
Assets
Current assets:
    Cash and cash equivalents                                               $    538,000
    Prepaid expenses and other current assets                                     47,000
    Net assets of minority investment in discontinued operations - Drew        1,954,000
                                                                            ------------
Total current assets                                                           2,539,000

Other assets, principally patents and equipment                                  191,000
                                                                            ------------
Total assets                                                                $  2,730,000
                                                                            ============

Liabilities and shareholders' equity
Current liabilities:
    Secured 10%/13% Convertible Notes, including interest paid in kind      $  2,983,000
    Accrued interest                                                             155,000
    Current portion of long term debt                                             75,000
    Accounts payable                                                             264,000
    Accrued expenses and other current liabilities                               215,000
    Liabilities of discontinued operations - HCAD and ECSD                       174,000
                                                                            ------------
Total current liabilities                                                      3,866,000
                                                                            ------------

Commitments and contingencies
Shareholders' equity (deficiency):
    Acquisition preferred stock, par value $.01 per share;
       750,000 shares authorized, none issued                                         --
    Preferred stock, 2,000,000 shares authorized, none issued                         --
    Common stock, par value $.01 per share; authorized 65,000,000
       shares, 21,754,471 shares issued and 20,991,289 shares outstanding        218,000
    Additional paid-in capital                                                30,126,000
    Accumulated deficit                                                      (30,581,000)
                                                                            ------------
                                                                                (237,000)
    Less 763,182 treasury shares                                                (899,000)
                                                                            ------------
Total shareholders' deficiency                                                (1,136,000)
                                                                            ------------
Total liabilities and shareholders' equity (deficiency)                     $  2,730,000
                                                                            ============
</TABLE>

See accompanying notes
<PAGE>

                    BCAM International, Inc. and Subsidiaries
                      Consolidated Statements of Operations
                 For the years ended December 31, 1998 and 1997
  
<TABLE>
<CAPTION>
                                                         1998            1997 
                                                     ------------    ------------
<S>                                                  <C>             <C>         
License revenue                                      $      2,000    $     27,000
                                                     ------------    ------------
Costs and expenses:
  Selling, general and administrative                   1,904,000       1,544,000
  Charge for compensatory element of
     1997 options approved in 1998                        858,000               0
  Research & development                                  459,000         280,000
                                                     ------------    ------------
                                                        3,221,000       1,824,000
                                                     ------------    ------------
     Loss from operations                              (3,148,000)     (1,797,000)

Other income (expense) - interest and other income         71,000          46,000
Minority interests charge for beneficial
   subsidiaries preferred stock conversion                      0        (788,000)
                                                     ------------    ------------
Loss from continuing operations                        (3,148,000)     (2,539,000)
                                                     ------------    ------------
Discontinued operations - Drew operations
   through September 1998                              (7,083,000)     (2,121,000)
Discontinued operations - Drew gain on sale of            
   56.7% interest                                         242,000               0
                                                     ------------    ------------
     Subtotal - Drew                                   (6,841,000)     (2,121,000)
Discontinued operations - HCAD and ECSD,
   including estimated loss on disposal of HCAD
   of approximately $250,000 in 1998 and                 
   approximately $50,000 for ECSD in 1997                (803,000)     (1,376,000)
                                                     ------------    ------------
Loss from discontinued operations                      (7,644,000)     (3,497,000)
                                                     ------------    ------------
Loss before extraordinary item                        (10,792,000)     (6,036,000)
                                                     ------------    ------------
Extraordinary item - charge for
   April 1998 restructure of debt                        (552,000)              0
                                                     ------------    ------------
Net loss                                             $(11,344,000)   $ (6,036,000)
                                                     ============    ============
Basic net loss per share:
   Continuing operations                             $      (0.16)   $      (0.16)
   Discontinued operations                           $      (0.38)   $      (0.22)
                                                     ------------    ------------
      Loss per share before extraordinary item       $      (0.54)   $      (0.38)

   Extraordinary item                                $      (0.03)   $         --
                                                     ------------    ------------
      Net loss                                       $      (0.57)   $      (0.38)
                                                     ============    ============
Weighted average number of common
   shares outstanding (see Note 6)                     19,970,000      16,071,000
                                                     ============    ============
</TABLE>

See accompanying notes
<PAGE>

                    BCAM International, Inc. and Subsidiaries
       Consolidated Statements of Common Shareholders' Equity (Deficiency)

<TABLE>
<CAPTION>
                                                      Common Stock $.01 par value                    Unamortized Charge
                                                ---------------------------------         Additional      For Beneficial
                                                      Shares               Amount    Paid-in Capital    Debt Conversion
                                                ------------         ------------    --------------- ------------------
<S>                                               <C>                <C>                <C>                  <C>        
Balance at December 31, 1996                      15,642,915         $    156,000       $ 14,959,000                 -- 
Shares issued in January 1997 Placement            1,075,000               11,000          1,064,000                 -- 
Issuance costs of January 1997 Placement                  --                   --            (46,000)                -- 
Beneficial conversion feature of
 subsidiary preferred stock                               --                   --            788,000                 -- 
10% / 13% Convertible Notes:
 Est. fair value of detachable warrants                   --                   --          1,872,000                 -- 
 Est. fair value of beneficial conversion                                                  5,925,000       $ (5,925,000)
Shares issued in acquisition of Drew Shoe            375,000                4,000            446,000                 -- 
Shares issued and options granted in
 Drew Shoe acquisition financing                     347,500                3,000            967,000                 -- 
Acquisition financing costs                               --                   --           (275,000)                -- 
Amortization of beneficial debt conversion                --                   --                 --          1,635,000
Consultant stock options                                  --                   --            175,000                 -- 
Conversion of subsidiary preferred                   706,226                8,000            435,000                 -- 
Exercise of options                                   25,000                   --             28,000                 -- 
Net loss                                                  --                   --                 --                 -- 
                                                ------------         ------------       ------------       ------------
Balance at December 31, 1997                      18,171,641              182,000         26,338,000         (4,290,000)
Conversion of subsidiary preferred stock           1,066,585               11,000            607,000                 -- 
Additional beneficial debt conversion
 from March 1998 payment-in-kind                          --                   --            219,000           (219,000)
Amortization of beneficial conversion                     --                   --                 --          4,509,000
Compensation charge for stock options
  issued in 1997 and approved in 1998                     --                   --          1,144,000                 -- 
Exercise of Class AA Warrants                        100,000                1,000             64,000                 -- 
April 1998 offering of common stock
 (subject to "repricing"(a))and warrants           1,980,198               20,000          1,980,000                 -- 
Stock offering and registration costs                     --                   --           (252,000)                -- 
Warrants forfeited in debt restructure                    --                   --           (281,000)                -- 
Issuance of warrants to consultants                       --                   --            311,000                 -- 
Shares issued in first "repricing"
   increment of April 1998 offering                  436,047                4,000             (4,000)                -- 
Net loss                                                  --                   --                 --                 -- 
                                                -----------------------------------------------------------------------
Balance at December 31, 1998                      21,754,471(a)      $    218,000       $ 30,126,000         $       --
                                                =======================================================================

<CAPTION>
                                                 Accumulated                           Shares held                   
                                                     Deficit           Subtotal        in Treasury              Total
                                                ------------       ------------       ------------       ------------
<S>                                             <C>                <C>                <C>                <C>         
Balance at December 31, 1996                    $(13,201,000)      $  1,914,000       $   (899,000)      $  1,015,000
Shares issued in January 1997 Placement                   --          1,075,000                 --          1,075,000
Issuance costs of January 1997 Placement                  --            (46,000)                --            (46,000)
Beneficial conversion feature of
 subsidiary preferred stock                               --            788,000                 --            788,000
10% / 13% Convertible Notes:
 Est. fair value of detachable warrants                   --          1,872,000                 --          1,872,000
 Est. fair value of beneficial conversion 
Shares issued in acquisition of Drew Shoe                 --            450,000                 --            450,000
Shares issued and options granted in
 Drew Shoe acquisition financing                          --            970,000                 --            970,000
Acquisition financing costs                               --           (275,000)                --           (275,000)
Amortization of beneficial debt conversion                --          1,635,000                 --          1,635,000
Consultant stock options                                  --            175,000                 --            175,000
Conversion of subsidiary preferred                        --            443,000                 --            443,000
Exercise of options                                       --             28,000                 --             28,000
Net loss                                          (6,036,000)        (6,036,000)                --         (6,036,000)
                                                ------------       ------------       ------------       ------------
Balance at December 31, 1997                     (19,237,000)         2,993,000           (899,000)         2,094,000
Conversion of subsidiary preferred stock                  --            618,000                 --            618,000
Additional beneficial debt conversion
 from March 1998 payment-in-kind                          --                 --                 --                 --
Amortization of beneficial conversion                     --          4,509,000                 --          4,509,000
Compensation charge for stock options
  issued in 1997 and approved in 1998                     --          1,144,000                 --          1,144,000
Exercise of Class AA Warrants                             --             65,000                 --             65,000
April 1998 offering of common stock
 (subject to "repricing"(a))and warrants                  --          2,000,000                 --          2,000,000
Stock offering and registration costs                     --           (252,000)                --           (252,000)
Warrants forfeited in debt restructure                    --           (281,000)                --           (281,000)
Issuance of warrants to consultants                       --            311,000                 --            311,000
Shares issued in first "repricing"
   increment of April 1998 offering                       --                 --                 --                 --
Net loss                                         (11,344,000)       (11,344,000)                --        (11,344,000)
                                                ---------------------------------------------------------------------
Balance at December 31, 1998                    $(30,581,000)      $   (237,000)      $   (899,000)      $ (1,136,000)
                                                =====================================================================
</TABLE>

See accompanying notes.
(a) Specifically see Note 6
<PAGE>

                    BCAM International, Inc. and Subsidiaries
                      Consolidated Statements of Cash Flows
                 For the Years Ended December 31, 1998 and 1997

<TABLE>
<CAPTION>
                                                                            1998           1997
                                                                            ----           ----
<S>                                                                     <C>             <C>         
Operating activities
Net loss                                                                $(11,344,000)   $(6,036,000)
Adjustments to reconcile net loss to net
 cash used in operating activities:
   Depreciation and amortization                                             261,000        212,000
   Amortization of unamortized charge for beneficial debt conversion       4,509,000      1,635,000
   Amortization of deferred finance costs and debt discount                  453,000        151,000
   Write off of deferred finance costs and debt discount                   1,651,000              0
   Interest paid-in-kind                                                     805,000              0
   Compensation charge for stock options including $286,000
     related to discontinued operations                                    1,144,000              0
   Non-cash minority interest charge (benefit)                               (35,000)       788,000
   Extraordinary item                                                        552,000              0
   Gain on disposal of 56.7% of Drew                                        (242,000)             0
   Charge for compensatory consultant stock options                          311,000        175,000
   Changes in operating assets and liabilities:
     Accounts receivable                                                    (283,000)       337,000
     Inventory                                                              (603,000)       (99,000)
     Current assets of discontinued operations                               (35,000)       (56,000)
     Accounts payable, accrued expenses and other current liabilities        179,000        248,000
     Other, net                                                               20,000       (120,000)
                                                                        ------------    -----------
Net cash used in operating activities                                     (2,657,000)    (2,765,000)
                                                                        ------------    -----------
Investing activities
Cash paid for purchase of shares of Drew                                           0     (3,882,000)
Cash paid for costs to acquire Drew                                                0       (476,000)
Purchases of equipment and software technology                              (431,000)      (151,000)
                                                                        ------------    -----------
Net cash used in investing activities                                       (431,000)    (4,509,000)
                                                                        ------------    -----------
Financing activities
Proceeds from sale of common stock and warrants                            2,000,000      1,075,000
Proceeds from sale of convertible preferred stock of subsidiary                    0      1,200,000
Proceeds from sale of 10%/13% Convertible Notes and Warrants                       0      6,000,000
Proceeds from financing at Drew, net                                         426,000      1,135,000
Payment of existing debentures due to former Drew shareholders                     0       (845,000)
Proceeds from note payable and drawdown on line of credit                          0        754,000
Payment of long term debt                                                   (207,000)      (450,000)
Proceeds from exercise of options and warrants                                65,000         28,000
Payment for deferred finance, stock issuance and registration  costs        (252,000)      (555,000)
                                                                        ------------    -----------
Net cash provided by financing activities                                  2,032,000      8,342,000
                                                                        ------------    -----------
Increase (decrease) in cash and cash equivalents                          (1,056,000)     1,068,000
Cash and cash equivalents at beginning of year                             1,594,000        526,000
                                                                        ------------    -----------
Cash and cash equivalents at end of year                                $    538,000    $ 1,594,000
                                                                        ============    ===========
Supplemental disclosure:
   Cash interest paid                                                   $    384,000    $   110,000
                                                                        ============    ===========
   Exchange of Convertible Notes for 56.7% ownership of Drew            $  3,780,000              0
                                                                        ============    ===========
Forgiveness of Seller notes in disposition of Drew                      $    200,000    $         0
                                                                        ============    ===========
</TABLE>

See accompanying notes
<PAGE>

                    BCAM International, Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements

                                December 31, 1998

1. Description of Business; Principles of Consolidation; General; Going Concern
   Considerations

      Description of Business; Principles of Consolidation; General - BCAM
International, Inc. and subsidiaries (the "Company") has been primarily a
software, technology and consulting company, specializing in providing ergonomic
solutions (human factors engineering) to individuals, corporations and
government. The Company's revenues had historically been derived primarily from
ergonomic consulting services. Through a series of actions since approximately
September 1997 including the acquisition of 100% of Drew Shoe Corporation
("Drew"), subsequent disposition of approximately 66.7% of Drew (and the
disposition of the remaining approximately 33.3% subsequent to December 31, 1998
in March 1999) and certain other restructuring activities (which are summarized
in the following paragraph and described in more detail in Notes 3 and 5), the
Company is now a technology pioneer in the field of Intelligent Surface
Technology ("IST") blending biomechanics and ergonomics with innovative
electronic systems and software.

      The acquisition and restructuring activity since approximately September
1997 has included the following. On September 22, 1997, the Company acquired
Drew as described in Note 4. Drew is a manufacturer, marketer and distributor of
medical footwear. The purchase of Drew was financed principally by the issuance
of 10%/13% Convertible Notes and Warrants. In December 1997 the Board of
Directors of the Company decided to sell the operations of the Ergonomic
Consulting Services Division ("ECSD") due to the inability of that business to
generate operating profits for the Company as discussed further in Note 7. In
February 1998, the Board of Directors of the Company decided to discontinue the
HumanCAD Systems Operations ("HCAD") as a result of the lack of available
financing, on acceptable terms to the Company, to further the necessary business
development activities of that division as discussed further in Note 7. In April
1998 the Company restructured the 10%/13% Convertible Notes which included
granting a 10% interest in the common stock of Drew (and also 10% of the common
stock of another subsidiary, BCAM Technologies, Inc.) to the noteholders as
further discussed in Note 5. In October 1998, the Company sold 56.7% of Drew to
the holder of the 10%/13% Convertible Notes and agreed to sell its remaining
33.3% interest in the common stock of Drew subject to approval of the
shareholders as discussed further in Note 3. In March 1999 the shareholders of
the Company approved the sale of the Company's remaining ownership in Drew.

      The Consolidated Balance Sheet at December 31, 1998 and results of
operations for each of the two years then ended reflect the Company's net
investment in Drew and results of operations of Drew as a discontinued operation
with a measurement date of October 2, 1998. Drew has been owned by the Company
since September 22, 1997 (see Note 4) and the results of operations for the year
ended December 31, 1997 reflect the results of Drew from September 22, 1997 to
December 31, 1997.

      The consolidated financial statements include the accounts of BCAM
International, Inc. and its subsidiaries, principally BCAM Technologies, Inc.
(principally IST and related technologies).

      Until the sale of a majority interest in Drew in October 1998, Drew had
been considered a "predecessor" of the Company. Subsequent to October 1998, Drew
is no longer considered a "predecessor" of the Company.

      At December 31, 1997, the Company required additional capital to fund its
activities in 1998 and made a private placement of its equity securities in
April 1998 in order to satisfy this need (see Note 6). In April 1998, the
Company and the holders of its 10%/13% Convertible Notes agreed to a
restructuring of the obligation which accelerated repayment to April 1999, among
other matters discussed in Note 5.

      Going Concern Consideration - As indicated in the accompanying
consolidated financial statements, as of December 31, 1998, the Company had
negative working capital of approximately ($1,327,000) and negative net worth of
approximately ($1,136,000), and for the year then ended had losses from
continuing operations of approximately ($3,148,000) with no material revenues.
The Company has a development agenda which requires additional financing. Losses
from continuing operations have continued since December 31, 1998. These
factors, among others, indicate that the Company is in need of significant
additional financing and/or a strategic business arrangement in order to
continue its operations through the 1999 fiscal year. The Company believes that
its cash resources at December 31, 1998 are sufficient to fund its operations
for approximately four months, assuming it receives the cooperation of its
creditors, after which (or sooner if certain creditor cooperation is not
received) it will 
<PAGE>

                    BCAM International, Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements

                                December 31, 1998

be required to raise additional capital or enter into a strategic business
arrangement in order to continue its planned operations.

      The Company's plans include undertaking a development program to
miniaturize and lower the cost of IST applications in the belief that the result
will be a more marketable product than the current IST application. The
development and subsequent marketing is a multi-year project. In order to
miniaturize and lower the cost of IST applications, the Company and MCNC
(founded in 1980 as the Microelectronics Center of North Carolina and now known
simply as MCNC) have completed an alpha prototype of a microvalve component to
control air flow in the IST system. A beta (production ready) version of the
MCNC microvalve would be the subject of further development about which the
Company and MCNC have entered into a non-binding letter of intent. The Company's
ability to perform such further development will be dependent upon its ability
to obtain sufficient financial resources or its ability to enter into a
strategic transaction which would provide the Company the resources to perform
such development. Such further development would involve costs incurred under
arrangements with MCNC as well as costs incurred by the Company. Beyond
development, the Company would require capital to commercialize, market and
sell. The Company's plans are to raise additional financing or enter into a
strategic transaction in order to proceed with the development program. These
factors, among others, indicate that in the absence of additional financing or a
strategic business arrangement, the Company does not have the financial
resources to go forward with such further development and to continue as a going
concern.

      There can be no assurances that management's plans described in the
preceding paragraph will be realized. The accompanying Consolidated Financial
Statements do not include any adjustments related to the recoverability and
classification of assets or the amounts and classification of liabilities that
might be necessary should the Company be unable to continue operations as a
going concern.

2. Summary of Significant Accounting Policies

Cash Equivalents, Financial Instruments and Concentration of Credit Risk

      The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents. Financial
instruments that potentially subject the Company to concentrations of credit
risk consist principally of cash. The Company maintains its cash in bank deposit
accounts that, at times, may exceed Federally insured limits.

Use of Estimates

      The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
footnotes. Actual results could differ from those estimates.

Revenues

      License revenues are recorded when earned under the related license
agreement.

Equipment

      Equipment is stated at cost. Depreciation is calculated using the
straight-line method over the estimated useful lives of the assets.

Other Assets

      The costs of acquiring or processing (principally professional and
government fees) patents, trademarks and other intellectual properties are
capitalized at cost. This amount is being amortized using the straight-line
method over the estimated useful lives of the underlying assets of approximately
5 years.

Research and Development

      Research and development costs are charged to operations in the period
incurred.
<PAGE>

                    BCAM International, Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements

                                December 31, 1998

Income Taxes

      The Company accounts for income taxes using Financial Accounting Standards
Board ("FASB") Statement ("SFAS") No. 109, "Accounting for Income Taxes." At
December 31, 1998, the Company has net operating loss carryforwards of
approximately $22,000,000 for income tax purposes, expiring through 2013.

      At December 31, 1998 and 1997, deferred tax assets approximating
$8,800,000 and $5,900,000, respectively, arising from the future potential
availability of net operating loss carryforwards have been offset in full by
valuation allowances in accordance with SFAS 109.

      The utilization of these losses to reduce future income taxes will depend
on the generation of sufficient taxable income prior to the expiration of the
net operating loss carryforwards. Additionally, based on ownership changes which
occurred in 1998 and 1997 and in prior years, it is expected that the annual
utilization of the otherwise available net operating loss carryforwards will be
limited by the provisions of Sections 382 and 383 of the Internal Revenue Code,
as amended. As such the Company will likely be restricted as to the utilization
of its net operating loss carryforwards. The Company believes that significant
issuances of additional stock could trigger an additional change and a new
limitation.

Net Loss Per Share

      In March 1997, the FASB issued SFAS No. 128, "Earnings per Share." SFAS
128 replaced the calculation of primary and fully diluted earnings per share
with basic and diluted earnings per share. Unlike primary earnings per share,
basic earnings per share excludes any dilutive effects of options, warrants and
convertible securities. Diluted earnings per share is very similar to the
previously reported fully diluted earnings 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. There was no effect on the Company's financial statements of
adopting SFAS 128.

Stock-Based Compensation

      In 1996, the Company adopted SFAS No. 123, "Accounting for Stock-Based
Compensation." In accordance with the standard, the Company elected to continue
to account for its stock-based compensation for employees under Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" and
related interpretations ("APB 25"). Under APB 25, because the exercise price of
the Company's stock options granted equals the market price of the underlying
stock on the date of the grant, no compensation expense is required to be
recognized except in the case of certain options issued in 1997 which are
subject to shareholder approval as discussed further in Note 6.

3. Discontinued Operations - Drew

      On October 2, 1998, the Board of Directors of the Company approved a plan
to dispose of the Company's interest in Drew (the "Plan"). Pursuant to the Plan,
on October 23, 1998, the Company entered into a Stock Purchase and Restructure
Agreement with Impleo, LLC. ("Impleo") and sold 56.7% of the outstanding shares
of its Drew subsidiary to Impleo in exchange for approximately $3,780,000
principal amount of the Company's 10%/13% Secured Convertible Notes ("Notes").
Impleo, which initially owned $5,000,000 principal amount of Notes, purchased
the remaining $1,000,000 principal amount (plus accrued interest) of Notes on
October 23, 1998, thereby making it the sole holder of the Notes. After this
transaction, the remaining principal balance on the Convertible Notes was
$2,220,000 plus accrued interest which aggregated approximately $960,000 as of
December 31, 1998 (including approximately $805,000 paid-in-kind and
approximately $155,000 accrued). The Notes are secured by all of the assets of
the Company and are due in April 1999. In April 1998, the Company had granted
Impleo and the other holders of the 10%/13% convertible notes an aggregate 10%
ownership interest in Drew. At December 31, 1998, as a result of the
transactions described above, Impleo owns approximately 66.7% of the common
stock of Drew and the Company owns the remaining 33.3%. As a condition of the
sale of the Drew shares to, and the redemption of the Notes from, Impleo,
Michael Strauss, the Chairman, President and Chief 
<PAGE>

                    BCAM International, Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements

                                December 31, 1998

Executive Officer of the Company, has become the Chief Executive Officer of
Drew. Mr. Strauss is obliged to spend a defined amount of his time on the
business of Drew. Mr. Strauss will continue to serve the Company as its
Chairman, President and Chief Executive Officer and has entered into a new
employment agreement with the Company that reduces his compensation from the
Company and requires him to spend a defined amount of his time on the Company's
business.

      Because the Company's intention is to divest itself of its entire interest
in Drew pursuant to the Plan, the Company has accounted for Drew as a
discontinued operation with a measurement date of October 2, 1998. Accordingly,
the Company reflected Drew's operations (which had been consolidated prior to
that date) and the gain from the sale of the 56.7% as separate components of
loss from discontinued operations in the accompanying Consolidated Statements of
Operations. The Company has reflected the carrying value of its 33.3% equity in
the net assets of Drew at September 30, 1998 as Net assets of minority
investment in discontinued operations - Drew, in its December 31, 1998
consolidated financial statements. The Company has been informed by Drew that
Drew's operations for the remainder of 1998 (October through December) and for
the period until its ultimate sale on March 4, 1999, are expected to generate
material losses. The Company's proportionate share of such losses would likely
be material. Generally accepted accounting principles, as reflected in Emerging
Issues Task Force Issue 85-36, indicate that such operating losses should not be
recorded when the sale transaction will generate a gain after considering such
losses since the recognition of losses in one period will generate a gain in the
next. The Company expects to report a non-cash gain (in excess of $500,000) on
the March 4, 1999 sale of the 33.3% interest in Drew after reflecting such
losses and costs of disposal and, as such, has not recorded such losses from
Drew's operations subsequent to September 30, 1998. Accordingly, the carrying
value of the Company's investment in Drew at December 31, 1998 approximates the
carrying value of Drew that would be recorded at September 30, 1998 had the
Company sold 56.7% of Drew at that date.

      The Company entered into a separate Purchase and Sale Agreement on October
23, 1998 with Impleo in which it agreed to promptly submit to its shareholders a
proposal to sell the remaining 33.3% of Drew to Impleo in exchange for the
cancellation of the then remaining principal amount of Notes together with
accrued interest thereon (the "Second Sale"). On March 4, 1999, at a Special
Meeting of Shareholders, the sale of the remaining 33.3% of Drew was approved.

      Impleo is an affiliate of Wexford Management, LLP.

      In connection with the sale and redemption transaction, the Company has
been released from its guarantee of approximately $3,800,000 of secured
obligations of Drew to a bank.

      Separately, the Company and Drew, under the Plan, have reached agreement
with the sellers of Drew to the Company in 1997 to: (i) cancel an employment
contract and enter into a severance agreement with the former president of Drew
(to be paid by Drew), (ii) cancel approximately $200,000 of notes payable by the
Company to the former owners of Drew, (iii) forgive certain purchase price
adjustments due to the Company from the former owners of Drew and the
assumption, by Drew, of certain contingent liabilities in connection with the
Ulin & Holland litigation (such litigation is discussed in Note 8).

      Also see Note 8 regarding a shareholder derivative action commenced in
February 1999 regarding this matter.

      The following summary shows the selected balance sheet information at
September 30, 1998 (unaudited) and the results of operations for the nine months
ended September 30, 1998 (unaudited) and for the period from September 23, 1997
(date of acquisition) to December 31, 1997 for Drew.

      Drew's balance sheet consisted principally of the following at September
30, 1998 (unaudited):
<PAGE>

                    BCAM International, Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements

                                December 31, 1998

      Cash                                            $         0
      Accounts receivable                               1,876,000
      Inventories                                       6,681,000
      Other current assets                                205,000
                                                      -----------
           Total current assets                         8,762,000
      Property and equipment, net                       3,033,000
      Other assets                                        334,000
                                                      -----------
           Total assets                               $12,129,000
                                                      ===========

      Current portion of secured bank debt            $ 3,370,000
      Accounts payable                                  1,119,000
      Accruals and other current liabilities            1,002,000
                                                      -----------
         Total current liabilities                      5,491,000
      Long-term debt                                    1,121,000
                                                      -----------
         Total liabilities                              6,612,000
      Stockholders' equity                              5,517,000
                                                      -----------
         Total liabilities and stockholders' equity   $12,129,000
                                                      ===========

            The above unaudited balance sheet information of Drew does not
      reflect the "push down" of the acquisition debt of the Company utilized to
      purchase Drew. After reflecting such obligation, Drew's Stockholders'
      Equity would be a deficit of in excess of ($1,000,000).

      Statement of operations data for Drew (unaudited):

                                                   For the nine        From
                                                   months ended   September 23 -
                                                   September 30,   December 31,
                                                       1998            1997
                                                   ------------    -----------
      Revenues                                     $ 11,643,000    $ 3,800,000
                                                   ------------    -----------
      Gross profit                                    4,931,000      1,601,000
                                                   ------------    -----------
      Operating profit                                  708,000        115,000
                                                   ------------    -----------
      Interest expense, net                            (320,000)      (104,000)
                                                   ------------    -----------

      Income before Minority interests and
         corporate financing costs                      387,000          9,000
                                                   ------------    -----------
      Minority interests                                (35,000)             0
                                                   ------------    -----------
      Acquisition financing charges:
        Interest and financing costs                 (1,275,000)      (376,000)
        Write-off debt discount & financing costs    (1,651,000)             0
        Charge for beneficial conversion             (4,509,000)    (1,754,000)
                                                   ------------    -----------
                 Total                               (7,435,000)    (2,130,000)
                                                   ------------    -----------
      Net loss                                     $ (7,083,000)   $(2,121,000)
                                                   ============    ===========

      Certain of the more relevant accounting policies and disclosures which are
specific to Drew have been condensed to include the following:

      Revenues - Revenues from wholesale medical footwear sales are recognized
at the time products are shipped. Revenue from retail medical footwear sales
through Company-owned retail operations are recognized at the point of sale.
<PAGE>

                    BCAM International, Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements

                                December 31, 1998

      Inventories - Inventories at Drew are stated at the lower of cost,
determined on a first-in, first-out basis, or market.

      Property and Equipment - Property and equipment are stated at cost.
Depreciation is calculated using the straight-line method over the estimated
useful lives of the assets.

      Inventories - Drew's inventories consisted of the following at September
30, 1998 (unaudited):

                  Raw materials                        $  845,000
                  Work in process                         967,000
                  Finished goods                        4,869,000
                                                       ----------
                  Total                                $6,681,000
                                                       ==========

      Property and equipment - Drew's property and equipment consisted of the
following at September 30, 1998 (unaudited) and were depreciated and amortized
utilizing the estimated useful lives indicated below:

                                            Range of
                                           Estimated
                                        Useful Lives
                                        ------------
      Land                                                 $  138,000
      Buildings and improvements         10-35 years          766,000
      Equipment                           5-10 years        2,464,000
                                                           ----------
      Total                                                 3,368,000
                                                           ----------
      Less accumulated depreciation                          (335,000)
                                                           ----------
      Total                                                $3,033,000
                                                           ==========

      Bank Debt - On December 10, 1998, Drew was notified by the commercial bank
with which it has the Term loan and Revolving credit relationship described in
Note 5 that such bank believes there is a "pending default" of such Term loan
and Revolving credit. The commercial bank cites its view that there has been a
"material adverse change" at Drew and that they anticipate violation of the debt
service covenant at December 31, 1998 when Drew's financial statements for the
year ended December 31, 1998 are prepared. Drew is discussing this matter with
the commercial bank.

      Litigation - In January 1998, a third party filed suit against Drew
alleging that it is due a fee of not less than $297,000 in connection with
Drew's sale to the Company. Drew disputes this claim and intends to vigorously
defend this action.

      Significant customer - One customer accounted for approximately 12% and
11% of Drew's revenues for the nine months ended September 30, 1998 (unaudited)
and the year ended December 31, 1997, respectively.

4. Acquisition of Drew -

      Effective September 22, 1997, the Company acquired all of the outstanding
common stock of Drew for approximately $4,700,000 plus the assumption of
liabilities. The purchase price was paid by delivery to the shareholders of Drew
of an aggregate of $3,882,000 in cash, promissory notes in the aggregate
principal amount of $400,000 (see Note 5) and by delivery of an aggregate of
375,000 unregistered shares of the Company's common stock (valued at
approximately $1.20 per share to reflect a discount for lack of registration).
The promissory notes bear interest at 8% per annum, are due on September 19,
1999, and are payable in twenty-four (24) equal monthly installments aggregating
$8,333.34 (plus interest) with final payments due in the twenty-fifth (25th)
month aggregating $200,000 (see, however, Notes 3 and 5).

      See Note 5 for a description of the securities issued in order to finance
the acquisition of Drew.
<PAGE>

                    BCAM International, Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements

                                December 31, 1998

      Simultaneously with the acquisition, Drew entered into a credit facility
with a commercial bank which is further described in Note 5 and was guaranteed
by the Company (see Note 3).

      Drew is a designer, manufacturer, marketer and distributor of medical
footwear headquartered in Lancaster, Ohio. In addition, Drew operates specialty
retail shoe stores. The Company has accounted for its acquisition of Drew under
the purchase method of accounting. Under such method, the purchase price paid
plus costs of the acquisition are allocated to the assets and liabilities of the
acquired company based on the estimated fair value of assets and liabilities
acquired. The remaining amount, if any, is allocated to goodwill. The results of
operations of Drew are consolidated with the Company's operations beginning on
the date of purchase. At December 31, 1997, a preliminary estimate of the fair
value of assets and liabilities had been made based upon certain appraisals and
other data that was preliminary and subject to change. Based upon such
preliminary evaluation at December 31, 1997, approximately $21,000 of goodwill
had been recorded in connection with the acquisition of Drew. In September 1998,
the preliminary evaluation was finalized and goodwill was recorded at
approximately $421,000. The increase in goodwill resulted from increasing
liabilities by approximately $200,000 and reducing the value of inventories by
approximately $200,000.

      The following summary shows the unaudited pro-forma results of operations
for the year ended December 31, 1997 assuming that the Company had purchased
Drew as of January 1, 1997. This information gives effect to the increased
interest and financing costs (excluding certain material non-recurring charges
that are discussed in Note 5) and the amortization of fair value adjustments
(principally for increased depreciation). The Company has not included a
provision for income taxes because it believes that it would have sufficiently
available net operating losses available to offset anticipated profits from
Drew. This summary may not be indicative of what the actual results of
operations would have been had the purchase occurred at the beginning of the
period shown.

                                                          1997
                                                     ------------
      Revenues                                       $ 15,083,000
                                                     ------------
      Loss from operations                           $ (1,321,000)
                                                     ------------
      Loss from continuing operations (excluding
          non-recurring charges)                     $ (2,905,000)
                                                     ------------
      Net loss (excluding non-recurring charges)     $ (4,280,000)
                                                     ------------
      Net loss per share (excluding non-recurring)   $      (0.26)
                                                     ------------

5. Long Term Debt and Convertible Notes

      Secured 10%/13% Convertible Notes and Warrants - In order to fund the
acquisition of Drew and provide working capital to the Company, on September 19,
1997, the Company issued convertible notes (the "Convertible Notes"), and
Non-Redeemable Class DD Warrants to purchase 2,400,000 shares of common stock of
the Company at $1.75 (subject to the operation of certain antidilution
provisions) prior to September 19, 2002, in the aggregate amount of $6,000,000.
The Convertible Notes bear an interest rate of 10%, payable semi-annually, but
the Company, at its discretion, may pay interest in the form of additional
Convertible Notes ("payment-in-kind") in which case the annual interest rate
becomes 13% with semi-annual compounding. The Convertible Notes required the
Company to maintain compliance with certain financial covenants including
maintenance of minimum levels of interest coverage and net worth (as defined).
At December 31, 1997, the Company was in violation of such covenants and the
Convertible Notes were subsequently restructured as described in the second
succeeding paragraph. On March 19, 1998 and on September 19, 1998, the Company
elected to make the semiannual interest payment in kind. As such, the Company
increased the related obligation under the Convertible Notes to $6,805,350.

      The Convertible Notes are due, as amended (see below), on April 16, 1999,
unless at any time after September 19, 1998 they are converted, as amended, at
$.80 per share, into 7,500,000 shares of Common Stock of the Company (subject to
the operation of antidilution provisions to certain transactions including the
April 1998 financing described in Note 6 and related "repricings" and other
potential financings). 
<PAGE>

                    BCAM International, Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements

                                December 31, 1998

      On April 14, 1998, the noteholders and the Company entered into the First
Amendment of the Note Purchase Agreement (together with a Stock Pledge Agreement
and Security Agreement) in order to restructure the obligation. The key elements
of the restructuring are as follows: (1) waiving of the Company's violations of
the financial covenants at December 31, 1997 (as well as certain other breaches
of the agreement), (2) eliminating the financial covenants through April 16,
1999, (3) securing the obligation with a pledge of all of the assets of the
Company (excluding the assets of Drew which are already pledged to a bank),
including the stock of the Company's subsidiaries, (4) accelerating the maturity
date for the obligation from September 19, 2002 to April 16, 1999, (5)
cancellation of Class DD warrants to purchase 400,000 shares of common stock of
the Company, (6) issuance to the holders of a total of 10% of the common shares
of the Company's subsidiaries, Drew Shoe Corporation and BCAM Technologies, Inc.
As a result of the restructuring, the Company had a significant capital
requirement to repay this obligation ($6,805,350 including interest "paid in
kind" on March 19, 1998 and September 19, 1998, respectively, and before
additional interest payments in cash or in kind subsequent to that date) by
April 19, 1999 or face default and foreclosure on the security. The Company's
intention has been to refinance or otherwise restructure this obligation prior
to its maturity. 

      During 1998 the Company reflected an aggregate of approximately $2,500,000
of charges to operations and/or stockholders' equity in connection with the
restructuring of the debt. Such charges included: (i) approximately $1,651,000
to write-off interest and finance costs as further described in the second
following paragraph, (ii) approximately $552,000 charged to extraordinary item
representing the approximate value of the 10% interest in subsidiaries given up
and (iii) approximately $281,000 charged to shareholders' equity representing
the unamortized portion of the amounts assigned to the value of the 400,000
Class DD warrants given up by the holders of the Convertible Notes.

      As discussed in Note 3, on October 23, 1998, the Company agreed with the
holders of the Convertible Notes to redeem $3,780,000 principal amount of
Convertible Notes in exchange for 56.7% of the common stock of Drew. Further,
the parties agreed that the Company would request shareholder approval to redeem
the remaining approximately $2,220,000 principal amount of Convertible Notes
together with paid-in-kind and accrued interest in exchange for the remaining
33.3% of the common stock of Drew owned by the Company. On March 4, 1999, at a
Special Meeting of Shareholders, the proposal to sell the remaining 33.3%
interest in Drew was approved by the shareholders.

      The Company originally recorded approximately $1,872,000 of the $6,000,000
received from the sale of the Convertible Notes and Warrants as the estimated
value (based upon a "Black Scholes" calculation) of the detachable warrants
issued in connection with the Convertible Notes resulting in a discount to the
value assigned to the Convertible Notes. Additionally, the Company originally
recorded approximately $825,000 in deferred financing costs in connection with
the issuance of the Convertible Notes. The $1,872,000 in debt discount and
$825,000 of deferred finance costs were being charged to interest and financing
costs over the 60 month term of the Convertible Notes. As discussed above, in
April 1998, the Company and the holders of the Convertible Notes agreed to
shorten the maturity of the Convertible Notes from September 2002 to April 1999.
Under generally accepted accounting principles the Company recorded a charge to
interest and financing costs during 1998 for the amortization of this discount
and these costs that would have occurred during the 41 months that have been
shortened from the original maturity ($1,651,000).

      The private placement of convertible notes and warrants to one investor
group (aggregating $5,000,000 of the total $6,000,000) was made with the
assistance of an investment banker who charged a cash fee of 6% ($300,000) plus
187,500 unregistered shares of common stock (valued at $1.20 per share to
reflect a discount for lack of registration), and Class EE warrants to purchase
500,000 shares of common stock at an exercise price of $0.80 per share, of the
Company. The cash fee, shares of stock and the estimated fair value of the
warrants aggregate approximately $1,025,000. This amount has been apportioned
between deferred financing costs (discussed in the preceding paragraph), and
acquisition costs of Drew. The portion allocated to deferred financing costs
(approximately $775,000), together with legal and other costs of the transaction
are being amortized over the term of the Convertible Notes. There were no
investment banking fees associated with the remaining $1,000,000 of proceeds.
<PAGE>

                    BCAM International, Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements

                                December 31, 1998

      Remaining debt discount and deferred financing costs in connection with
the transaction are being amortized over the remaining term of the Convertible
Notes.

      The market value of the Company's common stock on The Nasdaq SmallCap
Market on September 19, 1997 was approximately $1.50 at the inception of the
Notes and approximately $1.25 and $0.25 at March 19, 1998 and September 19,
1998, respectively, (when additional Convertible Notes were issued as
payment-in-kind for interest).

      In response to positions recently taken by the Securities and Exchange
Commission, Emerging Issues Task Force Statement D-60 has been issued. Statement
D-60 requires certain accounting for securities issued which are convertible
into common stock at a value which is "beneficial" at the date of issuance (such
as the Convertible Notes). This accounting requires that the beneficial value be
charged to operations (based upon the traded market price, without discount,
compared to the conversion price) in the case of a convertible note, over a
period reflecting the shortest period in which the investor has to exercise and
under the most favorable terms to the investor. As such, the Company has charged
approximately $5,925,000 at September 19, 1997, an additional $219,000 at March
19, 1998 and no additional amount at September 19, 1998, to Unamortized Charge
for Beneficial Debt Conversion in the shareholders' equity section of its
Consolidated Balance Sheet. Such amounts represent the value of the beneficial
debt conversion feature of the Convertible Notes measured at the date of
issuance in September 1997 and for the payment-in-kind in March 1998. These
amounts were charged to Interest and financing costs of discontinued operations
in the Consolidated Statements of Operations for approximately $4,509,000 and
$1,635,000, respectively, during the years ended December 31, 1998 and 1997.
This charge to operations is considered a non-recurring charge in the
preparation of the summary pro-forma data contained in Note 4.

      At December 31, 1998, long term debt, principally associated with
discontinued operations - Drew, consists of the following:

      10%/13% Convertible Notes, original face amount 
      $2,220,000 plus interest payments-in-kind of $805,350, 
      net of approximately $42,350 of unamortized debt 
      discount, with interest payable on March 19, 1999,
      due April 16, 1999 unless earlier converted                  $2,983,000

      Notes payable to sellers of Drew, bearing interest
      at 8%, with monthly payments of principal aggregating
      $8,333 plus interest and balloon payments aggregating
      $200,000 (which were forgiven as part of the sale of Drew
      described in Note 3) due on September 19, 1999 (a)               75,000
                                                                   ----------
      Total long term debt                                          3,058,000

      Less: current portion                                         3,058,000
                                                                   ----------
                                                                   $        0
                                                                   ----------

      (a) In February 1999, the Company advised the Noteholders that the January
1999 monthly payment of principal and interest would not be made and that future
monthly payments would similarly not be made until and unless the Company
obtained new financing. The Company requested the Noteholders' forbearance.

      Secured bank debt of Drew (See also, Notes 3 and 4) - Simultaneously with
the acquisition of Drew, the Company through its wholly-owned subsidiary, Drew,
entered into a credit facility with a commercial bank consisting of: (i) a
revolving line of credit up to $4,500,000 (which is based upon agreed upon
percentages of accounts receivable and inventory) and (ii) a term loan of
$1,000,000. As of the date of the Drew acquisition, the Company believed there
was approximately $4,500,000 available under this credit facility (approximately
$3,750,000 of which was drawn down to pay certain existing liabilities of Drew,
including an existing liability to that bank of approximately $2,655,000,
debentures payable to former shareholders of approximately $845,000, and to
transfer $250,000 to the Company). The revolving line of credit matures on
September 30, 1999, and calls for current payments of interest at a rate of
prime plus 1.5% (9.25% and 10% at December 31, 1998 and 1997, 
<PAGE>

                    BCAM International, Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements

                                December 31, 1998

respectively). The term loan portion of the credit facility (in the principal
amount of $1,000,000) also bears an interest rate of prime plus 1.5% (9.25% and
10% at December 31, 1998 and 1997, respectively) and is payable in monthly
installments through September 30, 2000 with a payment due at that time of
$583,000. Both the revolving line of credit and term loan may be used for
general working capital purposes and were guaranteed by the Company until
October 1998 (see Note 3). The credit facility with this bank requires Drew to
maintain compliance with certain financial covenants, principally net worth, and
contains restrictions on the transfer of cash to the Company.

Costs incurred in connection with the bank term loan and revolving credit
totaling approximately $75,000 are included in other assets as deferred finance
costs and are being amortized to interest and financing costs using the
effective interest method over a two year period ending September 19, 1999.

6. Shareholders' Equity

      1998 Private placement of common shares, subject to "repricing", and
warrants - Beginning on April 14, 1998, the Company commenced a private offering
of its common stock and warrants. The offering generated aggregate proceeds of
$2,000,000 from the purchase of 1,980,198 shares of common stock of the Company
subject to "repricing", as described below, and warrants to purchase 250,000
shares of common stock at $2.05 for three years by seven accredited investors.
The Company has agreed to, and did, register such shares.

      The number of shares issuable to these investors will be "repriced"
pursuant to a schedule in two $300,000 increments and then in seven $200,000
increments on eight occasions commencing with the effectiveness of a
registration statement (August 13, 1998) covering the up to 4,000,000 shares and
again 60 days later and then in 30 day intervals. On such dates, the investor
would receive the additional number of shares, if any, that result from the
difference between the number of shares actually issued and the number of shares
which would have been issued using a 23% discount to the market price, as
defined, at that time. The operation of this provision could result in
significantly greater number of shares being issued. The Company paid a
placement agent a fee of 6.5% with respect to this transaction.

      In August 1998, 436,047 shares were issued in connection with the
"repricing" provisions and very significant additional shares (estimated to be
in excess of 5,000,000 shares) would be required to be issued for the October,
November and December 1998 "repricing" dates.

      On December 24, 1998, the Company and the investors agreed to amend the
subscription agreement with respect to "repricing". The December 24, 1998
amendment has four principal effects as follows: (i) the August, October,
November and December 1998 "repricings" are eliminated in favor of new
"repricings" which began on January 1, 1999, (ii) the discount from market used
to measure the "repricings" was increased from 23% to 27% (iii) a ceiling price
was established of $0.75 per share and (iv) certain penalties under the
agreement were waived. Under the amended agreement, the investors, at their
option, may reprice up 12 1/2% of the amount invested (an aggregate of $250,000
based upon the original $2,000,000 invested in April 1998) on the first of each
month beginning with January 1, 1999. Any amounts not "repriced" in any month
may be carried over to any future month without limitation.

      In connection with the amendment, the Company will issue additional shares
to the investors to bring the total shares from 1,980,198 originally purchased
up to 2,666,667 shares (inclusive of the 436,047 shares issued in August 1998 as
discussed in the preceding paragraph) based upon the $0.75 ceiling price in the
amendment.

      Additionally, these investors requested a "repricing" of $190,000 of the
offering in January 1999 which resulted in the issuance to them of an additional
2,259,827 shares on January 27, 1999. Of the total dollar amount of the
offering, only this $190,000 of the $2,000,000 proceeds of the offering has been
"repriced" leaving $1,810,000 still to be "repriced" at the holders' option. The
"repricing" of this amount ($1,810,000), if requested by the investors, at
market prices for the Company's stock in March 1999 would result in a very
significant number of additional shares being issued and in a change of control
of the Company to these investors. The Company is in discussions with the
representatives of the investors to restructure the "repricing" provisions in
light of the very significant effects that would result at current prices of the
Company's common stock.
<PAGE>

                    BCAM International, Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements

                                December 31, 1998

      The Company is exposed to significant penalties for failure to file a
registration statement covering additional shares with respect to possible
"repricings" by April 15, 1999 and to have such registration statement declared
effective prior to July 31, 1999 and has agreed not to issue certain financings.
As a practical matter, the Company expects that it will be unable to file such
registration statements when required as a result of the financial and liquidity
concerns discussed in Note 1. As such, the Company is attempting to renegotiate
such penalties also. If it is not successful, such penalties will begin to
accrue in April 1999.

      1997 Sale of Convertible Preferred Stock of Subsidiary - On July 22, 1997,
September 8 and September 18, 1997, BCA Services, Inc. ("BCA"), previously
wholly-owned by the Company, sold 120 shares of BCA's Convertible Preferred
Stock (the "Preferred Stock") for an aggregate consideration of $1,200,000 in
two private offerings to accredited investors.

      The Preferred Stock is convertible into shares of the Company's common
stock at a price equal to a fixed discount (30%) of the average closing bid
price of the common stock over a period of time ending on the day preceding the
conversion date and subject to a ceiling price.

      In addition, for 100 of the shares of Preferred Stock sold, the Company
issued Non-Redeemable Class BB Warrants to purchase 50,000 shares of common
stock at $0.72 per share. For 20 shares of Preferred Stock sold, the Company
issued Non-Redeemable Class CC Warrants to purchase 10,000 shares of common
stock at $1.03 per share. The Class BB and CC Warrants have a term of five years
and the underlying common stock has been registered by the Company.

      The two private placements of BCA Preferred Stock were made with the
assistance of a placement agent. The placement agent charged a commission of 8%
in fees and 2% in expenses, plus warrants to purchase 50,000 shares of common
stock of the Company at approximately $0.72 per share for five years, for the
first offering ($1,000,000). The placement agent charged 6% in fees and no
warrants for the second offering ($200,000).

      At December 31, 1997, $500,000 of the Preferred Stock had been converted
into 706,226 common shares of the Company at a weighted average conversion price
of approximately $0.71. During 1998, the remaining $700,000 of the Preferred
Stock has been converted into 1,066,585 shares of common stock at $0.66 per
share resulting in the transfer of $618,000 of minority interest at December 31,
1997 into shareholders' equity.

      See Note 5 for a discussion of certain accounting treatment called for by
Emerging Issues Task Force Statement D-60 for securities issued which are
convertible into common stock at an amount which is "beneficial". Because the
Preferred Stock issued is that of a subsidiary, but is convertible into shares
of the Company, the Company has recorded the Preferred Stock of the subsidiary
as "Minority interest" in the consolidated financial statements until its
conversion into common stock of the Company. The "beneficial" conversion
feature, therefore, has been charged to Minority interests (approximately
$788,000) in the accompanying Consolidated Statement of Operations for the year
ended December 31, 1997. Such amount is considered a non-recurring charge in
preparation of the summary pro forma data in Note 4.

      1997 Sale of common stock and warrants of the Company - In January 1997,
the Company commenced an offering and ultimately sold 1,075,000 equity units
(each consisting of one share of the Company's common stock and one
non-redeemable Class AA warrant) for $1,075,000. The Class AA warrants, as
amended, entitle the holder to purchase one share of the Company's common stock
at $0.65 per share until March 31, 2002. During 1998, warrants to purchase
100,000 shares were exercised.

      Authorized shares/Shares reserved for future issuance - At the annual
meeting of shareholders on February 19, 1998 (including an adjournment to March
16, 1998), the shareholders of the Company approved an increase in the
authorized shares of common stock from 40,000,000 shares to 65,000,000 shares.
Additionally, the shareholders approved the adoption of changes to the bylaws of
the Company to, among other matters, permit the Board of Directors to issue up
to 2,000,000 shares of Preferred Stock of the Company on terms to be set by the
Board of Directors.
<PAGE>

                    BCAM International, Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements

                                December 31, 1998

      The Company is also authorized to issue up to 750,000 shares of its
acquisition preferred stock, $.01 par value, none of which are presently issued
and outstanding. The acquisition preferred stock is permitted to be issued
pursuant to (i) a statutory merger or consolidation in 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 Board of Directors
is authorized to fix, before issuance, the voting powers, designations,
preferences and other rights, qualifications, limitations and restrictions
applicable to each series of acquisition preferred stock. Common shares reserved
for future issuance as of December 31, 1998, adjusted in the case of the 1998
stock option plan for the February 1998 increase to the shares available under
such plan, are approximately as follows:

<TABLE>
<S>                                                                                 <C>  
      Units sold in public offering in 1990:
         Class B warrants, subject to antidilution, expired in October 1998 .....         none
         Class E warrants, subject to antidilution, expired in October 1998 .....         none
         Unit Options, expired in 1997 ..........................................         none
      Conversion feature of 10%/13% Convertible Notes, subject to
         antidilution and "pay in kind" provisions, extinguished in March
         1999 upon repayment of the related Convertible Notes ($0.80, 1999
         see Note 5) ............................................................    3,782,000
      Third party options (see information below) ...............................    1,850,000
      1989 Stock Option Plan (400,000 expiring in 1999, see below) ..............      428,000
      1989 Nonstatutory Plan (expiring in 1999, see below) ......................       25,000
      1995 Stock Option Plan (as amended in 1998, see below) ....................    8,000,000
      Warrants issued in private placements:
           Class C warrants, expired during 1997 ................................            0
           Class D warrants, expired during 1997 ................................            0
           Class AA warrants ($0.65, 2002, see above) ...........................      975,000
           Class BB warrants ($0.72, 2002, see above) ...........................      100,000
           Class CC warrants ($1.03, 2002, see above) ...........................       10,000
           Class DD warrants ($1.75, 2002, see above) ...........................      740,000
           Class EE warrants ($0.80, 2002 see Note 5) ...........................      500,000
                                                                                    ----------
                                                                                    16,410,000
                                                                                    ----------
</TABLE>

      Class B and Class E Warrants - The Company's Class B warrants were issued
in connection with a 1990 public offering of securities of the Company. The
Class E Warrants were issued in connection with a "Discounted Warrant Plan"
offered to holders of the Class A Warrants (all of which have been exercised or
expired) and Class B Warrants issued in connection with the public offering in
1990. The Class B and Class E Warrants were exercisable and were due to expire,
as amended, and did expire on October 17, 1998. Such warrants were subject to
anti-dilution provisions which were triggered by certain of the financings
completed in 1997.

      Stock Options

      In June 1995, the shareholders of the Company approved the adoption of the
1995 Stock Option Plan (the "1995 Plan"). The 1995 Plan supercedes and closes
all prior option plans and provides for the granting of incentive stock options
("ISOs") and/or nonqualified stock options to employees, directors or
consultants of the Company to purchase an aggregate of 8,000,000 shares, as
amended by a vote of the shareholders in February 1998, of the Company's common
stock. The option price per share for ISOs granted under the 1995 Plan shall not
be less than the fair market value of the Company's common stock on the date of
grant. Options vest and are exercisable over various periods up to ten years
from the date of grant. No option may be granted under the 1995 Plan after June
2005. At December 31, 1998, there were 2,585,500 shares available for granting
of future options.

      In 1989, the shareholders of the Company approved the adoption of a 1989
Stock Option Plan (the "1989 Plan"). The 1989 Plan provided for the granting of
incentive stock options and/or nonqualified stock options to key employees and
consultants to purchase shares of the Company's common stock at a price per
share not less than the fair market value on the date of grant. In 1992, the
Plan was amended to: (a) increase the number of shares to 
<PAGE>

                    BCAM International, Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements

                                December 31, 1998

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 and are
exercisable over various periods up to six years from the date of grant.

      In 1989, the Company also adopted a Nonstatutory Stock Option Plan (the
"1989 Nonstatutory Plan") for directors and outside consultants. Under the 1989
Nonstatutory Plan, the Company could grant options for the purchase of an
aggregate of 355,000 shares of common stock at not less than fair market value
at the date of grant. Pursuant to the terms of the 1995 Plan, no options may be
granted under the 1989 Plan or the 1989 Nonstatutory Plan subsequent to June 22,
1995.

      Option activity during each of the two years ended December 31, 1998 for
the 1989 Plan and the 1989 Nonstatutory Plan is summarized as follows:

<TABLE>
<CAPTION>
                                       1989 Nonstatutory Plan                          1989 Plan
                                        Shares Under Option                        Shares Under Option
                                  ---------------------------------------------------------------------------
                                                                                        Weighted
                                                       Number                            Average      Number
                                   Option price          of         Option price per    Exercise        of
                                     per share         Shares             share           Price       Shares
                                  ---------------------------------------------------------------------------
<S>                               <C>                  <C>           <C>                  <C>         <C>    
Balance at January 1, 1997                             100,000                            $1.94       432,000
Exercised                                  $1.13       (25,000)                                            --
Cancelled/expired                 $1.10 to $1.13       (50,000)                                            --
                                                      --------                                       --------
Balance at December 31,1997                             25,000                            $1.94       432,000
                                                      --------                                               
Exercised                                                    0                                             --
Cancelled/expired                                            0       $0.92 to 3.1875                  (18,000)
                                                      --------                                       --------
Balance at December 31,1998              $1.6875        25,000                            $1.94       414,000
                                                      ========                                       ========
</TABLE>

Option activity during each of the two years ended December 31, 1998 for the
1995 Plan is summarized as follows:

                                                     1995 Plan
                                               Shares Under Option
                              -------------------------------------------------
                              Option price per       Weighted           Number
                                    share             Average             of
                                                  Exercise Price        shares
                              -------------------------------------------------
Balance at January 1, 1997                             $1.04          1,755,500
Granted                         $0.75 to $1.52         $1.09          3,984,000
Cancelled/expired               $0.92 to $1.68         $1.17            (55,000)
                                                                      ---------
Balance at December 31,1997                            $1.04          5,684,500
Granted                                                                       0
Cancelled/expired               $0.75 to $1.52                         (270,000)
                                                                      ---------
Balance at December 31,1998                            $1.03          5,414,500
                                                                      =========

      Of the options issued in 1997, options to purchase approximately 3,684,500
shares were issued subject to approval of the Company's shareholders of an
increase in the number of shares available for grant under the 1995 plan. Such
approval was received in February 1998. Generally accepted accounting principles
require, under circumstances which apply to the Company, that a charge to
compensation expense be made if the market value 
<PAGE>

                    BCAM International, Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements

                                December 31, 1998

of the stock on the date of shareholder approval exceeds the market value on the
date of grant. The closing bid price of the Company's common stock on the date
of the shareholder vote was approximately $1.41. Options to purchase
approximately 1,800,000 shares were granted at market prices at the date of
grant that were below the $1.41 fair market value at the date of shareholder
approval. As a result, the Company has recorded a charge to compensation expense
of approximately $1,144,000 (including approximately $286,000 related to
discontinued operations) during the year ended December 31, 1998.

      Primarily as a result of the acquisition activity of the Company, 550,000
fully vested nonstatutory stock options were granted to eight investment bankers
and other vendors who, as third parties, are outside of the 1995 Plan, as
amended. Of the 550,000 options, all of which are exercisable for periods of
from two to ten years, options for 375,000 shares are exercisable at a price of
$0.75 per share and options for 175,000 shares are exercisable at a price of
$1.52 per share.

      During 1996, the Company granted 100,000 fully vested nonstatutory stock
options at fair market value to a third party, which are exercisable for a
period of ten years at a price of $1.17 per share. In addition, during 1995, the
Company granted 300,000 fully vested nonstatutory stock options at fair market
value to a third party, which are exercisable for a period of eighteen months at
a price of $1.05 per share, and 5,000 nonstatutory stock options at fair market
value to a third party, which were cancelled in 1996. Further, in 1994 the
Company granted 100,000 nonstatutory stock options at fair market value to a
third party, which vest ratably over two years and are exercisable for a period
of five years at a price of $1.69 per share. In 1998, the Company issued five
year options to purchase 800,000 shares to consultants with exercise prices
approximating $0.08 per share. At December 31, 1997, approximately 1,850,000 of
these options are outstanding.

      The Company recorded a charge to selling, general and administrative costs
of approximately $311,000 and $175,000, respectively, for the years ended
December 31, 1998 and 1997 related to the estimated fair value of the options
granted to consultants.

      Pro forma information regarding net income and earnings per share is
required by SFAS 123, "Accounting for Stock-Based Compensation" which requires
that the information be determined as if the Company has accounted for its stock
options granted subsequent to December 31, 1994 under the fair value method of
that statement. The fair value for these options was estimated at the date of
the grant using a Black-Scholes option pricing model. The Company's pro forma
information follows:

<TABLE>
<CAPTION>
                                                December 31,    December 31,
                                                   1998             1997
                                               ------------    ------------
<S>                                            <C>             <C>          
            Pro forma net loss:
                     Continuing operations     $ (3,947,000)   $ (2,874,000)
                     Discontinued operations     (8,489,000)     (3,497,000)
                                               ------------    ------------
                     Total                     $(12,436,000)   $ (6,371,000)
                                               ============    ============
            Pro forma net loss per share:
                     Continuing operations     $       (.20)   $       (.18)
                     Discontinued operations   $       (.43)   $       (.22)
                                               ------------    ------------
                     Totals                    $       (.63)   $       (.40)
                                               ============    ============
</TABLE>

      The fair value of these options at the date of the grant was estimated
with the following weighted average assumptions for 1998 and 1997: risk free
interest rates ranging from 4.7% to 6.36%, no dividend yield, volatility factor
of the expected market price of the Company's common stock ranging from 49% to
76%, and a weighted average expected life of the options ranging from five to
ten years. Because Statement 123 is applicable only to options granted
subsequent to December 31, 1994 and employee stock options granted vest over a
period from one to four years, its pro forma effect will not be fully reflected
in pro forma net loss.
<PAGE>

                    BCAM International, Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements

                                December 31, 1998

      The following table summarizes information about stock options, including
those to third parties, outstanding at December 31, 1998:

<TABLE>
<CAPTION>
                              Options Outstanding                    Options Exercisable
                 --------------------------------------------     -------------------------
                     Number      Weighted Average    Weighted         Number       Weighted
                 Outstanding at      Remaining        Average     Outstanding at    Average
   Range of       December 31,      Contractual      Exercise       December 31,   Exercise
Exercise Price        1998              Life           Price           1998          Price
-------------------------------------------------------------------------------------------
<S>                <C>               <C>               <C>           <C>             <C>  
$0.08-$0.10          800,000         5 years           $0.09           800,000       $0.09
$0.75-$2.00        6,874,500         6.5 years         $1.10         5,665,000       $1.00
$2.01-$3.22          204,000         0.3 years         $2.65           204,000       $2.65
-------------------------------------------------------------------------------------------
$0.08-$3.22        7,878,500         6.5 years         $1.00         6,669,000       $1.00
===========================================================================================
</TABLE>

      The weighted average fair value of all stock options granted in $0.08 per
share in 1998 and $0.63 per share in 1997.

7. Other Discontinued Operations

Ergonomic Consulting Services Division - In December 1997, the Board of
Directors of the Company approved a plan to sell the operations of its Ergonomic
Consulting Services Division ("ECSD"). ECSD has not generated operating profits
and was no longer considered a core asset in light of the Company's strategy.
The plan of disposition involved finding a strategic buyer who would take over
the Company's contractual commitments (some of which are long-term) to
consulting division customers and liquidating the remaining assets through
collection (with respect to receivables) or sale or disposal (with respect to
furniture and equipment). On February 9, 1998, the Company closed on the sale of
the revenue contract rights and transfer of the obligations for certain related
personnel of the ECSD to a third party. Terms of the sale call for the payment
of a portion of future revenues of the contracts sold as well as a portion of
certain follow-on work, or referrals for work provided by the Company. At
December 31, 1997, assets of the ECSD were approximately $155,000, consisting
principally of billed and unbilled receivables, and liabilities were
approximately $76,000 consisting principally of trade payables. The operations
of the ECSD from January 1, 1998 through disposal on February 9, 1998 did not
generate a loss due to the high utilization of personnel on contracts during
that time. Approximately $50,000 was accrued in the December 31, 1997 financial
statements as a loss on disposal representing management's estimate of the
write-off of furniture and equipment and accrual of certain lease costs. There
was no material severance paid in connection with the discontinuance of the
ECSD. Assets of ECSD at December 31, 1998 were immaterial. Revenues, gross
margin and loss from operations for ECSD operations (exclusive of provision for
loss on disposal of approximately $50,000 in 1997) are approximately the
following for the year ended December 31, 1997:

                  Revenues                   $  467,000
                  Gross Margin               $  183,000
                  Loss from operations       $ (326,000)

Royalties from the sale of ECSD of approximately $13,000 in 1998 are included
with interest and other income in the accompanying consolidated financial
statements.

      HumanCAD Systems Operations - During late February 1998, as a result of
specific events at the time, the Board of Directors of the Company approved a
plan to seek alternative value for the HumanCAD Systems operations ("HCAD") by:
(i) initially reducing the activity and (ii) seeking a strategic or management
buyer for the operation.

      In December 1997, the Company had reached preliminary agreement with a
funding source to provide approximately $2,500,000 for development and marketing
of the Company's existing and planned HCAD ergonomic modeling software products.
In January 1998, the Company commenced executing the business plan contemplated
by the financing but in late February 1998, the funding source advised the
Company that they were no longer willing to go forward with the planned
financing. The Company was unsuccessful in seeking a strategic 
<PAGE>

                    BCAM International, Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements

                                December 31, 1998

or possible management buyer for a majority of HCAD on a basis which would
result in meaningful value for the shareholders and therefore, in October 1998,
placed the operations of HCAD in receivership under the bankruptcy laws of
Ontario, Canada, where HCAD was headquartered.

      The measurement date for the discontinuance was February 1998, at which
time losses from January 1, 1998 through February 1998 were recorded and a
provision for discontinued operations (principally severance and non-cancelable
lease costs) was made. Such amount aggregated $803,000. The Company has
reflected the 1997 operations of HCAD as a discontinued operation in the
December 31, 1997 consolidated financial statements. At December 31, 1998 and
1997, assets of the HCAD were approximately $0 and $98,000, respectively,
consisting principally of customer receivables, certain computer and
communications equipment, furniture, and inventory. Liabilities were
approximately $174,000 and $60,000, respectively, consisting principally of
trade payables and, in 1997, payroll. Revenues, gross margin, loss from
operations, provision for disposal and loss from discontinued HCAD operations
are approximately the following for the years ended December 31, 1998 and 1997:

                                             1998              1997
                                          ---------       -----------
         Revenues                         $  55,000       $   135,000

         Gross Margin                     $  50,000       $   125,000

         Loss from operations             $(553,000)(a)   $(1,000,000)

         Provision for loss on disposal   $(250,000)      $         0

         Loss from discontinued           $(803,000)      $(1,000,000)

(a)   Includes approximately $286,000 of non-cash charge for stock options
      issued in 1997 which were approved by the shareholders in February 1998 as
      discussed further in Note 6.

      The provision for discontinued operations consists principally of payroll
and other costs associated with the effort to discontinue, the write off of
inventories and other assets dedicated to HCAD and severance principally for the
former HCAD President. At December 31, 1998, substantially all of such costs
have been incurred and the remaining accrual is not material. 

8. Commitments and contingencies

      Litigation - On or about February 22, 1999, a shareholder derivative
action was filed in United States District Court for the Eastern District of New
York in connection with certain transactions culminating in the sale by the
Company to Impleo of the Company's interest in Drew.

      The complaint names all of the Company's current directors and several
former members of the Board as defendants as well as Impleo and certain related
entities and individuals (collectively, the "Defendants").

      The allegations contained in the complaint challenge the Defendants'
actions in connection with certain transactions, including but not limited to,
(i) the April 14, 1998 restructuring of certain convertible notes; (ii) the
October 1998 sale of 56.7% of Drew to Impleo; and (iii) the proposed sale to
Impleo of the Company's remaining 33.3% interest in the Drew. In addition to
seeking recovery on behalf of the Company for certain allegedly wrongful acts on
the part of the Defendants, the complaint seeks, among other things, to enjoin
or set aside any shareholder vote in connection with a proxy statement filed
with the SEC on or about February 1, 1999 pursuant to which the Company sought
shareholder approval to sell its remaining 33.3% interest in Drew and to block
or rescind the sale of any interests in Drew to Impleo. On March 4, 1999, at a
Special Meeting of Shareholders, over 68% of the shareholders approved the sale
of the remaining 33.3% of Drew. The current Directors deny the allegations
concerning any allegedly wrongful actions.

      In January 1998, Ulin & Holland Incorporated ("U & H") filed suit against
the Company's then subsidiary, Drew, in United States District Court for the
District of Massachusetts. The suit alleges that U & H was retained in 1992 by
Drew pursuant to which U & H alleges that it is due a fee of not less than
$297,000 in connection with the Company's acquisition of Drew. Drew disputes
this claim. U & H has named the Company as 
<PAGE>

                    BCAM International, Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements

                                December 31, 1998

a defendant in this lawsuit. Subsequent to the Company's divestiture of the
majority ownership of Drew, Drew is responsible for the defense of this matter.
In March 1999, the Company was notified that it is no longer a defendant in that
lawsuit.

      In October 1998, the Company's HumanCAD Systems Inc. subsidiary filed an
assignment in bankruptcy under the laws of the Province of Ontario, Canada and
Fuller Landau Ltd., 151 Bloor St. West, Toronto, Canada, was appointed receiver
and trustee. Certain creditors of the HumanCAD operations have filed or
threatened to file claims against the Company for the debts of HumanCAD. One
such action was filed by Miller Freeman, Inc. in the Civil Court of The City of
New York in the amount of approximately $18,000. The Company intends to
vigorously defend itself in such action, however its ability to do so may be
limited by its financial resources which are currently inadequate (see Note 1).

      Leases - The Company leases its office space for a term, as amended,
extending through March 31, 2001. Additionally, the Company has entered into
various operating leases for equipment. Future minimum payments under
non-cancelable operating leases for years subsequent to December 31, 1998 are
approximately as follows:

            1999                                 $ 98,000
            2000                                  101,000
            2001                                   36,000
            2002                                   12,000
            2003                                   12,000

      Rent expense in 1998 and 1997, under all operating leases, was
approximately $137,000 and $154,000, respectively.

      Employment commitments - The Company has an employment commitment with its
Chairman, President and Chief Executive Officer that calls for material payments
in the event of a change in control of the Company.

      Technology transfer agreement - The Company has entered into a non-binding
letter of intent with a third party technology partner which encompasses
granting the Company rights to certain microvalve technology for specific uses
and obligates the Company to pay certain considerations including equity in the
Company reflecting the value of the technology transferred. Binding agreements
have not been consummated.

9. Other

      Other assets- Other non-current assets principally include patent costs of
approximately $127,000 (net of related amortization of approximately $10,000).

      Costs of 1997 financings not completed - In the third quarter of 1997, the
Company was able to secure more favorable acquisition financing and credit
facility for its acquisition of Drew than it had originally expected. As a
result, the Company elected not to complete a proposed acquisition financing and
a proposed credit facility. Costs associated with such uncompleted financings of
approximately $130,000 were charged to Interest and financing costs of
discontinued operations in the year ended December 31, 1997.

      Charges to 1997 fourth quarter operations - Significant charges to
operations in the fourth quarter of 1997 include: (i) approximately $175,000 for
the estimated value of options granted to consultants in May and September 1997,
(ii) accrual of contractual management bonuses for three executives of
approximately $75,000 (including $25,000 related to discontinued operations),
(iii) write off of approximately $75,000 of capitalized software costs no longer
considered realizable (included in discontinued operations) and (iv) costs of
approximately $235,000 related to a collaborative research effort (microvalve)
and certain software development costs.
<PAGE>

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

      On December 16, 1998, the Board of Directors of the Company appointed J.
H. Cohn LLP, Roseland, NJ as its independent public accountants to replace Ernst
& Young LLP, who were dismissed. In November 1998, Drew Shoe Corporation
("Drew"), formerly a significant subsidiary of the Company, appointed Hays &
Company, New York, NY as its independent auditors. J.H. Cohn LLP states reliance
on Hays & Company's audit of the financial statements of Drew as of and for the
year ended December 31, 1998 with respect to J.H. Cohn LLP's report on the audit
of the Company's consolidated financial statements as of and for the year ended
December 31, 1998.

      The reports of Ernst & Young LLP on the Company's financial statements for
the past two fiscal years did not contain an adverse opinion or a disclaimer of
opinion and were not modified as to uncertainty, audit scope or accounting
principles.

      During the Company's two most recent fiscal years the Company has not
consulted J.H. Cohn LLP with respect to the application of accounting principles
to a specified completed or proposed transaction, or the type of audit opinion
that might be rendered on the Company's financial statements.

      During Drew's two most recent fiscal years Drew has not consulted Hays and
Company with respect to the application of accounting principles to a specified
completed or contemplated transaction, or the type of audit opinion that might
be rendered on Drew's financial statements.

      In connection with the audits of the Company's financial statements for
each of the two fiscal years ended December 31, 1997, there were no
disagreements with Ernst & Young LLP on any matters of accounting principles or
practices, financial statement disclosure, or auditing scope and procedures
which, if not resolved to the satisfaction of Ernst & Young LLP would have
caused Ernst & Young LLP to make reference to the matter in their report. In
connection with its audit of the financial statements for the year ended
December 31, 1997, Ernst & Young LLP advised the Company that the Company's
internal control structure design is deficient principally due to a lack of
adequate segregation of duties and adequate systems and information output. The
audit committee of the board of directors discussed the subject matter of each
of the internal control deficiencies with Ernst & Young LLP. The Company has
authorized Ernst & Young LLP to respond fully to the inquiries of the successor
accountant concerning the subject matter of each deficiency.

      The Company requested Ernst & Young LLP to furnish it a letter addressed
to the Commission, stating whether it agrees with the above statements. A copy
of that letter, dated January 7, 1999, is filed as Exhibit 16a to the Company's
Form 8-K/A filed on January 7, 1999.

      In connection with the audit of the financial statements of Drew, a
significant subsidiary of the Company, for the year ended December 31, 1996,
there were no disagreements with J.H. Cohn LLP on any matters of accounting
principles or practices, financial statement disclosure, or auditing scope and
procedure, which, if not resolved to the satisfaction of J.H. Cohn LLP would
have caused them to make reference to the subject matter in connection with
their report.
<PAGE>

                                    PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS, COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT

Directors and Executive Officers

As of March 31, 1999, the directors and executive officers of BCAM
International, Inc. ("the Company") are as follows:

<TABLE>
<CAPTION>
Name                                Class     Age     Position with Company
----                                -----     ---     ---------------------
<S>                                  <C>      <C>     <C>
Directors:
  Michael Strauss                     I       57      Chairman, President, Chief Executive Officer and Director
  Robert P. Wong                      I       57      Director
  Joel L. Gold                        II      57      Director
  Glenn F. Santmire                  III      55      Director
  Mark L. Plaumann                    I       43      Director
Non-Director Executive Officer:
  Kenneth C. Riscica                          45      Vice President - Finance, Chief Financial
                                                      Officer, Treasurer and Secretary
</TABLE>

      The Company's directors have historically been elected by the Company's
stockholders at each annual meeting or, in the case of a vacancy, were 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. At the 1997 Annual Meeting of
Stockholders, held on February 19, 1998, the stockholders approved a resolution
providing for the staggered election of members of the Board of Directors. The
Company has elected to group the Directors into three classes, with each class
to serve for a three-year period. In that manner, the shareholders benefit from
continuity and experience of the Directors. The Directors are grouped into Class
I, Class II and Class III. In the first year of such classifications, it is
necessary to stagger the period of service of the Classes. Thereafter, members
of each Class would serve for three years. Therefore, Class I Directors serve
for a three year period ending with the annual meeting of shareholders following
the year ended December 31, 1999, Class II Directors serve for two years until
the annual meeting following the year ended December 31, 1998 and the Class III
Directors serve for one year until the next annual meeting of the shareholders.
The Company's Directors, Non Director Executive Officer and Former Directors who
served in 1998 are as follows:

      Directors -

      Michael Strauss became the Company's President and Chief Operating Officer
effective January 2, 1995 and its Chairman of the Board and Chief Executive
Officer on February 16, 1995. From 1991 to December 31, 1994, Mr. Strauss was
President and Chief Operating Officer of Colorado Prime Corp., a home food
service company providing home delivery of high quality, custom designed food
programs to retail customers. From 1984 to 1991, he was Chairman and Chief
Executive Officer of Capital Credit Corporation, a subsidiary of Union
Corporation, a New York Stock Exchange Company. Capital Credit Corporation
provides receivables management and consumer debt collection services to
corporations in the financial services, telecommunications, health care and
related businesses. Prior to his tenure at Union Corporation, Mr. Strauss was
employed by American Express Company in various senior management positions
including Executive Vice President of the Financial Services Division of
Shearson Lehman Brothers, Executive Vice President of Travel Related Services,
and President of American Express Canada, Inc. Mr. Strauss has a BBA from the
City University of New York and an MBA from the Baruch School-City University of
New York.

      Robert P. Wong is presently a member of the Board of Directors of the
Company. Mr. Wong was appointed Vice Chairman of the Board and Chief Technology
Officer in February 1995, after having become a director in February of 1994,
and served in such capacity until December 31, 1998. From September 1996 through
October 15, 1997, Mr. Wong also served as Acting Chief Financial Officer, Acting
Secretary and Acting Treasurer. Previously, from February 1994 through February
1995, Mr. Wong worked as a representative for the Prudential Insurance Company,
and was a private investor from 1989 to February 1995. Over the previous 27
years, Mr. Wong was founder and president of several technology companies and
president of several subsidiaries of Coordinated Apparel, Inc. Mr. Wong has an
SB in Electrical Engineering and also an SB in Industrial Management from
Massachusetts Institute of Technology.

      Joel L. Gold was elected a Director in February 1994. From 1999 to the
present, Mr. Gold has served as a vice-president of ISG, a financial services
firm. From September 1997 until 1999, Mr. Gold has served as Vice Chairman of
<PAGE>

Coleman and Company Securities Inc., and Senior Managing Director of Interbank
Capital Group, LLC. From April 1996 to September 1997, Mr. Gold was Executive
Vice President of L.T. Lawrence Co., an investment banking firm. From April 1995
to April 1996, Mr. Gold was a managing director and head of investment banking
at Fechtor & Detwiler. From 1993 to 1995, Mr. Gold was a managing director at
Furman Selz Incorporated, an investment banking firm. Prior to joining Furman
Selz, from 1991 to 1993, he was a managing director at Bear Sterns & Co., an
investment banking firm. Previously, Mr. Gold was a managing director at Drexel
Burnham Lambert for nineteen years. He is currently a member of the Board of
Directors of Concord Camera, Sterling Vision, Inc. and Life Medical Sciences,
Inc. Mr. Gold has a law degree from New York University and an MBA from Columbia
Business School.

      Glenn F. Santmire was appointed a director in October 1995. Since 1995 he
has been employed by Unisys Corporation as Group Vice President of the Worldwide
Services-Market Sector Group. From 1994 to 1995 he was President of GFS
Associates, Inc., a consulting firm which he founded. From 1992 to 1994 Mr.
Santmire was a Senior Vice President at Mastercard International and from 1990
to 1992 he was President of Enhanced Telephone Services, Inc., a subsidiary of
Citibank. Mr. Santmire possesses both a BA and an MBA degree from New York
University as well as a law degree from George Washington University School of
Law.

      Mark L. Plaumann was appointed a director in September of 1997. Mr.
Plaumann has been a Managing Member of Greyhawke Capital Advisors LLC since June
1998. Prior thereto, Mr. Plaumann was a Senior Vice President of Wexford
Management from January 1996 to March 1997 and then as a consultant to that
firm, and since March 1995 has been a director and/or Vice President of the
general partner of various public partnerships managed by Wexford Management.
Mr. Plaumann joined the predecessor entities of Wexford Management in February
1995. Mr. Plaumann continues to provide consulting services to Wexford
Management. Prior to joining Wexford Management, Mr. Plaumann was a Managing
Director of Alvarez & Marsal, Inc., a crisis management consulting firm, from
1990 to 1995, and from 1985 to 1990 he was with American Healthcare Management,
Inc., an owner and operator of hospitals, where he served in a variety of
capacities, most recently as its President. Prior to that he was with Ernst &
Young LLP in its auditing and consulting divisions for eleven years. Mr.
Plaumann has been a director of Wahlco Environmental Systems, Inc., a
manufacturer of environmental conditioning systems and is currently a director
of Elcotel, Inc.

      Non-Director Executive Officer -

      Kenneth C. Riscica joined the executive officers of the Company as Vice
President - Finance, Chief Financial Officer, Treasurer and Secretary effective
October 16, 1997. Mr. Riscica, formerly a partner in charge of an emerging
companies practice group with Arthur Andersen & Co. LLP (having been a partner
from 1987 to 1992 after joining the firm in 1976), more recently served as Chief
Executive Officer of Riscica Associates, Inc.,(1993-1997) a financial and
management consulting firm and as Chief Financial Officer of Magna-Lab, Inc., a
publicly traded medical technology company (1993 to 1997). Mr. Riscica has
advised the Company that he will leave its full-time employ after April 30,
1999.

      Directors who served in 1998 and are no longer Directors -

      Norman B. Wright was appointed President and Chief Executive Officer of
the Company's HumanCAD Systems division and Vice-Chairman of the Board of
Directors of the Company in April of 1997. Mr. Wright resigned from the Board of
Directors in September 1998. Prior to joining the Company, Mr. Wright was
President and Chief Executive Officer of Virtek Vision International, Inc., a
Canadian-based, multi-national laser-projection machine intelligence and pattern
analysis systems designer and manufacturer. Prior to that he held senior
management positions in several companies and has launched and guided a number
of public software technology companies through their successful development.

      Charles G. Schuyler was appointed a director in September of 1997 and
resigned as a director effective April 1, 1998. Mr. Schuyler was President and
Chief Executive Officer of Drew until November 1, 1998. Drew Shoe was acquired
by the Company on September 22, 1997. Mr. Schuyler commenced his employment with
Drew Shoe in 1970 and became a 50% principal owner in 1982. Mr. Schuyler is a
member of the National Shoe Retailers Association, Pedorthic Footwear
Association and Two/Ten Foundation. Mr. Schuyler is a graduate of Ohio
University majoring in Economics.

      Stephen Savitsky was appointed a director in October of 1997 and resigned
as a Director in October 1998. Mr. Savitsky is the Founder, Chairman of the
Board of Directors and Chief Executive Officer, since 1988, of Staff Builders,
Inc., a large provider of temporary services to the home healthcare industry in
the United States. Mr. Savitsky has a BA in Economics from Yeshiva University
and an MBA in Marketing and Finance from Baruch School of Business.

Compliance with Section 16(a) of the Securities Exchange Act of 1934

      Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors and persons who own more than ten percent of a
registered class of the Company's equity securities (collectively, the
"Reporting Persons"), to file reports of ownership and changes in ownership with
the Securities and Exchange Commission and to furnish the Company with copies of
these reports. Based solely on the Company's review of the copies of such forms
<PAGE>

received by it during the Company's fiscal year ended December 31, 1998, the
Company believes that the Reporting Persons complied with all filing
requirements applicable to them.

ITEM 10. EXECUTIVE COMPENSATION

Directors' Compensation

      Employee-directors receive no compensation for serving on the Board of
Directors other than reimbursement of expenses incurred in attending meetings.
Non-employee directors elected or appointed to the Board of Directors are paid
an annual director's fee of $5,000 plus $500 for each Board meeting attended and
are reimbursed for expenses incurred in attending meetings. 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 1997.

<TABLE>
<CAPTION>
                                                                                       Long Term
                                         Annual Compensation                      Compensation Awards
                                   ------------------------------   -----------------------------------------------
Name and Principal                            Salary       Bonus      Other Annual       Options      All Other
Position                           Year         ($)         ($)     Compensation ($)       (#)     Compensation ($)
                                   ----      --------    --------   ----------------    ---------  ----------------
<S>                                <C>       <C>         <C>             <C>            <C>            <C>
Michael Strauss (1)                                                                     
      Chairman, President,                                                              
      Chief Executive              1998      $201,000    $      0        $ 9,000               --      $35,000
      Officer and Chief            1997      $225,000    $100,000        $ 9,000        2,000,000           --
      Operating Officer            1996      $200,000          --        $ 8,280               --           --
Robert P. Wong (2)                                                                      
      Vice Chairman and            1998      $127,000    $      0        $ 8,700               --      $80,000
      Chief Technology             1997      $127,000    $ 25,000        $ 6,000          750,000           --
      Officer                      1996      $102,000          --        $ 6,000               --           --
Norman Wright (3)                                                                       
      Vice Chairman and                                                                 
      Chief Executive              1998      $128,000    $      0        $ 5,600               --           --
      Officer of the               1997      $ 93,750    $ 25,000        $ 7,000          750,000           --
      HumanCAD division            1996            --          --             --               --           --
Kenneth C. Riscica (4)                                                                  
      Vice President Finance       1998      $120,000    $      0        $ 2,200                0           --
      Chief Financial Officer      1997      $ 25,000    $      0        $14,375          200,000           --
      Treasurer and Secretary      1996      $      0    $      0        $     0               --           --
</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 which
      was subsequently increased to $225,000, effective January 1, 1997 plus
      annual cost of living increases. He subsequently became Chairman and Chief
      Executive Officer on February 16, 1995. Effective November 1, 1998, Mr.
      Strauss entered into a new employment agreement with the Company calling
      for annual compensation of $100,000. At the time of the termination of his
      previous contract Mr. Strauss was owed approximately $35,000 of unused
      vacation pay under his contract. The Company has accrued (but not paid)
      such amount to the consolidated financial statements at December 31, 1998.
      Such amount is included in the above table as All Other Compensation.

(2)   Mr. Wong was elected a Director in February, 1994. He became employed by
      the Company as its Chief Technology Officer, and was appointed Vice
      Chairman, on February 16, 1995 at an annual salary of $84,000, which was
      subsequently raised to $102,000 in 1996 and $127,000 effective January 1,
      1997. From September, 1996 through October 15, 1997, he also served as
      Acting Chief Financial Officer, Acting Secretary and Acting Treasurer. On
      December 31, 1998, Mr. Wong's employment contract with the Company expired
      and the Company has accrued (but not paid) approximately $70,000 as the
      severance amount due Mr. Wong under his contract. Further, the Company
      paid Mr. Wong approximately $9,000 in unused vacation pursuant to his
      contract. Such amounts (severance and vacation) are included in All Other
      Compensation in the above table.
<PAGE>

(3)   Mr. Wright became Vice Chairman of the Board and President and Chief
      Executive Officer of HumanCAD Systems Division in April 1997. Pursuant to
      a consulting agreement effective April 7, 1997, and expiring April 7,
      1999, unless renewed, Mr. Wright receives a basic consulting fee at a rate
      of $125,000 per annum and a performance bonus of at least $25,000 per year
      for the first two years. In September 1998, the Company entered into a
      severance agreement with Mr. Wright calling for payment of his previously
      existing contract through September 15, 1998 and then a final payment of
      $50,000 (which has been paid).

(4)   Mr. Riscica joined the Company on October 16, 1997 as Vice President -
      Finance, Chief Financial Officer, Treasurer and Secretary. From
      approximately September 15, 1997 through approximately October 15, 1998,
      Riscica Associates, Inc. (a consulting company in which Mr. Riscica is the
      principal owner) provided consulting services to the Company. Fees paid
      for such consulting services are included above in Other Annual
      Compensation. Mr. Riscica does not have an employment agreement with the
      Company and has advised the Company of his intention to leave its full
      time employ after April 30, 1999.

Employment Agreements

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. On February 16, 1995 Mr.
Strauss became the Chief Executive Officer and Chairman of the Board of
Directors. Pursuant to a revised employment agreement effective January 1, 1997,
and expiring December 31, 1999, unless renewed, Mr. Strauss receives a base
salary at a rate of $225,000 per year. Mr. Strauss shall be entitled to receive
a bonus, which amount for the period ending December 31, 1997 shall not exceed
$100,000 nor be less than $25,000. The amount of the bonus for the years ending
December 31, 1998 and December 31, 1999 shall be agreed to by Mr. Strauss and
the Company by December 31, 1997, and be based upon mutually agreed to
objectives for Mr. Strauss. For 1997 Mr. Strauss received a bonus of $100,000
and for 1998 no bonus was payable to Mr. Strauss. Mr. Strauss is also entitled
to participate in any pension plans or bonus plans of the Company or of any
subsidiary, which ever is more beneficial to him, to be included in the
Company's health, disability, life insurance and other benefit plans, and to
receive an allowance for the cost of an automobile.

      Mr. Strauss received, in addition to his salary and any bonus, (i) options
to purchase at the fair market value January 2, 1995, an aggregate of 300,000
shares of common stock of the Company, scheduled to vest and become exercisable
for 100,000 shares on January 2, 1996, for 100,000 shares on January 2, 1997,
and for 50,000 shares on January 2, 1998 and 1999, respectively; (ii) options to
purchase at the fair market value on February 16, 1995, an aggregate of 200,000
shares of common stock of the Company, scheduled to vest and become exercisable
for 50,000 shares on February 16, 1996, 1997, 1998 and 1999 respectively; (iii)
options to purchase at the fair market value on May 7, 1997, an aggregate of
1,000,000 shares of common stock of the Company, scheduled to vest and become
exercisable 33 1/3% of such shares immediately, 33 1/3% of such shares on
January 2, 1998, and 33 1/3% of such shares on January 2, 1999, (iv) options to
purchase, at the fair market value on July 3, 1995, an aggregate of 500,000
shares of common stock of the Company, scheduled to vest and become exercisable
for 100,000 shares on each of the succeeding four anniversary dates, and (v)
options to purchase at the fair market value on September 17, 1997, an aggregate
of 1,000,000 shares of common stock of the Company, scheduled to vest and become
exercisable 33 1/3% of such shares on September 17,1998, 33 1/3% of such shares
on September 17, 1999, and 33 1/3% of such shares on September 17, 2000. All
options granted hereunder shall be incentive stock options to the extent they
may qualify for such treatment.

      Effective November 1, 1999, the Company and Mr. Strauss entered into a new
employment agreement calling for annual compensation of $100,000 (subject to
periodic increases) and calling for Mr. Strauss to spend a defined amount of his
time on the affairs of the Company.

Robert P. Wong

      Mr. Robert P. Wong became Vice Chairman of the Board and Chief Technology
Officer of the Company effective February 16, 1995. Pursuant to an employment
agreement effective January 1, 1997, and expiring December 31, 1998, unless
renewed, Mr. Wong receives a base salary at a rate of $127,000 per annum. Mr.
Wong has been entitled to receive a bonus, which amount for the period ending
December 31, 1997 shall not exceed $70,000 nor be less than $25,000. The amount
of the bonus for the year ending December 31, 1998 shall be agreed to by Mr.
Wong and the Company by December 31, 1997, and be based upon mutually agreed to
objectives for Mr. Wong. Mr. Wong received a bonus of $25,000 in 1997 and did
not receive a bonus in 1998. Mr. Wong is also entitled to participate in any
pension plans or bonus plans of the Company or of any subsidiary, which ever is
more beneficial to him, to be included in the Company's health, disability, life
insurance and other benefit plans, and to receive an allowance for the cost of
an automobile.
<PAGE>

      Mr. Wong received, in addition to his salary and any bonus, (i) options to
purchase at the fair market value on July 21, 1994 an aggregate of 7,500 shares
of common stock of the Company scheduled to vest and become exercisable on July
21, 1995; (ii) options to purchase at fair market value on February 16, 1995 an
aggregate of 200,000 shares of common stock of the Company, scheduled to vest
and become exercisable for 10,000 shares on August 16, 1995, for 51,250 shares
on February 16, 1996, for 51,250 shares on February 16, 1997, for 43,750 shares
on February 16, 1998, and for 43,750 shares on February 16, 1999; (iii) options
to purchase at the fair market value on June 22, 1995 an aggregate of 25,000
shares of common stock of the Company, scheduled to vest and be exercisable for
10,000 shares on June 22, 1995, for 7,500 shares on June 22, 1996, and for 7,500
shares on June 22, 1997; (iv) options to purchase at the fair market value on
July 3, 1995, an aggregate of 267,500 shares of common stock of the Company,
scheduled to vest and be exercisable for 66,875 shares on each of the succeeding
anniversaries of the grant, over four years; and (v) options to purchase at the
fair market value on May 7, 1997, an aggregate of 500,000 shares of common stock
of the Company, scheduled to vest and become exercisable 50% of such shares
immediately and 50% of such shares on January 2, 1998. Subsequently, on
September 17, 1997, he was granted on option to purchase 250,000 shares of
common stock of the Company, scheduled to vest and become exercisable, in equal
amounts on the anniversary of the grant, over three years. All options granted
hereunder shall be incentive stock options to the extent they may qualify for
such treatment.

      Mr. Wong's employment agreement was not renewed at its termination on
December 31, 1998. Under the provisions of such agreement, Mr. Wong is entitled
to severance pay equivalent to approximately $70,000.

Norman B. Wright

      Mr. Norman B. Wright became Vice Chairman of the Board and President and
Chief Executive Officer of the HumanCAD Systems division in April 1997. Pursuant
to a consulting agreement effective April 7, 1997, and expiring April 7, 1999,
unless renewed, Mr. Wright receives a basic consulting fee at a rate of $125,000
per annum. Mr. Wright is entitled to receive a performance bonus on an annual
basis within 30 days of the end of the Company's fiscal year. The amount of such
bonus shall be fixed by the board of directors of the Company acting upon
recommendations from Management and its Compensation Committee, provided that
the minimum amount of incentive bonus payable to Mr. Wright in respect of each
of the first two years of the engagement will be not less than $25,000.00. Mr.
Wright received a bonus for $25,000 under the contract for 1997 and none for
1998. Mr. Wright is also entitled to receive an allowance for the cost of an
automobile, and will be reimbursed for the costs of maintaining a health plan,
including a term life insurance policy.

      Mr. Wright received, in addition to his salary and any bonus, options to
purchase at the fair market value on May 7, 1997, an aggregate of 500,000 shares
of common stock of the Company, scheduled to vest and become exercisable 50% of
such shares immediately and 50% of such shares on April 7, 1998. Subsequently,
on September 17, 1997, he was granted on option to purchase 250,000 shares of
common stock of the Company, scheduled to vest and become exercisable, in equal
amounts on the anniversary of the grant, over three years. All options granted
hereunder shall be incentive stock options to the extent they may qualify for
such treatment.

      Notwithstanding the fixed term of the engagement, the Company may
terminate the engagement of Mr. Wright at any time for cause including but not
limited to any material breach of the provisions of the agreement by Mr. Wright.
In September 1998, the Company and Mr. Wright entered into a severance agreement
under which Mr. Wright was paid his contractual fee through September 15, 1998
and the a lump sum of $50,000 for the remainder of the term.
<PAGE>

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Security Ownership of Certain Beneficial Owners and Management

The following table sets forth information as of January 27, 1999 based on
information obtained from the records of the Company with respect to the
beneficial ownership of shares of Common Stock of the Company by (i) each person
known by the Company to be owners of more than five (5%) 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

<TABLE>
<CAPTION>
                                                          Amount and Nature       Percentage of Common
        Name and Address of Beneficial Owner         of Beneficial Ownership(1)       Stock Owned
        ------------------------------------         --------------------------       -----------
<S>                                                         <C>                           <C> 
Michael Strauss (2)                                         2,208,333 (6)                  8.7%
Robert P. Wong (2)                                          1,016,458 (7)                  4.2%
Joel L. Gold (2)                                              107,500 (8)                   *
Glenn F. Santmire (2)                                          25,000 (9)                   *
Mark Plaumann (2)                                                 -0-                       *
Balmour Funds, S.A. (3)                                     2,726,292 (10)                11.5%
Austost Anstalt Schaan (4)                                  2,450,795 (10)                10.4%
Kirr Marbach & Co., LLC (5)                                 1,488,500 (11)                 6.2%
Impleo, LLC(12)                                             4,932,308 (12)                17.5%
Wexford Management, LLC(12)                                 4,932,308 (12)                17.5%
All officers and directors as a group (9 persons)           3,507,291                     14.0%
</TABLE>

1)    The Company believes that all persons named in the table have sole voting
      and investment power with respect to all shares of Common Stock
      beneficially owned by them.
2)    Address is c/o BCAM International, Inc., 1800 Walt Whitman Road, Melville,
      New York 11747.
3)    Address is Trident Chambers, P.O. Box 146, Road Town, Tortola, British
      Virgin Islands.
4)    Address is 7440 Fuerstentum, Landstrasse 163 Lichtenstein.
5)    Address is 621 Washington Street, Columbus, IN 47201.
6)    Includes options to purchase 2,208,333 shares of Common Stock currently
      exercisable or exercisable within 60 days of the date hereof.
7)    Includes options to purchase 1,016,458 shares of Common Stock currently
      exercisable or which will be exercisable within 60 days of the date
      hereof.
8)    Includes options to purchase 107,500 shares of Common Stock currently
      exercisable or exercisable within 60 days of the date hereof.
9)    Includes options to purchase 25,000 shares of Common Stock exercisable
      within 60 days of the date hereof. Does not include options to purchase
      50,000 shares of Common Stock not exercisable within 60 days of the date
      hereof.
10)   These investors represent aggregate proceeds of $1,600,000 of a total
      $2,000,000 private placement of Common Stock in April 1998 (the "April
      1998 private placement"). The agreement with the investors in the April
      1998 private placement is that shares issuable under the private placement
      will be periodically "repriced". Such "repricings" can result in the
      issuance of very significant additional shares of Common Stock without
      further consideration. See Note 7 to the December 31, 1997 Consolidated
      Financial Statements and Form 8-K dated May 6, 1998 for further
      description of the original "repricing" provisions.

      On December 24, 1998, the Company and the investors in the April 1998
      private placement agreed to amend the subscription agreement with respect
      to the operation of the "repricing" provisions. The December 24, 1998
      amendment to the subscription agreement with these investors has four (4)
      principal effects (i) the original August, October, November and December
      1998 "repricings" are eliminated in favor of new "repricings" which began
      on January 1, 1999; (ii) the discount from market used to measure the
      "repricings" is increased from twenty-three (23%) percent to twenty-seven
      (27%) percent; (iii) a ceiling price was established of seventy-five
      ($0.75) cents; and (iv) certain penalties under the agreement are waived.
      Under the amended agreement, the investors, at their option, may "reprice"
      up to twelve and one-half (12 1/2%) percent of the amount invested (an
      aggregate of $250,000 based upon the original $2,000,000 invested in April
      1998) on the first of each month beginning with January 1, 
<PAGE>

      1999. Any amounts not "repriced" in any month may be carried over to any
      future month without limitation. See Form 8-K filed on January 11, 1999
      for further information.

      On January 27, 1999, the Company issued an aggregate 2,259,827 shares of
      Common Stock of the Company to the investors in the April 1998 private
      placement pursuant to the December 31, 1998 amendment and the January 1999
      increment of "repricing" elected by the investors. In January 1999, the
      April 1998 private placement investors elected to "reprice" an aggregate
      $190,000 of the first $250,000 "repricing" increment, leaving an aggregate
      $1,810,000 still to be "repriced". At recently experienced market prices
      for the Company's Common Stock, the remaining amount subject to
      "repricing" ($1,810,000) could result in very significant additional
      shares being issued to the April 1998 private placement investors.
11)   Included 700,000 shares that may be acquired upon the exercise of
      warrants.
12)   Address is 411 West Putnam Avenue, Greenwich, CT 06830. Impleo, LLC was
      organized for the purpose of investing in the Registrant. The members of
      Impleo, LLC are Wexford Spectrum Investors, LLC, Wexford Special
      Situations 1997, LP and Wexford Special Situations 1997 Institutional, LP.
      Impleo, LLC has sole voting and despositive discretion with respect to
      securities held by these entities, which include, in the aggregate
      approximately 760,000 shares of Common Stock issuable upon presently
      exercisable Non-Redeemable Class DD Warants and approximately 4,192,308
      shares issuable pursuant to the conversion feature of the remaining
      $2,220,000 10%/13% Convertible Notes together with approximately
      $1,050,000 (at December 31, 1998) of accrued interest which is payable in
      10%/13% Convertible Notes. Such share amounts are subject to adjustment
      pursuant to the anti-dilution provisions of such securities, including
      potential antidilution which may result from the "repricing" provisions of
      the April 1998 private placement discussed in Note 11 and elsewhere.

*     Less than 1.0%.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      None.

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

      (a) Exhibits.
      3.1   Restated Certificate of Incorporation(1)
      3.2   Restated and Amended By-Laws(1)
      4.1   Underwriter's Unit Purchase Option(4)
      4.2   Finder's Unit Purchase Option(4)
      4.3   Warrant Agreement(4)
      4.4   Form of Senior Secured Convertible Promissory Note (5)
      4.5   Form of Class C common Stock Purchase Warrant(5)
      4.6   Form of Class D Common Stock Purchase Warrant(5)
      4.7   Revised Form of Amendment No. 1 to Warrant Agreement(7)
      4.8   Revised Form of Class E Common Stock Purchase Warrant(7)
      10.1  Stock Redemption Agreement(1)
      10.2  1989 Stock Option Plan(1)
      10.3  Employment Agreement with Dr. Clifford M. Gross(1)
      10.4  Employment Agreement with Arthur Fein(1)
      10.5  Bridge Warrant(1)
      10.6  Bridge Note and Related Loan Agreement(1)
      10.7  Consulting Agreement with Lear Siegler Seating Corporation(1)
      10.8  Extension Agreement to Redemption Agreement (Exhibit 10.1)
      10.9  Consulting Agreement dated August 1, 1988 with NRC Resources Group,
            Inc.(1)
      10.10 General Release of NRC Resources Group, Inc.(1)
      10.11 Mortgage Note and Related Loan Agreement and Mortgage and Security
            Agreement(1)
      10.12 Second Extension Agreement to Redemption Agreement(4)
      10.13 Merger and Acquisition Agreement with D.H. Blair & Co., Inc.(4)
      10.14 1989 Nonstatutory Stock Option Plan(2)
      10.15 Consulting Agreement with D.H. Blair & Co., Inc.(4)
      10.16 Consulting Agreement with Steelcase, Inc.(2)
      10.17 License and Manufacturing Agreement with MicroComputer Accessories,
            Inc.(4)
      10.18 Employment Agreement with Cynthia Roth(4)
<PAGE>

      10.19 Employment Agreement with Kenneth Goodman(4)
      10.20 Form of Employment Agreement with Ava Stern(4)
      10.21 Form of Employment Agreement with William G. Sirois(4)
      10.22 Lease of Premises at 1800 Walt Whitman Road, Melville, New York(4)
      10.23 Consulting Agreement dated as of February 1, 1990, with NRC
            Resources Group, Inc.(4)
      10.24 Underwriting Agreement (for IPO) with D.H. Blair & Co., Inc.(4)
      10.25 Securities Purchase Agreement dated June 25, 1991, among the
            Company, the Purchasers and D.H. Blair & Co., Inc.(5)
      10.26 Security Agreement dated as of June 25, 1991 between the Company and
            D.H. Blair & Co., Inc., as Purchasers' Representative(5)
      10.29 Employment Agreement dated as of June 20, 1991 between David A.
            Deutsch and the Company(5)
      10.30 Letter of Understanding between Kenneth A. Goodman and the
            Company(5)
      10.31 Employment Agreement dated as of August 1, 1991 between Joel Sher
            and the Company(5)
      10.32 Amendment to 1989 Stock Option Plan(5)
      10.33 Distributor Agreement with Techexport, Inc.(3)
      10.34 Partnership Agreement dated December 28, 1992, for Ergonomic
            Solutions Group (ESG)(8)
      10.35 License Agreement dated December 28, 1992, between the Company and
            ESG(8)
      10.36 Development and Licensing Agreement dated March 5, 1993, between the
            Company and McCord Winn Textron, Inc.(8)
      10.37 Agreement dated August 22, 1992, between the Company and PT Industry
            Pesawat Terbang Nusantara (IPTN)(8)
      10.38 Further Amendments to 1989 Stock Option Plan(8)
      10.39 Amendment to Development and Licensing Agreement dated October 27,
            1993, between the Company and McCord Winn Textron.(10)
      10.40 Investors Consulting Agreement with Strategic Growth International
            Inc.(9)
      10.41 Agreement dated December 22, 1993 between the Company and PT
            Industri Pesawat Terbank Nusantara (IPTN)(9)
      10.42 Agreement dated September 29, 1993, between the Company, McCord Winn
            Textron, Inc. and Lear Seating Company.(9)
      10.43 Development and Licensing Agreement dated January 4, 1994, between
            the Company and Reebok International Ltd.(9)
      10.44 Development and License Agreement dated September 28, 1994, between
            the Company and Lumex, Inc.(11)
      10.45 Employment Agreement dated October 13, 1994, between Michael Strauss
            and the Company (10)
      10.46 Letter Agreement dated February 15, 1996, between the Company and
            McCord Winn Textron, Inc. to extend the Development and License
            Agreement dated March 5, 1993 (14)
      10.47 Amendment to Employment Agreement between Michael Strauss and the
            Company(13) 
      10.48 1995 Stock Option Plan(13)
      10.49 Amendment letter of agreement dated August 15, 1996 between the
            Company and McCord Winn Textron, Inc.(15)
      10.50 Letter of agreement terminating the September 28, 1994, Development
            and License Agreement between the Company and Lumex, Inc.(15) 
      10.51 Letter of Agreement with Josephberg & Grosz to provide the Company
            investment banking services(15)
      10.52 Stock Purchase Agreement between the Company and the owners of Drew
            Shoe Corporation(15) 
      10.53 - 10.69 Not used
      10.70 Form of Subscription Agreement between the Company and the investors
            in the April 1998 private placement of common stock and warrants(16)
      10.71 Form of Common Stock Purchase Warrant between the Company and the
            investors in the April 1998 private placement of common stock and
            warrants. (16)
      10.72 Escrow Agreement between the Company, the several investors and
            Grushko and Mittman (as escrow agent) in connection with the April
            1998 private placement of common stock and warrants. (16)
      10.73 First Amendment, dated as of April 14, 1998, to Note Purchase
            Agreement dated September 19, 1997 between the Company and Impleo,
            LLC. (16)
      10.74 First Amendment, dated as of April 14, 1998, to Note Purchase
            Agreement dated September 19, 1997 between the Company and the
            members of the Kirr Marbach group. (16)
      10.75 Security Agreement dated as of April 14, 1998 between Wexford
            Management, LLC, as agent for the noteholders, and the Company. (16)
<PAGE>

      10.76 Stock Pledge Agreement dated as of April 14, 1998 between Wexford
            Management, LLC, as agent for the noteholders, and the Company. (16)
      10.77 Stock Purchase and Restructuring Agreement between the Company and
            Impleo, LLC.(17)
      10.78 Second Amendment to Note Purchase Agreement between BCAM
            International and Impleo, LLC. (17)
      10.79 Shareholders agreement between the Company, Drew Shoe Corporation
            and Impleo, LLC. (17)
      10.80 Purchase and sale agreement between the Company and Impleo, LLC(17)
      10.81 Letter of agreement between the Company and Charles G. Schuyler and
            Frank Shyjka. (17)
      10.82 Release, Cancellation and Discharge of Guarantee Agreement of BCAM
            International, Inc. by BankOne, National Association. (17)
      21.00 Subsidiaries of the Company (12)
      27    Financial Data Schedule

(1)   Filed as an Exhibit to Registrant's Registration Statement on Form S-18
      (file no. 33-31282) and incorporated herein by reference thereto.
(2)   Filed as an Exhibit to Registrant's Annual Report on Form 10-K for the
      fiscal year ended December 31, 1989 (file no. 0-18109) and incorporated
      herein by reference thereto.
(3)   Filed as an Exhibit to the Registrant's Annual Report on Form 10-K for the
      fiscal year ended December 31, 1991 (file no. 0-18109) and incorporated
      herein by reference thereto.
(4)   Filed as an Exhibit to Registrant's Registration Statement on Form
      S-1(file no. 33-38204) and incorporated herein by reference thereto.
(5)   Filed as an Exhibit to Post Effective Amendment No. 1 to Registrant's
      Registration Statement on Form S-1 (file no. 33-38204) and incorporated
      herein by reference thereto.
(6)   Filed as an Exhibit to Post Effective Amendment No. 2 to Registrant's
      Registration Statement on Form S-1 (file no. 33-38204) and incorporated
      herein by reference thereto.
(7)   Filed as an Exhibit to Post-Effective Amendment No. 3 to Registrant's
      Registration Statement on Form S-1 (file no. 33-38204) and incorporated
      herein by reference thereto.
(8)   Filed as an Exhibit to Registrant's Annual Report on Form 10-KSB for the
      fiscal year ended December 31, 1992 (file no. 0-18109) and incorporated
      herein by reference thereto.
(9)   Filed as an Exhibit to Registrant's Annual Report on Form 10-KSB for the
      fiscal year ended December 31, 1993 (file no. 0-18109) and incorporated by
      reference thereto.
(10)  Filed as an Exhibit to Registrant's Form 10-QSB/A filed December 5, 1994
      amending the Form 10-QSB for quarterly period ended September 30, 1994
      (file no. 0-18109) and incorporated by reference thereto.
(11)  Filed as an Exhibit to Registrant's Form 10-QSB/A for the fiscal year
      ended December 31, 1993 (file no. 0-18109) and incorporated by reference
      thereto.
(12)  Filed as an Exhibit to Registrant's Form 10-KSB for the fiscal year ended
      December 31, 1994 (file no. 0-18109) and incorporated by reference
      thereto.
(13)  Filed as an Exhibit to Registrant's Form 10-QSB for the quarter ended June
      30, 1995 (file no. 0-18109) and incorporated by reference thereto.
(14)  Filed as an Exhibit to Registrant's Form 10-KSB for the fiscal year ended
      December 31, 1995 (file no. 0-18109) and incorporated by reference
      thereto.
(15)  Filed as an Exhibit to Registrant's Form 10-KSB for the fiscal year ended
      December 31, 1996 (file no. 0-18109) and incorporated by reference
      thereto.
(16)  Filed as an Exhibit to the Registrant's Form 8-K filed on May 6, 1998 and
      incorporated herein by reference thereto.
(17)  Filed as an Exhibit to the Registrant's Form 8-K filed on November 6, 1998
      and incorporated herein by reference thereto.

      (b) Reports on Form 8-K

      During the fourth quarter of the period covered by this Report, and
      through the date of this report, the Company filed a report on Form 8-K/A
      to report the following events: 

      1     A report on November 6, 1998 reporting the sale of 56.7% of the
            Company's interest in Drew Shoe Corporation to the holders of the
            Company's 10%/13% Convertible Notes in exchange for redemption of
            $3,780,000 and related matters.

      2     A report on December 22, 1998, as amended on January 7, 1999,
            reporting that the Company had replaced its auditors, Ernst & Young
            LLP with J.H. Cohn LLP and that Drew Shoe Corporation had replaced
            Ernst & Young LLP with Hays & Company LLP.
<PAGE>

      3     A report on January 11, 1999 reporting the restructuring of the
            subscription agreement with the investors in the April 1998 private
            placement of common stock and warrants with respect to the
            "repricing" provisions.

      4     A report on February 26, 1999 reporting that a shareholder had filed
            a derivative action lawsuit against the Company and its current and
            certain former directors as well as others.

      5     A report on March 4, 1999 reporting the vote of over 67.7% of the
            shareholders on a proposal to sell the Company's remaining 33.3%
            interest in Drew Shoe Corporation.

AVAILABLE INFORMATION

      Registrant will furnish any exhibits listed but not contained herein to
any beneficial owner of its securities upon receipt of a written request from
such person. Requests should be directed to Shareholder Relations Department,
BCAM International, Inc., 1800 Walt Whitman Road, Melville, New York 11747.
<PAGE>

SIGNATURES

      In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
has caused this report to be signed on its behalf by the undersigned, thereto
duly authorized.

                           BCAM International, Inc.


                           By: /s/ Michael Strauss
                               --------------------------------
                               Michael Strauss
                               Chairman of the Board of Directors
                               Chief Executive Officer
                               (Principal Executive Officer)
                               Date: April 15, 1999


                           By: /s/ Kenneth C. Riscica
                               --------------------------------
                               Kenneth C. Riscica
                               Vice President - Finance,
                               Chief Financial Officer, Treasurer and Secretary
                               (Principal Financial and Accounting Officer)
                               Date: April 15, 1999

      In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.


/s/ Michael Strauss
----------------------         Chairman of the Board             April 15, 1999
Michael Strauss                of Directors and
                               Chief Executive Officer
                               (Principal Executive Officer)


/s/ Robert P. Wong
----------------------         Director                          April 15, 1999
Robert P. Wong


/s/ Joel L. Gold
----------------------         Director                          April 15, 1999
Joel L. Gold


/s/ Glenn F. Santmire
----------------------         Director                          April 15, 1999
Glenn F. Santmire


/s/ Mark L Plaumann
----------------------         Director                          April 15, 1999
Mark L Plaumann