UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 30, 1996
or
[ ] Transition report pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1994
For the transition period from to
Commission file number 0-28236
InVision Technologies, Inc.
Delaware 94-3123544
-------- ----------
(State or other jurisdiction of I.R.S. Employer Identification No.
incorporation or organization)
3420 East Third Avenue
Foster City, California 94404
(415) 578-1930
Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
--- ---
The number of shares of the Registrant's Common Stock, $0.001 par value,
outstanding as of September 30, 1996 was 4,459,590.
This quarterly report on Form 10-Q consists of 11 pages of which this is
page 1.
<PAGE>
INVISION TECHNOLOGIES, INC.
INDEX TO FORM 10-Q
For the quarter ended September 30, 1996
Part 1: FINANCIAL INFORMATION
- -----------------------------------------------------
Item Page
- ------- --------
1. Financial Statements (unaudited)
a. Condensed Balance Sheets
September 30, 1996 and December 31, 1995 3
b. Condensed Statements of Operations
Three Months and Nine Months Ended
September 30, 1996 and 1995 4
c. Condensed Statements of Cash Flows
Nine Months Ended September 30, 1996 and 1995 5
d. Notes to Condensed Financial Statements 6-7
2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-9
PART II. OTHER INFORMATION
- ---------------------------------------------------
1. Legal Proceedings 10
2. Changes in Securities 10
3. Defaults Upon Senior Securities 10
4. Submission of Matters to a Vote of Security Holders 10
5. Other Information 10
6. Exhibits and Reports on Form 8-K 10
Signature Page 11
<PAGE>
PART 1. FINANCIAL INFORMATION
<TABLE>
Item 1. Financial Statements
INVISION TECHNOLOGIES, INC.
CONDENSED BALANCE SHEETS
(in thousands except per share data)
<CAPTION>
September 30, December 31,
1996 1995
------------- ------------
(Unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash $ 6,381 $ 1,927
Accounts receivable 1,376 735
Inventories (Note 4) 4,290 3,413
Prepaid expenses 329 252
--------- --------
Total current assets 12,376 6,327
Property and equipment, net 1,146 914
Other assets 75 75
--------- --------
$13,597 $ 7,316
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 2,237 $ 3,137
Accrued expenses 1,123 1,115
Short-term debt (Note 5) - 2,260
Advances from stockholders 200 200
Deferred revenue 2,057 3,082
Current portion of capital lease 77 10
--------- --------
Total current liabilities 5,694 9,804
--------- --------
Long-term portion of capital lease 122 34
Stockholders' equity (deficit):
Convertible preferred stock, $.001 par
value; 5,000 shares authorized; 0 and
2,619 shares issued and outstanding - 12,212
Common stock, $.001 par value; 20,000
shares authorized; 4,168 and 62 shares
issued and outstanding 5 -
Additional paid-in capital 26,513 1,885
Deferred stock compensation (443) (692)
Accumulated deficit (18,294) (15,927)
--------- ---------
Total stockholders' equity (deficit) 7,781 (2,522)
--------- ---------
$13,597 $ 7,316
========= =========
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
3
</TABLE>
<PAGE>
<TABLE>
INVISION TECHNOLOGIES, INC.
CONDENSED STATEMENTS OF OPERATIONS - Unaudited
(in thousands except per share data)
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
----------------------------------------
1996 1995 1996 1995
-------- -------- ------- -------
<S> <C> <C> <C> <C>
Revenues:
Product sales $ 3,916 $ 3,052 $11,376 $ 6,464
Contract revenues 315 135 1,209 495
--------- -------- -------- --------
Total revenues 4,231 3,187 12,585 6,959
--------- -------- -------- --------
Operating expenses:
Cost of product sales 2,232 2,088 6,873 4,431
Cost of contract revenues 276 98 1,075 451
Research and development 611 536 1,755 1,245
Selling, general and administrative 1,488 1,007 3,869 2,305
--------- -------- -------- --------
Total operating expenses 4,607 3,729 13,572 8,432
--------- -------- -------- --------
Operating loss (376) (542) (987) (1,473)
Interest expense (7) (65) (1,502) (285)
Interest income 61 11 122 30
--------- -------- -------- --------
Net loss $ (322) $ (596) $(2,367) $(1,728)
========= ======== ======== ========
Net loss per share $(0.07) $(0.17) $(0.63) $(0.51)
========= ======== ======== ========
Weighted average shares outstanding 4,325 3,561 3,746 3,391
========= ======== ======== ========
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
4
</TABLE>
<PAGE>
<TABLE>
INVISION TECHNOLOGIES, INC.
CONDENSED STATEMENTS OF CASH FLOWS - Unaudited
(in thousands)
<CAPTION>
Nine Months
Ended September 30,
1996 1995
---------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (2,367) $(1,728)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation 254 170
Amortization of bridge loan warrant 1,330 150
Compensation expense from stock options 278 -
Changes in assets and liabilities:
Accounts receivable (641) (1,289)
Inventories (877) (915)
Prepaid expenses (77) (11)
Accounts payable (901) 313
Accrued expenses 8 625
Deferred revenue (1,025) 1,477
-------- --------
Net cash used in operating activities (4,018) (1,208)
-------- --------
Cash flows from investing activities:
Acquisition of property and equipment (486) (388)
-------- --------
Net cash used in investing activities (486) (388)
-------- --------
Cash flows from financing activities:
Proceeds from short-term debt 1,000 -
Repayments of short-term debt (4,000) -
Proceeds from capital lease 165 -
Repayments of capital lease (9) -
Proceeds from issuance of preferred stock - 344
Proceeds from issuance of common stock, net 11,802 5
-------- -------
Net cash provided by financing activities 8,958 349
-------- -------
Net increase (decrease)in cash for the period 4,454 (1,247)
Cash at beginning of period 1,927 2,241
-------- --------
Cash at end of period $ 6,381 $ 994
======== ========
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
5
</TABLE>
<PAGE>
INVISION TECHNOLOGIES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS - Unaudited
Summary of Significant Accounting Policies
1. Interim Unaudited Financial Information
The accompanying interim unaudited condensed financial statements have
been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions
to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not
contain all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In
the opinion of management, the accompanying unaudited condensed
financial statements reflect all adjustments, (consisting of normal
recurring adjustments) considered necessary for a fair presentation of
the Company's financial position as of September 30, 1996 and December 31,
1995, the results of its operations for the three and nine month periods ended
September 30, 1996 and 1995, and its cash flows for the nine month periods
ended September 30, 1996 and 1995. These financial statements should be read
in conjunction with the audited financial statements of the Company as
of December 31, 1995 and 1994 and for each of the three years in the
period ended December 31, 1995, including notes thereto, included in the
Company's Registration Statement on Form S-1 (Commission File No. 333-
380). Certain prior period balances have been reclassified to conform with
current period presentation.
Operating results for the three month and nine month periods ended
September 30, 1996 may not necessarily be indicative of the results that may
be expected for the year ended December 31, 1996 or any other future period.
2. Equity Financing
On April 23, 1996, the Company's initial public offering (the IPO) of
900,000 shares of its common stock at $11.00 per share became effective.
The Company received net proceeds of $8,211,000.
On May 23, 1996, the Company's Managing Underwriter, Donald and Co.
Securities, Inc., under the terms of the over-allotment option provided
in the IPO, completed the sale of an additional 135,000 shares of the
Company's common stock, at $11 per share. The Company received net
proceeds of $1,321,000.
Proceeds from the offering were used primarily to repay short term debt,
reduce outstanding accounts payable and to provide working capital for the
Company.
The Managing Underwriter received, under the terms of the underwriting
agreement, four year warrants to purchase 90,000 shares of the Company's
Common Stock at a price of $13.20 per share commencing April 23, 1997.
In connection with a Bridge Loan (Note 5, below), the lender received
three-year warrants (the "Bridge Loan Warrants") to purchase 31,818 and
227,272 shares of the Company's Common Stock at a price per share equal to
the initial public offering price ($11.00 per share) and $8.80 per share,
respectively. The Bridge Loan Warrants were exercised in full at various
times during the month of August 1996 with the Company receiving proceeds
from the exercise of $2,349,992.
6
<PAGE>
INVISION TECHNOLOGIES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS - Unaudited -- Continued
3. Net Loss Per Share
Net loss per share is computed using the weighted average number of
common and common equivalent shares outstanding during the periods.
Common equivalent shares consist of stock options and warrants (using the
treasury stock method). Common equivalent shares from stock options are
excluded from the computation if their effect is antidilutive, except that
pursuant to the requirements of the Securities and Exchange Commission,
common and common equivalent shares issued from January 1, 1995 through the
effective date of the Company's initial public offering on April 23, 1996
(see Note 2 above) have been included in the computation using the treasury
stock method as if they were outstanding for all periods prior the effective
date.
4. Inventories
The components of inventory consist of the following (in thousands):
<TABLE>
<CAPTION>
September, 30 December 31,
1996 1995
--------- ------------
<S> <C> <C>
Raw materials $ 2,219 $ 1,853
Work-in-process 1,628 779
Finished goods 443 781
--------- ---------
$ 4,290 $ 3,413
========= =========
</TABLE>
5. Short-term Debt
In December 1995, the Company entered into a $2,000,000 Bridge Loan
Agreement ("Agreement," or the "Bridge Loan") with a lender. Under the
Agreement, the Company had drawn $1,000,000 as of December 31, 1995. In
February, 1996 the Company borrowed the remaining $1,000,000 available
under the bridge loan. The Bridge Loan was repaid in full on May 1, 1996 in
accordance with the terms of the agreement.
In connection with the Bridge Loan, the lender received the Bridge Loan
Warrants described in Note 2, above. The aggregate fair value of the Bridge
Loan Warrants, as determined at the date of issuance, is $1,330,000. Such
value represents a discount that was amortized as a financing cost over the
period that the Bridge Loan was outstanding.
6. Long-term Debt
In September 1995, the Company obtained a $500,000 lease line under a
Master Lease Agreement. This lease line is to provide financing for the
purchase of computers, office automation and other equipment. As of September
30, 1996 the total amount drawn under this lease line is $165,000.
7
<PAGE>
INVISION TECHNOLOGIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Overview
Except for the historical information contained herein, the following
discussion contains forward looking statements that involve risks or
uncertainties. The Company's actual results could differ materially from
those discussed here. Factors that could cause or contribute to such
differences include, but are not limited to, those discussed in this
section, general economic and political conditions, world events impacting
airline security, and those discussed in the Company's Registration Statement
Form S-1 (Commission File 333-380) and amendments thereto.
Results of Operations
The operating loss for the third quarter of 1996 decreased to $376,000
from $542,000 in the third quarter of 1995. Continuing losses from
operations are anticipated through the end of 1996 as the Company prepares for
future growth by investing in manufacturing, service, sales and
administrative infrastructure.
Unit shipments are expected to increase over time as the CTX 5000 continues
to achieve greater market awareness and acceptance, and as the market for
explosive detection systems is more fully developed. Management anticipates
this growth in unit shipments will be moderate through the end of the year due
to the long sales cycle and complexity of the technology.
Product Sales in the third quarter of 1996 increased 33% to $4.0 million
from $3.0 million in the third quarter of 1995. The increase was primarily
due to changes in product configurations leading to an increase in the average
selling price for system sales as well as sales of add-on products to current
customers.
Contract Revenues in the third quarter of 1996 increased to $315,000
from $135,000 primarily due to increased activity under a new FAA grant which
did not exist in the third quarter of 1995. The Company's FAA revenues do not
include a significant margin as they primarily represent a reimbursement of
development costs incurred.
Product Gross Margins increased to 43% in the third quarter of 1996
from 32% in the third quarter of 1995. The increase is primarily due to
better efficiencies and overhead absorption based on the increased
number of units produced, sold and in process.
Research and Development expenses increased to $611,000 in the third
quarter of 1996, as compared to $536,000 in the third quarter of 1995.
This increase reflects the effects of personnel additions and costs of
prototype development incurred as the Company enhances the current CTX 5000
system. The Company expects to continue to increase its investment in
Research and Development expenses.
Selling, General and Administrative Expenses increased to $1,488,000 in
the third quarter of 1996 from $1,007,000 in the third quarter of 1995. The
increase is primarily due to headcount related expenses and infrastructure
required to transition to a fully operating international enterprise. These
expenses are expected to continue to grow in response to increased unit
shipments and efforts by the Company to expand acceptance of our technology
and develop the market.
8
<PAGE>
INVISION TECHNOLOGIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS -- Continued
Interest Expense decreased to $7,000 in the third quarter of 1996
from $65,000 in the third quarter of 1995. This decrease is direct result of
the repayment of debt from the proceeds of the Initial Public Offering.
Liquidity and Capital Resources
The Company's cash balance at September 30, 1996 was $6,381,000, an
increase of $4,454,000 from the cash balance of $1,927,000 at December 31,
1995. The Company's working capital at September 30, 1996 was $6,681,000,
an increase of $10,192,000 from the working capital deficit of $3,511,000 at
December 31, 1995.
The Company's Initial Public Offering was completed on April 30, 1996,
resulting in net proceeds to the Company (after underwriting discounts and
expenses) of approximately $8.2 million. $2,000,000 of such proceeds were
immediately used to repay the Bridge Loan (Note 5, above). Additional funds
were used to reduce the Company's outstanding balance in accounts payable.
The Company also repaid the $2,000,000 outstanding balance under its Line-of-
Credit agreement with San Paolo Bank. On May 23, 1996 the Company's
Underwriter exercised its over-allotment option for an additional 135,000
shares of Common Stock resulting in additional net proceeds of $1.3 million.
In connection with the Bridge Loan, the lender received three-year
warrants to purchase 31,818 and 227,272 shares of the Company's Common Stock
at a price per share equal to the initial public offering price ($11.00 per
share) and $8.80 per share, respectively. During the month of August 1996
these warrants were exercised by the lender. The Company received net
proceeds from the exercise of $2,349,992.
In February 1996, the Company entered into a subcontract with Imatron
Federal Systems, Inc. (IFS) to perform activities under a Federal Aviation
Administration (FAA) grant which was awarded to IFS. Such subcontract will
provide up to $2.0 million to the Company during 1996 to fund research and
development efforts towards increasing throughput and lowering the cost of the
CTX 5000. To date InVision has received $433,000 under this grant. Amounts not
utilized during 1996 are expected to be carried forward to 1997. The Company
was also notified that IFS may receive up to an additional $2.1 million from
the FAA in 1997, of which the Company expects to receive $2.0 million, for
further throughput enhancement and cost reduction activities to begin in
1997. This most recent award represents a continuation of FAA funding of new
product development by the Company.
The Company believes that, based on current estimates, the present cash
balances and cash generated from operations, including funds to be received
under FAA grants, will be sufficient to meet its operating requirements into
the second quarter of 1997. Substantial increases in sales order volume, and
the associated increase in production costs to fill those orders, could
create a requirement for additional capital. Management believes that
additional sources of liquidity, if required, could be obtained through
credit lines, other financing instruments or the issuance and sale of
additional debt or equity of the Company, although there can be no assurances
that such additional sources of financing can be obtained.
9
<PAGE>
Part II: OTHER INFORMATION
Item 1: Legal Proceedings - Not Applicable.
Item 2: Changes in Securities - Not Applicable.
Item 3: Defaults Upon Senior Securities - Not Applicable.
Item 4: Submission of Matters to a Vote of Security Holders -
Not Applicable.
Item 5: Other Information - Not Applicable.
Item 6: Exhibits and Reports on Form 8-K
(a) Exhibit 27 - Financial Data Schedule.
(b) Reports on Form 8-K - Not Applicable.
10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
INVISION TECHNOLOGIES, INC.
Registrant
Date: November 13 , 1996 /S/ Curtis P. DiSibio
---------------------
Curtis P. DiSibio
Chief Financial Officer and
Duly Authorized Officer
/S/ Dr. Sergio Magistri
-----------------------
Dr. Sergio Magistri
President and
Chief Executive Officer and
Duly Authorized Officer
11
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 6,381
<SECURITIES> 0
<RECEIVABLES> 1,376
<ALLOWANCES> 0
<INVENTORY> 4,290
<CURRENT-ASSETS> 12,376
<PP&E> 2,103
<DEPRECIATION> 957
<TOTAL-ASSETS> 13,597
<CURRENT-LIABILITIES> 5,694
<BONDS> 0
0
0
<COMMON> 26,518
<OTHER-SE> (18,737)
<TOTAL-LIABILITY-AND-EQUITY> 13,597
<SALES> 4,231
<TOTAL-REVENUES> 4,231
<CGS> 2,508
<TOTAL-COSTS> 4,607
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7
<INCOME-PRETAX> (322)
<INCOME-TAX> 0
<INCOME-CONTINUING> (322)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (322)
<EPS-PRIMARY> (.07)
<EPS-DILUTED> (.07)
</TABLE>
