<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 7, 1996
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
INVISION TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 3844 94-3123544
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction of Classification Code Number) Identification
incorporation or No.)
organization)
</TABLE>
3420 E. THIRD AVE.
FOSTER CITY, CALIFORNIA 94404
(415) 578-1930
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
------------------------------
CURTIS P. DISIBIO
CHIEF FINANCIAL OFFICER
INVISION TECHNOLOGIES, INC.
3420 E. THIRD AVE.
FOSTER CITY, CA 94404
(415) 578-1930
(Name, address and telephone number of agent for service)
------------------------------
Copies to:
Robert L. Jones, Esq.
Cooley Godward Castro Huddleson & Tatum
3000 El Camino Real, Suite 400
Palo Alto, California 94306
------------------------------
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
------------------------------
If any of the Securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM
PROPOSED MAXIMUM AGGREGATE
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PER SHARE (1) PRICE (1) REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, $.001 par value............... 259,090 shares $13.00 $3,368,170 $1,161.44
</TABLE>
(1) Estimated in accordance with Rule 457(c) solely for the purpose of computing
the amount of the registration fee based on the average of the high and low
prices of the Company's Common Stock as reported on the Nasdaq SmallCap
Market on June 5, 1996.
------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
INVISION TECHNOLOGIES, INC.
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(b) OF REGULATION S-K
SHOWING LOCATION IN PROSPECTUS OF INFORMATION
REQUIRED BY ITEMS OF FORM S-1
<TABLE>
<CAPTION>
ITEM NUMBER AND HEADING
IN FORM S-1 REGISTRATION STATEMENT LOCATION IN PROSPECTUS
- ---------------------------------------------------------------- -----------------------------------------------------
<C> <S> <C>
1. Forepart of the Registration Statement and Outside
Front Cover Page of Prospectus...................... Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages of
Prospectus.......................................... Inside Front and Outside Back Cover Pages of
Prospectus
3. Summary Information; Risk Factors, and Ratio of
Earnings to Fixed Charges........................... Inside Front Cover Page; Prospectus Summary; Risk
Factors
4. Use of Proceeds...................................... Use of Proceeds
5. Determination of Offering Price...................... Not applicable
6. Dilution............................................. Not applicable
7. Selling Security Holders............................. Principal Stockholders and Selling Security Holders
8. Plan of Distribution................................. Outside Front Cover Page; Plan of Distribution
9. Description of Securities to be Registered........... Description of Capital Stock
10. Interests of Named Experts and Counsel............... Not applicable
11. Information with Respect to the Registrant........... Outside Front and Inside Front Cover Pages;
Prospectus Summary; Risk Factors; Dividend Policy;
Selected Financial Data; Management's Discussion and
Analysis of Financial Condition and Results of
Operations; Business; Management; Certain
Transactions; Principal Stockholders; Description of
Capital Stock; Shares Eligible for Future Sale;
Qualified Small Business Stock; Glossary of
Technical Terms; Financial Statements
12. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities...................... Not applicable
</TABLE>
<PAGE>
PROSPECTUS 259,090 SHARES
[LOGO]
COMMON STOCK
------------------------
All of the shares of Common Stock offered hereby are issuable upon the
exercise of warrants issued by InVision Technologies, Inc. (the "Company" or
"InVision") in a private placement in 1995, and held by Anaconda Partners, L.P.
("Anaconda") and LEO Holdings, Inc. (collectively, the "Selling Security
Holders"). Such warrants are exercisable for 227,272 shares at $8.80 per share
and 31,818 shares at $11.00 per share. The foregoing Warrants are referred to
herein as the "Warrants." All of the shares are being offered hereby by the
Selling Security Holders. The Company's Common Stock is traded on The Nasdaq
SmallCap Market under the symbol "INVN." The last reported sales price of the
Company's Common Stock on the Nasdaq SmallCap Market on June 5, 1996 was $12.75
per share.
------------------------
THIS OFFERING INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" COMMENCING ON PAGE 6 HEREOF.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
No underwriting commissions or discounts will be paid by the Company in
connection with this offering. Estimated expenses payable by the Company in
connection with this offering are $81,161.44. The aggregate proceeds to the
Selling Security Holders from the Common Stock will be the purchase price of the
Common Stock sold less the aggregate agents' commissions and underwriters'
discounts, if any, and other expenses of issuance and distribution not borne by
the Company. See "Plan of Distribution."
June 7, 1996
THE DATE OF THIS PROSPECTUS IS JUNE 7, 1996
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith, files annual and quarterly reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission"). Such
reports, proxy statements and other information may be inspected and copied at
the Commission's Public Reference Section, 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, as well as at the Commission's Regional Offices at 7
World Trade Center, 13th Floor, New York, New York 10048; and 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such material can be
obtained at prescribed rates from the Public Reference Section of the Commission
at 450 Fifth Street, N.W., Washington, D.C. 20549. The Common Stock of the
Company is quoted on the Nasdaq SmallCap Market. Reports and other information
concerning the Company may be inspected at the National Association of
Securities Dealers, Inc. at 1735 K Street, N.W. Washington, D.C. 20006.
A registration statement on form S-1 with respect to the Common Stock
offered hereby (the "Registration Statement") has been filed with the Commission
under the Act. This Prospectus does not contain all of the information contained
in such Registration Statement and the exhibits and schedules thereto, certain
portions of which have been omitted pursuant to the rules and regulations of the
Commission. For further information with respect to the Company and the Common
Stock offered hereby, reference is made to the Registration Statement and the
exhibits and schedules thereto. Statements contained in this Prospectus
regarding the contents of any contract or any other documents are not
necessarily complete and, in each instance, reference is hereby made to the copy
of such contract or document filed as an exhibit to the Registration Statement.
The Registration Statement, including exhibits thereto, may be inspected without
charge at the Securities and Exchange Commission's principal office in
Washington, D.C., and copies of all or any part thereof may be obtained from the
Public Reference Section, Securities and Exchange Commission, Washington, D.C.,
20549, upon payment of the prescribed fees.
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY AND SHOULD BE READ IN
CONJUNCTION WITH THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS AND THE
NOTES THERETO APPEARING ELSEWHERE IN THIS PROSPECTUS. A GLOSSARY OF TECHNICAL
TERMS IS INCLUDED AT PAGE 48 OF THIS PROSPECTUS.
THE COMPANY
InVision Technologies, Inc. was incorporated in September 1990 to develop,
manufacture, market and support aviation security products based on advanced
computed tomography ("CT" or "CAT Scan") technology. In December 1994,
InVision's sole product, the CTX 5000, became the first explosive detection
system ("EDS") to be certified by the Federal Aviation Administration ("FAA")
for use in the inspection of checked luggage on commercial flights. In order to
meet the throughput requirements of FAA certification, two CTX 5000 units were
configured in parallel. Although the CTX 5000 has proven its detection
capability through FAA certification, there currently is no requirement that
U.S. airlines (or international airlines or airports) deploy FAA certified
explosive detection systems or that U.S. airlines (or most international
airlines or airports) deploy explosive detection systems at all. To date,
InVision is aware of no other company that has applied for FAA certification.
InVision was organized to develop CT-based technology, which had been widely
adopted in the medical industry in the 1970's, for the detection of hidden
explosives. The Company's CTX 5000 is the only CT-based technology currently
available in the EDS industry. CT technology is based on a technique of rotating
an x-ray source around the object being analyzed, rather than passing a single
x-ray through the object, thereby allowing assessment of the object from many
different angles. Using highly sophisticated algorithms, CT-based technology is
able to both "see into" an object regardless of superimposition or neighboring
objects, and also characterize density, mass, uniformity and morphology of the
objects.
Conventional x-ray scanners which were adopted during the 1970's to detect
hidden weapons used by hijackers are generally not effective in detecting
explosives. Perhaps the most dramatic example of the inability of conventional
x-ray technology to detect explosives was the tragic bombing of Pan Am Flight
103 in December 1988. In response to this bombing and many others during the
late 1980's, government agencies, airport operating companies and international
airlines accelerated their efforts to develop, test and deploy EDS technology.
The Company believes that the CTX 5000 system provides customers with the
highest level of confidence currently available for the detection of concealed
explosives based on the following: (1) the CTX 5000 is the only system certified
by the FAA to detect all categories of explosives considered to be a threat to
civil aviation; (2) following the quantitative measurement of the material's
characteristics, the CTX 5000's computer software automatically interprets the
CT-data, compares the characteristics of suspect objects to a database
containing the characteristics of compounds used in explosive devices, and
identifies objects with characteristics similar to explosive devices (threats);
and (3) upon identification of a threat, the CTX 5000 automatically triggers an
alarm, thus eliminating reliance on an operator to interpret each image of the
contents of the luggage. The operator then is able to use the CTX 5000 to focus
on the suspect object, obtain enhanced images of the threat, and accurately
detect the presence of concealed explosives.
Certain European airports have implemented a multi-level approach to
explosive detection. In these multi-level systems a primary high-throughput
"Level 1" system screens 100% of the baggage. Level 1 alarms are reviewed by an
operator or screened by a secondary "Level 2" system. Baggage which cannot be
cleared at Level 2 is reinspected by a tertiary "Level 3" system. The CTX 5000
is primarily sold as both a Level 2 and Level 3 system for its entry into the
European marketplace. InVision will continue to sell the CTX 5000 as a Level 2
and Level 3 system while attempting to broaden the market's awareness of the CTX
5000 as a primary (Level 1 or stand-alone) high detection system.
3
<PAGE>
As of May 31, 1996 the Company has received a total of 22 orders from end
users for its CTX 5000 systems. The Company has produced a total of 21 systems.
Seventeen of these systems have been shipped to end users, two have been shipped
to the FAA (one of which replaces the original prototype delivered to the FAA),
one has been shipped to a distributor, and one remains as the Company's
engineering development system. The Company's marketing efforts are currently
focused on: (1) international customers whose governments have established
regulations for the deployment of explosive detection systems; (2) new airports
under construction; and (3) FAA operational tests at key U.S. airports to
support the FAA rule making process and to support deployment of EDS technology
by U.S. airlines.
There are certain product limitations which have an adverse effect on the
ability of the Company to market the CTX 5000. These include the relatively
higher price of the CTX 5000, its lower throughput relative to competitive
explosive detection systems utilizing different technologies, and the inability
of the CTX 5000 to scan some luggage sizes.
In February 1996, the Company entered into a subcontract with Imatron
Federal Systems, Inc. ("IFS") to perform activities under an FAA grant which was
awarded to IFS. Such subcontract will provide up to $2.0 million to the Company
during 1996 for use in increasing throughput and lowering the cost of the CTX
5000. 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 in
1997. This most recent award represents a continuation of FAA funding of new
product development by the Company. To date, through subcontracts with IFS, the
Company has received an aggregate of approximately $6.8 million in FAA funding.
The Company hopes to continue to receive such funding in the future.
The Company's business strategy is to establish its system as the detection
standard for the EDS industry and to maintain this position as it undertakes
development of higher throughput enhancements to the system.
RISK FACTORS
In addition to the other information contained in this Prospectus, the
discussion of risk factors on pages 6 to 13 of this Prospectus should be
considered carefully in evaluating an investment in the Common Stock. The risks
of investment in the Common Stock include the following factors:
- The Company has a history of losses and there can be no assurance that it
will achieve profitability.
- The report by the Company's independent accountants contains an
explanatory paragraph regarding the Company's ability to continue as a
going concern.
- The CTX 5000 currently is the only product offered by the Company and
there is uncertainty of its market acceptance.
- There is a limited market for the CTX 5000 based upon its higher cost,
lower throughput, limited configuration, and the difficulty of integrating
the CTX 5000 into a continuously operating baggage handling system.
- The EDS market is becoming intensely competitive and there can be no
assurance that the Company will be able to compete with competitors, many
of whom have significantly greater resources than the Company.
For a full discussion of these risk factors and other risk factors relating
to an investment in the Common Stock offered hereby, carefully read the "Risk
Factors" beginning on page 6 of this Prospectus.
The Company was incorporated in Delaware and its facilities are located at
3420 E. Third Avenue, Foster City, California 94404 where the telephone number
is (415) 578-1930.
4
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common Stock outstanding 4,150,199 shares (1)
before the offering..........
Common Stock offered by the 259,090 shares
Selling Securityholders......
Common Stock to be outstanding 4,409,289 shares (1)
after the offering...........
Use of proceeds............... Proceeds to the Company from the exercise of the
Warrants will be used for general corporate
purposes. The Company will not receive any of
the proceeds from the sale of Common Stock by
the Selling Securityholders.
Nasdaq Symbol................. INVN
</TABLE>
- ------------------------
(1) Excludes (i) 567,028 shares of Common Stock issuable upon exercise of
options outstanding as of May 31, 1996, of which 273,863 shares were
exercisable at such date at a weighted average exercise price of $1.90 per
share, (ii) 90,000 shares issuable upon exercise of the warrants held by
Donald & Co. Securities, Inc. (the "Representative's Warrants") at an
exercise price of $13.20 per share, (iii) 150,138 shares reserved for future
issuance under the Company's Equity Incentive Plan and (iv) 150,000 shares
reserved for issuance under the Company's Employee Stock Purchase Plan.
SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1991 1992 1993 1994 1995
--------- --------- --------- --------- ---------
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, MARCH 31,
1995 1996
--------------- -------------
(UNAUDITED) (UNAUDITED)
--------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenues..................... $ 699 $ 3,099 $ 1,518 $ 821 $ 9,653 $ 990 $ 4,469
Operating loss..................... (2,612) (2,044) (3,025) (3,324) (2,988) (633) (185)
Net loss........................... (2,650) (2,196) (3,307) (3,727) (3,292) (746) (1,215)
Pro forma net loss per share (1)... $ (0.99) $ (0.23) $ (0.39)
Pro forma weighted average shares
outstanding (1)................... 3,321 3,306 3,121
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1996
DECEMBER 31, --------------------------
1995 ACTUAL AS ADJUSTED (2)
------------- --------- ---------------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash..................................................................... $ 1,927 $ 470 $ 5,962
Working capital (deficit)................................................ (3,511) (4,348) 4,762
Total assets............................................................. 7,316 6,703 11,927
Total liabilities........................................................ 9,838 9,737 6,119
Total stockholders' (deficit) equity..................................... (2,522) (3,034) 5,808
</TABLE>
- ------------------------------
(1) See Note 2 of Notes to Financial Statements for an explanation of the method
used to determine the number of shares used to compute pro forma per share
amounts.
(2) As adjusted to give effect to the sale of the 1,035,000 shares of Common
Stock sold in the Company's initial public offering and the application of
the net proceeds therefrom, including the repayment of indebtedness.
UNLESS OTHERWISE INDICATED, ALL INFORMATION IN THIS PROSPECTUS ASSUMES, (I)
NO EXERCISE OF OUTSTANDING OPTIONS TO PURCHASE AN AGGREGATE OF 567,028 SHARES OF
COMMON STOCK OUTSTANDING AS OF MAY 31, 1996, AND (II) NO EXERCISE OF THE
REPRESENTATIVE'S WARRANTS.
5
<PAGE>
RISK FACTORS
AN INVESTMENT IN THE COMPANY INVOLVES A HIGH DEGREE OF RISK. THE FOLLOWING
RISK FACTORS SHOULD BE CONSIDERED CAREFULLY BEFORE PURCHASING THE COMMON STOCK
OFFERED HEREBY.
HISTORY OF LOSSES; NO ASSURANCE OF PROFITABILITY. InVision commenced
business operations in September 1990 and remained in the development stage
through 1994. The Company received its first revenues from product sales in the
first quarter of 1995. InVision has had net losses for each year since
inception, and as of March 31, 1996, had an accumulated deficit of $17,142,000
and a working capital deficit of $4,348,000. The Company estimates that in order
to achieve break-even operating results in 1996 (excluding non-cash charges to
be charged to earnings in 1996 of approximately $1,675,000 related to options
and warrants to be outstanding at the closing of this offering), it would need
to sell 18 to 22 CTX 5000 systems during 1996, depending on many factors
including the configuration, pricing, options and required integration of
systems sold. The Company received new orders from end users for five CTX 5000
systems during calendar year 1995 and has received an additional four orders in
1996. As of May 31, 1996, the Company has shipped seven systems to end users in
1996 and has orders for five systems in backlog. There can be no assurance that
order volume will increase or that any increase will enable the Company to
achieve profitability or, if it is achieved, that profitability can be
maintained. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
ABILITY TO CONTINUE AS GOING CONCERN; EXPLANATORY PARAGRAPH IN ACCOUNTANTS'
REPORT. The report by InVision's independent accountants included in this
Prospectus contains an explanatory paragraph regarding the Company's ability to
continue as a going concern. Such report states that the Company has incurred
recurring losses from operations since inception and has a net capital
deficiency that raises substantial doubt as of the date of such report about the
Company's ability to continue as a going concern. In the opinion of management,
existing funding together with the net proceeds from the Company's initial
public offering and cash from operations will be sufficient to fund the
Company's operations into the second quarter of 1997. See Note 12 of the Notes
to Financial Statements. See also "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources."
SINGLE PRODUCT; UNCERTAINTY OF MARKET ACCEPTANCE. The CTX 5000 currently is
the only product offered by the Company and the Company derives substantially
all of its revenues from the sale of CTX 5000 units. All of the Company's orders
from end users to date have been received from an aggregate of eight customers
and a majority of these have been from a single customer. The market for EDS
technology is largely undeveloped and the Company believes that, in the
foreseeable future, the market for the CTX 5000 will be limited to international
airports. To achieve market acceptance, the CTX 5000 must replace low cost, high
throughput x-ray technology and there can be no assurance that the CTX 5000 will
replace such x-ray technology. Factors described below such as limited field
operations, lower throughput, limited configuration and competition may delay,
limit or prevent market acceptance. In addition, given the large capital
commitment required to purchase the CTX 5000 system, the requirement to purchase
two units in order to obtain an FAA certified explosive detection system, and
the budgetary concerns of governments, airlines and airports the marketability
of the CTX 5000 system may be limited. The commercial success of the CTX 5000
will depend upon its acceptance by domestic and international airports and
government agencies as a safe, useful and cost-effective alternative to less
expensive, higher throughput competitive products employing different
technologies. The Company believes that the overall demand for EDS technology
will depend significantly upon the public perception of the risk of terrorist
attacks. This perception places economic pressure upon the airline industry to
implement, and political pressure on government agencies to mandate, EDS
screening. There can be no assurance that the public will perceive the threat of
terrorist bombings to be substantial or that the airline industry and
governmental agencies will actively pursue EDS technology. As a result of these
factors, there is no assurance the Company will be able to achieve initial
market penetration, revenue growth or profitability. See "Business."
6
<PAGE>
LIMITED FIELD OPERATIONS; DEPENDENCE ON MANCHESTER AIRPORT INSTALLATION.
Customers of the Company have installed CTX 5000 systems at a total of five
airports in four countries. However, most of these installations have been very
recent and the Company's customers have only limited experience with the
operation of the CTX 5000 in high-volume airport operations. At the current
time, the Company's single largest customer has been the airport authority in
Manchester, England, which has ordered 10 systems, all of which have been
installed. The Manchester airport is the first major deployment of the CTX 5000
as an integral part of security screening at a major airport. Many of the
factors necessary to make the overall Manchester baggage scanning system a
success, such as the CTX 5000's integration with the baggage handling system,
ongoing training and maintenance and reliability of operators, are beyond the
control of the Company. The failure of the CTX 5000 to perform successfully in
this deployment may have an adverse effect on the Company's marketing efforts.
See "Business."
LIMITED MARKET FOR CURRENT SYSTEM. There are certain product limitations
with regard to throughput, configuration and integration which may have an
adverse effect on the ability of the Company to market the CTX 5000. See
"Business."
- LOWER THROUGHPUT. Throughput, the measurement of the number of bags that
an explosive detection system is able to scan per hour, is an important
factor in a potential customer's decision to purchase a particular
explosive detection system. The CTX 5000 currently has a throughput of 300
bags per hour ("bph"), a throughput that is significantly lower than
certain of the Company's competitors that claim throughput of 700 to 1,000
bph. As a result, the CTX 5000 is marketed by InVision, and used by
existing customers, as a secondary (Level 2) and/or tertiary (Level 3)
screening device in combination with conventional x-ray technology in many
locations. The market for secondary and/or tertiary screening devices is
substantially smaller than the market for primary screening devices. There
can be no assurance that the Company will be able to increase the
throughput of the CTX 5000 to enable the Company to market the CTX 5000 as
a primary screening device or that the Company will be able to continue to
sell the CTX 5000 as a secondary or tertiary screening device.
- LIMITED CONFIGURATION. The physical configuration of the CTX 5000
currently accommodates luggage of 63 to 70 centimeters wide, depending on
certain factors. In many countries, including Europe, luggage up to one
meter (100 centimeters) in width is permitted on commercial flights. As a
result, in these countries, the CTX 5000 is not able to scan all types of
luggage. The inability of the CTX 5000 to scan all types of luggage has
had, and is expected to continue to have, an adverse effect on the
Company's ability to market the CTX 5000.
- INTEGRATION; QUEUING. Many airport baggage handling systems have conveyor
belts which operate continuously at rates of up to .5 meters per second.
The CTX 5000 does not operate continuously and requires that the conveyor
belt stop and that luggage be held in the system for an average of 10 to
12 seconds. In order to integrate the CTX 5000 into these systems, queuing
conveyors are required in front of, and often in back of, the CTX 5000.
There can be no assurance that InVision will be successful in integrating
its stop-belt systems into the continuous-flow environment of airport
baggage handling systems.
COMPETITION; GREATER RESOURCES OF COMPETITORS. The EDS market is becoming
intensely competitive. The market includes vendors specifically dedicated to the
EDS market as well as major corporations which have considerably greater
resources than InVision. The Company is aware of other major corporations
competing in other markets that intend to enter the EDS market such as Lockheed/
Martin Corporation, which has recently announced an intention to market, and
which has received an FAA grant of approximately $4.7 million in 1996 and may
receive an additional $4 million in 1997 to design and develop, a CT-based
explosive detection system over the next two years. Many of InVision's current
and potential competitors have greater financial, marketing, technical and other
resources than InVision. The commercial airline industry has shown a preference
for such competitors' systems due to their lower cost, faster throughput and
ability to handle all baggage. The FAA is encouraging
7
<PAGE>
the development of greater competition in the EDS industry and has announced an
intent to fund the further development of CT-based EDS technology. There can be
no assurance that InVision will be successful in convincing the commercial
airline industry that the CTX 5000 offers better overall value than existing
systems, that new systems with comparable or greater performance, lower price
and faster or equivalent throughput will not be introduced, or that InVision
will otherwise be able to compete successfully with existing or new competitors.
See "Business -- Competition."
DEPENDENCE ON SUPPLIERS. Certain key components used in InVision's products
have been designed by InVision to its custom specifications and are currently
available only from limited or single source suppliers. InVision currently does
not have long-term agreements with these suppliers. In view of the high cost of
many of these components, InVision is unable to maintain significant inventories
of some necessary components. In the event that a supplier were to cease
operations or discontinue a product, InVision may be unable to acquire such
product from alternative sources within a reasonable period of time. In the
event that the Company's suppliers were to experience financial, operational,
production or quality assurance difficulties, the supply of components to the
Company would be reduced or interrupted. InVision also uses a variety of
independent third-party manufacturers and subassemblers. The inability to
develop alternative sources for single or sole source components, to find
alternative third party manufacturers or subassemblers, or to obtain sufficient
quantities of these components could result in delays or reductions in product
shipments, which could adversely affect the Company's business, financial
condition and results of operations and damage the Company's relationship with
its customers. See "Business."
NEED FOR ADDITIONAL FINANCING. The Company estimates that the net proceeds
of the Company's initial public offering and FAA development funding from IFS
together with cash receipts from customers for backlog net of customer advance
payments received prior to December 31, 1995 would be sufficient to satisfy the
Company's cash requirements into the second quarter of 1997. The Company may
nevertheless require additional capital before or after such period and will
most likely require additional capital in connection with any future operations.
In connection therewith, the Company may need to sell equity or debt securities
to help finance its working capital requirements. Even if the Company achieves
profitability, it believes that it will require significant additional financing
to support its future operations. There can be no assurance that any such
additional financing will be available to the Company or, if available, will be
on reasonable terms. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources."
POTENTIAL DILUTION FROM ADDITIONAL FINANCING. The Company may be required
or may choose to sell equity securities to obtain financing in the future. If
the Company sells additional equity securities at a price per share less than
the public offering price, investors purchasing shares of Common Stock in this
offering would incur additional dilution. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."
LIMITED MANUFACTURING EXPERIENCE. As of May 31, 1996, the Company has
produced a total of 21 systems. Seventeen of these systems have been shipped to
end users, two have been shipped to the FAA (one of which replaces the original
prototype delivered to the FAA), one has been shipped to a distributor, and one
remains as the Company's engineering development system. The Company has not yet
proven its ability to produce the CTX 5000 units in quantity for any sustained
period of time, nor has it produced the CTX 5000 in quantity with the necessary
quality and reliability for the harsh airport environment in which the scanners
must operate. The Company anticipates that it will need to improve its
infrastructure and hire additional production and quality control personnel in
order to achieve the requisite quantity, quality and reliability. The Company
has not sustained production levels for any significant period of time at the
levels required to achieve profitability. The failure of the Company to
establish such production capability would result in a material adverse effect
on the Company's business, financial condition and results of operations. See
"Business -- Manufacturing."
8
<PAGE>
FLUCTUATIONS IN RESULTS OF OPERATIONS; LONG SALES CYCLE. The average
purchase price of a single CTX 5000 unit is in excess of $800,000, with
additional related expenses required to integrate the system into the baggage
handling process at individual sites. Because the Company's CT-based technology
is a relatively new technology and has a high sales price, the sales process
with any particular customer is typically 6 to 12 months and may be longer. In
addition, the manufacturing process for an individual CTX 5000 unit typically
lasts approximately three months. Customers may initially purchase a single CTX
5000 unit for extended evaluation and testing and determine any volume purchases
based upon the performance of that unit. As a result, orders for CTX 5000 units
take considerable time and the timing of individual shipments has a significant
impact on the Company's results of operations and operating income for a
particular period. Accordingly, results of operations for a given period should
not be considered indicative of the results to be expected for future periods.
In addition, a significant portion of the Company's operating expenses are, and
will be, relatively fixed in nature and based primarily on anticipated orders.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations."
NO ASSURANCE OF CONTINUED CERTIFICATION; RISK OF CERTIFICATION OF COMPETING
TECHNOLOGIES; GOVERNMENT REGULATION. The FAA has responsibility for setting and
maintaining performance standards for explosive detection systems for all U.S.
airlines, both in the United States and abroad. The FAA Final Criteria for
Certification of EDS, published in September 1993, requires, among other things,
a throughput of 450 bph for an explosive detection system. InVision's CTX 5000
unit currently has been tested by the FAA at 300 bph and has therefore not been
certified as a single unit. The CTX 5000, when combined in a system consisting
of two units, was certified by the FAA in 1994. There currently is no
requirement that U.S. airlines (or international airlines or airports) deploy
FAA certified explosive detection systems or that U.S. airlines (or most
international airlines or airports) deploy explosive detection systems at all.
Should the standards be lowered and should other lower priced or higher
throughput technologies become certified, or should other competitive systems
otherwise become certified, the Company would lose a significant competitive
advantage and there can be no assurance that InVision would be able to compete
successfully with these systems. The certification by the FAA of any competing
EDS technology could have a material adverse effect on the business of the
Company. Should the FAA increase its certification standards, there can be no
assurance that the CTX 5000 would meet such standards. See "Business."
The Company has recently modified the CTX 5000 and the FAA has notified the
Company that such modification requires recertification by the FAA. The Company
intends to submit the CTX 5000 for recertification before the end of 1996. The
Company intends to continue to modify the CTX 5000 in an effort to make
throughput enhancements and cost reductions to the CTX 5000 based upon the
availability of adequate funds. Any such modifications or updated versions of
the CTX 5000 may require FAA approval in order to retain certification or may
require re-certification. There can be no assurance that any such modifications
will be approved or, if required, certified by the FAA, and the failure to be
approved or certified could have a material adverse effect on the Company. The
Company believes that its long-term success will depend in part upon the ability
to manufacture an EDS that meets or exceeds the throughput standards of the FAA
Final Certification Criteria without being combined with another unit. See
"Business -- Research and Development."
CURRENT DEPENDENCE ON GOVERNMENT FUNDING FOR UNITED STATES CUSTOMERS. To
date, all orders from United States customers have been entirely funded by the
FAA. There can be no assurance that such funding will continue in the future.
The failure of the United States government to continue such funding could
adversely affect the Company's sales in the United States and could have an
adverse effect on the Company's business, financial condition and results of
operations. See "Business -- Marketing, Sales and Service."
COMPETITION FOR FAA GRANTS. The U.S. Government currently plays an
important role in funding the development of EDS technology. In July 1995, the
FAA issued a broad agency announcement for the funding of the research and
development of CT-based EDS technology. In February 1996, the Company entered
into a subcontract with IFS to perform activities under an FAA grant which was
9
<PAGE>
awarded to IFS. Such subcontract will provide up to $2.0 million to the Company
during 1996 for use in increasing throughput and lowering the cost of the CTX
5000. 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 in
1997. The Company is also aware that Lockheed/Martin Corporation was awarded a
grant of approximately $4.7 million in 1996 and may receive up to an additional
$4.0 million in 1997. When and if additional funds become available in the
future, there is no assurance that InVision will receive any such additional
funds. Should InVision fail to receive any such additional future funding, such
failure would create a negative public perception of InVision's CT-based
technology and could have a material adverse effect on the Company's ability to
market the CTX 5000 and on the Company's business, financial condition and
operations. In addition, the grant to Lockheed/Martin Corporation and any future
grants to the Company's other competitors may legitimize the efforts of such
competitors to develop and market CT-based EDS technology and cause the
Company's customers to delay any purchase decisions and could therefore have a
material adverse effect on the Company's ability to market the CTX 5000 and on
the Company's business, financial condition and operations. See "Business -- FAA
Contract."
DEPENDENCE ON PROPRIETARY TECHNOLOGY. InVision's success is partially
dependent upon proprietary technology. In the United States, the Company relies
upon copyrights and trade secrets for the protection of its proprietary
technology. There can be no assurance, however, that the Company could enforce
such trade secrets or copyrights. The Company has a United States patent for
CT-based detection of concealed objects using a pre-scanner (the "Patent") but
does not rely on the Patent. There can be no assurance that the Patent would be
effective in preventing CT-based competition. InVision generally enters into
confidentiality agreements with each of its employees, distributors, customers,
and potential customers and limits access to distribution of its software,
documentation and other proprietary information. There can be no assurance that
these agreements will not be breached, that the Company will have adequate
remedies for any breach, or that the Company's trade secrets will not otherwise
become known to or independently developed by others. Outside the United States,
the time period for filing a foreign counterpart of the Patent has expired, and
the Company has not sought or obtained patent protection (except to the extent
of licenses held under patents owned by Imatron, Inc., a stockholder of the
Company) and has relied to date primarily on software copyrights and trade
secrets for the protection of its proprietary technology. The absence of a
foreign counterpart could adversely affect the Company's ability to prevent a
competitor from using technology similar to technology used in the CTX 5000.
There can be no assurance that the steps taken by InVision to protect its
proprietary technology will be adequate or that its competitors will not be able
to develop similar or functionally equivalent technology.
There can be no assurance that any infringement claims (or claims for
indemnification resulting from infringement claims against third parties, such
as customers) will not be asserted against the Company. If the Company's product
is found to infringe a patent, a court may grant an injunction to prevent
making, selling or using the product in the applicable country. Irrespective of
the validity or success of such claims, the Company could incur significant
costs with respect to the defense thereof. If infringement claims are asserted
against the Company, the Company may seek to obtain a license of such third
party's intellectual property rights, which may not be available under
reasonable terms or at all. Litigation may be necessary to enforce patents
issued to the Company, protect trade secrets or know-how owned by the Company,
and to defend the Company against claimed infringement of the rights of others.
See "Business -- Patents and Licenses."
DEPENDENCE ON TECHNICAL PERSONNEL. InVision depends on the technical
expertise of certain technical personnel with skills in the disciplines of x-ray
physics, image reconstruction and expert systems design. In addition, much of
the Company's proprietary technology is known only by certain technical
employees and might be unavailable should such individuals leave the Company.
The number of scientists qualified to perform the development required by
InVision is extremely limited. InVision also depends on the skills of certain
key management personnel. While the Company maintains key-man life insurance for
Dr. Sergio Magistri in the amount of $3 million, the Company does not
10
<PAGE>
maintain key person life insurance for any of its other employees and has
employment agreements with only four of its executive officers, which agreements
the employees may terminate at will. There can be no assurance that these
individuals will continue employment with InVision. The loss of certain
technical personnel or failure of InVision to attract and retain new technical
personnel could materially adversely affect the Company's business, financial
condition and results of operations. See "Business."
INTERNATIONAL BUSINESS; FLUCTUATION IN EXCHANGE RATES; RISK OF CHANGE IN
FOREIGN REGULATIONS. InVision believes that a majority of the overall market for
EDS technology currently is located outside the United States. Accordingly,
InVision will necessarily be exposed to the risks of international business
operations, including unexpected changes in regulatory requirements, changes in
foreign control legislation, possible foreign currency controls, uncertain
ability to protect and utilize its intellectual property in foreign
jurisdictions, currency exchange rate fluctuations or devaluation, tariffs or
other barriers, difficulties in staffing and managing foreign operations,
difficulties in obtaining and managing vendors and distributors, and potentially
negative tax consequences. International sales are subject to certain inherent
risks including tariffs, embargoes and other trade barriers, staffing and
operating foreign sales and service operations and collecting accounts
receivable. The Company is also subject to risks associated with regulations
relating to the import and export of high technology products. The Company
cannot predict whether quotas, duties, taxes or other charges or restrictions
upon the importation or exportation of the Company's products in the future will
be implemented by the United States or any other country. Fluctuations in
currency exchange rates could cause the Company's products to become relatively
more expensive to customers in a particular country, leading to a reduction in
sales or profitability in that country. There can be no assurance that any of
these factors will not have a material adverse effect on the Company's business,
financial condition and results of operations. See "Business -- Marketing, Sales
and Service."
PRODUCT LIABILITY RISKS; RISK OF FAILURE TO DETECT EXPLOSIVES; AVAILABILITY
OF INSURANCE. The Company's business will expose it to potential product
liability risks which are inherent in the manufacturing and sale of airport
security equipment. There are many factors beyond the control of the Company
that could lead to liability claims such as the reliability of the customer's
operators, the training of the operators after the initial installation and
training period and the maintenance of the units by the customers. For these and
other reasons, there can be no assurance that the units will detect all
explosives hidden in the luggage scanned. The Company does not believe that it
would be liable for any such claims but the cost of defending any such claims
would be significant and any adverse determination would likely be in excess of
the Company's insurance coverage. The failure of the CTX 5000 to detect an
explosive could also result in negative publicity which could impact sales. Many
of the Company customers require the Company to maintain insurance at certain
levels. The Company currently has product liability insurance in the amount of
$10 million. There can be no assurance that, if required, additional insurance
coverage could be obtained on acceptable terms, if at all. See "Business."
CONTROL BY PRINCIPAL STOCKHOLDER. The Company's principal stockholder,
HARAX Holdings, S.A. ("HARAX"), and its affiliates currently hold approximately
47.4% of the Company's Common Stock and have the ability to elect the Company's
directors and to determine the outcome of corporate actions requiring
stockholder approval. The voting power held by the Company's principal
stockholder and their right to elect members of the Company's Board of Directors
could discourage certain types of transactions involving an actual or potential
change in control of the Company, including transactions in which the holders of
Common Stock might otherwise receive a premium for their shares over then
current prices, and may limit the ability of such stockholders to cause or
approve transactions which they may deem to be in their best interests. See
"Certain Transactions." See also "Principal Stockholders."
PENDING TRIAL INVOLVING PRINCIPAL STOCKHOLDER. HARAX is controlled by
Eugenio Rendo, who is a majority stockholder of HARAX. Mr. Rendo is a senior
executive of the Italimprese group of companies in Italy, a large,
privately-held conglomerate. Mr. Rendo has been charged in Italy with bribery of
public officials in connection with obtaining public sector contracts. Mr. Rendo
denies such
11
<PAGE>
allegations and is vigorously defending himself in such matter. The proceedings
with respect to such charges recently have been relocated from Milan, Italy to
Rome, Italy. No hearing or trial date has been set with respect to such charges.
See "Certain Transactions."
ANTI-TAKEOVER PROVISIONS. The Company's Certificate of Incorporation
authorizes the Company's Board of Directors to issue up to five million shares
of preferred stock in one or more series, to fix the rights, preferences,
privileges and restrictions granted to or imposed upon any wholly unissued
shares of preferred stock, to fix the number of shares constituting any such
series, and to fix the designation of any such series, without further vote or
action by its stockholders. The rights of the holders of Common Stock will be
subject to, and may be materially adversely affected by, the rights of the
holders of any preferred stock that may be issued in the future. The issuance of
preferred stock could have the effect of making it more difficult for a third
party to acquire a majority of the outstanding voting stock of the Company. The
Company has no present plans to issue shares of preferred stock. In addition, in
the event of certain transactions by which the Company is acquired or becomes
controlled by a single investor or group of investors, the Board of Directors
pursuant to the Company's Employee Stock Purchase Plan, has discretion to
provide that each right to purchase Common Stock will be assumed or an
equivalent right substituted by the successor corporation, if any, or the Board
may shorten the offering period and provide for all sums collected by payroll
deductions to be applied to purchase stock immediately prior to such
transaction. Furthermore, the Company's Certificate of Incorporation provides
for a staggered board and does not permit stockholder action by written consent,
both of which may have the effect of delaying or preventing changes in control
or management of the Company. The Company also is subject to the provisions of
Section 203 of the Delaware General Corporation Law, an anti-takeover law. The
voting power held by the Company's principal stockholder and its right to elect
members of the Company's Board of Directors, certain provisions of the Company's
Certificate of Incorporation, preferred stock which may be issued in the future
the Company's Employee Stock Purchase Plan and the application of Delaware
General Corporate Law Section 203 could discourage certain types of transactions
involving an actual or potential change in control of the Company, including
transactions in which the holders of Common Stock might otherwise receive a
premium for their shares over then current prices, and may limit the ability of
such stockholders to cause or approve transactions which they may deem to be in
their best interests, all of which could have an adverse effect on the market
price of the Common Stock offered hereby. See "Description of Capital Stock --
Delaware Law and Certain Charter Provisions."
LIMITATION ON THE LIABILITY OF DIRECTORS AND OFFICERS. The Company's
Certificate of Incorporation and bylaws contain certain provisions permitted
under Delaware Law relating to the liability of directors and officers. These
provisions eliminate a director's personal liability for monetary damages
resulting from a breach of fiduciary duty of care to the Company or its
stockholders, except in certain circumstances involving certain wrongful acts,
and also contain provisions indemnifying the directors and officers of the
Company to the fullest extent permitted by Delaware General Corporation Law.
Accordingly, except in certain circumstances, in the event that monetary damages
are granted against a director or officer of the Company (including damages
awarded in connection with an action brought by the stockholders of the Company)
the Company may be obligated to indemnify such director or officer to the extent
of such damages. Damages in any such circumstances could be substantial and the
resulting indemnification obligation could have a material adverse effect on the
Company's financial condition. See "Description of Capital Stock -- Limitation
of Liability and Indemnification."
ABSENCE OF PRIOR TRADING MARKET; POTENTIAL VOLATILITY OF STOCK PRICE. Prior
to this offering, there has been a public market for the Common Stock on The
Nasdaq SmallCap Market for less than two months. There can be no assurance that
an active trading market will develop for the Common Stock or, if one does
develop, that it will be maintained. The market price of the shares of Common
Stock, like that of the common stock of many other high technology companies, is
likely to be highly volatile. Factors such as fluctuation in the Company's
operating results, announcements of technological innovations or new products by
the Company or its competitors and general market conditions may
12
<PAGE>
have a significant effect on the market price of the Common Stock. The initial
public offering price of the Common Stock was negotiated between the Company and
the Representative. See "Underwriting."
SHARES ELIGIBLE FOR FUTURE SALE AND POTENTIAL ADVERSE EFFECT ON STOCK PRICE;
REGISTRATION RIGHTS. Sales of substantial amounts of the Common Stock in the
public market following this offering could have an adverse effect on the price
of the Common Stock. In addition to the 259,090 shares offered hereby,
approximately 308,548 shares became eligible for sale in the public market upon
the effective date of the Registration Statement for the Company's initial
public offering (the "Effective Date") in reliance on Rule 144(k) under the
Securities Act. Thereafter, approximately 20,279 shares and 242,994 shares will
be eligible for sale in the public market beginning approximately 90 and 365
days, respectively, after the Effective Date. The remaining 2,543,378 shares of
Common Stock will become eligible for sale under Rule 144 and Rule 701 at
various dates thereafter as the holding period provisions of Rule 144 are
satisfied. See "Shares Available for Future Sale."
Approximately ten months after this offering, the Company will be required
to register the 90,000 shares of Common Stock underlying the Representative's
Warrants at the request of the Representatives and/or their transferees and on
any registration statement filed by the Company, and, if, following the first
anniversary of the Effective Date, the Company proposes to register any of its
Common Stock under the Securities Act, the Company may be required to register
an additional 90,909 shares held by Kays Corporation on any registration
statement filed by the Company. See "Description of Capital Stock --
Registration Rights."
DIVIDENDS UNLIKELY. The Company has never declared or paid dividends on its
capital stock, and does not anticipate paying any cash dividends in the
foreseeable future. See "Dividend Policy."
13
<PAGE>
USE OF PROCEEDS
The purpose of this offering is to register Common Stock issuable upon the
exercise of the Warrants. Proceeds to the Company from the exercise of the
Warrants will be used for general corporate purposes. The Company will not
receive any of the proceeds from the sale of the Common Stock by the Selling
Securityholders. If the Warrants are exercised in full, the gross proceeds to
the Company will be $2,350,000.
DIVIDEND POLICY
The Company has not declared or paid cash dividends on its Common Stock
since inception, presently intends to retain earnings, if any, for use in its
business, and does not anticipate paying cash dividends in the foreseeable
future.
14
<PAGE>
SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Financial Statements and Notes thereto included elsewhere in
this Prospectus. The following data, insofar as it relates to each of the years
1991 - 1995, have been derived from audited financial statements, including the
balance sheets at December 31, 1994 and 1995 and the related statements of
operations and of cash flows for the three years ended December 31, 1995 and
notes thereto appearing elsewhere herein. The report of independent accountants
which also appears herein contains an explanatory paragraph regarding the
Company's ability to continue as a going concern described in Note 12 to such
financial statements. The statement of operations data for the three-month
periods ended March 31, 1995 and 1996 and the balance sheet data at March 31,
1996 have been derived from unaudited financial statements of the Company
included elsewhere in this Prospectus. In the opinion of management of the
Company, such unaudited financial information includes all adjustments
(consisting only of normal recurring accruals) considered necessary for a fair
presentation of the Company's results of operations for the periods then ended
and the Company's financial position as of March 31, 1996. Operating results for
the three-month period ended March 31, 1996 are not necessarily indicative of
the results that will be obtained for the entire year.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1991 1992 1993 1994 1995
--------- --------- --------- --------- ---------
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, MARCH 31,
1995 1996
------------- -------------
(UNAUDITED) (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Product sales............................ $ -- $ -- $ -- $ -- $ 9,060 $ 892 $ 3,922
Contract revenues........................ 699 3,099 1,518 821 593 98 547
--------- --------- --------- --------- --------- ------------- -------------
Total revenues......................... 699 3,099 1,518 821 9,653 990 4,469
--------- --------- --------- --------- --------- ------------- -------------
Operating expenses:
Cost of product sales.................... -- -- -- -- 6,777 658 2,453
Cost of contract revenues................ 647 2,857 1,425 693 547 91 537
Research and development................. 1,608 899 1,568 1,710 1,885 342 595
Selling, general and administrative...... 1,056 1,387 1,550 1,742 3,432 532 1,069
--------- --------- --------- --------- --------- ------------- -------------
Total operating expenses............... 3,311 5,143 4,543 4,145 12,641 1,623 4,654
--------- --------- --------- --------- --------- ------------- -------------
Operating loss (2)......................... (2,612) (2,044) (3,025) (3,324) (2,988) (633) (185)
Interest expense......................... (51) (162) (288) (410) (338) (125) (1,040)
Interest income.......................... 13 10 6 7 34 12 10
--------- --------- --------- --------- --------- ------------- -------------
Net loss (2)............................... $ (2,650) $ (2,196) $ (3,307) $ (3,727) $ (3,292) $ (746) $ (1,215)
--------- --------- --------- --------- --------- ------------- -------------
--------- --------- --------- --------- --------- ------------- -------------
Pro forma net loss per share (1)........... $ (0.99) $ (0.23) $ (0.39)
Pro forma weighted average shares
outstanding (1)........................... 3,321 3,306 3,121
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------------- MARCH 31,
1991 1992 1993 1994 1995 1996
--------- --------- --------- --------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash...................................................... $ 72 $ 562 $ 212 $ 2,241 $ 1,927 $ 470
Working capital (deficit)................................. (1,825) (2,365) (4,759) (4,893) (3,511) (4,348)
Total assets.............................................. 965 1,804 1,950 4,646 7,316 6,703
Total stockholders' (deficit)............................. (1,505) (1,696) (3,983) (4,224) (2,522) (3,034)
</TABLE>
- ------------------------
(1) See Note 2 of Notes to the audited Financial Statements for an explanation
of the method used to determine the number of shares used to compute pro
forma per share amounts.
(2) The Company recorded $369,000 in the year ended December 31, 1995 and
$98,000 in the three months ended March 31, 1996, representing non-cash
charges related to grants of stock options to employees and directors. See
Note 8 of Notes to the audited Financial Statements.
15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
OVERVIEW
InVision designs, manufactures and markets an explosive detection system
based on advanced CT technology. The Company was formed in September 1990 and at
that time began design and development of a commercial product, the CTX 5000
explosive detection system for airport security. The Company was in the
development stage from inception through December 1994.
The Company received its first commercial order for a CTX 5000 in June 1994
and shipped its first commercial CTX 5000 system in November 1994. Revenues were
recognized for this system in the first quarter of 1995 upon customer
acceptance. As of December 31, 1994, the Company had received orders from end
users for 12 systems and had shipped 1 system. Since December 31, 1994, orders
from end users for an additional 10 systems have been received, including 3
systems in February 1996 and 2 systems in March 1996, making a total of 22
systems ordered from inception through May 31, 1996 of which 17 systems have
been shipped.
As of May 31, 1996 the Company had a backlog of approximately $5.5 million
as compared to approximately $8.4 million as of May 31, 1995. The May 1995
backlog was significantly higher primarily due to the fact that the Company
received a $7.5 million order in December 1994, none of which had been filled as
of May 31, 1995. All of the May 31, 1996 backlog is expected to be filled in
1996.
Prior to its first commercial revenues, the Company received virtually all
of its revenues in the form of research and development funding as a
subcontractor with Imatron Federal Systems ("IFS") pursuant to IFS' contract
with the FAA (the "FAA Contract"). InVision formed IFS in 1991 to enable
InVision to perform work under the FAA Contract without obtaining access to
certain classified information that cannot be made available to InVision under
Federal security regulations due to the substantial foreign ownership interest
in the Company. See "Business -- FAA Contract." The subcontracts with IFS were
awarded on a cost plus fixed fees basis.
The Company currently derives most of its annual revenues from the sale of a
small number of systems ranging in price typically from $750,000 to more than $1
million depending on configuration, volume discount, options and required
integration. In addition, the Company's operating results will be subject to
quarterly and other fluctuations due to a variety of factors, including the
volume and timing of orders, length of the sales and production cycles,
cancellation or rescheduling of orders, pricing pressures, availability and cost
of component parts and materials from the Company's suppliers, competitive
pressures, research and development expenses associated with product
introduction, and the timing and level of development costs. As a result, an
inability to receive future orders and any delay in recognition of revenues for
a single system could have a material adverse effect on the Company's results of
operations for a given accounting period.
The Company recognizes revenue on shipment where no special acceptance
criteria exist. In cases where special acceptance criteria exist, revenue is
recognized upon customer acceptance. A provision for installation, training and
estimated future warranty costs is recorded at the time revenue is recognized.
Systems typically carry a one-year warranty.
Sales to customers outside the United States accounted for approximately 90%
of product sales for the year ended December 31, 1995. In particular, 11 of the
Company's first 21 orders from end users were received from the United Kingdom.
The Company's international sales are primarily denominated in U.S. dollars and,
to date, have not presented significant currency exchange exposure. Accordingly,
the Company has not entered into hedging transactions. However, future sales to
international customers may be affected by fluctuation of U.S. dollar exchange
rates since international pricing decisions are affected by such fluctuations.
16
<PAGE>
The Company typically requires an advance payment of 50% or more of the
sales price six months in advance of shipment on customer purchase orders. Such
funds are used by the Company to finance working capital during the order and
production cycle.
During 1994 and 1995, management took actions to reduce the Company's
outstanding indebtedness. The primary action was a private equity offering to
then existing stockholders. In two closings under such offering, one in June
1994 and the second in May 1995, the Company raised $3.4 million and $2.8
million, respectively. Of these amounts, $3.0 million and $2.4 million,
respectively, represented conversion of outstanding debt and accrued interest,
with the balance coming in the form of new cash investment.
In the year ended December 31, 1995, the Company recorded compensation
expense of $369,000 and, as of December 31, 1995, had deferred stock
compensation of $692,000 associated with options granted to employees and
directors in June and October 1995. The amount deferred at December 31, 1995
will be charged to expense on a straight line basis over the succeeding eight
quarters.
In December 1995, the Company entered into a $2 million bridge loan
agreement with Anaconda. The first $1,000,000 available under the agreement was
drawn in December 1995, while the remaining $1,000,000 was borrowed in February
1996. Under the agreement, the Company issued to
Anaconda three-year warrants to purchase up to 259,090 shares of Common Stock.
The fair value of the Bridge Loan warrants were $1,330,000. Such amount was
amortized as a financing expense during the first four months of 1996 as the
Bridge Loan was required to be repaid by the Company on the earlier of the
closing of the Company's initial public offering or June 28, 1996. On April 3,
1996, Anaconda assigned 19,431 of the Bridge Loan warrants to LEO Holdings, Inc.
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND MARCH 31, 1995
Product sales in the first quarter of 1996 increased to $3.9 million from
$.9 million in the first quarter of 1995. The increase was due to an increase in
the number of units sold to five in the first quarter of 1996 from one in the
first quarter of 1995.
Contract revenues in the first quarter of 1996 increased to $547,000 from
$98,000 primarily due to billings under a new FAA contract in the first quarter
of 1996 which did not exist in the first quarter of 1995. The Company's FAA
contracts do not include a significant margin as they primarily represent a
reimbursement of costs incurred.
Product gross margins increased to 37% in the first quarter of 1996 from 26%
in the first quarter of 1995. The increase is primarily due to better
efficiencies and overhead absorption based on the increased number of units
produced and sold.
Research and development expenses increased to $595,000 in the first quarter
of 1996, as compared to $342,000 in the first quarter of 1995. The increase in
the dollar amount of Research and Development expense primarily reflects the
increased personnel and prototype development costs required as the Company
makes enhancements to its CTX 5000 systems and as early stages of its long-term
development plans are initiated.
The Company expects to continue to increase the dollar amount of its
Research and Development expenses as it makes improvements to its current
products and develops new systems for the future.
Selling, general and administrative expenses increased to $1,069,000 in the
first quarter of 1996 from $532,000 in the first quarter of 1995. The increase
is primarily due to increased selling costs related to the larger number of
units sold in 1996.
Interest Expense increased to $1,040,000 in the first quarter of 1996 from
$125,000 in the first quarter of 1995. Over $900,000 of the increase represents
a non-cash charge for the amortization of the value of the Bridge Loan warrants
in the first quarter of 1996. In accordance with generally accepted accounting
principles, the value of these warrants is amortized as financing expense over
the life of the Bridge Loan, which was repaid on May 1, 1996.
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YEARS ENDED DECEMBER 31, 1995 AND 1994
REVENUE. Revenues for the year ended December 31, 1995 are primarily
comprised of sales of CTX 5000 systems and accessories. Such revenues commenced
in the first quarter of 1995 and amounted to approximately $9.1 million during
the year ended December 31, 1995. There were no product sales in the year ended
December 31, 1994. The Company earned $587,000 in revenue from FAA contracts in
the year ended December 31, 1995 which was a decline from $700,000 during the
year ended December 31, 1994. This decrease resulted primarily from the
completion of a majority of the work under the contracts in the prior period.
GROSS PROFIT. The Company's gross profit on product sales was approximately
$2.3 million or 25% for the year ended December 31, 1995. During the year ended
December 31, 1995, the average selling price was approximately $825,000 and
generally ranged from $750,000 to more than $1.0 million depending on pricing,
configuration, options, and the level of custom integration required. Future
margin will be dependent upon sales volume and the Company's ability to reduce
manufacturing costs.
RESEARCH AND DEVELOPMENT. Research and development expenses increased to
approximately $1.9 million in 1995 from $1.7 million in the year ended December
31, 1994. Substantial efforts are underway in the areas of quality and
reliability improvement, throughput, airport integration and communication, and
conceptual design of future improvements.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses increased to $3.4 million in the year ended December 31, 1995 from $1.7
million in the year ended December 31, 1994. The increase was primarily due to
significantly greater selling costs including foreign travel, trade shows,
public relations, bonuses and commissions as the Company generated its first
product sales revenue in 1995.
INTEREST EXPENSE. Interest expense for the years ended December 31, 1995
and 1994 was $338,000 and $410,000, respectively, and results from the
short-term debt outstanding during each period.
INCOME TAXES. At December 31, 1995, the Company had federal net operating
loss carryforwards of approximately $7.5 million available to reduce future
federal taxable income. The Company's net operating loss carryforwards expire
from 2005 to 2010. As a result of the change in ownership that occurred in the
1995 financings, future utilization of the Company's carryforwards will be
limited to approximately $500,000 per year.
YEARS ENDED DECEMBER 31, 1994 AND 1993
REVENUES. During calendar years 1994 and 1993 product revenues had not yet
commenced and the Company was still in the development stage. During these
years, the Company earned revenues from development contracts funded by the FAA.
These contracts are generally funded on a cost plus fixed fee basis. The Company
received $700,000 and $1.5 million in funds from such development contracts for
the years ended December 31, 1994 and 1993, respectively. The decreasing trend
in contract funding in the years ended December 31, 1993 and 1994 is primarily
due to the completion of a majority of the development work under the contract.
COST OF REVENUES. Consistent with the trend in revenues from development
contracts discussed above, the Company incurred $693,000 and $1.4 million in
contract costs for the years ended December 31, 1994 and 1993, respectively.
RESEARCH AND DEVELOPMENT. Research and development expenses were $1.7
million and $1.6 million, for the years ended December 31, 1994 and 1993,
respectively. The increase in research and development expense in each of the
years ended December 31, 1993 and 1994 reflects the increase in the proportion
of total research and development costs funded by the Company as a result of the
decrease in funding received under the FAA Contract during the period.
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SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses were $1.7 million and $1.6 million in 1994 and 1993, respectively. The
slight increases each subsequent year represent the Company's early marketing
efforts to sell on a direct basis and to establish foreign independent sales
representatives and to work closely with potential customers.
INTEREST EXPENSE. Interest expense for the years ended December 31, 1994
and 1993 was $410,000 and $288,000, respectively, resulting from the short-term
debt outstanding during each annual period.
LIQUIDITY AND CAPITAL RESOURCES
From inception through December 31, 1995, the Company raised an aggregate of
$14.1 million of equity financing (of which $5.6 million represents indebtedness
converted to equity), primarily provided by its majority stockholder and
affiliates, and $3.2 million of short-term borrowings. At March 31, 1996, the
Company had a working capital deficit of $4.3 million.
Beginning in December 1994, the Company also used advance payments from
customers to finance the purchase and manufacturing of inventory as well as
covering other operating expenses. As of March 31, 1996, the Company had an
accrued liability for deferred revenue related to these advance payments of
approximately $2.6 million. The amount of advance payments received from
customers fluctuates based on the number of systems that are on order and on the
status of each system against the payment schedule. These advance payments
represent deferred revenue that will be earned as products are manufactured and
shipped. Should the Company not be able to continue this practice, other means
of financing would be necessary to provide the working capital needed to fulfill
production requirements.
The Company established a bridge debt credit facility in the amount of $2
million in December 1995. The amounts borrowed under this credit facility were
repaid on May 1, 1996 from the proceeds of the Company's initial public
offering.
The Company currently has $2 million of short-term bank debt. Interest is
charged at prime plus 1%. The Company expects that this amount will be repaid
from the proceeds of the Company's initial public offering on or before June 30,
1996.
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. 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.
The Company believes that, based on current estimates, the net proceeds of
the Common Stock offered in its initial public offering, together with its
current cash balances, FAA funding to be received in 1996 pursuant to the
Company's subcontract with IFS and cash generated from operations, will be
sufficient to meet its working capital, debt repayment and capital expenditure
requirements into the second quarter of 1997. However, it is possible that cash
generated from operations may not be sufficient to satisfy the Company's
requirements. Under such circumstances, the Company would need to sell
additional equity or debt securities or obtain bank or other credit facilities.
The sale of additional equity securities as a means of financing could result in
additional dilution to the Company's stockholders. There can be no assurance
that the Company will be able to sell such securities or obtain such credit
facilities on acceptable terms in the future, if at all. The Company's inability
to fund its capital requirements would have a material adverse effect on the
Company's business, financial condition and results of operations.
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BUSINESS
GENERAL
InVision Technologies, Inc. was organized in September 1990 to develop,
manufacture, market and support a computed tomography ("CT") based system for
the automated detection of explosive devices in baggage, parcels and freight.
Based in part on FAA certification of the CTX 5000, the Company believes that
CT-based technology is the best technology currently available for providing
high confidence detection of hidden explosives regardless of the nature of the
explosive material.
InVision was initially organized as a 50/50 joint venture between Imatron,
Inc. ("Imatron") and FI.M.A.I. Holding, S.A. ("FI.M.A.I."), an investment
company. Imatron is a manufacturer of ultrafast CT medical scanners. Imatron
provided a technology license to the Company, together with an early prototype
CT-based explosive detection system, while FI.M.A.I. provided the majority of
private development financing. In 1994, FI.M.A.I. transferred its ownership
interest in the Company to HARAX Holdings, S.A. ("HARAX") and ElectroParts
Holdings, S.A. ("ElectroParts"). HARAX and ElectroParts are affiliates of
FI.M.A.I.
The Company's sole product is the CTX 5000, an explosive detection system
for use in the inspection of commercial aviation luggage, parcels and freight.
The CTX 5000, using computer software, automatically interprets CT data, and,
based on density and mass, is able to locate potential explosive devices
(threats). Upon detection of a possible threat, the CTX 5000 automatically
triggers an alarm and allows the operator to fully reveal the threat and
determine whether the threat has the characteristics of an actual explosive
device.
In September 1991, InVision, through a subcontract with IFS, received
funding from an FAA contract for the development and testing of the CTX 5000 at
an international airport. In February 1996, the Company entered into a
subcontract with IFS to perform activities under an FAA grant which was awarded
to IFS. Such subcontract will provide up to $2.0 million to the Company during
1996 for use in increasing throughput and lowering the cost of the CTX 5000. 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 in 1997. This most
recent award represents a continuation of FAA funding of new product development
by the Company. To date, the Company has received an aggregate of $6.8 million
in FAA funding through its subcontract with IFS and hopes to continue to receive
such funding in the future.
In December 1994, the CTX 5000 became the first EDS system to be certified
by the FAA for domestic and international use. The Company believes that FAA
certification has been significant as an indication of the detection capability
of the CTX 5000. Although the CTX 5000 has proven its detection capability
through FAA certification, there currently is no requirement that U.S. airlines
(or international airlines or airports) deploy FAA certified explosive detection
systems or that U.S. airlines (or most international airlines or airports)
deploy explosive detection systems at all. Even if the FAA were to require
certified explosive detection systems at domestic airports and for domestic
carriers, it would not be able to compel such use internationally. Nevertheless,
the Company believes certification is an endorsement of the CTX 5000's detection
capability and aids its marketing efforts both domestically and internationally.
The CTX 5000 is the only system to have received FAA certification to date. In
order to meet the throughput requirements of certification, two units were
combined and tested as a single system.
INDUSTRY BACKGROUND
In the 1970's, the commercial aviation industry faced a large and growing
threat from hijackings. In response, the FAA implemented policies requiring
airlines to screen carry-on baggage for hidden weapons. Today, there are over
7,000 x-ray scanners installed worldwide for the screening of passenger carry-on
baggage, and the incidence of airline hijacking has declined dramatically.
However, while the incidence of hijacking was reduced, terrorists in some
cases adopted the tactic of airline bombings. According to the report of the
President's Commission On Aviation Security And
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Terrorism dated August 4, 1989, there were over 42 bombings against civilian
aviation targets between 1975 and 1989. Probably the single bombing which had
the greatest effect on public perceptions of risk was the bombing of Pan Am
Flight 103 over Lockerbie, Scotland in December 1988. Essentially all of these
bombings occurred outside the United States, although in many cases planes
operated by U.S. carriers were the targets of the bombings.
The incidence of civil aviation bombing demonstrated that current aviation
security systems and technologies were inadequate for the detection of hidden
explosives. In particular, it became apparent that existing x-ray screening
technologies were primarily effective in the detection of weapons and metal
objects but were not effective in the detection of explosive devices. While
conventional x-ray systems can be enhanced in certain respects to improve their
effectiveness in detecting certain types of bombs, sophisticated triggering
devices and explosive materials can be concealed in such a manner as to make
these security devices unreliable for the detection of explosives. For example,
post crash analysis indicated that the device used in the bombing of Flight 103
was a small volume, high yield plastic military explosive, weighing less than
one kilogram, which was undetectable by the operator of deployed screening
systems.
While security can be enhanced through the adoption of techniques such as
matching passengers with luggage, the FAA and aviation security agencies in
foreign countries recognized the need for more effective screening technologies
surpassing the capabilities of conventional x-ray systems. In 1985, the FAA
announced its intention to encourage the development of EDS technology, to
increase its funding of new technology development, and to encourage the
screening of checked baggage for hidden explosives. Outside the United States,
international airports, commercial airlines and government agencies responsible
for airline safety have also encouraged the development of new technology for
use in detecting the presence of explosives in luggage.
In the wake of the bombing of Pan Am Flight 103, Congress passed the
Aviation Security Improvement Act of 1990 (the "Aviation Act"). The Aviation Act
both directed and authorized the FAA to establish an accelerated research and
development program for the development and implementation of technologies and
procedures to counteract terrorist acts against civil aviation. Under the
Aviation Act, deployment of explosive detection systems may be required if the
FAA administrator certifies that, based on the results of tests conducted
pursuant to protocols developed upon consultation with expert scientists from
outside the FAA, such equipment alone or as part of an integrated system can
detect under realistic air carrier operating conditions the amounts,
configurations, and types of explosive material which would be likely to be used
to cause catastrophic damage to commercial aircraft. The criteria for
certification were published in September 1993.
THE INVISION SOLUTION
InVision was organized to develop CT-based technology, which had been widely
adopted in the medical scanning industry, for the detection of hidden
explosives. CT technology is based on a technique of rotating an x-ray source
around the object being analyzed, rather than passing a single x-ray through the
object, thereby allowing assessment of the object from many different angles. In
this way, using highly sophisticated algorithms, CT technology is able to "see
into" an object regardless of superimposition or neighboring objects, and also
to characterize density, mass, uniformity and morphology of the objects. This
distinct capability of CT technology makes it very well suited to very high
value scanning applications in the aviation industry where detection is
essential. The Company believes that CT technology can bring to EDS applications
the same performance advantages which it has provided to the medical scanning
industry, where CT-based systems (CAT scans) have clearly surpassed conventional
x-rays for purposes of sensitive scanning requirements.
The Company's sole product, the CTX 5000, uses CT technology and materials
interpretation software to provide high confidence automated detection of
explosives and other contraband concealed in luggage, parcels and freight. The
Company believes that the CTX 5000 is the only system capable of detecting all
categories of explosives considered by the FAA to be a threat to commercial
aviation on a reliable basis.
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The CTX 5000 uses a source of x-rays rotating around an object to obtain a
large number of very precise x-ray "views" or "profiles" in order to create two
dimensional images of the object's cross section (slice). InVision's volumetric
modeling software then reconstructs images of the object based on
cross-sectional CT-data. The image itself is actually a mapping of the density
of each volume element within the imaged cross section. The CTX 5000 uses its
data to determine the physical characteristics of objects and measure their
density, volume, mass, shape, homogeneity and texture and then provide a
quantitative measure of the material's characteristics, regardless of position
inside the luggage and surrounding objects.
Following the quantitative measurement of material's characteristics, the
CTX 5000's computer software automatically interprets the CT-data, compares the
characteristics of suspect objects to a database containing the characteristics
of compounds used in explosive devices, and identifies objects with
characteristics similar to explosive devices (threats).
Upon identification of a threat, the CTX 5000 automatically triggers an
alarm, thus eliminating reliance on an operator to interpret each image of the
contents of the luggage. The operator then is able to use the CTX 5000 to focus
on the suspect object, obtain enhanced images of the threat, and accurately
detect the presence of concealed explosives.
Certain European airports have implemented a multi-level explosive detection
system. At the first level ("Level 1") 100% of baggage is screened by a primary
high-throughput EDS technology. Images of baggage that alarm at Level 1 are
reviewed by an operator or secondary screening device ("Level 2"). Baggage which
can not be cleared at Level 2 is then inspected by a tertiary screening device
("Level 3"). The CTX 5000 is positioned horizontally across all levels of the
various multiple level configurations. The CTX 5000 is primarily sold as both a
Level 2 and Level 3 scanner for its entry into the European marketplace.
InVision will continue to sell the CTX 5000 as a Level 2 and Level 3 system
while attempting to broaden the market's awareness of the CTX 5000 as a primary
(Level 1 or stand-alone) high detection system.
While the current throughput limitations of the CTX 5000 have made it
difficult to sell the CTX 5000 as a Level 1 system in the multi-level detection
systems used in Europe to date, management believes that this multi-level system
represents a significant compromise in detection and increases the complexity of
the baggage handling system. Specifically, the Level 1 systems in the current
implementation do not detect explosives with a high level of confidence. As a
result, the overall effectiveness of the combined system is limited to the
detection capability of the Level 1 machine.
COMPANY STRATEGY
The Company's primary objective is to make the CTX 5000 system a critical
facet of every major airport's security operation, and in doing so, eliminate
passenger baggage as a venue for terrorist activities. To achieve this
objective, the Company has implemented a business strategy incorporating the
following key elements:
MAINTAIN TECHNICAL CAPABILITY AND CONTINUOUS PRODUCT IMPROVEMENT. The
Company is not aware of any competitor's commercially available explosive
detection system that has a detection rate as high as that of the CTX 5000. The
Company believes that competitors would require a substantial amount of time to
incorporate CT-based technology into their EDS products. The Company's continued
research and development efforts are dedicated to continuing to improve the
throughput, alarm resolution, reliability and serviceability of the CTX 5000
while maintaining what it believes are the industry's highest detection levels.
DIRECTED SALES AND MARKETING. The Company's sales and marketing strategy
includes maintaining and developing close working relationships with its
customers and potential customers in order to understand their needs and exceed
their expectations for automated explosives detection. The Company has
established a customer project management group which provides critical pre- and
post-sale support for the Company's product to ensure customer satisfaction.
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STRENGTHEN POSITION IN THE LEVEL 3 AND LEVEL 2 SYSTEMS MARKETPLACE. The
Company believes that the CTX 5000 has proven to be an effective Level 3 system.
In Brussels and Manchester, where the CTX 5000 is being integrated into the
baggage handling system, the CTX 5000 is utilized as a Level 2 system as well.
The Company plans to increase its efforts in the Level 3 market, and to continue
to establish a position in the Level 2 market.
DEVELOP SYSTEM FOR LEVEL 1 MARKETPLACE. InVision's current throughput level
has limited its ability to market the CTX 5000 as a Level 1 System in most
locations. The CTX 5000 is currently used as a Level 1 System in Tel Aviv and a
CTX 5000 system owned by a U.S. airline is being used as a Level 1 System in an
operational test in San Francisco. The Company intends to develop a higher
throughput version of the system and management believes that the combination of
higher throughput and FAA certification could make the CTX 5000 the choice for
security conscious Level 1 customers.
THE CTX 5000
The Company believes that the following aspects of the CTX 5000 offer
significant advantages over other explosive detection approaches:
DETECTION OF ALL TYPES OF EXPLOSIVES. No other single or combination of
technologies known to the Company can achieve the high detection levels of the
CTX 5000 for bulk military, sheet, powder and commercial explosives. No existing
technology known to the Company, other than the CTX 5000, can consistently
identify sheet explosives.
AUTOMATIC DETECTION. The CTX 5000 automatically alarms when a possible
explosive (threat) is detected, eliminating total reliance on an operator for
reviewing each image of the luggage.
QUANTITATIVE INSPECTION. The CTX 5000 is the only explosive detection
system known by the Company which collects and analyzes quantitative data of
each object contained in luggage to estimate the volume, mass, and type of
explosive.
THREAT RESOLUTION CAPABILITY. The uncluttered CT-images produced by the CTX
5000 provide a means for security personnel to unambiguously identify explosive
devices and resolve false alarms.
EDS TECHNOLOGY
CTX 5000 TECHNOLOGY. The CTX 5000 is a CT scanner modified by InVision's
proprietary enhancements. Such enhancements were necessary to convert a
technology designed to create images for human (physician) interpretation
operating on a low duty cycle into a system with automatic (computer)
interpretation of images designed to operate continuously in excess of 16 hours
per day. The CTX 5000 is designed to make up to 70,000 CT scans (slices) per
day, as compared to the few thousand which is typical of medical CT scanners.
The CTX 5000 collects an x-ray projection image to determine the location of
any potential threats. If the CTX 5000 determines secondary analysis is
necessary, it will reconstruct several slices along an axis to create a series
of cross-sectional slices. Using this data the CTX 5000 can calculate the volume
and mass of the object, determine its uniformity and consistency, determine
shape (important in explosive yield), and locate and highlight detonators and
timing circuits. An operator is then alerted to the presence of an object that
meets certain recognition criteria. The cross section images are displayed and
the suspect object is highlighted in different colors.
Once a threat occurs, the CTX 5000 provides a means for security personnel
to unambiguously identify explosive devices and resolve false alarms. Computer
analysis is a much lower risk option to the security personnel and its
operational impact is not significant. In the United States it is not lawful to
open a passenger's bag without the passenger being present.
COMPETING TECHNOLOGIES. The Company is encountering competition from
numerous explosive detection suppliers. Specifically, three companies, Vivid
Technologies, Inc. ("Vivid"), Thermedics, Inc. ("Thermedics") and EG&G
Astrophysics Research Corporation ("Astrophysics") have introduced
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EDS products which are currently being used in several airports as part of a
multi-level security system. Other companies worldwide manufacture mature dual
energy x-ray systems that were developed for weapons, not for explosives
detection. Below is a brief description of the three main classes of competing
EDS technologies.
X-RAY TECHNIQUES (VIVID AND ASTROPHYSICS): Dual energy x-ray scanners
add the capability of discriminating between organic and inorganic materials
but in the past have required the interpretation of every image by an
operator because they lacked automated analysis of the data. Competitors
offering conventional dual energy x-ray products are developing and
introducing enhanced systems. Over the past five years, dual energy x-ray
has been enhanced by the addition of better material resolution by companies
such as Vivid and Astrophysics. These companies have also implemented
automated analysis of the images. These developments lead to an improved
detection of bulk military explosives; however, significant limitations in
the detection of commercial, powder and sheet explosives remain. Products
from these companies are currently being evaluated in several airports or
have been purchased as part of a combined technology security system. The
main advantage of x-ray systems is throughput. These companies claim
throughput rates of 700 to 1000 bags per hour or more, compared to
InVision's throughput rate of approximately 300 bags per hour.
TRACE DETECTION TECHNIQUES (THERMEDICS): Currently available trace
detection technologies have achieved some level of acceptance for limited
applications including the screening of people. However, hermetically sealed
explosives cannot be detected, and these systems are labor intensive and do
not provide images for threat resolution. Thermedics trace detection systems
are currently being used and evaluated in several airports for threat
resolution as part of a multi-level system.
QUADROPOLE RESONANCE (QUANTUM MAGNETICS, MARCONI LTD.): Still in the
early stages of development and testing, this technique uses a series of
radio frequency pulses and is related to magnetic resonance imaging ("MRI").
Quadropole Resonance is highly specific and effective for selected types of
explosives. Hurdles which must be overcome before commercial deployment of
Quadropole Resonance include long inspection times for certain explosives,
the lack of images for threat resolution, the inability to detect explosives
concealed in metallic containers and problems associated with interference
from normal airport radio signals.
COMPETITION
The EDS market is becoming intensely competitive and the Company expects
competition to intensify as aviation security authorities establish the security
standards under which their countries and airports will operate. The market
includes vendors specifically dedicated to the EDS market as well as major
corporations competing in other markets which have considerably greater
resources than InVision. The Company is aware of major corporations that intend
to enter the EDS market, such as Lockheed/Martin Corporation which has recently
announced an intention to market, and which has received an FAA grant to
develop, a CT-based explosive detection system. Many of InVision's current and
potential competitors have greater financial, marketing, technical and other
resources than InVision. While the Company believes that its CTX 5000 offers a
higher level of security and better overall performance than its primary
competitors' systems, certain potential customers have shown a preference for
such competitors' systems due to their lower cost and faster throughput. The
Company is also aware of corporations that are developing other approaches to
decreasing the threat of terrorist bombings of commercial airlines such as
Kevlar-Registered Trademark- linings used to protect the cargo holds of
airplanes.
Competitive factors include absolute product performance (detection),
throughput, relative price/ performance, product quality and reliability, ease
of understanding and use, marketing capability, service and support, financial
resources, size of installed base, name recognition and corporate reputation.
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InVision may need to increase the throughput of the CTX 5000 in order to
remain competitive in the EDS market. The Company's competitors have claimed
significantly higher throughput levels than InVision and will attempt to
increase the detection levels associated with their present systems. New
competitors also may introduce systems with detection comparable to the CTX
5000, but that have greater throughput. There can be no assurance that the
Company will continue to successfully market the CTX 5000 based upon its higher
detection rate or that the Company will be able to significantly improve the
throughput of the CTX 5000.
In Europe, one of the major markets for the CTX 5000, the CTX 5000 is not
able to scan all sizes of luggage. The EDS technology offered by many of the
Company's competitors are generally able to scan such luggage. Present EDS
technology, or EDS systems developed in the future, that are able to scan all
sizes of permitted baggage in European airports, have, or will have, a
competitive advantage over the CTX 5000 based upon configuration.
The CTX 5000 has a higher cost of manufacture than competing systems and
must be priced at a significantly higher price. The average sales price for a
single CTX 5000 system is in excess of $800,000, whereas the Company is advised
that its competitors offer systems generally priced from $100,000 to $500,000.
To meet the throughput requirements for FAA certification, a customer would be
required to pay approximately $1,600,000 for an EDS composed of two CTX 5000
systems. The importance of certification is the benefit the Company believes it
derives from having the only certified explosive detection system currently
available. There can be no assurance that customers will perceive the price
performance advantages that the Company believes to be inherent in its CTX 5000
system.
FAA CONTRACT
In September 1990, InVision, utilizing an early prototype of the CTX 5000,
successfully detected the presence of a variety of explosives in an FAA
sponsored test. In order to receive funding from an FAA development contract
(the "FAA Contract") the Company formed IFS and contributed to its capital in
exchange for non-voting preferred stock. The purpose of forming IFS was to
enable InVision to perform work under the FAA Contract without obtaining access
to certain classified information which, under the security regulations of the
Federal government, cannot currently be made available to InVision as a result
of the substantial foreign ownership interest in InVision.
Based on the September 1990 test, IFS was awarded the FAA Contract in
September 1991, which provided for the final development and testing of the CTX
5000 at an international airport. IFS was the primary contractor under the FAA
Contract and, in turn, has granted a subcontract to InVision covering
approximately 90% of the work performed under the FAA Contract. InVision owns
100% of the non-voting preferred stock of IFS but owns no voting stock and has
no right to participate on the IFS board of directors.
In February 1996, the Company entered into a subcontract with IFS to perform
activities under an FAA grant which was awarded to IFS. Such subcontract will
provide up to $2.0 million to the Company during 1996 for use in increasing
throughput and lowering the cost of the CTX 5000. 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 in 1997.
The CTX 5000, in a parallel configuration of two units, is currently the
only FAA certified explosive detection system. The Company is not aware of any
current or development stage technology which is expected to commence the FAA
certification test procedure in the near future.
MARKETING, SALES AND SERVICE
The market for EDS technology is largely undeveloped. The Company believes
that the growth of the EDS market will be dependent on the evolution and
acceptance of EDS technology and the public's perception of the risks associated
with air travel.
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CUSTOMERS. The Company's primary target customers are the top 125
international airports around the world and the major United States airlines
that serve international airports. Accordingly, the Company's marketing efforts
are currently focused on: (1) international customers whose governments have
established regulations for deployment of explosive detection systems; (2) new
airports under construction; and (3) FAA operational tests at key U.S. airports
to support the FAA rule making process and to encourage deployment of EDS
technology by U.S. airlines. Based on current sales activities and on the
perceived terrorist threat in Europe and Asia, the Company believes that
deployment of advanced explosive detection technology is likely to proceed, if
at all, first in Europe, then in Asia, and then the United States.
Key installations and customers include:
BRUSSELS: In June 1994, InVision received its first CTX 5000 order from the
Brussels International Airport. This system was delivered in November 1994
and accepted by the customer in March 1995. The CTX 5000 in Brussels is
integrated at Level 2 with input and output queuing conveyor belts as a part
of an EDS screening platform. Brussels represented 12% of total revenues for
1995.
MANCHESTER: In December 1994, the Manchester Airport Authority ordered 10
CTX 5000 systems for integration at Level 2. The Manchester Airport will be
the first demonstration of high detection, high throughput implementation of
a two-level explosive detection system. Manchester Airport represented 48%
of total revenues for 1995. Of the 10 orders received from Manchester, 6
were delivered in 1995 and the remaining 4 were delivered before March 15,
1996.
THE ISRAEL AIRPORTS AUTHORITY: In April 1995, after an extensive trial, The
Israel Airports Authority ("Israel") purchased its first CTX 5000 system. In
June 1995, Israel ordered an additional unit which was delivered in January
1996. Most recently, in February 1996, Israel ordered two additional units
that the Company expects to deliver before the end of September 1996. Israel
is using the CTX 5000 in front of the check in counter to scan selected
luggage.
LONDON: British Airport Authority (BAA) ordered one CTX 5000 in October
1994. This unit was delivered in February 1995 to the Gatwick (London)
Airport. The unit has been extensively tested and is part of the multi-level
system in development and test by the BAA.
UNITED AIRLINES: The first CTX 5000 for domestic use was purchased by
United Airlines and was delivered to the San Francisco International Airport
in November 1995. The unit is used behind the check in counters in the
international terminal for screening international luggage. The FAA has
funded this installation and is closely monitoring the tests to collect data
for evaluating the use of CT-based EDS technology. United Airlines
represented 10% of total revenues for 1995.
DELTA AIRLINES: In July 1995, Delta Airlines ordered two CTX 5000 units.
These units were delivered in April, 1996. The installation of these units
is funded by the FAA and is monitored by the FAA in substantially the same
manner as the United Airlines San Francisco installation was funded and is
maintained by the FAA. These units are installed in Atlanta, Georgia.
NORTHWEST AIRLINES: In February 1996, Northwest Airlines ordered two CTX
5000 units. The Company expects to deliver these units before the end of
August 1996. When and if delivered, the installation of these units would be
funded by the FAA and would be monitored by the FAA in substantially the
same manner as the United Airlines San Francisco installation was funded and
is maintained by the FAA. Northwest Airlines intends to install these units
in Manila, Philippines.
EL AL ISRAEL AIRLINES, LTD. In March 1996, El Al Israel Airlines, Ltd.
ordered one CTX 5000 unit. The Company expects to deliver such unit before
September 1996. El Al Israel Airlines, Ltd. intends to install this unit at
the John F. Kennedy Airport in New York, New York.
SALES. The Company, in most territories, markets its products directly
through in-house sales personnel in conjunction with independent sales
representatives. In certain territories, the Company
26
<PAGE>
markets indirectly through independent distributors. The Company supports its
independent representatives and distributors with training, promotional
literature, a multi-media presentation, marketing videos, competitive analysis,
prospect generation, and technical pre-sales and integration support. The
Company markets the CTX 5000 directly in the United States.
Customers may initially purchase a single CTX 5000 unit for extended
evaluation and testing and determine any volume purchases based upon the
performance of that unit. The sales cycle typically runs from six to twelve
months. During this time, multiple customer contacts by either InVision
personnel, independent representatives or distributor personnel are necessary to
present the product, assist in the design of the installation and negotiate the
terms of the sale. Often, local government regulators become involved in the
sales decision process or provide funds for the purchase.
The Company believes that strong sales in the current European EDS market
and the emerging Asian market are critical to the Company's success pending any
future development of a U.S. market for explosive detection systems.
International sales represented approximately 90% of the Company's revenues from
product sales in the year ended December 31, 1995, the first year of customer
revenues. In November 1995, the Company shipped its first unit to a U.S.
customer. Because of the magnitude of its international sales, the Company is
subject to the normal risks of conducting business internationally. See "Risk
Factors -- International Business."
The FAA has been encouraging the development and deployment of EDS
technology and has worked with the Company to bring about initial sales and
field tests of the CTX 5000 in the United States. In particular, one
installation at the San Francisco International Airport has been completed and
operations have commenced. Funding for this demonstration project, as well as
technical and administrative oversight, is provided by the FAA. To date, three
U.S. airlines currently have placed orders with InVision for CTX 5000 systems
related to this demonstration project.
The Company believes that a close working relationship with its customers
and potential customers helps to ensure that the Company's products are designed
to meet the airport security industry's detection and operational performance
requirements. Beginning with the pre-sales process, InVision personnel may
review and model certain variables related to a potential CTX 5000 installation
site. This information is utilized to design or simulate certain communications
and baggage handling systems for successful integration in an airport. For
example, customer-requested projects have included (1) a remote display station
option which will allow security screeners to be remotely located from the
actual bag, (2) an automatic baggage rotation and centering conveyor which
reduces the need for human intervention in feeding bags to the CTX 5000 from the
main baggage handling systems, and (3) integration with queuing conveyor belt
systems. Some of these improvements, once successful, have become an option
offered to all of the Company's customers. In some cases, the customer may
subsidize all or part of the development cost of these options, although such
financial support is often not provided. The Company typically offers a one year
warranty. On average, the Company provides one week of on-site training included
with the price of the system. Subsequent training is provided for a fee.
SERVICE. The Company believes that the quality and reliability of its
systems and the Company's rapid response time are important to customer
satisfaction. Consequently, InVision offers an array of customer services and
support programs, including hardware maintenance and service, software service
and upgrades, documentation support and training. The Company intends to add
customer support personnel as the number of installed InVision systems grows.
InVision provides limited warranties in connection with the sales of its
systems. The Company expects that many of its customers will enter into
maintenance contracts with the Company.
MANUFACTURING
The Company manufactures the CTX 5000 at its leased facility in Foster City,
California. The Company's manufacturing operations consist primarily of
materials management, assembly, test and quality control of parts, components
and subassemblies and final system test. Using the Company's
27
<PAGE>
designs and specifications, subcontractors assemble mechanical and electrical
sub-components. The Company performs final assembly and test of these systems
along with integration with the computer and software systems.
InVision has a limited manufacturing history. Over the two years prior to
May 31, 1996, 21 systems have been produced. Seventeen of these systems have
been shipped to end users, two have been shipped to the FAA (one of which
replaces the original prototype delivered to the FAA), one has been shipped to a
distributor, and one remains as the Company's engineering development system.
The Company would need to significantly build its manufacturing organization
in order to meet any increase in volume. Should orders significantly surpass
projections, the Company believes it could develop strategic partners and/or
contract or license some of its manufacturing.
Although InVision uses many standard parts and components for its products,
certain custom components are currently available only from limited or single
sources. The inability to develop alternative sources, a reduction or
interruption in supply, or a significant increase in the price of one or more
components, would adversely affect InVision's business and operating results.
RESEARCH AND DEVELOPMENT
GENERAL. The Company's research and development efforts are focused on
enhancing both the hardware and software components of the CTX 5000. Among the
software development activities are: increased throughput programs; inspection
algorithm enhancements for higher detectability and lower false alarms; and
completion of the final software architectural platform. Hardware development
activities consist primarily of minor modifications and preparation of
documentation in anticipation of volume production. In February 1996, the
Company entered into a subcontract with IFS to perform activities under an FAA
development grant which was awarded to IFS. Such subcontract will provide the
Company with up to $2.0 million during 1996 for increasing the throughput and
reducing the cost of the CTX 5000. 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 in 1997.
THROUGHPUT. InVision's CTX 5000 currently has a measured throughput of
approximately 300 bags per hour (bph). A system composed of two CTX 5000
configured side by side was used to meet the FAA's certification throughput
requirement of 450 bph for EDS's. InVision engineers believe they have
identified the engineering tasks required to increase the CTX 5000's throughput
to 450 bph and have determined the feasibility of such tasks. The Company is
scheduled to start the development of its first 450 bph system in 1996.
INTEGRATION. InVision currently is positioning its CTX 5000 in Europe as a
Level 2 and Level 3 system. Critical to this approach is the operational
integration of the CTX 5000 into an airport's baggage handling system. InVision
has been developing operational interfaces and infeed and outfeed conveyors for
integration for the past year. The CTX 5000 shipped to an airport authority in
Brussels, Belgium in November 1994 was the first implementation of this
integration hardware and software. InVision will continue to refine its conveyor
integration systems in 1996 and the following years in order to provide
customers with a seamless, fully integrated system.
During 1993, 1994 and 1995, the Company's research and development expenses
were approximately $1.6 million, $1.7 million and $1.9 million, respectively.
The Company intends to continue making substantial investments in research and
development activities for the development of new hardware and software
enhancements, upgrades and products to maintain and improve its competitive
position in the evolving marketplace.
PATENTS AND LICENSES
The Company relies on a combination of copyrights and trade secrets to
protect the proprietary elements of the CTX 5000. Although medical CT technology
is relatively mature and widely known,
28
<PAGE>
the Company believes that several of the software enhancements which make such
technology practical for baggage screening are novel and difficult to replicate.
In addition, in the United States, the Company has obtained a patent on the use
of CT-based technology for the detection of concealed objects using a
pre-scanner but does not rely on this patent. Foreign counterparts to this
patent application will not be filed. There can be no assurance that such patent
would be effective in preventing CT-based competition. The Company also relies
on a combination of trade secrets, proprietary technology and know-how to
protect its intellectual property.
The Company also holds an exclusive, royalty-free, worldwide license from
Imatron (obtained in connection with the formation of the Company) under
Imatron's patents and know-how to develop, manufacture and sell (a) systems for
the inspection of mail, freight, parcels and baggage, and (b) compact medical
scanner products for military field applications. The Company, in exchange,
granted to Imatron an exclusive, royalty-free, worldwide license under the
Company's patent or future patents and know-how to permit Imatron to utilize
such technology in medical scanner products (other than compact medical scanner
products for military field applications). Imatron is a stockholder of the
Company and is a manufacturer of medical scanning systems and holds a portfolio
of CT patents.
The Company attempts to protect its trade secrets and other proprietary
rights through formal agreements with employees, customers, suppliers and
consultants. Although the Company intends to protect its rights vigorously,
there can be no assurance that these efforts will be successful.
While the Company believes that its intellectual property rights are
valuable, the Company also believes that because of the rapid pace of
technological change in the industry, factors such as innovative skills,
technical expertise, the ability to adapt quickly to new technologies and
evolving customer requirements, product support, and customer relations are of
greater competitive significance.
POTENTIAL FUTURE MARKETS AND PRODUCTS
The Company is currently focused on the development and deployment of its
CTX 5000 for explosives detection. However, while the Company has not initiated
a formal program to enter into new markets or develop new products and does not
intend to initiate such a program in the near future, the Company believes that
the vast amount of information the CTX 5000 collects (or is capable of
collecting) about concealed objects should, in the future, enable InVision to
pursue additional applications of its core technology, including:
CONCOURSE SCANNING. InVision is exploring the potential of adapting the CTX
5000 for concourse scanning of passengers and their luggage at check-in with a
joint venture partner. However, the cost of manufacture of the CTX 5000
substantially exceeds that of x-ray systems currently in use and this
application will not be fully developed unless aviation security authorities are
prepared to replace their current equipment, which screens only for weapons,
with EDS technology.
CONTRABAND DETECTION. There is interest internationally in the ability to
detect narcotics. Customs and drug enforcement agencies in many countries desire
to reduce or prevent narcotics trafficking. Given these organizations' limited
manpower, they are seeking automated technologies to help them detect narcotics.
FREIGHT AND PARCEL SCREENING. The CTX 5000 can inspect parcels and small
freight for explosives and contraband. The Company believes that potential
applications include providing CT-based EDS technology to delivery services
throughout the world.
POSTAL SCREENING. In some areas in the world the postal service is a common
target for bombing. Booby traps in specially triggered devices are fabricated,
packaged and shipped via the postal service to their targets. This form of
terrorism has been used successfully in several countries, including Spain,
Greece, Turkey, the United States and Thailand, and is a significant concern to
government agencies.
29
<PAGE>
EMPLOYEES
As of May 31, 1996 InVision employed 69 people, of whom 24 were primarily
engaged in engineering and research and development activities, 8 in marketing
and sales, 24 in manufacturing and customer support and field services, and 13
in administration and finance. In addition, InVision utilizes the services of 8
full-time consultants and temporary employees as of May 31, 1996. Management
believes that the Company's relationship with its employees is good.
FACILITIES
InVision's principal administrative, marketing, development and
manufacturing facility is located in Foster City, California and consists of
approximately 27,000 square feet under a lease which expires in October 1998.
The Company has an option to extend the lease for one year. The base rent under
this lease is approximately $300,000 per year. The Company believes that
additional space will be required for growth in 1996.
30
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and officers of InVision as of the date of this Prospectus are
as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------------- --- ----------------------------------------
<S> <C> <C>
Dr. Sergio Magistri 43 President, Chief Executive Officer and
Director
Sauveur Chemouni 42 Vice President, Engineering
Curtis P. DiSibio 39 Vice President and Chief Financial
Officer
David Pillor 41 Senior Vice President, Sales and
Marketing
Dr. Benno Stebler 43 Vice President, Manufacturing
Stephen Wolff 37 Vice President, Marketing & Product
Development
Dr. Douglas P. Boyd 54 Director
Dr. Giovanni Lanzara 55 Director, Chairman of the Board
Dr. Bruno Trezza 58 Director
</TABLE>
Dr. Sergio Magistri, President, Chief Executive Officer and Director of the
Company joined InVision in December 1992. From June 1991 to November 1992, he
was a Project Manager at AGIE, Switzerland, a manufacturer of high precision
tooling equipment, responsible for all aspects of a family of new products for
high precision electro-erosion machining with sub-micron precision. From 1988 to
June 1991 he was a consultant to high technology companies including FI.M.A.I.
As a consultant to FI.M.A.I., Dr. Magistri was involved in the formation of
InVision, the development of its business plan and its technology. From 1983 to
1988, he was Engineering Physicist, Manager Advanced Reconstruction System, and
Director of Computer Engineering at Imatron. Dr. Magistri received his diploma
of Electrical Engineering and doctorate in Biomedical Engineering from the Swiss
Institute of Technology, Zurich, Switzerland.
Mr. Sauveur Chemouni, Vice President of Engineering, joined InVision in
1990. He has over 15 years experience in system design and software for
inspection, animation and simulation. From 1988 to 1990, he was with Imatron, a
CT medical scanner company, where he co-developed the predecessor of the CTX
5000. From 1983-1988 he was owner of a computer graphics company. Mr. Chemouni
obtained a degree in physics in 1978 in Grenoble, France, and a Masters degree
in Computer Sciences from Supelec, in Paris, France.
Mr. Curtis P. DiSibio, Chief Financial Officer, joined InVision in April
1991. He has over 15 years of experience in financial management, consulting and
audit of San Francisco Bay Area high technology companies. After six years in
public accounting, in 1986 he joined Trilogy Systems Corporation ("Trilogy"), a
development stage mainframe computer company, as controller and part of the
turnaround management team. At Trilogy he participated in the sale of Trilogy's
operations to Digital Equipment Corporation. From 1987 to 1990 he was Treasurer
and later Chief Financial Officer of ELXSI Corporation, a publicly traded
mini-super computer company which Trilogy had acquired. Mr. DiSibio is a C.P.A.
and received an M.B.A from Santa Clara University.
Mr. David M. Pillor, Senior Vice President, Sales and Marketing, joined
InVision in July 1994 with over 15 years of experience in sales, and sales
management of high technology products, including CT and MRI scanners. From 1988
to July 1994, Mr. Pillor held the positions of Area Sales Manager, National
Sales Manager and Vice President of Sales with Technomed International in
Boston, Massachusetts, a medical products company, where he was responsible for
international sales & marketing and the launch of new technologies including
lithotripsy. Mr. Pillor received his Bachelor's of Science degree in Chemistry
from the University of Maryland.
Dr. Benno Stebler, Vice President, Manufacturing, joined InVision in May
1991. He has more than 12 years experience in CT and MRI scanners. From 1989 to
1991, Dr. Stebler was employed at Toshiba
31
<PAGE>
America, a consumer electronics company, where he was responsible for the
architecture of a new generation MRI system. Dr. Stebler was involved in the
fields of image reconstruction and system design at Imatron from 1986 to 1989,
where he was also Software Manager of the compact medical scanner, a predecessor
to the CTX 5000. Dr. Stebler received his diploma of Electrical Engineering and
doctorate in Biomedical Engineering from the Swiss Institute of Technology,
Zurich, Switzerland.
Mr. Stephen Wolff, Vice President of Marketing & Product Development, joined
InVision in 1990. He has over 10 years experience in explosives and contraband
detection technology development. Prior to joining InVision, from 1981 to 1990
Mr. Wolff held various titles at Science Applications International, Corp., a
government research contractor, including Project Coordinator for development of
a Prototype Thermal Neutron Analysis explosive detection system. Mr. Wolff was
also principle investigator for an FAA sponsored testing program for weapons
detection technology. Mr. Wolff received a BS degree in Chemical Engineering
from Imperial College, London, England. He completed his Masters degree in
Chemical Engineering at Stanford University, Palo Alto, California.
Dr. Douglas P. Boyd, Director, is a founder and director of Imatron where he
has held several positions since its inception in 1981 and is presently its
Chairman. Dr. Boyd holds many patents in CT and x-ray devices and is an Adjunct
Professor of Radiology at the University of California, San Francisco. Dr. Boyd
served as a Director of the Company from September 1990 to December 1992 and was
reappointed to the Board of Directors in June 1993.
Dr. Giovanni Lanzara, Director and Chairman of the Board, is a professor and
head of the Transportation Engineering Department at the University of Aquila,
Rome, Italy where he has served since 1978. Dr. Lanzara has served in advisory
capacities to several European governments, holds patents in the field of
transportation engineering and has been President of the International Center
for Transportation Studies since 1987. Dr. Lanzara is a director of Imatron and
has served as a Director of the Company since its inception.
Dr. Bruno Trezza, Director, has been a professor of economics at the
University "La Sapienza" in Rome, Italy since 1974. From 1980 to 1981 Dr. Trezza
served as economic advisor to the Italian Prime Minister. He also served as
member of the committee for economic planning of the Italian Ministry of
Planning from 1974 to 1983. Dr. Trezza has served as a director of several
private companies and public institutions in Italy. Dr. Trezza was elected to
the Board of Directors in November 1993.
COMMITTEES
The Audit Committee consists of Messrs. Boyd and Trezza. The Audit Committee
makes recommendations to the Board regarding the selection of independent
accountants, reviews the results and scope of the audit and other services
provided by the Company's independent accountants, and reviews and evaluates the
Company's control functions.
The Compensation Committee consists of Messrs. Boyd and Lanzara. The
Compensation Committee makes recommendations to the Board concerning salaries
and incentive compensation for employees and consultants of the Company.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Prior to the formation of a Compensation Committee in December 1995, the
Board of Directors made all determinations with respect to executive officer
compensation.
DIRECTOR COMPENSATION
Non-employee directors currently receive $1,200 per day (per meeting) in
cash compensation from the Company for their services as members of the Board of
Directors, and are reimbursed for certain expenses in connection with attendance
at Board and Committee meetings. Non-employee directors are paid consulting fees
of approximately $1,200 per day for services rendered to the Company (each day
services are rendered) which services may or may not be in connection for acting
32
<PAGE>
as directors of InVision. Consulting services rendered by members of the Board
of Directors include long-term technical and product strategy, financing and
financing strategy and general management advice.
Aggregate consulting fees paid to directors of the Company were $193,000 in
1993, $136,280 in 1994 and $115,800 in 1995. During these years, individual
directors who received consulting fees in excess of $60,000 in any individual
calendar year were Francesco Scorsone (who received $90,000 in 1993) and
Giovanni Lanzara (who received $100,000 in 1994 and $71,400 in 1995).
OPTION GRANTS TO DIRECTORS IN THE LAST FISCAL YEAR
The following table sets forth each grant of stock options made during the
fiscal year ended December 31, 1995 to each of the following directors:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------------- POTENTIAL REALIZABLE
PERCENTAGE VALUE AT ASSUMED
NUMBER OF OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED IN PER SHARE OPTION TERM (6)
OPTIONS FISCAL EXERCISE EXPIRATION -------------------------------------
NAME GRANTED 1995 (5) PRICE DATE 0% 5% 10%
- ------------------------------------- ------------ ------------- ----------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Dr. Douglas P. Boyd.................. 1,537(1) * $ 1.10 06/10/05 $ 15,216 $ 24,786 $ 39,467
31,818(1) 7.1 $ 2.20 10/30/05 $ 279,998 $ 456,088 $ 726,244
Dr. Giovanni Lanzara................. 23,355(2) 5.2 $ 1.10 06/10/05 $ 231,215 $ 376,624 $ 599,711
22,727(2) 5.1 $ 2.20 10/30/05 $ 199,998 $ 325,775 $ 518,742
Dr. Sergio Magistri.................. 20,727(3) 4.6 $ 1.10 06/10/05 $ 205,197 $ 334,245 $ 532,229
10,909(3) 2.4 $ 2.20 10/30/05 $ 95,999 $ 156,373 $ 248,997
Dr. Bruno Trezza..................... 1,537(4) * $ 1.10 06/10/05 $ 15,216 $ 24,786 $ 39,467
22,727(4) 5.1 $ 2.20 10/30/05 $ 199,998 $ 325,775 $ 518,742
</TABLE>
- ------------------------
* Less than 1%
(1) The options granted to Dr. Boyd to purchase 1,537 shares of Common Stock
were fully vested on the date of grant and 31,818 shares of Common Stock
become exercisable at a rate of 33% per year, over 3 years.
(2) The option granted to Dr. Lanzara to purchase 22,727 shares of Common Stock
becomes exercisable at a rate of 33% per year over 3 years. The option
granted to Dr. Lanzara to purchase 23,355 shares of Common Stock were fully
vested on the date of grant.
(3) The options granted to Dr. Magistri to purchase 20,723 and 10,909 shares of
Common Stock become exercisable at a rate of 25% and 33% per year,
respectively, over 4 and 3 years, respectively.
(4) The options granted to Mr. Trezza to purchase 1,537 and 22,727 shares of
Common Stock become exercisable at a rate of 25% and 33% per year,
respectively, over 4 and 3 years, respectively.
(5) Based on an aggregate of 447,784 options granted to employees and directors
of the Company in fiscal 1995 including the directors named above and the
Named Executive Officers set forth in the Summary Compensation Table below.
(6) The potential realizable value is calculated based on the term of the option
at this time of grant (ten years). Stock price appreciation of five percent
and ten percent is assumed pursuant to rules promulgated by the Securities
and Exchange Commission and does not represent the Company's prediction of
its stock price performance. The potential realizable value of 0%
appreciation measures the value of the option at effectiveness based on the
assumed initial public offering price ($11.00) less the exercise price. The
potential realizable value at 5% and 10% appreciation is calculated by
assuming that the proposed initial public offering price of $11.00 per share
appreciates at the indicated rate for the entire term of the option and that
the option is exercised at the exercise price and sold on the last day of
its term at the appreciated price.
33
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth certain compensation awarded or paid by the
Company during the fiscal year ended December 31, 1995 to its President and
Chief Executive Officer and the Company's other executive officers who earned
more than $100,000 during the year ended December 31, 1995 (collectively, the
"Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
-------------
NUMBER OF
ANNUAL COMPENSATION SECURITIES
------------------------------ UNDERLYING
NAME AND PRINCIPAL POSITION SALARY BONUS OPTIONS
- ------------------------------------------------------------------ -------------- -------------- -------------
<S> <C> <C> <C>
Dr. Sergio Magistri .............................................. $ 141,982(1) -- 31,636
President and Chief Executive Officer
Curtis P. DiSibio ................................................ $ 109,000 $ 18,790 19,663
Chief Financial Officer
David Pillor ..................................................... $ 100,000 $ 117,790(2) 77,093
Senior Vice President, Sales & Marketing
Dr. Benno Stebler ................................................ $ 114,000 $ 19,206 21,899
Vice President, Manufacturing
Stephen Wolff .................................................... $ 82,499 $ 23,325(3) 15,321
Vice President, Marketing and Product Development
</TABLE>
- ------------------------
(1) Includes approximately $10,000 of relocation expenses.
(2) Represents commission payments and includes $47,000 related to orders
received in 1994.
(3) Includes commission payment of $20,325.
34
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth the grant of stock options made during the
fiscal year ended December 31, 1995 to the Named Executive Officers:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------
PERCENTAGE POTENTIAL REALIZABLE VALUE AT
NUMBER OF OF TOTAL ASSUMED ANNUAL RATES OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION FOR OPTION
UNDERLYING GRANTED PER SHARE TERM(7)
OPTIONS IN FISCAL EXERCISE EXPIRATION ---------------------------------------
NAME GRANTED 1995(6) PRICE DATE 0% 5% 10%
- ------------------------------------ ----------- ------------- ----------- ---------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Dr. Sergio Magistri (1)............. 20,727 4.6 $ 1.10 06/10/05 $ 205,197 $ 334,245 $ 532,229
10,909 2.4 $ 2.20 10/30/05 $ 95,999 $ 156,373 $ 248,997
Curtis P. DiSibio (2)............... 3,455 * $ 1.10 06/10/05 $ 34,205 $ 55,716 $ 88,718
16,208 3.6 $ 2.20 10/30/05 $ 142,630 $ 232,329 $ 369,947
David Pillor (3).................... 33,255 7.4 $ 1.10 06/10/05 $ 329,224 $ 536,272 $ 853,924
43,837 10.0 $ 2.20 10/30/05 $ 385,765 $ 628,372 $ 1,000,577
Dr. Benno Stebler (4)............... 3,835 * $ 1.10 06/10/05 $ 37,967 $ 61,843 $ 98,475
18,065 4.0 $ 2.20 10/30/05 $ 158,972 $ 258,949 $ 412,332
Stephen Wolff (5)................... 1,685 * $ 1.10 06/10/05 $ 16,682 $ 27,172 $ 43,268
13,636 3.0 $ 2.20 10/30/05 $ 134,996 $ 195,462 $ 311,241
</TABLE>
- ------------------------
(1) The options granted to Dr. Magistri to purchase 20,727 and 10,909 shares of
Common Stock become exercisable at a rate of 25% and 33% per year,
respectively, over 4 and 3 years, respectively.
(2) The options granted to Mr. DiSibio to purchase 2,073, 1,382 and 16,208
shares of Common Stock become exercisable at a rate of 25%, 25% and 33% per
year, respectively, over 4, 4 and 3 years, respectively.
(3) The options granted to Mr. Pillor to purchase 4,025 and 43,837 shares of
Common Stock become exercisable at a rate of 25% and 33% per year,
respectively, over 4 and 3 years, respectively. The option to purchase
29,231 shares of Common Stock was fully exercisable on the date of grant.
(4) The options granted to Dr. Stebler to purchase 3,835 and 18,065 shares of
Common Stock become exercisable at a rate of 25% and 33% per year,
respectively, over 4 and 3 years, respectively.
(5) The options granted to Mr. Wolff to purchase 1,685 and 13,636 shares of
Common Stock became exercisable at a rate of 25% and 33% per year,
respectively, over 4 and 3 years, respectively.
(6) Based on an aggregate of 447,784 options granted to employees and directors
of the Company in fiscal 1995 including the Named Executive Officers set
forth in the "Summary Compensation Table" above and directors set forth in
"Director Compensation" above.
(7) The potential realizable value is calculated based on the term of the option
at this time of grant (ten years). Stock price appreciation of five percent
and ten percent is assumed pursuant to rules promulgated by the Securities
and Exchange Commission and does not represent the Company's prediction of
its stock price performance. The potential realizable value of 0%
appreciation measures the value of the option at effectiveness based on the
assumed initial public offering price less the exercise price. The potential
realizable value at 5% and 10% appreciation is calculated by assuming that
the proposed initial public offering price of $11.00 per share appreciates
at the indicated rate for the entire term of the option and that the option
is exercised at the exercise price and sold on the last day of its term at
the appreciated price.
35
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth information with respect to the number of
securities underlying unexercised options held by the Named Executive Officers
as of January 1, 1996 and the value of unexercised in-the-money options (i.e.
options for which the assumed initial public offering price for the Common Stock
of $11.00 per share exceeds the exercise price) as of January 1, 1996:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING IN-THE-MONEY
NUMBER OF UNEXERCISED OPTIONS AT OPTIONS AT JANUARY 1,
SHARES JANUARY 1, 1996 1996(1)
ACQUIRED ON VALUE -------------------------- ----------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE(1)
- -------------------------------- ----------- --------- ----------- ------------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Dr. Sergio Magistri............. -- -- 51,517 59,210 $ 511,536 $ 584,828
Curtis P. DiSibio............... -- -- 19,781 13,063 $ 192,407 $ 119,830
David Pillor.................... -- -- 48,358 39,325 $ 468,971 $ 364,028
Dr. Benno Stebler............... -- -- 24,487 12,044 $ 238,852 $ 108,393
Stephen Wolff................... -- -- 12,655 9,091 $ 122,009 $ 81,826
</TABLE>
- ------------------------
(1) Based on the initial public offering price of the common stock of $11.00 per
share, minus the exercise price, multiplied by the number of shares
underlying the option.
EMPLOYMENT CONTRACTS
The Company has entered into employment agreements with Messrs. Magistri,
DiSibio, Pillor and Stebler which provides for salaries and other employment
terms. The annual salaries for 1996 for Messrs. Magistri, DiSibio, Pillor and
Stebler currently are $133,000, $109,000, $110,000 and $114,000, respectively.
The agreements with Messrs. Magistri, DiSibio, Pillor and Stebler each provide
that if the Company terminates the employee's employment without cause, the
employee is entitled to a severance payment equal to his annual base salary for
six months. All of the employment agreements are terminable at the will of
either the employee or the Company at any time, with or without cause.
INCENTIVE AWARDS
The Company has a policy of granting certain cash incentive awards to its
senior management based upon the achievement of certain performance goals. The
specific performance goals are determined by the Company's Board of Directors
and are designed to fairly reward senior management for significant positive
contributions to the Company. Management does not expect such incentive awards
(excluding sales commissions) to exceed $200,000 in the aggregate in 1996.
401(k) PLAN
In January 1992, the Company adopted a tax-qualified employee savings and
retirement plan (the "401(k) Plan") covering all of the Company's employees.
Pursuant to the 401(k) Plan, employees may elect to reduce their current
compensation by up to the annual limit prescribed by statute ($9,240 in 1995)
and have the amount of such reduction contributed to the 401(k) Plan. The 401(k)
Plan does not provide for additional matching contributions to the 401(k) Plan
by the Company. The trustee under the 401(k) Plan, at the direction of each
participant, invests the assets of the 401(k) Plan in numerous investment
options. The 401(k) Plan is intended to qualify under Section 401 of the
Internal Revenue Code so that contributions by employees to the 401(k) Plan, and
income earned on plan contributions, are not taxable until withdrawn, and so
that the contributions by employees will be deductible by the Company when made.
EQUITY INCENTIVE PLANS
EQUITY INCENTIVE PLAN. The Company's 1991 Stock Option Plan was adopted by
the Board of Directors and approved by the shareholders in May 1991. In March
1996 the 1991 Stock Option Plan was amended and restated as the Equity Incentive
Plan (the "Equity Plan"). A total of 790,909 shares of Common Stock has been
reserved for issuance under the Equity Plan. The Equity Plan provides for grants
of incentive stock options, nonstatutory stock options, stock bonuses, rights to
purchase
36
<PAGE>
restricted stock, and stock appreciation rights (collectively "Stock Awards") to
employees (including officers and employee directors) and consultants of the
Company and its affiliates. The Equity Plan is presently being administered by
the Board of Directors, which determines optionees and the terms of options
granted, including the exercise price, number of shares subject to the option
and the exercisability thereof.
The terms of options granted under the Equity Plan generally may not exceed
ten years from the date of grant. Options granted under the Equity Plan to date
have been at the discretion of the Board and have typically vested at the rate
of 25% of the shares subject to option at the end of the first anniversary of
the date of grant and 1/16th of such shares at the end of each quarter
thereafter. No incentive stock option may be transferred by the optionee other
than by will or the laws of descent or distribution. Incentive stock options
shall be exercisable during the lifetime of the person to whom the option is
granted only by such person. An optionee whose relationship with the Company or
any related corporation ceases for any reason (other than by death or permanent
and total disability) may exercise options in the 30-day period following such
cessation (unless such options terminate or expire sooner by their terms) or in
such longer period determined by the Board of Directors.
Shares subject to Stock Awards (other than stock appreciation rights)
granted under the Equity Plan which have lapsed or terminated may again be
subject to Stock Awards granted under the Equity Plan. Furthermore, the Board of
Directors may offer to exchange new Stock Awards for existing Stock Awards, with
the shares subject to the existing Stock Awards again becoming available for
grant under the Equity Plan. Upon any merger or consolidation in which the
Company is not the surviving corporation, all outstanding Stock Awards shall
either be assumed by the surviving entity or continue in full force and effect.
If any surviving entity refuses to assume or continue such Stock Awards or
substitute similar Stock Awards then such Stock Awards shall be terminated if
not exercised prior to such event.
As of May 31, 1996, 73,741 shares of Common Stock had been issued upon the
exercise of options granted under the Equity Plan, options to purchase 567,028
shares of Common Stock at a weighted average exercise price of $1.90 per share
were outstanding and 150,138 shares remained available for future option grants.
The Equity Plan will terminate on May 2, 2001 unless sooner terminated by the
Board of Directors. To date no stock bonuses, restricted stock, or stock
appreciation rights have been granted under the Equity Plan.
EMPLOYEE STOCK PURCHASE PLAN. In March 1996, the Company adopted the
Employee Stock Purchase Plan (the "Purchase Plan") covering an aggregate of
150,000 shares of Common Stock. The Purchase Plan is intended to qualify as an
employee stock purchase plan within the meaning of Section 423 of the Internal
Revenue Code. Under the Purchase Plan, the Board of Directors may authorize
participation by eligible employees, including officers, in periodic offerings
following the adoption of the Purchase Plan. The offering period for any
offering will be no more than 27 months.
Employees are eligible to participate if they are employed by the Company or
an affiliate of the Company designated by the Board of Directors for at least 20
hours per week and are employed by the Company or a subsidiary of the Company
designated by the Board for at least five months per calendar year. Employees
who participate in an offering can have up to 15% of their earnings withheld
pursuant to the Purchase Plan. The amount withheld will then be used to purchase
shares of the Common Stock on specified dates determined by the Board of
Directors. The price of Common Stock purchased under the Purchase Plan will be
equal to 85% of the lower of the fair market value of the Common Stock on the
commencement date of each offering period or the relevant purchase date.
Employees may end their participation in the offering at any time during the
offering period except as provided in the terms of the offering, and
participation ends automatically on termination of employment with the Company.
In the event of certain transactions by which the Company is acquired or
becomes controlled by a single investor or group of investors, the Board of
Directors has discretion to provide that each right to
37
<PAGE>
purchase Common Stock will be assumed or an equivalent right substituted by the
successor corporation, if any, or the Board may shorten the offering period and
provide for all sums collected by payroll deductions to be applied to purchase
stock immediately prior to such transaction. The Purchase Plan will terminate at
the Board's direction. The Board has the authority to amend or terminate the
Purchase Plan, subject to the limitation that no such action may adversely
affect any outstanding rights to purchase Common Stock.
CERTAIN TRANSACTIONS
In connection with the formation of the Company, the Company issued 195,455
shares of Series A Preferred Stock to FI.M.A.I. in consideration for $650,000 in
cash and $1,500,000 in cancellation of indebtedness to Imatron and 195,455
shares of Series A Preferred Stock to Imatron in consideration for $250,000 in
cash and certain rights to technology pursuant to the Technology License
Agreement, dated as of September 11, 1990 between the Company and Imatron, Inc.
(the "Technology Agreement"). In addition, in connection with the formation of
the Company, FI.M.A.I. entered into a Manufacturing and Distribution Agreement
dated as of September 11, 1990 (the "Distribution Agreement") with which
agreement appointed FI.M.A.I. as the exclusive manufacturer, purchaser and
distributor for the CTX 5000 in Europe. FI.M.A.I. transferred its rights under
the Distribution Agreement to ElectroParts and HARAX in April 1995 in connection
with the transfer from FI.M.A.I. to HARAX and ElectroParts of FI.M.A.I.'s equity
interest in the Company. In June 1995, the Company issued 56,818 shares of
Series D Preferred Stock to ElectroParts and 170,455 shares of Series D
Preferred Stock to HARAX in exchange for the cancellation of the Distribution
Agreement. FI.M.A.I.'s entire equity interest in the Company was transferred to
ElectroParts and HARAX who are affiliated with FI.M.A.I.
Pursuant to the Technology Agreement, the Company received an exclusive,
worldwide, perpetual and fully paid right and license to use Imatron's Ultra
Fast E-Beam CT technology in the field of compact medical scanners for military
field applications and mail, freight, parcel or baggage scanner products. In
exchange, the Company granted to Imatron an exclusive, royalty free, worldwide
license to use InVision's technology on the field of medical scanner products.
In July 1991, the Company entered into a Standby Financing Agreement with
FI.M.A.I. (the "Standby Financing") pursuant to which FI.M.A.I. agreed to
provide an equity investment in the Company of up to $3,000,000 and to guarantee
a line of credit for the Company of up to $3,000,000. From July 1991 to April
1994, FI.M.A.I. guaranteed approximately $3,000,000 in bank indebtedness and
purchased 151,515 shares of Series C Preferred Stock at a purchase price of
$19.80 per share or an aggregate of $3,000,000. In June 1994, the Company issued
802,957 shares of Series D Preferred Stock to FI.M.A.I. at a purchase price of
$3.74 per share or an aggregate purchase price of $3,000,000. The funds received
from the sale of the Series D Preferred Stock were used to pay down $3,000,000
of the Company's then current $5,300,000 outstanding under its line of credit
and to terminate FI.M.A.I.'s guarantee with respect to such amount. FI.M.A.I.
currently guarantees approximately $2,000,000 under this credit facility. The
Series D Preferred Stock was issued to FI.M.A.I. on the same terms offered to
all investors in the Company's Series D Preferred Stock.
From July 1993 to November 1994, the Company borrowed approximately
$2,325,000 from HARAX at an interest rate of prime plus 1%. In May 1995, the
Company issued 649,434 shares of Series D Preferred Stock to HARAX at a purchase
price of $3.74 per share in exchange for the cancellation by HARAX of the
principal amount and interest of such indebtedness, or an aggregate purchase
price of $2,428,882.
HARAX and ElectroParts are participation holding companies that are
affiliated with FI.M.A.I. HARAX currently holds approximately 40.9% of the
outstanding equity of InVision. ElectroParts currently holds 6.5% of the
outstanding equity of InVision.
HARAX is controlled by Eugenio Rendo, who is a director and majority
stockholder of HARAX. Mr. Rendo is a senior executive of the Italimprese group
of companies in Italy, a large, privately-held
38
<PAGE>
conglomerate. Mr. Rendo, like a number of other senior executives of Italian
corporations in recent years, has been charged in Italy with bribery of public
officials in connection with obtaining public sector contracts. Mr. Rendo denies
such allegations and is vigorously defending himself in such matter. In
particular, Mr. Rendo asserts that the payments made by him which have been
called into question were lawful contributions to a political party and he
denies that any favor or other improper benefit was received in exchange. The
proceedings with respect to such charges recently have been relocated from
Milan, Italy to Rome, Italy. No hearing or trial date has been set with respect
to such charges. Under Italian law, two trials must be held before a conviction
is obtained.
On October 13, 1994, the Company issued 3,818 shares of Series D Preferred
Stock to Louis Turpen in consideration of services previously rendered by Mr.
Turpen. Mr. Turpen served as a director of the Company from December 1992 until
June 1995.
On November 11, 1994, the Company issued 5,455 shares of Series D Preferred
Stock to Lucio Lanza in consideration of services previously rendered by Mr.
Lanza. Mr. Lanza acted as Chairman of the Board of the Company from December
1992 until November 1993.
In October 1994, Dr. Sergio Magistri loaned the Company $50,000 for working
capital. In June 1995 the Company issued 13,368 shares of Series D Preferred
Stock to Dr. Sergio Magistri in exchange for the cancellation by Dr. Magistri of
such indebtedness. Dr. Magistri has served as a Director, the President and
Chief Executive Officer of the Company from December 1992 to present.
The Company believes that the foregoing transactions were in its best
interests and were on terms no less favorable to the Company than could be
obtained from unaffiliated third parties.
Future transactions, if any, with officers, directors, shareholders and
their affiliates will be made on terms no less favorable to the Company then
could be obtained from unaffiliated third parties.
Future loans, if any, to the Company's officers, directors and stockholders
will be approved by a majority of disinterested directors.
The Company will not grant options and warrants in excess of 15% of its
outstanding shares to officers, directors, employees, 5% shareholders and
affiliates for a one year period following this offering. In addition, any
options or warrants that are granted to the foregoing parties will have an
exercise price of at least 85% of fair market value on the date of grant.
39
<PAGE>
PRINCIPAL STOCKHOLDERS AND SELLING SECURITY HOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of May 31, 1996 held by (i) each
person who is known by the Company to own beneficially more than 5% of the
outstanding shares of Common Stock, (ii) each director and Named Executive
Officer of the Company, (iii) the Selling Security Holders, and (iv) all
directors and executive officers of the Company as a group. Unless otherwise
indicated below, to the knowledge of the Company, all persons listed below have
sole voting and investment power with respect to their shares of Common Stock,
except to the extent authority is shared by spouses under applicable law. Except
as otherwise provided below, the address of each person listed below is c/o the
Company, 3420 E. Third Ave., Foster City, CA 94404.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO THE OWNED AFTER THE
OFFERING (1) OFFERING (2)
------------------------ ------------------------
OFFICERS, DIRECTORS AND 5% STOCKHOLDERS NUMBER PERCENT NUMBER PERCENT
- ---------------------------------------------------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
HARAX Holdings, S.A....................................... 1,698,591 40.9 1,698,591 38.5
ElectroParts S.A.......................................... 270,324 6.5 270,324 6.1
Eugenio Rendo (3)......................................... 1,698,591 40.9 1,698,591 38.5
Mario Rendo (4)........................................... 270,324 6.5 270,324 6.1
HAKON Holdings, S.A....................................... 242,737 5.8 242,737 5.5
PASTEC Holdings, S.A...................................... 220,944 5.3 220,944 5.0
Dr. Sergio Magistri (5)................................... 74,515 1.8 74,515 1.7
Curtis P. DiSibio (6)..................................... 23,264 * 23,264 *
David Pillor (7).......................................... 58,252 1.4 58,252 1.3
Dr. Benno Stebler (8)..................................... 27,498 * 27,498 *
Stephen Wolff (9)......................................... 14,928 * 14,928 *
Dr. Douglas P. Boyd (10).................................. 23,311 * 23,311 *
Dr. Giovanni Lanzara (11)................................. 261,528 6.3 261,528 5.9
Dr. Bruno Trezza (12)..................................... 258,558 6.2 258,558 5.9
All directors and executive officers as a group (8
persons) (13)............................................ 741,854 17.9 741,854 16.8
<CAPTION>
SELLING SECURITY HOLDERS
- ----------------------------------------------------------
<S> <C> <C> <C> <C>
Anaconda Partners, L.P.................................... 239,659 6.0 -- --
LEO Holdings, Inc......................................... 19,431 0.2 -- --
</TABLE>
- ------------------------
* Less than 1% of the outstanding Common stock.
(1) Consists of 4,150,199 shares of Common Stock outstanding as of May 31,
1996.
(2) Assumes the sale of all 259,090 shares of Common Stock offered hereby.
(3) Consists of 1,698,591 shares of Common Stock held by HARAX. Eugenio Rendo
is the controlling stockholder of HARAX and is deemed to be the beneficial
owner of such shares.
(4) Consists of 270,324 shares of Common Stock held by ElectroParts. Mario
Rendo is the controlling stockholder of ElectroParts and is deemed to be
the beneficial owner of such shares.
(5) Includes 61,147 shares of Common Stock issuable pursuant to stock options
exercisable within 60 days after May 31, 1996.
40
<PAGE>
(6) Consists of 23,264 shares of Common Stock issuable pursuant to stock
options exercisable within 60 days after May 31, 1996.
(7) Consists of 58,252 shares of Common Stock issuable pursuant to options
exercisable within 60 days after May 31, 1996.
(8) Consists of 27,498 shares of Common Stock issuable pursuant to options
exercisable within 60 days after May 31, 1996.
(9) Consists of 14,928 shares of Common Stock issuable pursuant to options
exercisable within 60 days after May 31, 1996.
(10) Includes 19,266 shares of Common Stock issuable pursuant to stock options
exercisable within 60 days after May 31, 1996.
(11) Includes of (i) 11,363 shares of Common Stock issuable pursuant to stock
options exercisable within 60 days after May 31, 1996, and (ii) 220,944
shares of Common Stock held by PASTEC Holdings, S.A. Mr. Lanzara is the
controlling stockholder of PASTEC Holdings, S.A. and is deemed to be the
beneficial owner of such shares.
(12) Consists of (i) 15,821 shares of Common Stock issuable pursuant to stock
options exercisable within 60 days after May 31, 1996, and (ii) 242,737
shares of Common Stock held by HAKON Holdings, S.A. Mr. Trezza is the
controlling stockholder of HAKON Holdings, S.A. and is deemed to be the
beneficial owner of such shares.
(13) Includes 231,539 shares of Common Stock issuable pursuant to stock options
exercisable within 60 days after May 31, 1996.
41
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The following description of the capital stock of the Company and certain
provisions of the Company's Amended and Restated Certificate of Incorporation
and Amended Bylaws is a summary and is qualified in its entirety by the
provisions of the Amended and Restated Certificate of Incorporation and Bylaws,
which have been filed as exhibit to the Company's Registration Statement, of
which this Prospectus is a part. All material elements of the capital stock of
the Company and the Company's Amended and Restated Certificate of Incorporation
and Amended Bylaws are included in the following description.
The authorized capital stock of the Company consists of 20,000,000 shares of
Common Stock, par value $.001 and 5,000,000 shares of Preferred Stock, par value
$.001.
COMMON STOCK
At May 31, 1996 there were 4,150,199 shares of Common Stock outstanding. The
holders of Common Stock are entitled to one vote for each share held of record
on all matters submitted to a vote of the stockholders. The holders of Common
Stock are not entitled to cumulative voting rights with respect to the election
of directors, and as a consequence, minority stockholders will not be able to
elect directors on the basis of their votes alone.
Subject to preferences that may be applicable to any then outstanding shares
of Preferred Stock, holders of Common Stock are entitled to receive ratably such
dividends as may be declared by the Board of Directors out of funds legally
available therefor. See "Dividend Policy." In the event of liquidation,
dissolution or winding up of the Company, holders of the Common Stock are
entitled to share ratably in all assets remaining after payment of liabilities
and the liquidation preference of any then outstanding shares of Preferred
Stock. Holders of Common Stock have no preemptive rights and no right to convert
their Common Stock into any other securities. There are no redemption or sinking
fund provisions applicable to the Common Stock. All outstanding shares of Common
Stock are, and all shares of Common Stock to be outstanding upon completion of
this offering will be, fully paid and nonassessable.
PREFERRED STOCK
The Board of Directors has the authority, without further action by the
stockholders, to issue up to 5,000,000 shares of Preferred Stock in one or more
series and to fix the rights, preferences, privileges and restrictions thereof,
including dividend rights, conversion rights, voting rights, terms of
redemption, liquidation preferences, sinking fund terms and the number of shares
constituting any series or the designation of such series, without any further
vote or action by the stockholders. The issuance of Preferred Stock could
adversely affect the voting power of holders of Common Stock and the likelihood
that such holders will receive dividend payments and payments upon liquidation
may have the effect of delaying, deferring or preventing a change in control of
the Company, which could have a depressive effect on the market price of the
Company's Common Stock. The Company has no present plan to issue any shares of
Preferred Stock.
WARRANTS
As of May 31, 1996, there were warrants outstanding to purchase 31,818
shares of the Company's Common Stock at $11.00 per share and 227,272 shares at
$8.80 per share. In addition, there is a warrant outstanding to the
Representative to purchase 90,000 shares of Common Stock at an exercise price of
$13.20 per share. The Representative's Warrant will become exercisable
approximately twelve months from the Effective Date and will expire on the fifth
anniversary of such offering. Each warrant contains provisions for the
adjustment of the exercise price and the aggregate number of shares issuable
upon exercise of the warrant under certain circumstances, including stock
dividends, stock splits, reorganizations, reclassification and consolidations.
REGISTRATION RIGHTS
The holders of 90,909 shares of Common Stock and warrants to purchase up to
90,000 shares of Common Stock (the "Registrable Securities") or their
transferees, will be entitled to certain rights with
42
<PAGE>
respect to the registration of such shares under the Securities Act. Of such
Registrable Securities, 90,000 shares will be covered by the Representative's
Warrants. Under the terms of the Investor Rights Agreement dated as of December
29, 1995 among the Company and certain holders of its securities (the "Rights
Agreement"), if, following the first anniversary of the effectiveness of the
Company's initial public offering, the Company proposes to register any of its
Common Stock under the Securities Act, the holders of approximately 90,909
shares of Common Stock will be entitled to notice of such registration and to
include their Registrable Securities therein; provided, among other conditions,
that the underwriter of such offering, if any, has the right to limit the number
of shares included in any such registration. Further, the holders of Registrable
Securities may require the Company to register all or any portion of their
Registrable Securities on Form S-3, when such form becomes available to the
Company, subject to certain conditions and limitations. Pursuant to the terms of
the Representative's Warrants, the Company will be obligated to register the
Common Stock underlying the Representative's Warrants at any time commencing one
year after the date of this offering.
DELAWARE LAW AND CERTAIN CHARTER PROVISIONS
The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law (the "Delaware Law"), an anti-takeover law. In general,
the statute prohibits a publicly-held Delaware corporation from engaging in a
"business combination" with an "interested stockholder" for a period of three
years after the date of the transaction in which the person became an interested
stockholder, unless the business combination is approved in a prescribed manner.
A "business combination" includes a merger, asset sale or other transaction
resulting in a financial benefit to the stockholder. For purposes of Section
203, an "interested stockholder" is a person who, together with affiliates and
associates, owns (or within three years prior, did own) 15% or more of the
corporation's voting stock.
The Company's Certificate of Incorporation provides that each director will
serve for a three-year term and that approximately one-third of the directors
are to be elected annually. Candidates for directors shall be nominated only by
the Board of Directors or by a stockholder who gives written notice to the
Company at least 20 days before the annual meeting. The Company may have three
to nine directors as determined from time to time by the Board, which currently
consists of four members. Between stockholder meetings, the Board may appoint
new directors to fill vacancies or newly created directorships. The Certificate
does not provide for cumulative voting at stockholder meetings for election of
directors. Stockholders controlling more than 50% of the outstanding Common
Stock can elect the entire Board of Directors, while stockholders controlling
49% of the outstanding Common Stock may not be able to elect any directors. A
director may be removed from office only for cause by the affirmative vote of a
majority of the combined voting power of the then outstanding shares of stock
entitled to vote generally in the election of directors, or without cause by the
affirmative vote of the holders of at least sixty-six and two-thirds percent
(66 2/3%) of the voting power of the then outstanding stock.
The Company's Certificate of Incorporation requires that any action required
or permitted to be taken by stockholders of the Company must be effected at a
duly called annual or special meeting of stockholders and may not be effected by
a consent in writing. The Company's Certificate of Incorporation also provides
that the authorized number of directors may be changed only by resolution of the
Board of Directors. See "Management Directors and Executive Officers." Delaware
Law and these charter provisions may have the effect of deterring hostile
takeovers or delaying changes in control or management of the Company, which
could have a depressive effect on the market price of the Company's Common
Stock.
NASDAQ SMALLCAP MARKET LISTING
The Common Stock is traded on The Nasdaq SmallCap Market. The current rules
of the National Association of Securities Dealers, Inc. effectively preclude the
trading or quotation through The Nasdaq SmallCap Market of any securities of an
issuer which has issued securities or taken other corporate action that would
have the effect of nullifying, restricting or disparately reducing the per share
voting rights of holders of an outstanding class or classes of equity securities
registered under
43
<PAGE>
Section 12 of the Exchange Act. Certain national securities exchanges have
adopted similar rules and policies. The Company does not intend to issue any
additional shares of any stock that would make it ineligible for inclusion on
The Nasdaq SmallCap Market or any national securities exchange. However, in the
event the Company issues additional stock that causes it to become ineligible
for continued inclusion on The Nasdaq SmallCap Market, such ineligibility would
be likely to reduce materially the liquidity of an investment in the Common
Stock and would likely depress its market value below that which would otherwise
prevail.
LIMITATION OF LIABILITY AND INDEMNIFICATION
The Company's Certificate of Incorporation contains certain provisions
permitted under Delaware Law relating to the liability of directors. These
provisions eliminate a director's personal liability for monetary damages
resulting from a breach of fiduciary duty, except in certain circumstances
involving certain wrongful acts, such as (i) for any breach of the director's
duty of loyalty to the Company or its stockholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing violation
of law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv)
for any transaction from which the director derives an improper personal
benefit. These provisions do not limit or eliminate the rights of the Company or
any stockholder to seek non-monetary relief, such as an injunction or
rescission, in the event of a breach of director's fiduciary duty. These
provisions will not alter a director's liability under federal securities laws.
The Company's Certificate of Incorporation also contains provisions indemnifying
the directors and officers of the Company to the fullest extent permitted by
Delaware General Corporation Law. The Company believes that these provisions
will assist the Company in attracting and retaining qualified individuals to
serve as directors.
TRANSFER AGENT
The transfer agent for the Common Stock of the Company is Continental Stock
Transfer & Trust Company.
SHARES ELIGIBLE FOR FUTURE SALE
Prior to the Company's initial public offering, there was no public market
for the Common Stock of the Company. Further sales of substantial amounts of
Common Stock in the open market may adversely affect the market price of the
Common Stock offered hereby.
Upon completion of this offering, the Company will have outstanding an
aggregate of 4,409,289 shares of Common Stock assuming (i) the issuance of
259,090 shares of Common Stock upon exercise of the Warrants, (ii) no exercise
of outstanding options to purchase 567,028 shares of Common Stock, and (iii) no
exercise of Representative's Warrants for 90,000 shares of Common Stock. Of
these shares, the 1,035,000 shares sold in the Company's initial public offering
are freely tradeable without restriction or further registration under the
Securities Act, except for shares held by "affiliates" of the Company as that
term is defined in Rule 144 under the Securities Act (whose sales would be
subject to certain limitations and restrictions described below) and the
regulations promulgated thereunder.
The 3,115,199 shares held by officers, directors, employees, consultants and
other stockholders of the Company prior to its initial public offering were sold
by the Company in reliance on exemptions from the registration requirements of
the Securities Act and are "restricted" securities within the meaning of Rule
144 under the Securities Act. Approximately 308,548 of these shares of Common
Stock became eligible for sale in the public market upon the effective date of
the Company's initial public offering (the "Effective Date") in reliance on Rule
144(k) under the Securities Act. Beginning 90 days after the Effective Date, an
additional 20,279 of these shares will become eligible for sale subject to the
provisions of Rule 144. Beginning 365 days after the Effective Date, an
additional 242,994 of these shares, will become eligible for sale subject to the
provisions of Rule 144 upon the
44
<PAGE>
expiration of agreements not to sell such shares. The remaining 2,543,378 shares
of Common Stock will become eligible for sale under Rule 144 and Rule 701 at
various dates thereafter as the holding period provisions of Rule 144 are
satisfied.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated), including an affiliate, who has beneficially owned
shares for at least two years is entitled to sell, within any three-month period
commencing 90 days after the Effective Date, a number of shares that does not
exceed the greater of (i) 1% of the then outstanding shares of Common Stock
(approximately 44,093 shares immediately after this offering) or (ii) the
average weekly trading volume in the Common Stock during the four calendar weeks
preceding such sale, subject to the filing of a Form 144 with respect to such
sale and certain other limitations and restrictions. In addition, a person who
is not deemed to have been an affiliate of the Company at any time during the 90
days preceding a sale, and who has beneficially owned the shares proposed to be
sold for at least three years, would be entitled to sell such shares under Rule
144(k) without regard to the requirements described above. To the extent that
shares were acquired from an affiliate of the Company, such stockholder's
holding period for the purpose of effecting a sale under Rule 144 commences on
the date of transfer from the affiliate.
Any employee, officer or director of or consultant to the Company who was
granted options or purchased his or her shares upon exercise of such options
pursuant to a written compensatory plan or contract ("Rule 701 Shares") is
entitled to rely on the resale provisions of Rule 701. Rule 701 permits
non-affiliates to sell their Rule 701 Shares to the extent vested on the
Effective Date without having to comply with the public-information,
holding-period, volume-limitation or notice provisions of Rule 144 and permits
affiliates to sell their Rule 701 Shares, to the extent vested, without having
to comply with the holding period restrictions of Rule 144, in each case
commencing 90 days after the Effective Date. However, all officers and directors
and certain other stockholders have agreed not to sell or otherwise dispose of
Common Stock of the Company for a 365-day period following the Effective Date.
The Company intends to file a registration statement under the Securities
Act to register shares of Common Stock reserved for issuance under the Equity
Plan, thus permitting the resale of such shares by non-affiliates in the public
market without restriction under the Securities Act. Such registration statement
will become effective immediately upon its filing. The Company has granted
registration rights to certain of its stockholders and to the Representatives.
See "Description of Capital Stock -- Registration Rights."
45
<PAGE>
QUALIFIED SMALL BUSINESS STOCK
Section 1202 of the Internal Revenue Code, provides taxpayers, other than
corporations, with a 50 percent exclusion of gain from the sale or exchange of
"qualified small business stock" held for more than five years. In general, a
taxpayer's exclusion per taxable year with respect to "qualified small business
stock" of any one issuer is the greater of (a) $10 million ($5 million in the
case of married taxpayers filing separate returns), reduced by the amount of the
taxpayer's gain in prior years on stock of such issuer eligible for the
exclusion or (b) ten times the taxpayer's basis for "qualified small business
stock" of such issuer sold or exchanged during the taxable year. One-half of the
amount excluded with respect to "qualified small business stock" constitutes an
item of tax preference for alternative minimum tax purposes.
"Qualified small business stock" is stock of a "qualified small business"
issued after August 10, 1993 which is generally acquired at its original
issuance by the taxpayer for money or other property (not including stock) or in
connection with the performance of services. A "qualified small business" is any
domestic corporation (other than S corporation) which (i) had gross assets no
greater than $50 million at all times following August 10, 1993 up to the
issuance of the stock in question and immediately thereafter (taking into
account amounts received upon such issuance) and (ii) agrees to submit such
reports to its shareholders and the Internal Revenue Service as are prescribed
by future implementing regulations. The Company believes that the $50 million
gross asset test will be satisfied with respect to purchasers of shares from the
Company in this offering. The Company expects to submit the required reports as
long as any of its outstanding stock reasonably appears to constitute "qualified
small business stock."
In addition, in order for stock in any corporation to constitute "qualified
small business stock," 80 percent (by value) of the assets of such corporation
must be used by the corporation in the active conduct of one or more qualified
trades or businesses during substantially all of the taxpayer's holding period
for such stock. For issuers like the Company that have been in existence for
more than two years, up to 50 percent of the issuer's assets may qualify as
being used in the active conduct of a business by being held for reasonably
required working capital needs or held for investment and reasonably expected to
be used within two years to finance research and development. Application of
this active business test to the Company in the absence of additional official
guidance is uncertain, and it cannot be determined whether the Company will meet
the active business test upon completion of this offering or thereafter.
Because of the uncertainties surrounding application of the "qualified small
business stock" provision to the Company and holders of its Common Stock, no
assurance can be given that purchasers of Common Stock in this offering will be
entitled to the special capital gain exclusion, even if they hold that Common
Stock for the requisite five years. Potential investors must consult with and
rely exclusively upon their own tax advisors concerning all tax aspects of a
purchase of the Common Stock offered hereby including application of the
"qualified small business stock" provision. In addition, potential investors are
urged to consult their tax advisors as to the many special rules and limitations
contained in that provision which may be applicable to their individual
circumstances, including special rules relating to investors that are
partnerships or S corporations.
46
<PAGE>
PLAN OF DISTRIBUTION
The shares of Common Stock offered by the Selling Security Holders may be
sold from time to time to purchasers directly by the Selling Security Holders
acting as principal for its own account in one or more transactions at a fixed
price, which may be changed, or at varying prices determined at the time of sale
or at negotiated prices. Alternatively, the Selling Security Holders may from
time to time offer the Common Stock through underwriters, dealers or agents who
may receive compensation in the form of underwriting discounts, commissions or
concessions from the Selling Security Holders and/or the purchasers of shares
for whom they may act as agent. Sales may be made on The Nasdaq SmallCap Market
or in private transactions.
The Selling Security Holders and any underwriters, dealers or agents that
participate in the distribution of the Common Stock offered hereby may be deemed
to be underwriters within the meaning of the Act and any discounts, commissions
or concessions received by them and any provided pursuant to the sale of shares
by them might be deemed to be underwriting discounts and commissions under the
Act.
In order to comply with the securities laws of certain states, if
applicable, the Common Stock will be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states the
Common Stock may not be sold unless it has been registered or qualified for sale
or an exemption from registration or qualification requirements is available and
is complied with.
The Company has agreed to register the Common Stock issuable upon exercise
of the warrants under applicable federal and state securities laws. The Company
will pay substantially all of the expenses incident to the offering and sale of
the Common Stock to the public, other than commissions, concessions and
discounts of underwriters, dealers or agents. Such expenses (excluding such
commissions and discounts) are estimated to be $81,161.44.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Cooley Godward Castro Huddleson & Tatum, Palo Alto,
California.
EXPERTS
The financial statements as of December 31, 1994 and 1995 and for each of
the three years in the period ended December 31, 1995 included in this
Prospectus have been so included in reliance on the report (which contains an
explanatory paragraph relating to the Company's ability to continue as a going
concern as described in Note 12 to the financial statements) of Price Waterhouse
LLP, independent accountants, given on the authority of said firm as experts in
auditing and accounting.
47
<PAGE>
GLOSSARY OF TECHNICAL TERMS
<TABLE>
<S> <C>
Algorithm..................... A procedure for solving certain types of
problems; specifically software procedures for
image processing and detection of explosives.
Computed Tomography (CT or CAT The computerized production of cross-sectional
Scan)........................ "images" produced by x-ray sources and
detectors rotating around an object.
Dual Energy X-Ray Scanners.... A modification of traditional x-ray technology
that utilizes two x-ray/energies to generate
x-ray Projection Images which, when combined,
are able to distinguish between groups of
materials.
Electro-Erosion Technology.... The use of electrical discharges to machine and
shape conductive material of any hardness with
high precision.
Hermetically Sealed........... A hermetically sealed container is one which is
airtight and hence does not allow the escape of
vapors.
Lithotripsy................... The medical procedure whereby focused shockwaves
directed by Ultrasound are used to fragment
kidney stones and gall bladder stones.
Morphology.................... The form or structure of objects.
Throughput.................... The rate at which an explosives detection system
can scan luggage. The rate is typically
expressed by the number of bags processed per
hour (bph).
Trace Detection A procedure which detects explosives by
Technologies................. analyzing particles on the outside of luggage.
Explosives materials are sticky and may leave
traces on the outside of luggage, or may emit
detectable minute vapors if not properly sealed
in a container.
Volumetric Modelling Software that can determine the volume of an
Software..................... object. The use of volumetric modelling software
to determine the volume of an object allows
determination of the mass of the object.
X-Ray Projection Image........ The two-dimensional image produced by
traditional x-ray technology.
</TABLE>
48
<PAGE>
INVISION TECHNOLOGIES, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants......................................... F-2
Balance Sheets as of December 31, 1994 and 1995........................... F-3
Statements of Operations for the Years Ended December 31, 1993, 1994, and
1995..................................................................... F-4
Statements of Cash Flows for the Years Ended December 31, 1993, 1994 and
1995..................................................................... F-5
Statements of Stockholders' Deficit for the Years Ended December 31, 1993,
1994 and 1995............................................................ F-6
Notes to Financial Statements............................................. F-7
Condensed Balance Sheets -- December 31, 1995 and March 31, 1996
(unaudited).............................................................. F-15
Condensed Statements of Operations -- Three months ended March 31, 1995
and 1996 (unaudited)..................................................... F-16
Condensed Statements of Cash Flows -- Three months ended March 31, 1995
and 1996 (unaudited)..................................................... F-17
Condensed Statement of Stockholders' Deficit for the Three Months Ended
March 31, 1996 (unaudited)............................................... F-18
Notes to Unaudited Condensed Financial Statements......................... F-19
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
InVision Technologies, Inc.
In our opinion, the accompanying balance sheets and the related statements
of operations, of cash flows and of changes in stockholders' deficit present
fairly, in all material respects, the financial position of InVision
Technologies, Inc. at December 31, 1994 and 1995, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1995, in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 12 to the
financial statements, the Company has suffered recurring losses from operations
since inception and has a net capital deficiency that raise substantial doubt
about its ability to continue as a going concern. Management's plans in regard
to these matters are also discussed in Note 12. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
PRICE WATERHOUSE LLP
San Jose, California
January 26, 1996, except as to Note 12,
which is as of February 29, 1996, and
as to Note 13, which is as of March 15, 1996
F-2
<PAGE>
INVISION TECHNOLOGIES, INC.
BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1994 1995
--------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash............................................ $ 2,241 $ 1,927
Accounts receivable............................. 124 735
Inventories (Note 4)............................ 1,526 3,413
Prepaid expenses................................ 86 252
--------- ---------
Total current assets........................ 3,977 6,327
Property and equipment, net (Note 5)............ 563 914
Other assets.................................... 106 75
--------- ---------
$ 4,646 $ 7,316
--------- ---------
--------- ---------
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable................................ $ 920 $ 3,181
Accrued expenses................................ 302 1,115
Short-term debt (Note 6)........................ 2,500 2,260
Advances from stockholders...................... 2,200 200
Deferred revenue................................ 2,948 3,082
--------- ---------
Total current liabilities................... 8,870 9,838
--------- ---------
Commitments (Note 9)
Stockholders' deficit:
Convertible preferred stock, $.001 par value;
5,000 shares authorized; 1,512 and 2,619 shares
issued and outstanding; aggregate liquidation
preference of $16,796 at December 31, 1995..... 8,364 12,212
Common stock, $.001 par value; 20,000 shares
authorized; 29 and 62 shares issued and
outstanding actual; 3,115 shares issued and
outstanding....................................
Additional paid-in capital...................... 47 1,885
Deferred stock compensation..................... -- (692)
Accumulated deficit............................. (12,635) (15,927)
--------- ---------
Total stockholders' deficit................. (4,224) (2,522)
--------- ---------
$ 4,646 $ 7,316
--------- ---------
--------- ---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
INVISION TECHNOLOGIES, INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1993 1994 1995
--------- --------- ---------
<S> <C> <C> <C>
Revenues:
Product sales................................................................. $ -- $ -- $ 9,060
Contract revenues............................................................. 1,518 821 593
--------- --------- ---------
Total revenues............................................................ 1,518 821 9,653
--------- --------- ---------
Operating expenses:
Cost of product sales......................................................... -- -- 6,777
Cost of contract revenues..................................................... 1,425 693 547
Research and development...................................................... 1,568 1,710 1,885
Selling, general and administrative........................................... 1,550 1,742 3,432
--------- --------- ---------
Total operating expenses.................................................. 4,543 4,145 12,641
--------- --------- ---------
Operating loss.................................................................. (3,025) (3,324) (2,988)
Interest expense (including related party interest expense of $0; $90; and
$104).......................................................................... (288) (410) (338)
Interest income................................................................. 6 7 34
--------- --------- ---------
Net loss........................................................................ $ (3,307) $ (3,727) $ (3,292)
--------- --------- ---------
--------- --------- ---------
Pro forma net loss per share (unaudited) (Note 2)............................... $ (0.99)
Pro forma weighted average shares outstanding (unaudited) (Note 2).............. 3,321
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
INVISION TECHNOLOGIES, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1993 1994 1995
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss...................................................................... $ (3,307) $ (3,727) $ (3,292)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation................................................................ 114 255 239
Compensation expense from stock options..................................... -- -- 369
Changes in assets and liabilities:
Accounts receivable....................................................... (246) 163 (611)
Inventories............................................................... (275) (939) (1,887)
Other assets.............................................................. (27) (29) (135)
Accounts payable.......................................................... 97 618 2,365
Accrued expenses.......................................................... (114) 121 813
Customer deposits......................................................... 2,948 134
--------- --------- ---------
Net cash used in operating activities................................... (3,758) (590) (2,005)
--------- --------- ---------
Cash flows from investing activities:
Acquisition of property and equipment......................................... (62) (117) (590)
--------- --------- ---------
Net cash used in investing activities................................... (62) (117) (590)
--------- --------- ---------
Cash flows from financing activities:
Proceeds from short-term debt................................................. 2,450 2,250 1,000
Proceeds from issuance of preferred stock..................................... 1,000 464 1,244
Proceeds from issuance of common stock........................................ 20 22 37
--------- --------- ---------
Net cash provided by financing activities............................... 3,470 2,736 2,281
--------- --------- ---------
Net (decrease) increase in cash for the period.................................. (350) 2,029 (314)
Cash at beginning of period..................................................... 562 212 2,241
--------- --------- ---------
Cash at end of period........................................................... $ 212 $ 2,241 $ 1,927
--------- --------- ---------
--------- --------- ---------
Supplemental disclosures of cash flow information:
Interest paid................................................................. $ 288 $ 319 $ 220
Supplemental disclosure of non-cash financing activities:
Issuance of Series D preferred stock upon the conversion of short-term debt
and accrued interest......................................................... $ 3,000 $ 2,604
Warrant issued in connection with bridge loan financing....................... $ 740
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
INVISION TECHNOLOGIES, INC.
STATEMENTS OF STOCKHOLDERS' DEFICIT
(IN THOUSANDS)
<TABLE>
<CAPTION>
CONVERTIBLE
PREFERRED STOCK COMMON STOCK ADDITIONAL DEFERRED TOTAL
--------------- -------------- PAID-IN STOCK ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL COMPENSATION DEFICIT DEFICIT
------ ------- ------ ------ ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1992......................... 535 $ 3,900 5 $-- $ 5 $ -- $ (5,601) (1,696)
Issuance of Series C
preferred stock............ 51 1,000 1,000
Exercise of common stock
options.................... 11 20 20
Net loss.................... (3,307) (3,307)
------ ------- ------ ------ ---------- ------ ------------ ------------
Balance at December 31,
1993......................... 586 4,900 16 25 (8,908) (3,983)
Issuance of Series D
preferred stock............ 926 3,464 3,464
Exercise of common stock
options.................... 13 22 22
Net loss.................... (3,727) (3,727)
------ ------- ------ ------ ---------- ------ ------------ ------------
Balance at December 31,
1994......................... 1,512 8,364 29 47 (12,635) (4,224)
Issuance of Series D
preferred stock............ 789 2,948 2,948
Issuance of Series D
preferred stock to
stockholders for
distribution rights........ 227
Issuance of Series E
preferred stock............ 91 900 900
Deferred stock
compensation............... 1,061 (692) 369
Issuance of warrant......... 740 740
Exercise of common stock
options.................... 33 37 37
Net loss.................... (3,292) (3,292)
------ ------- ------ ------ ---------- ------ ------------ ------------
Balance at December 31,
1995......................... 2,619 $12,212 62 $-- $ 1,885 $ (692) $ (15,927) $ (2,522)
------ ------- ------ ------ ---------- ------ ------------ ------------
------ ------- ------ ------ ---------- ------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
INVISION TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
1. THE COMPANY
InVision Technologies, Inc. ("InVision," or the "Company") was incorporated
in Delaware and commenced operations in September 1990. The Company was formed
to develop, manufacture, and market computed tomographic ("CT") technology in
the baggage, parcel and freight scanning markets. To date, the Company has been
engaged principally in designing, engineering and manufacturing an explosives
detection system for sale primarily to large airlines and airports.
The Company was originally formed as a joint venture arrangement between
Imatron, Inc. ("Imatron," a publicly traded company in the U.S.) and FI.M.A.I.
Holding, S.A. ("FIMAI," a Luxembourg corporation). Imatron contributed cash of
$250,000 and transferred to the Company a technology license agreement and
materials (parts and components) related to prototype systems. FIMAI contributed
cash of $650,000 and a note receivable owed to it by Imatron of $1,500,000,
which was forgiven by the Company as partial consideration for the technology
license transferred from Imatron and charged to research and development
expense. In total, the Company issued 390,909 shares of Series A Preferred Stock
in consideration for these capital contributions (including technology). In
accordance with generally accepted accounting principles, the technology
contributed, as detailed above, was valued at zero, its historical carrying
value to Imatron.
The Company exited the development stage in 1995 upon the first commercial
sales of its principal product, the CTX 5000 explosives detection system.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
REVENUE RECOGNITION
Revenue from product sales is recognized upon shipment unless unusual
acceptance criteria exist. In such cases, revenue is recognized upon customer
acceptance. Contract revenue is recognized as services are performed using the
percentage-of-completion method of accounting, primarily based on contract costs
incurred to date compared with total estimated costs at completion.
All contract revenues have been derived from the company's subcontract with
Imatron Federal Systems ("IFS') to perform work under IFS' contract with the FAA
(described below). Export sales, primarily to customers in Europe, accounted for
84% of the Company's revenue in 1995. Sales to certain individual customers
accounted for 48%, 12% and 10% of total revenues during 1995.
INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out) or market.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Depreciation is computed using
the straight-line method based upon the estimated useful lives of the assets,
generally five years. Leasehold improvements are amortized using the
straight-line method over the shorter of their useful lives or the terms of the
leases.
F-7
<PAGE>
INVISION TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
OTHER ASSETS
Other assets consist principally of an investment in IFS (Note 3). The
Company has invested $75,000 in IFS in exchange for 100% of IFS' non-voting,
non-convertible preferred stock. The Company does not have representation on
IFS' Board of Directors. Accordingly, the investment in IFS is valued at
historical cost. The effect on the Company's financial statements presented
herein of not consolidating IFS is not material.
WARRANTY
Upon product shipment, the company provides for the estimated costs that may
be incurred under its product warranties.
DEFERRED REVENUE
Deferred revenue arises from advance payments received from customers for
systems to be delivered within the next year.
INCOME TAXES
The Company accounts for income taxes using an asset and liability approach
that requires the recognition of deferred tax assets and liabilities for the
expected future tax consequences of events that have been recognized in the
Company's financial statements or tax returns.
RESEARCH AND DEVELOPMENT COSTS
Research and development costs are charged to operations as incurred.
STOCK COMPENSATION
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("FAS 123"). FAS 123 requires companies that elect not to adopt
the fair value based method of accounting for stock compensation plans to make
pro forma disclosures of net income and earnings per share as if they had
adopted the fair value accounting method. Upon adopting FAS 123 in 1996, the
Company plans to present the required pro forma disclosures rather than change
its present method of accounting for employee stock options.
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist primarily of cash and accounts receivable.
The Company limits the amount of credit exposure of cash balances by maintaining
its accounts in a high credit quality financial institution. The Company's
accounts receivable are derived primarily from sales in Europe and the United
States. The Company's standard credit policy requires prepayment of 50% prior to
shipment on all sales. To date, the Company has not experienced any material
credit losses.
UNAUDITED PRO FORMA NET LOSS PER SHARE
The pro forma net loss per share is computed using the weighted average
number of common stock and common stock equivalents. The number of common shares
outstanding after giving retroactive effect to conversion of the convertible
preferred stock to common shares which will occur upon consummation of the
Company's initial public offering is included in per share amounts. Per share
amounts also give retroactive effect to the 1-for-11 reverse split of all shares
of capital stock as described in Note 13. Pursuant to Securities and Exchange
Commission Staff Accounting Bulletin No. 83, common stock and common stock
equivalents (including convertible preferred stock) issued at prices below the
assumed initial public offering price per share during the year immediately
preceding the initial filing date of the Company's registration statement for
its public offering have been
F-8
<PAGE>
INVISION TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
included as outstanding for all periods presented using the treasury stock
method and the initial public offering price per share. Historical net loss per
share amounts have not been presented because such amounts are not deemed
meaningful due to the significant changes in the Company's capital structure
that will occur in connection with the initial public offering.
RECLASSIFICATIONS
Certain 1993 and 1994 balances have been reclassified to be consistent with
the 1995 presentation.
3. RESEARCH AND DEVELOPMENT CONTRACT
In September 1991, the Company was awarded a subcontract by IFS to perform
work under IFS' contract with the Federal Aviation Administration ("FAA").
During 1995, the Company generated revenues of $593,000 under this
cost-plus-fixed fee subcontract. Billings are rendered to IFS monthly on the
basis of actual costs incurred. At December 31, 1994 and 1995, the related
receivable balance from IFS was $41,000 and $17,000, respectively.
4. INVENTORIES
Inventories consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1994 1995
------------- -------------
<S> <C> <C>
Raw materials..................................... $ 418,000 $ 1,853,000
Work-in-process................................... 252,000 779,000
Finished goods.................................... 856,000 781,000
------------- -------------
$ 1,526,000 $ 3,413,000
------------- -------------
------------- -------------
</TABLE>
5. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1994 1995
------------- -------------
<S> <C> <C>
Leasehold improvements............................ $ 34,000 $ 73,000
Equipment......................................... 960,000 1,474,000
Furniture and fixtures............................ 39,000 71,000
------------- -------------
1,033,000 1,618,000
Less: accumulated depreciation and amortization... (470,000) (704,000)
------------- -------------
$ 563,000 $ 914,000
------------- -------------
------------- -------------
</TABLE>
6. SHORT-TERM DEBT
At December 31, 1994 and 1995, $2,500,000 and $2,000,000 of short-term debt
was outstanding representing all of the funds available under a line of credit
agreement with a bank. Interest accrues under the agreement at prime plus 1%.
The rates in effect at December 31, 1994 and 1995 were 9.50% and 9.75%,
respectively. Borrowings under the line of credit are payable on demand and are
guaranteed by certain of the Company's stockholders. The agreement includes
certain non-financial covenants with which the Company is in compliance and is
subject to renewal during 1996.
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 has drawn $1,000,000 at December 31, 1995 and has the
option to draw up to an additional $1,000,000 in
F-9
<PAGE>
INVISION TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. SHORT-TERM DEBT (CONTINUED)
February 1996. Principal outstanding under the agreement is secured by all
assets of the Company. The Bridge Loan is due on the earlier of the closing of
the IPO or June 28, 1996 and bears interest at 10% per annum. The Company is
restricted from declaring dividends until the Bridge Loan is repaid.
In connection with the Bridge Loan, the lender received a three-year warrant
to purchase 31,818 and 113,636 shares of Common Stock at the IPO price and $8.80
per share, respectively. The aggregate fair value of the Bridge Loan warrant is
$740,000. Such value represents a discount that is being amortized over the
period that the Bridge Loan is outstanding. In addition, the lender is entitled
to receive a warrant to purchase up to 113,636 additional shares of Common Stock
at $8.80 per share on a pro-rata basis dependent upon the amount of funds drawn
by the Company under the agreement in February 1996. In the event that the
Company does not complete its planned IPO before July 1996, the exercise price
of the warrant with respect to all shares of Common Stock available thereunder
will be decreased to $6.60 per share and the warrant term will be extended to
ten years.
Additionally, at December 31, 1995, certain of the Company's stockholders
have advanced $200,000 directly to the Company. These funds are unsecured and
are payable on demand. As above, interest accrues at prime plus 1%.
In May 1995, $500,000 of the unsecured line of credit was paid down by the
Company's majority stockholder. In June 1995, $2,500,000 in unsecured direct
advances from the majority stockholder and $104,000 in accrued interest were
converted into Series D Preferred Stock.
7. CONVERTIBLE PREFERRED STOCK
The Company's Certificate of Incorporation, as amended, authorizes the
issuance of up to 4,000,000 shares of preferred stock of which 390,909, 43,497,
454,545, 2,272,727 and 454,545 shares have been designated as Convertible Series
A, B, C, D and E Preferred Stock (collectively referred to as preferred stock),
respectively. At each balance sheet date, there were 390,909, 43,497, and
151,515 shares of Series A, B and C Preferred Stock outstanding. Series D
Preferred Stock issued and outstanding at December 31, 1994 and December 31,
1995 was 926,288 and 1,941,854 shares, respectively. At December 31, 1995, there
were 90,909 shares of Series E Preferred Stock outstanding.
CONVERSION
Each share of Series A and B preferred stock is presently convertible into
two shares of common stock based on a conversion price of $5.50 and 11.50,
respectively. Each share of Series C, D and E preferred stock is presently
convertible into one share of common stock based on a conversion price of
$22.00, $3.74, and $9.90, respectively. These conversion prices are subject to
adjustment in certain circumstances including certain issuances of common stock
at below these conversion prices. Each share of preferred stock will
automatically convert into common stock in the event of either (i) an
underwritten public offering of the Company's common stock at a price per share
not less than $19.80 and with proceeds of at least $8,000,000 or (ii) the
written consent of holders of more than 60% of the then outstanding preferred
stock voting together as a single class. At December 31, 1995, Series A, B, C, D
and E preferred stock outstanding is convertible into 781,818, 86,994, 151,515,
1,941,854, and 90,909 shares of common stock, respectively.
VOTING
Preferred stock has voting rights, on an as-if converted basis, identical to
common stock.
F-10
<PAGE>
INVISION TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
7. CONVERTIBLE PREFERRED STOCK (CONTINUED)
DIVIDENDS
Holders of preferred stock are entitled to receive dividends when and as
declared by the Board of Directors. Dividends are to be paid ratably to
preferred stockholders in accordance with original issuance prices. Dividends
may not be declared or paid on any share of common stock unless an equal
dividend per share, on an as-if converted basis, is declared on the preferred
stock.
LIQUIDATION
In the event of liquidation, the holders of the Series A, B, C, D and E
preferred stock are entitled to receive $11.00, $23.00, $22.00, $3.74, and $9.90
per share, respectively, plus any dividends declared but unpaid on such shares.
After payment of such preference, the holders of the common stock and the
preferred stock share ratably all remaining assets in proportion to the number
of common shares on an as-if converted basis.
8. STOCK OPTION PLAN
In 1991, the Company adopted the 1991 Stock Option Plan (the "Plan"). Under
the Plan (as amended), the Company is authorized to grant options to employees,
directors and consultants for the purchase of up to 690,909 shares of common
stock. The Plan is administered by the Board of Directors and allows for the
granting of both incentive stock options and supplemental stock options. Under
the Plan, incentive stock options are granted at exercise prices not less than
estimated fair value at the date of grant as determined by the Board of
Directors and generally become exercisable over four years.
In December 1994, the Company repriced all outstanding options in order to
reconstitute the option pool as a result of the dilutive effect on common stock
of the issuance of Series D Preferred Stock during the year. The outstanding
options were canceled and new options were issued at an exercise price of $1.10
per share, which represented the fair value of common stock as determined by
Board. Cumulative vesting percentages applicable to the canceled options were
given to the regranted options.
In connection with grants of stock options to employees and directors in
June and October 1995, the Company recorded $1,061,000 for the difference
between the deemed fair value of the Company's common stock and the exercise
price at the date of grant. Of such amount, $369,000 related to option grants
that vested prior to December 31, 1995 and, accordingly, was expensed in the
year then ended. The remaining $692,000 is presented as a component of
stockholders' deficit at December 31, 1995 and is being amortized over the
24-month vesting period of the related options.
F-11
<PAGE>
INVISION TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
8. STOCK OPTION PLAN (CONTINUED)
The following is a summary of stock option activity under the Plan:
<TABLE>
<CAPTION>
OPTIONS PRICE PER SHARE
---------- -----------------
<S> <C> <C>
Outstanding at December 31, 1992............................... 128,795 $1.10 - $ 2.75
Granted...................................................... 40,575 $2.75 - $11.00
Canceled..................................................... (41,212) $1.10 - $11.00
Exercised.................................................... (11,052) $1.10 - $ 2.75
----------
Outstanding at December 31, 1993............................... 117,106 $1.10 - $ 2.75
Granted...................................................... 200,767 $1.10 - $ 2.75
Canceled..................................................... (113,407) $1.10 - $ 2.75
Exercised.................................................... (13,142) $1.10 - $ 2.75
----------
Outstanding at December 31, 1994............................... 191,324 $1.10
Granted...................................................... 447,784 $1.10 - $ 2.20
Canceled..................................................... (11,101) $1.10
Exercised.................................................... (33,396) $1.10
----------
Outstanding at December 31, 1995............................... 594,611 $1.10 - $ 2.20
----------
----------
Exercisable at December 31, 1995............................... 269,371 $1.10 - $ 2.20
Available for future grant at December 31, 1995................ 34,190
</TABLE>
9. COMMITMENTS
The Company leases its facility under a non-cancelable, operating lease
which expires on October 31, 1998. Future minimum lease payments under the lease
are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, AMOUNT
- -------------------------------------------------- -----------
<S> <C>
1996.............................................. $ 306,000
1997.............................................. 324,000
1998.............................................. 344,000
-----------
$ 974,000
-----------
-----------
</TABLE>
Rent expense for 1993, 1994 and 1995 was $240,000 and $252,000, and
$289,000, respectively.
10. INCOME TAXES
As a result of the losses generated during 1993, 1994 and 1995, the Company
has no provision for income taxes and therefore a reconciliation of the federal
statutory rate to the effective rate is not meaningful.
F-12
<PAGE>
INVISION TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
10. INCOME TAXES (CONTINUED)
Significant components of the Company's deferred tax assets are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1994 1995
-------------- --------------
<S> <C> <C>
Net operating loss carryforwards.............................. $ 4,022,000 $ 2,810,000
Credit carryforwards.......................................... 713,000 750,000
Amortization.................................................. 139,000 31,000
Accrued expenses.............................................. -- 380,000
Other......................................................... 444,000 199,000
-------------- --------------
Gross deferred tax assets..................................... 5,318,000 4,170,000
Deferred tax asset valuation allowance........................ (5,318,000) (4,170,000)
-------------- --------------
Net deferred tax assets....................................... $ -- $ --
-------------- --------------
-------------- --------------
</TABLE>
At December 31, 1994 and 1995, the deferred tax assets are fully reserved
due to uncertainty of realization.
At December 31, 1995, the Company had federal net operating loss
carryforwards of approximately $7,500,000 available to reduce future federal
taxable income. The Company's net operating loss carryforwards expire from 2005
to 2010. The tax benefit of the net operating loss and credit carryforwards may
be limited due to the impact of the Tax Reform Act of 1986. Events which may
cause the tax benefit to be limited include, but are not limited to, a
cumulative stock ownership change of more than 50%, as defined, over a
three-year period and the timing of utilization of various tax benefits carried
forward. As a result of a change in ownership that occurred in the 1995
financings, future utilization of the Company's carryforwards will be limited to
approximately $500,000 per year. Accordingly, the balance of net operating loss
carryforwards at December 31, 1995 has been adjusted to reflect the limitation.
11. RELATED PARTY TRANSACTIONS
In connection with the formation of the Company, the Company and FIMAI
entered into a Manufacturing and Distribution Agreement (the "Distribution
Agreement") which appointed FIMAI as the exclusive manufacturer, purchaser and
distributor for the Company's CTX 5000 products in Europe. At December 31, 1994,
the Company had obtained a temporary consent from FIMAI for the Company to
manufacture and sell the CTX 5000 in Europe.
In April 1995, FIMAI transferred all of its shares of InVision to Harax
Holding, S.A. ("Harax," a Luxembourg Corporation) and Electro Parts Holding,
S.A. ("Electro Parts," a Luxembourg Corporation). Both Harax and Electro Parts
have significant common ownership with FIMAI. As a consequence of the transfer
of ownership, FIMAI's rights under the Distribution Agreement were transferred
to Harax and Electro Parts.
In June 1995, the Company issued 56,818 and 170,455 shares of Series D
Preferred Stock to Electro Parts and Harax, respectively, in exchange for the
cancellation of the Distribution Agreement. Pursuant to Securities and Exchange
Commission Staff Accounting Bulletin No. 48, this transaction is valued at zero,
the historical cost basis of the Distribution Agreement to Electro Parts and
Harax.
During 1995, the Company paid $115,800 to certain of the Company's directors
for professional and/or consulting services. In June 1995, the Company issued
13,368 shares of Series D Preferred Stock to an officer of the Company in
satisfaction of $50,000 in indebtedness.
F-13
<PAGE>
INVISION TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
12. LIQUIDITY AND CAPITAL RESOURCES
The Company has incurred a cumulative loss of $15,927,000 since its
inception through December 31, 1995 and additional financing is required to
enable the Company to continue to develop, manufacture and market its products.
On February 29, 1996, the Company entered into a subcontract with IFS to perform
activities under an FAA grant which was awarded to IFS. Such subcontract will
provide the Company with up to $2,000,000 in development funding during 1996. In
the opinion of management, the funding described above together with the net
proceeds of the Company's initial public offering, if consummated, will be
sufficient to fund the Company's operations for at least one year. However,
there can be no assurance that any such additional financing will be available
to the Company.
13. SUBSEQUENT EVENT
RECAPITALIZATION
The Board of Directors has authorized the Company to file a registration
statement with the Securities and Exchange Commission under the Securities Act
of 1933 to sell Common Stock of the Company in an initial public offering
("IPO"). On March 15, 1996, a previously authorized 1-for-11 reverse split of
all outstanding capital stock became effective. All outstanding share and per
share data has been retroactively adjusted to reflect the reverse stock split.
Upon consummation of the offering, all outstanding shares of convertible
preferred stock will be required to be converted into common stock pursuant to
the written consent of the holders of more than 60% of the then outstanding
preferred stock as a condition of the underwriting agreement. Additionally,
authorized shares of Common Stock and Preferred Stock will be decreased to
20,000,000 and 5,000,000, respectively.
BRIDGE FINANCING
In February 1996, the Company borrowed the remaining $1,000,000 available
under the Bridge Loan agreement (Note 6). In connection with the additional
borrowing under the Bridge Loan, the lender received a three-year warrant to
purchase 113,636 shares of Common Stock at $8.80 per share. The fair value of
this additional Bridge Loan warrant is $590,000, which represents a discount
that will be amortized over the period that the Bridge Loan is outstanding.
EMPLOYEE BENEFIT PLANS
In March 1996, the Board of Directors adopted the 1996 Employee Stock
Purchase Plan and approved the amended and restated 1991 Stock Option Plan,
which was renamed the Equity Incentive Plan. A total of 150,000 and 790,909
shares of Common Stock, respectively, have been reserved for issuance
thereunder.
F-14
<PAGE>
INVISION TECHNOLOGIES, INC.
CONDENSED BALANCE SHEETS -- UNAUDITED
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
STOCKHOLDERS'
DEFICIT AT
DECEMBER 31, MARCH 31, MARCH 31,
1995 1996 1996
------------ ---------- ------------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash.................................................................. $ 1,927 $ 470
Accounts receivable................................................... 735 1,327
Inventories (Note 3).................................................. 3,413 3,299
Prepaid expenses...................................................... 252 293
------------ ----------
Total current assets.............................................. 6,327 5,389
Property and equipment, net........................................... 914 971
Other assets.......................................................... 75 343
------------ ----------
$ 7,316 $ 6,703
------------ ----------
------------ ----------
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable...................................................... $ 3,181 $ 1,975
Accrued expenses...................................................... 1,115 1,314
Short-term debt (Note 4).............................................. 2,260 3,618
Advances from stockholders............................................ 200 200
Deferred revenue...................................................... 3,082 2,630
------------ ----------
Total current liabilities......................................... 9,838 9,737
------------ ----------
Stockholders' deficit:
Convertible preferred stock, $.001 par value; 5,000 shares authorized;
2,619 shares issued and outstanding actual; no shares issued and
outstanding pro forma................................................ 12,212 12,212 $ --
Common stock, $.001 par value; 20,000 shares authorized; 62 and 69
shares issued and outstanding; 3,121 shares issued and outstanding
pro forma............................................................ 3
Additional paid-in capital............................................ 1,885 2,517 14,726
Deferred stock compensation........................................... (692) (621) (621)
Accumulated deficit................................................... (15,927) (17,142) (17,142)
------------ ---------- ------------
Total stockholders' deficit....................................... (2,522) (3,034) $ (3,034)
------------ ---------- ------------
------------
$ 7,316 $ 6,703
------------ ----------
------------ ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-15
<PAGE>
INVISION TECHNOLOGIES, INC.
CONDENSED STATEMENTS OF OPERATIONS -- UNAUDITED
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------
1995 1996
--------- ---------
<S> <C> <C>
Revenues:
Product sales.............................................................................. $ 892 $ 3,922
Contract revenues.......................................................................... 98 547
--------- ---------
Total revenues......................................................................... 990 4,469
--------- ---------
Operating expenses:
Cost of product sales...................................................................... 658 2,453
Cost of contract revenues.................................................................. 91 537
Research and development................................................................... 342 595
Selling, general and administrative........................................................ 532 1,069
--------- ---------
Total operating expenses................................................................... 1,623 4,654
--------- ---------
Operating loss............................................................................... (633) (185)
Interest expense............................................................................. (125) (1,040)
Interest income.............................................................................. 12 10
--------- ---------
Pro forma net loss........................................................................... $ (746) $ (1,215)
--------- ---------
--------- ---------
Pro forma net loss per share................................................................. $ (.23) $ (.39)
Weighted average shares outstanding.......................................................... 3,306 3,121
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-16
<PAGE>
INVISION TECHNOLOGIES, INC.
CONDENSED STATEMENTS OF CASH FLOWS -- UNAUDITED
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------
1995 1996
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net loss.................................................................................. $ (746) $ (1,215)
--------- ---------
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation.............................................................................. 52 79
Amortization of bridge loan warrant....................................................... -- 949
Compensation expense from stock options................................................... -- 99
Changes in assets and liabilities:
Accounts receivable..................................................................... (908) (592)
Inventories............................................................................. (460) 114
Prepaid expenses........................................................................ (111) (41)
Other assets............................................................................ -- (268)
Accounts payable........................................................................ (221) (1,206)
Accrued expenses........................................................................ 50 199
Deferred revenue........................................................................ 828 (452)
--------- ---------
Net cash used in operating activities............................................... (1,516) (2,334)
Cash flows from investing activities:
Acquisition of property and equipment..................................................... (81) (136)
--------- ---------
Net cash used in investing activities............................................... (81) (136)
--------- ---------
Cash flows from financing activities:
Proceeds from short-term debt............................................................. -- 1,000
Proceeds from issuance of common stock.................................................... 2 13
--------- ---------
Net cash provided by financing activities................................................. 2 1,013
--------- ---------
Net decrease in cash for the period................................................. (1,595) (1,457)
Cash at beginning of period................................................................. 2,241 1,927
--------- ---------
Cash at end of period....................................................................... $ 646 $ 470
--------- ---------
--------- ---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-17
<PAGE>
INVISION TECHNOLOGIES, INC.
CONDENSED STATEMENT OF STOCKHOLDERS' DEFICIT -- UNAUDITED
(IN THOUSANDS)
<TABLE>
<CAPTION>
CONVERTIBLE
PREFERRED STOCK COMMON STOCK ADDITIONAL DEFERRED
------------------- ------------------- PAID-IN STOCK ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL COMPENSATION DEFICIT
-------- -------- -------- -------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995....... 2,619 $ 12,212 62 $ -- $ 1,885 $ (692) $ (15,927)
Deferred stock compensation........ 29 71
Issuance of warrant................ 590
Exercise of common stock options... 12 13
Net loss........................... (1,215)
--
-------- -------- --- ------------ ------ ------------
Balance at March 31, 1996.......... 2,619 $ 12,212 74 $ -- $ 2,517 $ (621) $ (17,142)
--
--
-------- -------- --- ------------ ------ ------------
-------- -------- --- ------------ ------ ------------
<CAPTION>
TOTAL
STOCKHOLDERS'
DEFICIT
------------
<S> <C>
Balance at December 31, 1995....... $ (2,522)
Deferred stock compensation........ 100
Issuance of warrant................ 590
Exercise of common stock options... 13
Net loss........................... (1,215)
------------
Balance at March 31, 1996.......... $ (3,034)
------------
------------
</TABLE>
F-18
<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 only of
normal recurring adjustments) considered necessary for a fair presentation of
the Company's financial position as of March 31, 1996 and December 31, 1995, the
results of its operations for the three month periods ended March 31, 1996 and
1995, and its cash flows for the three month periods ended March 31, 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 herein.
Operating results for the three month period ended March 31, 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. PRO FORMA NET LOSS PER SHARE
The pro forma net loss per share is computed using the weighted average
number of common stock and common stock equivalents. The number of common shares
outstanding after giving retroactive effect to conversion of the convertible
preferred stock to common shares which occurred upon consummation of the
Company's initial public offering is included in per share amounts. Per share
amounts also give retroactive effect to the 1-for-11 reverse split of all shares
of capital stock. Pursuant to Securities and Exchange Commission Staff
Accounting Bulletin No. 83, common stock and common stock equivalents (including
convertible preferred stock) issued at prices below the initial public offering
price per share from January 1, 1995 to the effective date of the Company's
initial public offering on April 23, 1996 have been included as outstanding for
all periods presented using the treasury stock method and the initial public
offering price per share. Historical net loss per share amounts have not been
presented because such amounts are not deemed meaningful due to the significant
changes in the Company's capital structure that occurred in connection with the
initial public offering.
3. INVENTORIES
The components of inventory consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1995 1996
------------- -----------
<S> <C> <C>
Raw materials..................................... $ 1,853 $ 1,238
Work-in-process................................... 779 1,339
Finished goods.................................... 781 722
------------- -----------
$ 3,413 $ 3,299
------------- -----------
------------- -----------
</TABLE>
4. 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. Principal outstanding under the agreement is secured by
F-19
<PAGE>
INVISION TECHNOLOGIES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS -- UNAUDITED -- CONTINUED
4. SHORT-TERM DEBT (CONTINUED)
all assets of the Company. The Bridge Loan is due on the earlier of the closing
of the IPO or June 28, 1996 and bears interest at 10% per annum. The Company is
restricted from declaring dividends until the Bridge Loan is repaid.
In connection with the Bridge Loan, the lender received a three-year warrant
to purchase 31,818 and 227,272 shares of Common Stock at the IPO price and $8.80
per share, respectively. The aggregate fair value of the Bridge Loan warrant is
$1,330,000. Such value represents a discount that is being amortized over the
period that the Bridge Loan is outstanding.
5. SUBSEQUENT EVENTS
The Company's initial public offering of 900,000 shares of its common became
effective April 23, 1996 at a price of $11.00 per share. The Company received
gross proceeds of $9,900,000 upon closing on April 30, 1996.
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
Company's initial public offering, completed the sale of an additional 135,000
shares of the Company's common stock, at $11.00 per share. The Company received
gross proceeds of $1,485,000.
In accordance with the terms of the Bridge Loan Agreement the entire
$2,000,000 bridge loan balance was repaid from the gross proceeds of the
Company's initial public offering.
F-20
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION AND REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY TO ANY
PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL
OR TO ANY PERSON TO WHOM IT IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS
NOR ANY OFFER OR SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 6
Use of Proceeds........................................................... 14
Dividend Policy........................................................... 14
Selected Financial Data................................................... 15
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 16
Business.................................................................. 20
Management................................................................ 31
Executive Compensation.................................................... 34
Certain Transactions...................................................... 38
Principal Stockholders and Selling Security Holders....................... 40
Description of Capital Stock.............................................. 42
Shares Eligible for Future Sale........................................... 44
Qualified Small Business Stock............................................ 46
Plan of Distribution...................................................... 47
Legal Matters............................................................. 47
Experts................................................................... 47
Glossary of Technical Terms............................................... 48
Index to Financial Statements............................................. F-1
</TABLE>
259,090 SHARES
[LOGO]
COMMON STOCK
------------------
PROSPECTUS
------------------
JUNE 7, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all expenses payable by the Registrant in
connection with the sale of the Common Stock being registered. All the amounts
are estimates except for the registration fee.
<TABLE>
<S> <C>
Registration fee............................................... $ 1,161.44
Printing and engraving expenses................................ 30,000.00
Legal fees and expenses........................................ 20,000.00
Accounting fees and expenses................................... 30,000.00
----------
Total...................................................... $81,161.44
----------
----------
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Under Section 145 of the Delaware General Corporation Law, the Registrant
has broad powers to indemnify its directors and officers against liabilities
they may incur in such capacities, including liabilities under the Securities
Act of 1933, as amended (the "Securities Act"). The Registrant's Bylaws also
provide that the Registrant will indemnify its directors and executive officers
and may indemnify its other officers, employees and agents to the fullest extent
permitted by Delaware law.
The Registrant's Amended and Restated Certificate of Incorporation provides
for the elimination of liability for monetary damages for breach of the
directors' fiduciary duty of care to the Registrant and its stockholders. These
provisions do not eliminate the directors' duty of care and, in appropriate
circumstances, equitable remedies such an injunctive or other forms of
non-monetary relief will remain available under Delaware law. In addition, each
director will continue to be subject to liability for breach of the director's
duty of loyalty to the Registrant, for acts or omissions not in good faith or
involving intentional misconduct, for knowing violations of law, for any
transaction from which the director derived an improper personal benefit, and
for payment of dividends or approval of stock repurchases or redemptions that
are unlawful under Delaware law. The provision does not affect a director's
responsibilities under any other laws, such as the federal securities laws or
state or federal environmental laws.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Since November 1992, the Registrant has sold and issued the following
unregistered securities (adjusted to reflect the 1 for 11 reverse stock split
effected in March 1996):
(1) Since November 1992, the Company has granted stock options to
purchase 734,038 shares of the Company's Common Stock at a weighted average
exercise price of $1.63 per share to employees and directors pursuant to its
1991 stock option plan. Of these options, 139,349 have been canceled without
being exercised, 75,748 have expired without being exercised, 57,592 have
been exercised and 654,072 remain outstanding.
(2) In April 1993, the Company issued 101,010 shares of Series C
Preferred Stock to FI.M.A.I. at apurchase price of $19.80 per share or an
aggregate purchase price of $2,000,000.
(3) In January 1994 the Company issued 50,505 shares of Series C
Preferred Stock to FI.M.A.I. in exchange for the cancellation by FI.M.A.I.
of indebtedness totalling $1,000,000.
(4) In June 1995, the Company issued 56,818 shares of Series D Preferred
Stock to ElectroParts and 170,454 shares of Series D Preferred Stock to
HARAX in exchange for the cancellation of exclusive manufacturing and
distribution rights in Europe.
(5) In June 1994, the Company issued 917,015 shares of Series D
Preferred Stock to an aggregate of 11 investors at a purchase price of $3.74
per share or an aggregate purchase price of $3,429,636.
II-1
<PAGE>
(6) In May 1995, the Company issued 741,502 shares of Series D Preferred
Stock to an aggregate of 10 investors at a purchase price of $3.74 per share
or an aggregate purchase price of $2,773,217.
(7) On October 13, 1994, the Company issued 3,818 shares of Series D
Preferred Stock to Louis Turpen pursuant to a termination agreement with Mr.
Turpen.
(8) On November 11, 1994, the Company issued 5,455 shares of Series D
Preferred Stock to Lucio Lanza pursuant to a termination agreement with Mr.
Lanza.
(9) On June 10, 1995 the Company issued 13,368 shares of Series D
Preferred Stock to Dr. Sergio Magistri in exchange for the cancellation by
Dr. Magistri of $50,000 in indebtedness.
(10) In August 1995, the Company issued 33,636 shares of Series D
Preferred Stock to ElectroParts Holding, S.A. at a purchase price of $3.74
per share or an aggregate purchase price of $125,800.
(11) On December 28, 1995, the Company issued a warrant to Anaconda to
purchase 145,454 shares of Common Stock, 113,636 of which are exercisable at
a price of $8.80 per share and 31,818 of which are exercisable at the
initial public offering price.
(12) On December 29, 1995 the Company issued 90,909 shares of Series E
Preferred Stock to Kay's Corporation at a price of $9.90 per share.
(13) On February 16, 1996, the Company issued a warrant to Anaconda to
purchase 113,636 shares of Common Stock at an exercise price of $8.80 per
share.
The sales and issuances of securities described in paragraph (1) above were
deemed to be exempt from registration under the Securities Act by virtue of Rule
701 of the Securities Act. The sales and issuances of securities described in
paragraphs (2) through (13) above were made to "Accredited Investors" as such
term is defined under Rule 501 of the Securities Act and were therefore deemed
to be exempt from registration under the Securities Act by virtue of Section
4(2) and Rule 506 of the Securities Act.
Appropriate legends are affixed to the stock certificates issued in the
aforementioned transactions. Similar legends were imposed in connection with any
subsequent sales of any such securities. All recipients either received adequate
information about the Registrant or had access, through employment or other
relationships, to such information.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following is a list of exhibits filed as a part of this Registration
Statement:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- -------------------------------------------------------------------------------
<S> <C>
3.1 Amended and Restated Certificate of Incorporation of the Registrant.
3.2+ Bylaws of the Registrant.
4.1 Reference is made to Exhibits 3.1 and 3.2.
4.2+ Specimen Stock Certificate.
4.3+ Representative's Warrants Agreement.
5.1 Opinion of Cooley Godward Castro Huddleson & Tatum.
10.1+ Technology License Agreement, dated September 11, 1990, by and between
the Registrant and Imatron, Inc.
10.2+ Stockholders Agreement for the Formation of the Registrant, dated as
of August 13, 1990, between Imatron and FI.M.A.I and Amendment, dated
as of September 7, 1990, as amended by the Termination Agreement,
dated as of December 9, 1992 among the Registrant, FI.M.A.I and
Imatron.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- -------------------------------------------------------------------------------
<S> <C>
10.3+ Lease, dated as of May 20, 1992, as amended May 4, 1995, between the
Registrant and BVY Group.
10.4+ Registrant's Equity Incentive Plan, dated March 9, 1996.
10.5+ Registrant's 1996 Employee Stock Purchase Plan, dated March 9, 1996.
10.6+ Promissory Note, dated October 15, 1992, by and between the Registrant
and San Paolo Bank.
10.7+ Bridge Loan and Security Agreement, dated as of December 28, 1995 by
and between the Registrant and investors.
10.8+ Secured Promissory Note, dated as of December 28, 1995 by and between
the Registrant and Anaconda Partners, L.P.
10.9+ Warrant to Purchase Stock pursuant to the Bridge Loan Financing
Agreement, dated as of December 28, 1995, by and between the
Registrant and investors.
10.10+ Standby Financing Agreement, dated as of July 26, 1991, by and between
the Company and FI.M.A.I.
10.11+ Series D Subscription Agreement, dated as of May 19, 1995, by and
between the Registrant and investors.
10.12+ Series E Preferred Stock Purchase Agreement, dated as of December 29,
1995, by and between the Registrant and investors.
10.13+ Investor Rights Agreement, dated as of December 29, 1995, by and
between the Registrant and Kay's Corporation.
10.14+ Subcontract Agreement between the Registrant and Imatron Federal
Systems, Inc. dated as of February 29, 1996.
23.1 Consent of Price Waterhouse LLP.
23.2 Consent of Cooley Godward Castro Huddleson & Tatum. Reference is made
to Exhibit 5.1.
24.1 Power of Attorney.
27.1 Financial Data Schedule.
</TABLE>
- ------------------------
+Incorporated by reference into this Registration Statement by the Registrant's
Registration Statement No. 333-380 filed with the Commission on April 22, 1996.
(b) Financial schedules are omitted because they are not required, are not
applicable or the information is included in the financial statements or notes
thereto.
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers, and controlling persons of the
Registrant pursuant to the provisions described in Item 14 or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer, or controlling
person of the Registrant in the successful defense of any action, suit, or
proceeding) is asserted by such director, officer, or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will governed by the final adjudication of such issue.
II-3
<PAGE>
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the registration statement. Notwithstanding the foregoing, any increase
or decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high and of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than 20 percent change in the maximum
aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan of
distribution as previously disclosed in the registration statement or any
material change to such information in the registration statement;"
PROVIDED, HOWEVER, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply
if the information required to be included in a post-effective amendment
by those paragraphs is contained in periodic reports filed with or
furnished to the Commission by the registrant pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934 that are incorporated by
reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at the time shall be deemed to
be the initial BONA FIDE offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Foster
City, County of San Mateo, State of California, on the 7th day of June 1996.
INVISION TECHNOLOGIES, INC.
By /s/ DR. SERGIO MAGISTRI
-----------------------------------
Dr. Sergio Magistri
PRESIDENT AND CHIEF EXECUTIVE
OFFICER
(PRINCIPAL EXECUTIVE OFFICER)
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons on behalf
of the Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------------------------------------------- ---------------------------------- ------------------
<C> <S> <C>
/s/ DR. SERGIO MAGISTRI
---------------------------------------- (Principal Executive Officer) June 7, 1996
Dr. Sergio Magistri
/s/ CURTIS P. DISIBIO* (Principal Financial and
---------------------------------------- Accounting Officer) June 7, 1996
Curtis P. DiSibio
/s/ DOUGLAS P. BOYD*
---------------------------------------- Director June 7, 1996
Douglas P. Boyd
/s/ DR. GIOVANNI LANZARA*
---------------------------------------- Director June 7, 1996
Dr. Giovanni Lanzara
/s/ BRUNO TREZZA*
---------------------------------------- Director June 7, 1996
Bruno Trezza
*By: /s/ DR. SERGIO MAGISTRI
---------------------------------------- June 7, 1996
Dr. Sergio Magistri, ATTORNEY-IN-FACT
</TABLE>
II-5
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION OF DOCUMENT PAGE NUMBER
- --------- -------------------------------------------------------------------------------------------- -------------
<S> <C> <C>
3.1 Amended and Restated Certificate of Incorporation of the Registrant.........................
3.2+ Bylaws of the Registrant....................................................................
4.1 Reference is made to Exhibits 3.1 and 3.2...................................................
4.2+ Specimen Stock Certificate..................................................................
4.3+ Representative's Warrants Agreement.........................................................
5.1 Opinion of Cooley Godward Castro Huddleson & Tatum..........................................
10.1+ Technology License Agreement, dated September 11, 1990, by and between the Registrant and
Imatron, Inc...............................................................................
10.2+ Stockholders Agreement for the Formation of the Registrant, dated as of August 13, 1990,
between Imatron and FI.M.A.I and Amendment, dated as of September 7, 1990, as amended by
the Termination Agreement, dated as of December 9, 1992 among the Registrant, FI.M.A.I and
Imatron....................................................................................
10.3+ Lease, dated as of May 20, 1992, as amended May 4, 1995, between the Registrant and BVY
Group......................................................................................
10.4+ Registrant's Equity Incentive Plan, dated March 9, 1996.....................................
10.5+ Registrant's 1996 Employee Stock Purchase Plan, dated March 9, 1996.........................
10.6+ Promissory Note, dated October 15, 1992, by and between the Registrant and San Paolo Bank...
10.7+ Bridge Loan and Security Agreement, dated as of December 28, 1995 by and between the
Registrant and investors...................................................................
10.8+ Secured Promissory Note, dated as of December 28, 1995 by and between the Registrant and
Anaconda Partners, L.P.....................................................................
10.9+ Warrant to Purchase Stock pursuant to the Bridge Loan Financing Agreement, dated as of
December 28, 1995, by and between the Registrant and investors.............................
10.10+ Standby Financing Agreement, dated as of July 26, 1991, by and between the Company and
FI.M.A.I...................................................................................
10.11+ Series D Subscription Agreement, dated as of May 19, 1995, by and between the Registrant and
investors..................................................................................
10.12+ Series E Preferred Stock Purchase Agreement, dated as of December 29, 1995, by and between
the Registrant and investors...............................................................
10.13+ Investor Rights Agreement, dated as of December 29, 1995, by and between the Registrant and
Kay's Corporation..........................................................................
10.14+ Subcontract Agreement between the Registrant and Imatron Federal Systems, Inc. dated as of
February 29, 1996..........................................................................
23.1 Consent of Price Waterhouse LLP.............................................................
23.2 Consent of Cooley Godward Castro Huddleson & Tatum. Reference is made to Exhibit 5.1........
24.1 Power of Attorney...........................................................................
27.1 Financial Data Schedule.....................................................................
</TABLE>
- ------------------------
+Incorporated by reference into this Registration Statement by the Registrant's
Registration Statement No. 333-380 filed with the Commission on April 22, 1996.
<PAGE>
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
INVISION TECHNOLOGIES, INC.
InVision Technologies, Inc., a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), DOES HEREBY CERTIFY:
FIRST: The name of the Corporation is InVision Technologies, Inc.
SECOND: The date on which the Certificate of Incorporation of the
Corporation was filed with the Secretary of State of the State of Delaware is
September 7, 1990, under the name of Imatron Industrial Products, Inc.
THIRD: That the Board of Directors of this Corporation, pursuant to
Section 141 of the General Corporation Law of the State of Delaware, adopted
resolutions amending and restating the Certificate of Incorporation to read
in full as set forth below and declared such amendments to be advisable.
ARTICLE I.
The name of this corporation is InVision Technologies, Inc.
ARTICLE II.
The address of the registered office of the corporation in the State of
Delaware is 32 Loockermen Square, Suite L-100, City of Dover, County of Kent,
and the name of the registered agent of the corporation in the State of
Delaware at such address is The Prentice-Hall Corporation System, Inc.
ARTICLE III.
The purpose of this corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General
Corporation Law of the State of Delaware.
ARTICLE IV.
This corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock." The
total number of shares which the corporation is authorized to issue is
Twenty-Five Million (25,000,000) shares. Twenty Million (20,000,000) shares
shall be Common Stock, each having a par value of one tenth of one cent
($.001). Five
1.
<PAGE>
Million (5,000,000) shares shall be Preferred Stock, each having a par value
of one tenth of one cent ($.001).
The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is hereby authorized, by filing a certificate
(a "Preferred Stock Designation") pursuant to the Delaware General
Corporation Law, to fix or alter from time to time the designation, powers,
preferences and rights of the shares of each such series and the
qualifications, limitations or restrictions of any wholly unissued series of
Preferred Stock, and to establish from time to time the number of shares
constituting any such series or any of them; and to increase or decrease the
number of shares of any series subsequent to the issuance of shares of that
series, but not below the number of shares of such series then outstanding.
In case the number of shares of any series shall be decreased in accordance
with the foregoing sentence, the shares constituting such decrease shall
resume the status that they had prior to the adoption of the resolution
originally fixing the number of shares of such series.
ARTICLE V.
A.
For the management of the business and for the conduct of the affairs of
the corporation, and in further definition, limitation and regulation of the
powers of the corporation, of its directors and of its stockholders or any
class thereof, as the case may be, it is further provided that:
(1) The management of the business and the conduct of the affairs
of the corporation shall be vested in its Board of Directors. The number of
directors which shall constitute the whole Board of Directors shall be fixed
exclusively by one or more resolutions adopted by the Board of Directors.
(2) Subject to the rights of the holders of any series of
Preferred Stock to elect additional directors under specified circumstances,
following the closing of the initial public offering pursuant to an effective
registration statement under the Securities Act of 1933, as amended, covering
the offer and sale of Common Stock to the public (the "Initial Public
Offering"), the directors shall be divided into three classes designated as
Class I, Class II and Class III, respectively. Directors shall be assigned
to each class in accordance with a resolution or resolutions adopted by the
Board of Directors. At the first annual meeting of stockholders following the
closing of the Initial Public Offering, the term of office of the Class I
directors shall expire and Class I directors shall be elected for a full term
of three years. At the second annual meeting of stockholders following the
Closing of the Initial Public Offering, the term of office of the Class II
directors shall expire and Class II directors shall be elected for a full
term of three years. At the third annual meeting of stockholders following
the Closing of the Initial Public Offering, the term of office of the Class
III directors shall expire and Class III directors shall be elected for a
full term of three years. At each succeeding annual meeting of stockholders,
directors shall be elected for a full term of three years to succeed the
directors of the class whose terms expire at such annual meeting.
2.
<PAGE>
Notwithstanding the foregoing provisions of this Article, each director
shall serve until his successor is duly elected and qualified or until his
death, resignation or removal. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director.
(3) Subject to the rights of the holders of any series of
Preferred Stock, the Board of Directors or any individual director may be
removed from office at any time (i) with cause by the affirmative vote of the
holders of a majority of the voting power of all the then-outstanding shares
of voting stock of the corporation, entitled to vote at an election of
directors (the "Voting Stock") or (ii) without cause by the affirmative
vote of the holders of at least sixty-six and two-thirds percent (66 2/3%) of
the voting power of all the then-outstanding shares of the Voting Stock.
(4) Subject to the rights of the holders of any series of
Preferred Stock, any vacancies on the Board of Directors resulting from
death, resignation, disqualification, removal or other causes and any newly
created directorships resulting from any increase in the number of directors,
shall, unless the Board of Directors determines by resolution that any such
vacancies or newly created directorships shall be filled by the stockholders,
except as otherwise provided by law, be filled only by the affirmative vote
of a majority of the directors then in office, even though less than a quorum
of the Board of Directors, and not by the stockholders. Any director elected
in accordance with the preceding sentence shall hold office for the remainder
of the full term of the director for which the vacancy was created or
occurred and until such director's successor shall have been elected and
qualified.
B.
(1) Subject to paragraph (i) of Section 42 of the Bylaws, the
Bylaws may be altered or amended or new Bylaws adopted by the affirmative
vote of at least sixty-six and two-thirds percent (66-2/3%) of the voting
power of all of the then-outstanding shares of the Voting Stock. The Board
of Directors shall also have the power to adopt, amend, or repeal Bylaws.
(2) The directors of the corporation need not be elected by
written ballot unless the Bylaws so provide.
(3) No action shall be taken by the stockholders of the
corporation except at an annual or special meeting of stockholders called in
accordance with the Bylaws and following the closing of the Initial Public
Offering no action shall be taken by the stockholders by written consent.
(4) Advance notice of stockholder nominations for the election of
directors and of business to be brought by stockholders before any meeting of
the stockholders of the corporation shall be given in the manner provided in
the Bylaws of the corporation.
(5) Special meetings of the stockholders of the corporation may be
called, for any purpose or purposes, by (i) the Chairman of the Board of
Directors, (ii) the President, (iii)
3.
<PAGE>
the Board of Directors pursuant to a resolution adopted by a majority of the
total number of authorized directors (whether or not there exist any
vacancies in previously authorized directorships at the time any such
resolution is presented to the Board of Directors for adoption) or (iv) by
the holders of the shares entitled to cast not less that ten percent (10%) of
the votes at the meeting, and shall be held at such place, on such date, and
at such time as the Board of Directors shall fix.
ARTICLE VI.
A. A director of the corporation shall not be personally liable to the
corporation or its stockholders for monetary damages for any breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (iii) under Section 174 of the Delaware
General Corporation Law, or (iv) for any transaction from which the director
derived an improper personal benefit. If the Delaware General Corporation
Law is amended after approval by the stockholders of this Article to
authorize corporate action further eliminating or limiting the personal
liability of directors, then the liability of a director shall be eliminated
or limited to the fullest extent permitted by the Delaware General
corporation Law, as so amended.
B. Any repeal or modification of this Article VI shall be prospective
and shall not affect the rights under this Article VI in effect at the time
of the alleged occurrence of any act or omission to act giving rise to
liability or indemnification.
ARTICLE VII.
A. The corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, except as provided in
paragraph B of this Article VII, and all rights conferred upon the
stockholders herein are granted subject to this reservation.
B. Notwithstanding any other provisions of this Certificate of
Incorporation or any provision of law which might otherwise permit a lesser
vote or no vote, but in addition to any affirmative vote of the holders of
any particular class or series of the Voting Stock required by law, this
Certificate of Incorporation or any Preferred Stock Designation, the
affirmative vote of the holders of at least sixty-six and two-thirds percent
(66-2/3%) of the voting power of all of the then-outstanding shares of the
Voting Stock, voting together as a single class, shall be required to alter,
amend or repeal Articles V, VI, and VII.
4.
<PAGE>
IN WITNESS WHEREOF, InVision Technologies, Inc. has caused this Amended
and Restated Certificate of Incorporation to be signed by its President and
attested to by its Secretary this 23rd day of April, 1996.
INVISION TECHNOLOGIES, INC.
/s/ DR. SERGIO MAGISTRI
---------------------------------------
Dr. Sergio Magistri
President and Chief Executive Officer
ATTEST:
/s/ ROBERT L. JONES
- -----------------------------------
Robert L. Jones
Secretary
5.
<PAGE>
EXHIBIT 5.1
[Cooley Godward letterhead]
June 7, 1996
InVision Technologies
3420 E. Third Avenue
Foster City, CA 94404
Ladies and Gentlemen:
You have requested our opinion with respect to certain matters in connection
with the filing by InVision Technologies (the "Company") of a Registration
Statement on Form S-1 on or about June 7, 1996, (the "Registration
Statement") with the Securities and Exchange Commission covering the
offering of up to Two hundred and fifty nine thousand and ninety shares of
the Company's Common Stock, $.001 par value (the "Shares").
In connection with this opinion, we have examined the Registration Statement
and related Prospectus, your Amended and Restated Certificate of
Incorporation and Bylaws, as amended, and such other documents, records,
certificates, memoranda and other instruments as we deemed necessary as a
basis for this opinion. We have assumed the genuineness and authenticity of
all documents submitted to us as originals, the conformity to originals of
all documents submitted to us as copies thereof, and the due execution and
delivery of all documents where due execution and delivery are a prerequisite
to the effectiveness thereof.
On the basis of the foregoing, and in reliance thereon, we are of the opinion
that the Shares, when sold and issued in accordance with the Registration
Statement and related Prospectus, will be validly issued, fully paid and
nonassessable.
We consent to the filing of this opinion as an exhibit to the Registration
Statement.
Very truly yours,
COOLEY GODWARD CASTRO
HUDDLESON & TATUM
Robert L. Jones
21123787
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our report dated January 26, 1996, except
as to the liquidity and capital resources information described in Note 12,
which is as of February 29, 1996, and the subsequent events described in Note
13, which is as of March 15, 1996, relating to the financial statements of
InVision Technologies, Inc., which appears in such Prospectus. We also consent
to the reference to us under the heading "Experts" in such Prospectus.
PRICE WATERHOUSE LLP
San Jose, California
June 7, 1996
<PAGE>
EXHIBIT 24.1
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement on Form S-1 to be signed
on its behalf by the undersigned, in the City of Foster City, County of San
Mateo, State of California, on the 7th day of June, 1996.
INVISION TECHNOLOGIES, INC.
By: /s/ DR. SERGIO MAGISTRI
----------------------------------------
Dr. Sergio Magistri
PRESIDENT AND CHIEF EXECUTIVE OFFICER
(PRINCIPAL EXECUTIVE OFFICER)
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Dr. Sergio Magistri and Curtis P. DiSibio and
each of them, as his true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in connection therewith,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them, or their or his substitutes, may lawfully do or cause to be done by virtue
hereof.
IN ACCORDANCE WITH THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT WAS SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES STATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ------------------------------ --------------
<C> <S> <C>
/s/ DR. SERGIO MAGISTRI (Principal Executive Officer,
- ------------------------------------------ Director) June 7, 1996
Dr. Sergio Magistri
/s/ CURTIS P. DISIBIO (Principal Financial and
- ------------------------------------------ Accounting Officer) June 7, 1996
Curtis P. DiSibio
/s/ DOUGLAS P. BOYD
- ------------------------------------------ Director June 7, 1996
Douglas P. Boyd
/s/ DR. GIOVANNI LANZARA
- ------------------------------------------ Director June 7, 1996
Dr. Giovanni Lanzara
/s/ BRUNO TREZZA
- ------------------------------------------ Director June 7, 1996
Bruno Trezza
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