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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended JUNE 30, 1997 or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission File Number: 0-28236
INVISION TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
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<S> <C>
DELAWARE 94-3123544
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
</TABLE>
3420 E. THIRD AVENUE, FOSTER CITY, CALIFORNIA 94404
(Address of principal executive offices, including zip code)
(415) 578-1930
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
---
On June 30, 1997, there were 11,141,421 shares of the Registrant's Common Stock
outstanding.
1
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INVISION TECHNOLOGIES, INC.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1997
PART I: FINANCIAL INFORMATION
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ITEM PAGE
- ---- ----
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1. Condensed Consolidated Financial Statements (unaudited)
a. Condensed Consolidated Balance Sheets - June 30, 1997 and
December 31, 1996.......................................................... 3
b. Condensed Consolidated Statements of Operations - Three months and six
months ended June 30, 1997 and 1996........................................ 4
c. Condensed Consolidated Statements of Cash Flows - Six months
ended June 30, 1997 and 1996............................................... 5
d. Notes to Condensed Consolidated Financial Statements....................... 6 - 7
2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................................... 8 - 13
PART II. OTHER INFORMATION
1. Legal Proceedings................................................................ 14
2. Changes in Securities............................................................ 14
3. Defaults Upon Senior Securities.................................................. 14
4. Submission of Matters to a Vote of Security Holders.............................. 14
5. Other Information................................................................ 14
6. Exhibits and Reports on Form 8-K................................................. 14
Signature Page................................................................. 15
</TABLE>
2
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INVISION TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
JUNE 30, DECEMBER 31,
1997 1996
---- ----
Assets
Current assets:
Cash and short-term investments $ 21,836 $ 2,363
Short-term restricted cash 112 --
Accounts receivable 7,237 5,987
Inventories 8,324 4,810
Prepaid expenses 1,755 292
-------- --------
Total current assets 39,264 13,452
Long-term restricted cash 800 --
Property and equipment 4,087 1,804
Other assets 1,232 --
-------- --------
$ 45,383 $ 15,256
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and other accrued liabilities $ 7,407 $ 2,541
Accrued expenses 2,657 1,020
Deferred revenue 2,407 2,443
Current maturities of obligations under capital
leases 32 68
-------- --------
Total current liabilities 12,503 6,072
-------- --------
Long-term obligations under capital leases 154 110
-------- --------
Stockholders' equity:
Common stock, $0.001 par value, 20,000 shares
authorized; 11,141and 9,160 shares issued and
outstanding 8 9
Additional paid-in capital 50,179 28,919
Deferred stock compensation expense (178) (355)
Accumulated deficit (17,283) (19,499)
-------- --------
Total stockholders' equity 32,726 9,074
-------- --------
$ 45,383 $ 15,256
-------- --------
-------- --------
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
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INVISION TECHNOLOGIES, INC
CONDENSED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
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THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1997 1996 1997 1996
---- ---- ---- ----
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Revenues $ 13,408 $ 3,555 $ 22,785 $ 7,477
Cost of revenues 6,693 2,188 11,401 4,641
--------- -------- --------- --------
Gross profit 6,715 1,367 11,384 2,836
--------- -------- --------- --------
Operating expenses:
Research and development 2,241 481 3,574 1,066
Sales and marketing 1,459 638 2,692 1,235
General and administrative 1,220 674 2,563 1,146
--------- -------- --------- --------
Total operating expenses 4,920 1,793 8,829 3,447
--------- -------- --------- --------
Income (loss) from operations 1,795 (426) 2,555 (611)
Interest expense (41) (455) (51) (1,495)
Other income, net 163 51 186 61
--------- -------- --------- --------
Income (loss) before provision for income
taxes 1,917 (830) 2,690 (2,045)
Provision for income taxes 343 - 474 -
Net income (loss) $ 1,574 $ (830) $ 2,216 $ (2,045)
--------- -------- --------- --------
--------- -------- --------- --------
Net income (loss) per share $ 0.14 $ (0.11) $ 0.21 $ (0.27)
--------- -------- --------- --------
--------- -------- --------- --------
Weighted average shares outstanding (1) 11,188 7,816 10,730 7,499
</TABLE>
(1) Shares outstanding reflect the 2-for-1 stock split in the form of a stock
dividend effective as of February 7, 1997
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
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INVISION TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
SIX MONTHS ENDED
JUNE 30,
1997 1996
---- ----
Cash flows from operating activities:
Net income (loss) 2,216 (2,045)
Adjustments to reconcile net income (loss) to net
cash used in operating activities:
Depreciation and amortization 389 164
Amortization of bridge loan warrant --- 1,330
Stock compensation expense 178 188
Changes in assets and liabilities:
Restricted cash (912) ---
Accounts receivable (1,250) (1,343)
Inventories (3,513) (27)
Prepaid expenses (1,469) (113)
Other assets (977) ---
Accounts payable 2,642 (1,202)
Accrued liabilities 1,545 97
Deferred revenues 36 (1,756)
-------- --------
Net cash used in operating activities (1,115) (4,707)
-------- --------
Cash flows from investing activities:
Acquisition of property and equipment (2,859) (314)
Purchase of investments (17,737) ---
-------- --------
Net cash provided used in investing activities (20,596) (314)
-------- --------
Cash flows from financing activities:
Proceeds from short-term debt 2,200 1,036
Proceeds from long-term debt 44 ---
Repayments of short-term debt 118 (4,036)
Proceeds from issuance of common stock, net 21,085 9,543
-------- --------
Net cash provided by financing activities 23,447 6,543
-------- --------
Net increase in cash for the period 1,736 1,522
Cash at beginning of period 2,363 1,927
-------- --------
CASH AT END OF PERIOD $ 4,099 $ 3,449
-------- --------
-------- --------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid $ 50 $ 164
The accompanying notes are an integral part of these condensed consolidated
financial statements.
5
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INVISION TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED 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 fair presentation. These financial statements should be read
in conjunction with the audited consolidated financial statements of the
Company as of December 31, 1996 and 1995 and for each of the three years in
the period ended December 31, 1996, including notes thereto, included in the
Company's Annual Report on Form 10-K (Commission File No. 0-28236), as
amended.
Operating results for the three month and the six month periods ended
June 30, 1997 may not necessarily be indicative of the results that may be
expected for the year ended December 31, 1997 or any other future period.
2. NET INCOME (LOSS) PER SHARE
Net income (loss) per share is computed using the weighted average number
of common stock and common equivalent shares, when dilutive, from stock
options and warrants (using the treasury stock method). Pursuant to the
Securities and Exchange Commission Staff Accounting Bulletins, common stock
and common equivalent shares issued by the Company during the 12-month period
prior to the Company's initial public offering in April 1996, consisting of
convertible preferred stock (using the if-converted method), and stock
options and warrants (using the treasury stock method) have been included in
the calculation as if they were outstanding for all periods prior to and
including June 30, 1996, even though their effect is antidilutive.
In February 1997, the Financial Accounting Standards Board issued the
Statement of Financial Accounting Standards No.128, "Earnings per Share."
This Statement is effective for the Company's fiscal year ending December 31,
1997. The Statement redefines earnings per share under generally accepted
accounting principles. Under the new standard, primary earnings per share is
replaced by basic earnings per share and fully diluted earnings per share is
replaced by diluted earnings per share. If the Company had adopted this
Statement for the three month and six month periods ended June 30, 1997 and
1996, the Company's income (loss) per share would not have been materially
different from income (loss) per share as disclosed.
3. INVENTORIES
The components of inventory consist of the following (in thousands):
JUNE 30, DECEMBER 31,
1997 1996
---- ----
Raw material and purchased components $4,789 $3,003
Work-in-process 3,461 1,331
Finished goods 74 476
-- ---
8,324 $4,810
----- ------
----- ------
6
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INVISION TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(CONTINUED)
4. FOLLOW-ON EQUITY OFFERING
On May 14, 1997, the Company sold in a public equity offering 1,875,000
shares of its common stock at $12.00 per share. The Company received net
proceeds of $20,531,000. On June 12, 1997, the Company's managing
underwriter, Robertson, Stephens & Co., under the terms of the over-allotment
option provided in the equity offering, sold an additional 42,742 shares of
the Company's common stock at $12.00 per share from which the Company
received net proceeds of $483,412. The Company intends to use the net
proceeds from the offering to purchase capital equipment and undertake
facility improvements, to fund research and development, for working capital,
for other general corporate purposes, and to pursue possible acquisitions.
7
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INVISION TECHNOLOGIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION MAY CONTAIN FORWARD-LOOKING STATEMENTS WHICH
INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS, PERFORMANCE
OR ACHIEVEMENTS COULD DIFFER MATERIALLY FROM THE RESULTS EXPRESSED IN, OR
IMPLIED BY, THESE FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CAUSE OR
CONTRIBUTE TO SUCH DIFFERENCES INCLUDE RISKS RELATED TO MARKET ACCEPTANCE OF
THE COMPANY'S SINGLE PRODUCT, FLUCTUATIONS IN THE COMPANY'S QUARTERLY AND
ANNUAL OPERATING RESULTS, THE LOSS OF ORDERS OF THE COMPANY'S PRODUCT,
INCLUDING THE LOSS OF THE COMPANY'S MOST RECENT ORDER FROM THE FAA, LOSS OF
ANY OF THE COMPANY'S SOLE SOURCE SUPPLIERS, INTENSE COMPETITION, RELIANCE ON
LARGE ORDERS, CONCENTRATION OF THE COMPANY'S CUSTOMERS, RISKS RELATED TO THE
LENGTHY SALES CYCLES FOR THE CTX 5000, BUDGETING LIMITATIONS OF THE COMPANY'S
CUSTOMERS AND PROSPECTIVE CUSTOMERS, AND THE RISK RELATED TO THE COMPANY'S
MANUFACTURING EXPERIENCE, AS WELL AS SUCH OTHER RISKS AS ARE DESCRIBED UNDER
"BUSINESS RISKS" AND IN THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR
ENDED DECEMBER 31, 1996.
OVERVIEW
InVision Technologies, Inc. designs, manufactures and markets an
explosive detection system based on advanced CT technology. The Company was
formed in September 1990 to design and develop the CTX 5000 and remained in
the development stage through December 1994. In March 1994, the Company
received its first commercial order for a CTX 5000 system from the Brussels
International Airport in Belgium and since such time has received orders for
a total of 112 systems of which a total of 50 had been shipped as of June 30,
1997. For the six months ended June 30, 1997 and the fiscal year which ended
December 31, 1996, the Company had revenues of $22.8 million and $15.8
million, respectively, and by June 30, 1997 had orders in backlog of $62.1
million.
The Company considers research and development to be a vital part of its
operating discipline and continues to dedicate substantial resources for
research to enhance the performance, functionality and reliability of its CTX
5000 hardware and software. At June 30, 1997, the Company had 45 full-time
employees engaged in research and development activities while also using the
services of 7 specialized contract employees and consultants in this area.
Beginning in 1991, total research and development expenditures by the Company
have been partially offset by amounts reimbursed by the FAA under development
contracts and grants. The Company believes that investment in research and
development in absolute dollars will increase substantially to meet its
future needs regardless of the level of funding received from the FAA. During
the six months which ended June 30, 1997 and the fiscal year which ended
December 31, 1996, the Company spent $3.9 million and $4.3 million,
respectively, on research and development activities, of which $339,000 in
the first six months of 1997 and $1.5 million in 1996 were funded by the FAA
under development contracts and grants. To the extent that FAA contract and
grant receipts decline in the future, research and development expenditures
borne by the Company would increase, and the Company expects that its results
of operations would be adversely impacted.
In any given fiscal year, the Company's revenues have principally
consisted, and the Company believes will continue to consist, of orders of
multiple units from a limited number of customers. During the first six
months of 1997, approximately $19.4 million, or 85.3%, of the Company's
revenues, were generated from sales to the Company's four largest customers.
During the fiscal year ended December 31, 1996, revenues from the Company's
six largest customers were approximately $14.0 million, or 88.4%, of the
Company's revenues.
The Company markets its products both directly through internal sales
personnel and indirectly through authorized agents, distributors and systems
integrators. In the United States, the Company markets its CTX 5000 primarily
through direct sales personnel. Internationally, the Company utilizes both a
direct sales force and authorized agents to sell its products. During the six
months ended June 30, 1997 and the years ended December 31, 1996 and 1995,
international sales represented 62.3%, 76.2% and 89.2%, respectively, of the
Company's revenues.
8
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INVISION TECHNOLOGIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
The sales cycle of the CTX 5000 is often lengthy due to the protracted
approval process that typically accompanies large capital expenditures and
the time required to manufacture the CTX 5000 and install and assimilate the
CTX 5000. Typically, six to twelve months may elapse between a new customer's
initial evaluation of the Company's system and the execution of a contract.
Another three months to a year may elapse prior to shipment of the CTX 5000
as the customer site is prepared and the CTX 5000 is manufactured. During
this period the Company expends substantial funds and management resources
but recognizes no associated revenue.
The Company recognizes revenue on shipment unless extended acceptance
criteria exist, in which case revenue is recognized upon completion of such
acceptance criteria. The Company typically requires significant customer
deposits and progress payments in advance of shipment on customer purchase
orders. Provision for estimated installation, training and warranty costs is
recorded at the time revenue is recognized. Systems typically carry a
one-year warranty.
RESULTS OF OPERATIONS
The following table sets forth certain income and expenditure items from
the Company's condensed consolidated statement of operations expressed as a
percentage of revenues for the periods indicated.
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1997 1996 1997 1996
---- ---- ---- ----
Revenues 100.0 % 100.0 % 100.0 % 100.0 %
Cost of revenues 49.9 61.5 50.0 62.1
-------- -------- -------- --------
Gross profit 50.1 38.5 50.0 37.9
-------- -------- -------- --------
Operating expenses:
Research and development 16.7 13.5 15.7 14.3
Sales and marketing 10.9 17.9 11.8 16.5
General and administrative 9.1 19.0 11.2 15.3
-------- -------- -------- --------
Total operating expenses 36.7 50.4 38.7 46.1
-------- -------- -------- --------
Income (loss) from operations 13.4 (11.9) 11.3 (8.2)
Interest expense (0.3) (12.8) (0.2) (20.0)
Other income, net 1.2 1.4 0.8 0.8
-------- -------- -------- --------
Income (loss) before taxes 14.3 (23.3) 11.9 (27.4)
Provision for income taxes 2.6 0.0 2.1 0.0
-------- -------- -------- --------
Net income (loss) 11.7 % (23.3)% 9.8 % (27.4)%
-------- -------- -------- --------
-------- -------- -------- --------
9
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INVISION TECHNOLOGIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
REVENUES. The Company's revenues are comprised of system revenues,
which include sales of the CTX 5000, accessories, installation and
configuration, and maintenance related to product support.
The quarter ended June 30, 1997 was the Company's second profitable
quarter since the inception of the Company. Revenues increased by 272% to
$13.4 million in the second quarter of 1997 from $3.6 million in the second
quarter of 1996. Net revenues for the first six months ended June 30, 1997
grew 205% to $22.8 million from $7.5 million in the same period last year.
This increase was primarily the result of the growth in unit shipments
generated from initial deliveries on the 54 unit order by the FAA, and
continuing demand from international markets.
GROSS PROFIT. Cost of revenues primarily consists of purchased
materials procured for use in the assembly of the Company's products, as well
as manufacturing labor, overhead and warranty costs. In any given period the
Company's gross profit may be affected by several factors, including product
configuration, location of the installation, and complexity of integration
into various airport environments.
Gross profit increased by 378.6% to $6.7 million in the second quarter of
1997 from $1.4 million in the second quarter of 1996. Gross profit increased
by 302% to $11.4 million in the first half of 1997 from $2.8 million in the
first half of 1996. Gross margins were 50.0% in the second quarter of 1997
and 38.5% in the second quarter of 1996. This increase in gross margins is
largely the result of improved manufacturing efficiencies and lower overhead
cost per unit resulting from increased production volume.
RESEARCH AND DEVELOPMENT. Research and development expenditures consist
primarily of compensation paid to personnel engaged in research and
development activities, amounts paid for outside services, and costs of
materials utilized in the development of hardware products, including
prototype units. All software and hardware development costs are expensed as
incurred. Beginning in 1991, total research and development expenditures by
the Company have been partially offset by amounts reimbursed by the FAA under
development contracts and grants. The Company believes that research and
development expenditures in absolute dollars will increase substantially in
the future regardless of the level of funding received from the FAA.
Total research and development expenditures increased by 357.4% to $2.2
million in the second quarter of 1997 from $481,000 in the second quarter of
1996. Total research and development expenditures for the six months ended
June 30, 1997 increased by 95.0% to $3.9 million from $2.0 million in the
first half of 1996. Of these amounts, $339,000 and $894,000, respectively,
were funded by research and development contracts and grants from the FAA in
the first six months of 1997 and 1996. As a percentage of revenues, total net
research and development expenditures increased to 16.4% in the second
quarter of 1997 from 13.5% in the second quarter of 1996 and for the first
six months of 1997 research and development expenditures increased to 15.8%
from 14.3% in the first six months of 1996. The growth in total research and
development expenditures is primarily the result of personnel additions and
increased spending on engineering materials and services.
SALES AND MARKETING. Sales and marketing expenditures consist primarily
of compensation paid to direct and indirect sales and marketing personnel,
payments to consultants, travel related to the sales process, and other
selling and distribution costs.
Sales and marketing expenditures increased by 128.7% to $1.5 million in
the second quarter of 1997 from $638,000 in the second quarter of 1996. Sales
and marketing expenditures for the first half of 1997 increased 118% to $2.7
million from $1.2 million in the same period last year. As a percentage of
revenues, sales and marketing expenditures declined to 10.9% in the second
quarter of 1997 from 17.9% in the second quarter of 1996 and to 11.8% for the
first six months of 1997 from 16.5% for the same period last year. The
10
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INVISION TECHNOLOGIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
increased level of expenditures in the 1997 periods reflects higher
commissions and other direct selling expenses resulting from the increase in
revenues, as well as increases in staffing.
GENERAL AND ADMINISTRATIVE. General and administrative expenses consist
primarily of compensation paid to administrative personnel, including
directors, payments to consultants, professional service fees, and travel and
other general expenses.
General and administrative expenses increased by 81% to $1.2 million in
the second quarter of 1997 from $674,000 in the second quarter of 1996. As a
percentage of revenues, general and administrative expenses decreased to 0.1%
in the second quarter of 1997 from 19.0% in the second quarter of 1996.
General and administrative expenses for the first six months of 1997
increased 123.6% to $2.6 million from $1.1 million in the corresponding
period of 1996. The increase in general and administrative expenses in
absolute dollars is primarily the result of personnel additions and increased
professional and consulting costs incurred to prepare for planned growth,
increased insurance costs, and increased costs of operations associated with
being a publicly traded company.
INTEREST EXPENSE. Interest expense decreased to $41,000 in the second
quarter of 1997 from $455,000 in the second quarter of 1996. For the first
six months, interest expense decreased to $51,000 from $1.5 million in the
corresponding period of 1996. Interest expense in the first half of 1996
reflects the effect of a non-cash charge of $1.3 million resulting from the
amortization of a bridge loan warrant discount arising in December 1995.
INCOME TAXES. The provision for income taxes was $343,000 for the
second quarter of 1997 and $474,000 for the first six months of 1997
representing an effective tax rate of 17.0%. No provision for income taxes
was recorded in the first six months of 1996. The Company's effective tax
rate of 17.0% for the first half of 1997 is lower than the U.S. federal
statutory rate of 34.0% as a result of utilization of net operating loss and
other credit carry-forwards. At December 31, 1996 the Company had federal net
operating loss carry-forwards of approximately $11.0 million available to
reduce future federal taxable income. The Company's net operating loss
carry-forwards expire from 2005 to 2011. As a result of changes in ownership
that occurred in the 1995 financings, future utilization of certain of the
Company's carry-forwards are limited to not more than approximately $500,000
per year.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, the Company has financed its operations primarily
through private sales of $16.5 million of Preferred and Common Stock (of
which $5.6 million represents indebtedness converted to equity), the sale of
$9.5 million of Common Stock in the Company's Initial Public Offering in
April 1996 and $21.2 million in a second public offering in May 1997, and
$3.2 million of short-term borrowings. At June 30, 1997, the Company had
$21.8 million in cash and short-term investments.
In February 1997, the Company entered into two one-year revolving line
of credit agreements with Silicon Valley Bank. The first agreement provides
for maximum borrowings generally in an amount up to the lower of 80% of
domestic eligible accounts receivable or $4.5 million. Borrowings under this
agreement generally bear interest at the bank's prime rate plus 0.50% per
annum (9.25% at June 30, 1997). The second agreement is partially guaranteed
by the Export-Import Bank of the United States and provides for maximum
borrowings generally in an amount up to the lower of (i) the sum of 90% of
eligible export accounts receivable plus 70% of eligible raw materials and
work-in-process inventory designated for export customers, (ii) $4.5 million
less outstanding letters of credit or (iii) $3.0 million. Borrowings under
this agreement generally bear interest at the bank's prime rate plus 0.25%
per annum (9.00% at June 30, 1997). Borrowings under both agreements are
secured by all of the Company's assets. The agreements require that the
Company maintain certain financial ratios and levels of tangible net worth
and profitability and also prohibit the Company from paying cash dividends.
11
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INVISION TECHNOLOGIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
Proceeds of loans under the first line of credit may be used for general
corporate purposes, and proceeds of loans under the second line of credit
must be used to finance goods intended for export.
Cash used in operating activities was $1.1 million in the first six
months of 1997 and $4.7 million in first six months of 1996. Net cash used in
operating activities in the first half of 1997 principally due to net income
of $2.2 million and a $4.2 million increase in accounts payable and accrued
expenses, which were partially offset by a $912,000 increase in restricted
cash, a $3.5 million increase in inventories and a $1.3 million increase in
accounts receivable and a $1.4 million increase in prepaid expenses. Net cash
used in operations for the first half of 1996 was primarily due to the net
loss of $2.0 million, a $1.3 million increase in accounts receivable, a $1.2
million decrease in accounts payable and accrued liabilities and a $1.7
million decrease in deferred revenues which were partially offset by a
non-cash charge for the amortization of the warrant discount of $1.3 million.
Net cash used in investing activities was $20.6 million in the first
half of 1997 and $314,000 in the first half of 1996, in each case due
primarily to the purchase of property and equipment. The Company anticipates
spending approximately $2.0 million for facility improvements and
approximately $1.5 million for purchases of capital equipment in the second
and third quarters of 1997 in connection with a move of the Company's
principal executive offices and manufacturing facility. The Company has no
other significant capital spending or purchase commitments other than normal
purchase commitments and commitments under leases.
Net cash provided by financing activities was $23.4 million in the first
half of 1997 and $6.5 million in the first half of 1996. The increase in the
first six months of 1997 was primarily due to $21.1 million in net proceeds
from issuance of common stock in its May 1997 Public Offering.
On May 14, 1997, the Company sold in a public equity offering of
1,875,000 shares of its common stock at $12.00 per share. The Company
received net proceeds of $20,531,000. On June 12, 1997, the Company's
managing underwriter, Robertson, Stephens & Co., under the terms of the
over-allotment option provided in the equity offering, sold an additional
42,742 shares of the Company's common stock, at $12.00 per share. The Company
received net proceeds of $483,412.
The Company believes that existing cash of $4.1 million as of June 30,
1997 and available borrowings under the Company's line of credit agreements,
together with the net proceeds from the Company's recent public offering of
common stock will be sufficient to finance its working capital and capital
expenditure requirements for at least the next 12 months.
BUSINESS RISKS
The Company's quarterly revenues have fluctuated significantly in the
past and are expected to fluctuate significantly in the future. These
fluctuations are the result of a variety of factors, including the Company's
delivery cycle, variations in product configuration, timing of orders, and
suitability of client sites. The Company's cost of revenues fluctuates from
quarter to quarter consistent with fluctuations in such revenues. In
addition, the Company's gross margins may be affected by, among other
factors, the configuration of systems sold, the mix between system and add-on
sales, and the breakdown between domestic and international sales.
The first two quarters of 1997 were the Company's profitable quarters since
inception. There can be no assurance that the Company will continue to be
profitable on a quarterly basis or will become profitable on annual basis.
The Company's past operating results have been, and its future operating
results will be, subject to fluctuations resulting from a number of factors,
including the timing and announcement of orders, delays in shipments caused
by customer readiness or integration issues, the timing of new or enhanced
12
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INVISION TECHNOLOGIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
product offerings by the Company or it's competitors, the mix between sales
to domestic and international customers, market acceptance of any new or
enhanced version of the Company's products, availability of key components,
the availability of manufacturing capacity, the Company's ability to rapidly
increase production, and fluctuations in demand driven by general conditions
impacting the aviation industry beyond the control of the Company. The
Company's revenues in any period are generally derived from a limited number
of customers. The Company may also choose to reduce prices or increase
spending in response to competition or to pursue new market opportunities,
all of which may adversely affect the Company's business, financial condition
and results of operations.
13
<PAGE>
PART II. OTHER INFORMATION
Item 1: Legal Proceedings - Not Applicable
Item 2: Changes in Securities - Not Applicable
Item 3: Defaults Upon Senior Securities - Not Applicable
Item 4: Submission of Matters to a Vote of Security Holders
The Annual Meeting of the Stockholders was held June 12, 1997. Matters
voted at that meeting were:
(i) The election of the Class I director to hold office until 2000
Annual Meeting of Stockholders and until his successor is
elected and qualified.
(ii) The amendment of Company's Equity Incentive Plan, to increase
the aggregate number of shares of Common Stock authorized for
issuance by 640,000 shares to 2,221,818 shares.
(iii) The ratification of the selection of Price Waterhouse LLP as
independent auditors of the Company for its fiscal year ending
December 31, 1997.
Tabulations for each proposal were as follows:
Proposal I. Election of Class I director
Director For Withheld
-------- --- --------
Dr. Sergio Magistri 8,485,462 15,698
Proposal II. Amendment of the Company's Equity Incentive Plan
For Against Abstain Not Voted
--- ------- ------- ---------
6,195,054 133,532 34,131 1,787,443
Proposal III. Ratification of the selection of Price Waterhouse
For Against Abstain
--- ------- -------
8,448,276 26,382 26,502
Continuing Directors:
Dr. Giovanni Lanzara, the Class II director, and Dr. Douglas P.
Boyd and Dr. Bruno Trezza, the Class III directors, continued as
directors following the Annual Meeting.
Item 5: Other Information - Not Applicable
Item 6: Exhibits and Reports on Form 8-K
(a) Exhibits
10.4 The Company's Equity Incentive Plan, as amended through August 8, 1997.
11.1 Statement regarding calculation of net income (loss) per share.
27 Financial Data Schedule.
(b) The Company filed no reports on Form 8-K during the quarter
ended June 30, 1997.
14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1994, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
INVISION TECHNOLOGIES, INC.
REGISTRANT
Date: August 14, 1997 /s/ Dr. Sergio Magistri
-----------------------------
Dr. Sergio Magistri
President and
Chief Executive Officer
Date: August 14, 1997 /s/ Curtis P. DiSibio
-----------------------------
Curtis P. DiSibio
Chief Financial Officer
15
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INVISION TECHNOLOGIES, INC.
EQUITY INCENTIVE PLAN
ADOPTED MAY 2, 1991
AMENDED APRIL 15, 1992
AMENDED OCTOBER 21, 1994
AMENDED JUNE 10, 1995
AMENDED AND RESTATED MARCH 9, 1996
AMENDED DECEMBER 20, 1996
AMENDED AUGUST 8, 1997
1. PURPOSES.
(a) The purpose of the Plan is to provide a means by which selected
Employees and Directors of and Consultants to the Company, and its Affiliates,
may be given an opportunity to benefit from increases in value of the stock of
the Company through the granting of (i) Incentive Stock Options, (ii)
Nonstatutory Stock Options, (iii) stock bonuses, (iv) rights to purchase
restricted stock, and (v) stock appreciation rights, all as defined below.
(b) The Company, by means of the Plan, seeks to retain the services of
persons who are now Employees or Directors of or Consultants to the Company or
its Affiliates, to secure and retain the services of new Employees, Directors
and Consultants, and to provide incentives for such persons to exert maximum
efforts for the success of the Company and its Affiliates.
(c) The Company intends that the Stock Awards issued under the Plan shall,
in the discretion of the Board or any Committee to which responsibility for
administration of the Plan has been delegated pursuant to subsection 3(c), be
either (i) Options granted pursuant to Section 6 hereof, including Incentive
Stock Options and Nonstatutory Stock Options, (ii) stock bonuses or rights to
purchase restricted stock granted pursuant to Section 7 hereof, or (iii) stock
appreciation rights granted pursuant to Section 8 hereof. All Options shall be
separately designated Incentive Stock Options or Nonstatutory Stock Options at
the time of grant, and in such form as issued pursuant to Section 6, and a
separate certificate or certificates will be issued for shares purchased on
exercise of each type of Option.
2. DEFINITIONS.
(a) "AFFILIATE" means any parent corporation or subsidiary corporation,
whether now or hereafter existing, as those terms are defined in Sections 424(e)
and (f) respectively, of the Code.
(b) "BOARD" means the Board of Directors of the Company.
(c) "CODE" means the Internal Revenue Code of 1986, as amended.
1.
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(d) "COMMITTEE" means a Committee appointed by the Board in accordance
with subsection 3(c) of the Plan.
(e) "COMPANY" means Invision Technologies, Inc., a Delaware corporation.
(f) "CONCURRENT STOCK APPRECIATION RIGHT" or "CONCURRENT RIGHT" means a
right granted pursuant to subsection 8(b)(2) of the Plan.
(g) "CONSULTANT" means any person, including an advisor, engaged by the
Company or an Affiliate to render consulting services and who is compensated for
such services, provided that the term "Consultant" shall not include Directors
who are paid only a director's fee by the Company or who are not compensated by
the Company for their services as Directors.
(h) "CONTINUOUS STATUS AS AN EMPLOYEE, DIRECTOR OR CONSULTANT" means the
employment or relationship as a Director or Consultant is not interrupted or
terminated. The Board, in its sole discretion, may determine whether Continuous
Status as an Employee, Director or Consultant shall be considered interrupted in
the case of: (i) any leave of absence approved by the Board, including sick
leave, military leave, or any other personal leave; or (ii) transfers between
locations of the Company or between the Company, Affiliates or their successors.
(i) "COVERED EMPLOYEE" means the chief executive officer and the four (4)
other highest compensated officers of the Company for whom total compensation is
required to be reported to stockholders under the Exchange Act, as determined
for purposes of Section 162(m) of the Code.
(j) "DIRECTOR" means a member of the Board.
(k) "EMPLOYEE" means any person, including Officers and Directors,
employed by the Company or any Affiliate of the Company. Neither service as a
Director nor payment of a director's fee by the Company shall be sufficient to
constitute "employment" by the Company.
(l) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
(m) "FAIR MARKET VALUE" means, as of any date, the value of the common
stock of the Company determined as follows:
(1) If the common stock is listed on any established stock exchange
or a national market system, including without limitation the National Market of
The Nasdaq Stock Market, the Fair Market Value of a share of common stock shall
be the closing sales price for such stock (or the closing bid, if no sales were
reported) as quoted on such system or exchange (or the exchange with the
greatest volume of trading in common stock) on the last market trading day prior
to the day of determination, as reported in the Wall Street Journal or such
other source as the Board deems reliable;
2.
<PAGE>
(2) If the common stock is quoted on The Nasdaq Stock Market (but not
on the National Market thereof) or is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value of
a share of common stock shall be the mean between the bid and asked prices for
the common stock on the last market trading day prior to the day of
determination, as reported in the Wall Street Journal or such other source as
the Board deems reliable;
(3) In the absence of an established market for the common stock, the
Fair Market Value shall be determined in good faith by the Board.
(n) "INCENTIVE STOCK OPTION" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(o) "INDEPENDENT STOCK APPRECIATION RIGHT" or "INDEPENDENT RIGHT" means a
right granted pursuant to subsection 8(b)(3) of the Plan.
(p) "NON-EMPLOYEE DIRECTOR" means a Director who either (i) is not a
current Employee or officer of the Company or an Affiliate, does not receive
compensation (directly or indirectly) from the Company or an Affiliate for
services rendered as a Consultant or in any capacity other than as a Director
(except for an amount as to which disclosure would not be required under Item
404(a) of Regulation S-K promulgated pursuant to the Securities Act of 1933, as
amended ("Regulation S-K")), does not possess an interest in any other
transaction as to which disclosure would be required under Item 404(a) of
Regulation S-K, and is not engaged in a business relationship as to which
disclosure would be required under Item 404(b) of Regulation S-K; or (ii) is
otherwise considered a "non-employee director" for purposes of Rule 16b-3.
(q) "NONSTATUTORY STOCK OPTION" means an Option not intended to qualify as
an Incentive Stock Option.
(r) "OFFICER" means a person who is an officer of the Company within the
meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(s) "OPTION" means a stock option granted pursuant to the Plan.
(t) "OPTION AGREEMENT" means a written agreement between the Company and
an Optionee evidencing the terms and conditions of an individual Option grant.
Each Option Agreement shall be subject to the terms and conditions of the Plan.
(u) "OPTIONEE" means an Employee, Director or Consultant who holds an
outstanding Option.
(v) "OUTSIDE DIRECTOR" means a Director who either (i) is not a current
employee of the Company or an "affiliated corporation" (within the meaning of
3.
<PAGE>
Treasury regulations promulgated under Section 162(m) of the Code), is not a
former employee of the Company or an "affiliated corporation" receiving
compensation for prior services (other than benefits under a tax qualified
pension plan), was not an officer of the Company or an "affiliated
corporation" at any time, and is not currently receiving direct or indirect
remuneration from the Company or an "affiliated corporation" for services in
any capacity other than as a Director, or (ii) is otherwise considered an
"outside director" for purposes of Section 162(m) of the Code.
(w) "PLAN" means this Equity Incentive Plan.
(x) "RULE 16b-3" means Rule 16b-3 of the Exchange Act or any successor to
Rule 16b-3, as in effect when discretion is being exercised with respect to the
Plan.
(y) "STOCK APPRECIATION RIGHT" means any of the various types of rights
which may be granted under Section 8 of the Plan.
(z) "STOCK AWARD" means any right granted under the Plan, including any
Option, any stock bonus, any right to purchase restricted stock, and any Stock
Appreciation Right.
(aa) "STOCK AWARD AGREEMENT" means a written agreement between the Company
and a holder of a Stock Award evidencing the terms and conditions of an
individual Stock Award grant. Each Stock Award Agreement shall be subject to
the terms and conditions of the Plan.
(bb) "TANDEM STOCK APPRECIATION RIGHT" or "TANDEM RIGHT" means a right
granted pursuant to subsection 8(b)(1) of the Plan.
3. ADMINISTRATION.
(a) The Plan shall be administered by the Board unless and until the Board
delegates administration to a Committee, as provided in subsection 3(c).
(b) The Board shall have the power, subject to, and within the limitations
of, the express provisions of the Plan:
(1) To determine from time to time which of the persons eligible
under the Plan shall be granted Stock Awards; when and how each Stock Award
shall be granted; whether a Stock Award will be an Incentive Stock Option, a
Nonstatutory Stock Option, a stock bonus, a right to purchase restricted stock,
a Stock Appreciation Right, or a combination of the foregoing; the provisions of
each Stock Award granted (which need not be identical), including the time or
times when a person shall be permitted to receive stock pursuant to a Stock
Award; whether a person shall be permitted to receive stock upon exercise of an
Independent Stock Appreciation Right; and the number of shares with respect to
which a Stock Award shall be granted to each such person.
(2) To construe and interpret the Plan and Stock Awards granted under
it, and to establish, amend and revoke rules and regulations for its
4.
<PAGE>
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Stock Award
Agreement, in a manner and to the extent it shall deem necessary or expedient
to make the Plan fully effective.
(3) To amend the Plan or a Stock Award as provided in Section 14.
(4) Generally, to exercise such powers and to perform such acts as
the Board deems necessary or expedient to promote the best interests of the
Company which are not in conflict with the provisions of the Plan.
(c) The Board may delegate administration of the Plan to a committee
composed of not fewer than two (2) members (the "Committee"), all of the members
of which Committee shall be Non-Employee Directors and may also be, in the
discretion of the Board, Outside Directors. If administration is delegated to a
Committee, the Committee shall have, in connection with the administration of
the Plan, the powers theretofore possessed by the Board (and references in this
Plan to the Board shall thereafter be to the Committee), subject, however, to
such resolutions, not inconsistent with the provisions of the Plan, as may be
adopted from time to time by the Board. The Board may abolish the Committee at
any time and revest in the Board the administration of the Plan.
Notwithstanding anything in this Section 3 to the contrary, at any time the
Board or the Committee may delegate to a committee of one or more members of the
Board the authority to grant Stock Awards to eligible persons who (1) are not
then subject to Section 16 of the Exchange Act and/or (2) are either (i) not
then Covered Employees and are not expected to be Covered Employees at the time
of recognition of income resulting from such Stock Award, or (ii) not persons
with respect to whom the Company wishes to avoid the application of Section
162(m) of the Code.
4. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of Section 13 relating to adjustments upon
changes in stock, the stock that may be issued pursuant to Stock Awards shall
not exceed in the aggregate two million two hundred twenty-one thousand eight
hundred eighteen (2,221,818) shares of the Company's common stock. If any Stock
Award shall for any reason expire or otherwise terminate, in whole or in part,
without having been exercised in full, the stock not acquired under such Stock
Award shall revert to and again become available for issuance under the Plan.
Shares subject to Stock Appreciation Rights exercised in accordance with Section
8 of the Plan shall not be available for subsequent issuance under the Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
5. ELIGIBILITY.
(a) Incentive Stock Options and Stock Appreciation Rights appurtenant
thereto may be granted only to Employees. Stock Awards other than Incentive
5.
<PAGE>
Stock Options and Stock Appreciation Rights appurtenant thereto may be
granted only to Employees, Directors or Consultants.
(b) No person shall be eligible for the grant of an Incentive Stock Option
or an award to purchase restricted stock if, at the time of grant, such person
owns (or is deemed to own pursuant to Section 424(d) of the Code) stock
possessing more than ten percent (10%) of the total combined voting power of all
classes of stock of the Company or of any of its Affiliates unless the exercise
price of such Incentive Stock Option is at least one hundred ten percent (110%)
of the Fair Market Value of such stock at the date of grant and the Incentive
Stock Option is not exercisable after the expiration of five (5) years from the
date of grant, or in the case of a restricted stock purchase award, the purchase
price is at least one hundred percent (100%) of the Fair Market Value of such
stock at the date of grant.
6. OPTION PROVISIONS.
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. The provisions of separate
Options need not be identical, but each Option shall include (through
incorporation of provisions hereof by reference in the Option or otherwise) the
substance of each of the following provisions:
(a) TERM. No Option shall be exercisable after the expiration of ten (10)
years from the date it was granted.
(b) PRICE. The exercise price of each Incentive Stock Option shall be not
less than one hundred percent (100%) of the Fair Market Value of the stock
subject to the Option on the date the Option is granted; the exercise price of
each Nonstatutory Stock Option shall be not less than eighty-five percent (85%)
of the Fair Market Value of the stock subject to the Option on the date the
Option is granted. Notwithstanding the foregoing, an Option (whether an
Incentive Stock Option or a Nonstatutory Stock Option) may be granted with an
exercise price lower than that set forth in the preceding sentence if such
Option is granted pursuant to an assumption or substitution for another option
in a manner satisfying the provisions of Section 424(a) of the Code.
(c) CONSIDERATION. The purchase price of stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised, or (ii) at
the discretion of the Board or the Committee, at the time of the grant of the
Option, (A) by delivery to the Company of other common stock of the Company,
(B) according to a deferred payment or other arrangement (which may include,
without limiting the generality of the foregoing, the use of other common stock
of the Company) with the person to whom the Option is granted or to whom the
Option is transferred pursuant to subsection 6(d), or (C) in any other form of
legal consideration that may be acceptable to the Board.
In the case of any deferred payment arrangement, interest shall be payable
at least annually and shall be charged at the minimum rate of interest necessary
6.
<PAGE>
to avoid the treatment as interest, under any applicable provisions of the
Code, of any amounts other than amounts stated to be interest under the
deferred payment arrangement.
(d) TRANSFERABILITY. An Incentive Stock Option shall not be transferable
except by will or by the laws of descent and distribution, and shall be
exercisable during the lifetime of the person to whom the Incentive Stock Option
is granted only by such person. A Nonstatutory Stock Option may be transferred
to the extent provided in the Option Agreement; provided that if the Option
Agreement of a Nonstatutory Stock Option does not expressly permit such
transfer, such Nonstatutory Stock Option shall not be transferable except by
will, by the laws of descent and distribution or pursuant to a domestic
relations order satisfying the requirements of Rule 16a-12 of the Exchange Act
and shall be exercisable during the lifetime of the person to whom such
Nonstatutory Stock Option is granted only by such person or any transferee
pursuant to a domestic relations order. Notwithstanding the foregoing, the
person to whom the Option is granted may, by delivering written notice to the
Company, in a form satisfactory to the Company, designate a third party who, in
the event of the death of the Optionee, shall thereafter be entitled to exercise
the Option.
(e) VESTING. The total number of shares of stock subject to an Option
may, but need not, be allotted in periodic installments (which may, but need
not, be equal). The Option Agreement may provide that from time to time during
each of such installment periods, the Option may become exercisable ("vest")
with respect to some or all of the shares allotted to that period, and may be
exercised with respect to some or all of the shares allotted to such period
and/or any prior period as to which the Option became vested but was not fully
exercised. The Option may be subject to such other terms and conditions on the
time or times when it may be exercised (which may be based on performance or
other criteria) as the Board may deem appropriate. The provisions of this
subsection 6(e) are subject to any Option provisions governing the minimum
number of shares as to which an Option may be exercised.
(f) TERMINATION OF EMPLOYMENT OR RELATIONSHIP AS A DIRECTOR OR CONSULTANT.
In the event an Optionee's Continuous Status as an Employee, Director or
Consultant terminates (other than upon the Optionee's death or disability), the
Optionee may exercise his or her Option (to the extent that the Optionee was
entitled to exercise it at the date of termination) but only within such period
of time ending on the earlier of (i) the date three (3) months after the
termination of the Optionee's Continuous Status as an Employee, Director or
Consultant (or such longer or shorter period specified in the Option Agreement),
or (ii) the expiration of the term of the Option as set forth in the Option
Agreement. If, after termination, the Optionee does not exercise his or her
Option within the time specified in the Option Agreement, the Option shall
terminate, and the shares covered by such Option shall revert to and again
become available for issuance under the Plan.
An Optionee's Option Agreement may also provide that if the exercise of
the Option following the termination of the Optionee's Continuous Status as
an Employee, Director, or Consultant (other than upon the Optionee's death or
disability) would result in liability under Section 16(b) of the Exchange
Act, then the Option shall terminate on the earlier of (i) the expiration of
the term of the Option set forth in the Option Agreement, or (ii) the tenth
7.
<PAGE>
(10th) day after the last date on which such exercise would result in such
liability under Section 16(b) of the Exchange Act. Finally, an Optionee's
Option Agreement may also provide that if the exercise of the Option
following the termination of the Optionee's Continuous Status as an Employee,
Director or Consultant (other than upon the Optionee's death or disability)
would be prohibited at any time solely because the issuance of shares would
violate the registration requirements under the Act, then the Option shall
terminate on the earlier of (i) the expiration of the term of the Option set
forth in the first paragraph of this subsection 6(f), or (ii) the expiration
of a period of three (3) months after the termination of the Optionee's
Continuous Status as an Employee, Director or Consultant during which the
exercise of the Option would not be in violation of such registration
requirements.
(g) DISABILITY OF OPTIONEE. In the event an Optionee's Continuous Status
as an Employee, Director or Consultant terminates as a result of the Optionee's
disability, the Optionee may exercise his or her Option (to the extent that the
Optionee was entitled to exercise it at the date of termination), but only
within such period of time ending on the earlier of (i) the date twelve (12)
months following such termination (or such longer or shorter period specified in
the Option Agreement), or (ii) the expiration of the term of the Option as set
forth in the Option Agreement. If, at the date of termination, the Optionee is
not entitled to exercise his or her entire Option, the shares covered by the
unexercisable portion of the Option shall revert to and again become available
for issuance under the Plan. If, after termination, the Optionee does not
exercise his or her Option within the time specified herein, the Option shall
terminate, and the shares covered by such Option shall revert to and again
become available for issuance under the Plan.
(h) DEATH OF OPTIONEE. In the event of the death of an Optionee during, or
within a period specified in the Option after the termination of, the Optionee's
Continuous Status as an Employee, Director or Consultant, the Option may be
exercised (to the extent the Optionee was entitled to exercise the Option at the
date of death) by the Optionee's estate, by a person who acquired the right to
exercise the Option by bequest or inheritance or by a person designated to
exercise the option upon the Optionee's death pursuant to subsection 6(d), but
only within the period ending on the earlier of (i) the date eighteen (18)
months following the date of death (or such longer or shorter period specified
in the Option Agreement), or (ii) the expiration of the term of such Option as
set forth in the Option Agreement. If, at the time of death, the Optionee was
not entitled to exercise his or her entire Option, the shares covered by the
unexercisable portion of the Option shall revert to and again become available
for issuance under the Plan. If, after death, the Option is not exercised
within the time specified herein, the Option shall terminate, and the shares
covered by such Option shall revert to and again become available for issuance
under the Plan.
(i) EARLY EXERCISE. The Option may, but need not, include a provision
whereby the Optionee may elect at any time while an Employee, Director or
Consultant to exercise the Option as to any part or all of the shares subject to
the Option prior to the full vesting of the Option. Any unvested shares so
purchased shall be subject to a repurchase right in favor of the Company or to
any other restriction the Board determines to be appropriate.
8.
<PAGE>
(j) RE-LOAD OPTIONS. Without in any way limiting the authority of the
Board or Committee to make or not to make grants of Options hereunder, the
Board or Committee shall have the authority (but not an obligation) to
include as part of any Option Agreement a provision entitling the Optionee to
a further Option (a "Re-Load Option") in the event the Optionee exercises the
Option evidenced by the Option agreement, in whole or in part, by
surrendering other shares of Common Stock in accordance with this Plan and
the terms and conditions of the Option Agreement. Any such Re-Load Option
(i) shall be for a number of shares equal to the number of shares surrendered
as part or all of the exercise price of such Option; (ii) shall have an
expiration date which is the same as the expiration date of the Option the
exercise of which gave rise to such Re-Load Option; and (iii) shall have an
exercise price which is equal to one hundred percent (100%) of the Fair
Market Value of the Common Stock subject to the Re-Load Option on the date of
exercise of the original Option. Notwithstanding the foregoing, a Re-Load
Option which is granted to a 10% stockholder (as described in subsection
5(c)), shall have an exercise price which is equal to one hundred ten percent
(110%) of the Fair Market Value of the stock subject to the Re-Load Option on
the date of exercise of the original Option and shall have a term which is no
longer than five (5) years.
Any such Re-Load Option may be an Incentive Stock Option or a Nonstatutory
Stock Option, as the Board or Committee may designate at the time of the grant
of the original Option; PROVIDED, HOWEVER, that the designation of any Re-Load
Option as an Incentive Stock Option shall be subject to the one hundred thousand
dollar ($100,000) annual limitation on exercisability of Incentive Stock Options
described in subsection 12(e) of the Plan and in Section 422(d) of the Code.
There shall be no Re-Load Options on a Re-Load Option. Any such Re-Load Option
shall be subject to the availability of sufficient shares under subsection 4(a)
and shall be subject to such other terms and conditions as the Board or
Committee may determine which are not inconsistent with the express provisions
of the Plan regarding the terms of Options.
7. TERMS OF STOCK BONUSES AND PURCHASES OF RESTRICTED STOCK.
Each stock bonus or restricted stock purchase agreement shall be in such
form and shall contain such terms and conditions as the Board or the Committee
shall deem appropriate. The terms and conditions of stock bonus or restricted
stock purchase agreements may change from time to time, and the terms and
conditions of separate agreements need not be identical, but each stock bonus or
restricted stock purchase agreement shall include (through incorporation of
provisions hereof by reference in the agreement or otherwise) the substance of
each of the following provisions as appropriate:
(a) PURCHASE PRICE. The purchase price under each restricted stock
purchase agreement shall be such amount as the Board or Committee shall
determine and designate in such agreement, but in no event shall the purchase
price be less than eighty-five percent (85%) of the stock's Fair Market Value on
the date such award is made. Notwithstanding the foregoing, the Board or the
Committee may determine that eligible participants in the Plan may be awarded
stock pursuant to a stock bonus agreement in consideration for past services
actually rendered to the Company or for its benefit.
9.
<PAGE>
(b) TRANSFERABILITY. No rights under a stock bonus or restricted stock
purchase agreement shall be transferable except by will or the laws of descent
and distribution or pursuant to a domestic relations order satisfying the
requirements of Rule 16a-12 of the Exchange Act and any administrative
interpretations or pronouncements thereunder, so long as stock awarded under
such agreement remains subject to the terms of the agreement.
(c) CONSIDERATION. The purchase price of stock acquired pursuant to a
stock purchase agreement shall be paid either: (i) in cash at the time of
purchase; (ii) at the discretion of the Board or the Committee, according to a
deferred payment or other arrangement with the person to whom the stock is sold;
or (iii) in any other form of legal consideration that may be acceptable to the
Board or the Committee in its discretion. Notwithstanding the foregoing, the
Board or the Committee to which administration of the Plan has been delegated
may award stock pursuant to a stock bonus agreement in consideration for past
services actually rendered to the Company or for its benefit.
(d) VESTING. Shares of stock sold or awarded under the Plan may, but need
not, be subject to a repurchase option in favor of the Company in accordance
with a vesting schedule to be determined by the Board or the Committee.
(e) TERMINATION OF EMPLOYMENT OR RELATIONSHIP AS A DIRECTOR OR CONSULTANT.
In the event a Participant's Continuous Status as an Employee, Director or
Consultant terminates, the Company may repurchase or otherwise reacquire,
subject to the limitations described in subsection 7(d), any or all of the
shares of stock held by that person which have not vested as of the date of
termination under the terms of the stock bonus or restricted stock purchase
agreement between the Company and such person.
8. STOCK APPRECIATION RIGHTS.
(a) The Board or Committee shall have full power and authority,
exercisable in its sole discretion, to grant Stock Appreciation Rights under the
Plan to Employees or Directors of or Consultants to, the Company or its
Affiliates. To exercise any outstanding Stock Appreciation Right, the holder
must provide written notice of exercise to the Company in compliance with the
provisions of the Stock Award Agreement evidencing such right. If a Stock
Appreciation Right is granted to an individual who is at the time subject to
Section 16(b) of the Exchange Act (a "Section 16(b) Insider"), the Stock Award
Agreement of grant shall incorporate all the terms and conditions at the time
necessary to assure that the subsequent exercise of such right shall qualify for
the safe-harbor exemption from short-swing profit liability provided by Rule
16b-3 promulgated under the Exchange Act (or any successor rule or regulation).
No limitation shall exist on the aggregate amount of cash payments the Company
may make under the Plan in connection with the exercise of a Stock Appreciation
Rights.
(b) Three types of Stock Appreciation Rights shall be authorized for
issuance under the Plan:
10.
<PAGE>
(1) TANDEM STOCK APPRECIATION RIGHTS. Tandem Stock Appreciation
Rights will be granted appurtenant to an Option, and shall, except as
specifically set forth in this Section 8, be subject to the same terms and
conditions applicable to the particular Option grant to which it pertains.
Tandem Stock Appreciation Rights will require the holder to elect between the
exercise of the underlying Option for shares of stock and the surrender, in
whole or in part, of such Option for an appreciation distribution. The
appreciation distribution payable on the exercised Tandem Right shall be in cash
(or, if so provided, in an equivalent number of shares of stock based on Fair
Market Value on the date of the Option surrender) in an amount up to the excess
of (A) the Fair Market Value (on the date of the Option surrender) of the number
of shares of stock covered by that portion of the surrendered Option in which
the Optionee is vested over (B) the aggregate exercise price payable for such
vested shares.
(2) CONCURRENT STOCK APPRECIATION RIGHTS. Concurrent Rights will be
granted appurtenant to an Option and may apply to all or any portion of the
shares of stock subject to the underlying Option and shall, except as
specifically set forth in this Section 8, be subject to the same terms and
conditions applicable to the particular Option grant to which it pertains. A
Concurrent Right shall be exercised automatically at the same time the
underlying Option is exercised with respect to the particular shares of stock to
which the Concurrent Right pertains. The appreciation distribution payable on
an exercised Concurrent Right shall be in cash (or, if so provided, in an
equivalent number of shares of stock based on Fair Market Value on the date of
the exercise of the Concurrent Right) in an amount equal to such portion as
shall be determined by the Board or the Committee at the time of the grant of
the excess of (A) the aggregate Fair Market Value (on the date of the exercise
of the Concurrent Right) of the vested shares of stock purchased under the
underlying Option which have Concurrent Rights appurtenant to them over (B) the
aggregate exercise price paid for such shares.
(3) INDEPENDENT STOCK APPRECIATION RIGHTS. Independent Rights will
be granted independently of any Option and shall, except as specifically set
forth in this Section 8, be subject to the same terms and conditions applicable
to Nonstatutory Stock Options as set forth in Section 6. They shall be
denominated in share equivalents. The appreciation distribution payable on the
exercised Independent Right shall be not greater than an amount equal to the
excess of (A) the aggregate Fair Market Value (on the date of the exercise of
the Independent Right) of a number of shares of Company stock equal to the
number of share equivalents in which the holder is vested under such Independent
Right, and with respect to which the holder is exercising the Independent Right
on such date, over (B) the aggregate Fair Market Value (on the date of the grant
of the Independent Right) of such number of shares of Company stock. The
appreciation distribution payable on the exercised Independent Right shall be in
cash or, if so provided, in an equivalent number of shares of stock based on
Fair Market Value on the date of the exercise of the Independent Right.
9. CANCELLATION AND RE-GRANT OF OPTIONS.
The Board or the Committee shall have the authority to effect, at any time
and from time to time, (i) the repricing of any outstanding Options and/or any
Stock Appreciation Rights under the Plan and/or (ii) with the consent of the
11.
<PAGE>
affected holders of Options and/or Stock Appreciation Rights, the
cancellation of any outstanding Options and/or any Stock Appreciation Rights
under the Plan and the grant in substitution therefor of new Options and/or
Stock Appreciation Rights under the Plan covering the same or different
numbers of shares of stock, but having an exercise price per share not less
than eighty-five percent (85%) of the Fair Market Value (one hundred percent
(100%) of the Fair Market Value in the case of an Incentive Stock Option) or,
in the case of an Incentive Stock Option granted to a 10% stockholder (as
described in subsection 5(c)), not less than one hundred ten percent (110%)
of the Fair Market Value) per share of stock on the new grant date.
Notwithstanding the foregoing, the Board or the Committee may grant an Option
and/or Stock Appreciation Right with an exercise price lower than that set
forth above if such Option and/or Stock Appreciation Right is granted as part
of a transaction to which section 424(a) of the Code applies.
10. COVENANTS OF THE COMPANY.
(a) During the terms of the Stock Awards, the Company shall keep available
at all times the number of shares of stock required to satisfy such Stock
Awards.
(b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the Stock Award; provided,
however, that this undertaking shall not require the Company to register under
the Securities Act of 1933, as amended (the "Securities Act") either the Plan,
any Stock Award or any stock issued or issuable pursuant to any such Stock
Award. If, after reasonable efforts, the Company is unable to obtain from any
such regulatory commission or agency the authority which counsel for the Company
deems necessary for the lawful issuance and sale of stock under the Plan, the
Company shall be relieved from any liability for failure to issue and sell stock
upon exercise of such Stock Awards unless and until such authority is obtained.
11. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to Stock Awards shall constitute
general funds of the Company.
12. MISCELLANEOUS.
(a) The Board shall have the power to accelerate the time at which a Stock
Award may first be exercised or the time during which a Stock Award or any part
thereof will vest pursuant to subsection 6(e), 7(d) or 8(b), notwithstanding the
provisions in the Stock Award stating the time at which it may first be
exercised or the time during which it will vest.
(b) Neither an Employee, Director or Consultant nor any person to whom a
Stock Award is transferred under subsection 6(d), 7(b), or 8(b) shall be deemed
to be the holder of, or to have any of the rights of a holder with respect to,
any shares subject to such Stock Award unless and until such person has
satisfied all requirements for exercise of the Stock Award pursuant to its
terms.
12.
<PAGE>
(c) Nothing in the Plan or any instrument executed or Stock Award granted
pursuant thereto shall confer upon any Employee, Director, Consultant or other
holder of Stock Awards any right to continue in the employ of the Company or any
Affiliate (or to continue acting as a Director or Consultant) or shall affect
the right of the Company or any Affiliate to terminate the employment of any
Employee with or without cause the right of the Company's Board of Directors
and/or the Company's stockholders to remove any Director pursuant to the terms
of the Company's By-Laws and the provisions of the Delaware General Corporation
Law, or the right to terminate the relationship of any Consultant pursuant to
the terms of such Consultant's agreement with the Company or Affiliate.
(d) To the extent that the aggregate Fair Market Value (determined at the
time of grant) of stock with respect to which Incentive Stock Options are
exercisable for the first time by any Optionee during any calendar year under
all plans of the Company and its Affiliates exceeds one hundred thousand dollars
($100,000), the Options or portions thereof which exceed such limit (according
to the order in which they were granted) shall be treated as Nonstatutory Stock
Options.
(e) The Company may require any person to whom a Stock Award is granted,
or any person to whom a Stock Award is transferred pursuant to subsection 6(d),
7(b) or 8(b), as a condition of exercising or acquiring stock under any Stock
Award, (1) to give written assurances satisfactory to the Company as to such
person's knowledge and experience in financial and business matters and/or to
employ a purchaser representative reasonably satisfactory to the Company who is
knowledgeable and experienced in financial and business matters, and that he or
she is capable of evaluating, alone or together with the purchaser
representative, the merits and risks of exercising the Stock Award; and (2) to
give written assurances satisfactory to the Company stating that such person is
acquiring the stock subject to the Stock Award for such person's own account and
not with any present intention of selling or otherwise distributing the stock.
The foregoing requirements, and any assurances given pursuant to such
requirements, shall be inoperative if (i) the issuance of the shares upon the
exercise or acquisition of stock under the Stock Award has been registered under
a then currently effective registration statement under the Securities Act, or
(ii) as to any particular requirement, a determination is made by counsel for
the Company that such requirement need not be met in the circumstances under the
then applicable securities laws. The Company may, upon advice of counsel to the
Company, place legends on stock certificates issued under the Plan as such
counsel deems necessary or appropriate in order to comply with applicable
securities laws, including, but not limited to, legends restricting the transfer
of the stock.
(f) To the extent provided by the terms of a Stock Award Agreement, the
person to whom a Stock Award is granted may satisfy any federal, state or local
tax withholding obligation relating to the exercise or acquisition of stock
under a Stock Award by any of the following means or by a combination of such
means: (1) tendering a cash payment; (2) authorizing the Company to withhold
shares from the shares of the common stock otherwise issuable to the participant
as a result of the exercise or acquisition of stock under the Stock Award; or
(3) delivering to the Company owned and unencumbered shares of the common stock
of the Company.
13.
<PAGE>
13. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or subject to
any Stock Award, without the receipt of consideration by the Company (through
merger, consolidation, reorganization, recapitalization, reincorporation, stock
dividend, dividend in property other than cash, stock split, liquidating
dividend, combination of shares, exchange of shares, change in corporate
structure or other transaction not involving the receipt of consideration by the
Company), the Plan will be appropriately adjusted in the class(es) and maximum
number of shares subject to the Plan pursuant to subsection 4(a), and the
outstanding Stock Awards will be appropriately adjusted in the class(es) and
number of shares and price per share of stock subject to such outstanding Stock
Awards. Such adjustments shall be made by the Board or the Committee, the
determination of which shall be final, binding and conclusive. (The conversion
of any convertible securities of the Company shall not be treated as a
"transaction not involving the receipt of consideration by the Company".)
(B) In the event of: (1) a merger or consolidation in which the Company
is not the surviving corporation or (2) a reverse merger in which the Company is
the surviving corporation but the shares of the Company's common stock
outstanding immediately preceding the merger are converted by virtue of the
merger into other property, whether in the form of securities, cash or otherwise
then to the extent permitted by applicable law: (i) any surviving corporation
or an Affiliate of such surviving corporation shall assume any Stock Awards
outstanding under the Plan or shall substitute similar Stock Awards for those
outstanding under the Plan, or (ii) such Stock Awards shall continue in full
force and effect. In the event any surviving corporation and its Affiliates
refuse to assume or continue such Stock Awards, or to substitute similar Stock
Awards for those outstanding under the Plan, then such Stock Awards shall be
terminated if not exercised prior to such event. In the event of a dissolution
or liquidation of the Company, any Stock Awards outstanding under the Plan shall
terminate if not exercised prior to such event.
14. AMENDMENT OF THE PLAN AND STOCK AWARDS.
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in Section 13 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the stockholders of
the Company to the extent stockholder approval is necessary for the Plan to
satisfy the requirements of Section 422 of the Code, Rule 16b-3 or any Nasdaq or
securities exchange listing requirements.
(b) The Board may in its sole discretion submit any other amendment to the
Plan for stockholder approval, including, but not limited to, amendments to the
Plan intended to satisfy the requirements of Section 162(m) of the Code and the
regulations promulgated thereunder regarding the exclusion of performance-based
compensation from the limit on corporate deductibility of compensation paid to
certain executive officers.
(c) It is expressly contemplated that the Board may amend the Plan in any
respect the Board deems necessary or advisable to provide eligible Employees,
Directors or Consultants with the maximum benefits provided or to be provided
14.
<PAGE>
under the provisions of the Code and the regulations promulgated thereunder
relating to Incentive Stock Options and/or to bring the Plan and/or Incentive
Stock Options granted under it into compliance therewith.
(d) Rights and obligations under any Stock Award granted before amendment
of the Plan shall not be impaired by any amendment of the Plan unless (i) the
Company requests the consent of the person to whom the Stock Award was granted
and (ii) such person consents in writing.
(e) The Board at any time, and from time to time, may amend the terms of
any one or more Stock Award; provided, however, that the rights and obligations
under any Stock Award shall not be impaired by any such amendment unless (i) the
Company requests the consent of the person to whom the Stock Award was granted
and (ii) such person consents in writing.
15. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board may suspend or terminate the Plan at any time. Unless
sooner terminated, the Plan shall terminate on May 1, 2001, which shall be
within ten (10) years from the date the Plan is adopted by the Board or approved
by the stockholders of the Company, whichever is earlier. No Stock Awards may
be granted under the Plan while the Plan is suspended or after it is terminated.
(b) Rights and obligations under any Stock Award granted while the Plan is
in effect shall not be impaired by suspension or termination of the Plan, except
with the consent of the person to whom the Stock Award was granted.
16. EFFECTIVE DATE OF PLAN.
The Plan as amended on December 20, 1996, shall become effective on such
date, but no Stock Awards granted under the Plan, as amended, shall be exercised
unless and until the Plan, as amended, has been approved by the stockholders of
the Company, which approval shall be within twelve (12) months before or after
the date the Plan, as amended, is adopted by the Board.
15.
<PAGE>
EXHIBIT 11.1
INVISION TECHNOLOGIES, INC.
STATEMENT REGARDING CALCULATION OF NET INCOME (LOSS) PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income (loss) $ 1,574 $ (830) $ 2,216 $(2,045)
-------- ------- ------- -------
-------- ------- ------- -------
Shares used in per share calculations:
Common Stock 10,173 5,508 9,676 2,828
Common Stock issuable upon exercise of options and warrants 1,015 272 1,054 600
Convertible Preferred Stock -- 2,036 -- 4,071
-------- ------- ------- -------
Shares used in per share calculations 11,188 7,816 10,730 7,499
-------- ------- ------- -------
-------- ------- ------- -------
Net income (loss) per share $ 0.14 $ $ (0.11) $ $ 0.21 $ $ (0.27)
-------- ------- ------- -------
-------- ------- ------- -------
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE CONDENSED
CONSOLIDATED BALANCE SHEETS, CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS INCLUDED IN THE COMPANY'S
QUARTERLY REPORT ON FORM 10-Q FOR THE PERIOD ENDED JUNE 30, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 4,099
<SECURITIES> 17,737
<RECEIVABLES> 7,237
<ALLOWANCES> 0
<INVENTORY> 8,324
<CURRENT-ASSETS> 39,264
<PP&E> 4,087
<DEPRECIATION> 0
<TOTAL-ASSETS> 45,383
<CURRENT-LIABILITIES> 12,503
<BONDS> 0
0
0
<COMMON> 8
<OTHER-SE> 32,714
<TOTAL-LIABILITY-AND-EQUITY> 45,383
<SALES> 22,785
<TOTAL-REVENUES> 22,785
<CGS> 11,401
<TOTAL-COSTS> 11,401
<OTHER-EXPENSES> 8,829
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 51
<INCOME-PRETAX> 2,690
<INCOME-TAX> 474
<INCOME-CONTINUING> 2,216
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,216
<EPS-PRIMARY> 0.21
<EPS-DILUTED> 0.21
</TABLE>
