<PAGE>
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 MARCH 31, 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)
DELAWARE 94-3123544
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
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 March 31, 1997, there were 9,204,866 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 MARCH 31, 1997
PART I: FINANCIAL INFORMATION
ITEM PAGE
1. Condensed Consolidated Financial Statements (unaudited)
a. Condensed Consolidated Balance Sheets - December 31, 1996 and
March 31, 1997.............................................. 3
b. Condensed Consolidated Statements of Operations - Three months
ended March 31, 1996 and 1997............................... 4
c. Condensed Consolidated Statements of Cash Flows - Three months
ended March 31, 1996 and 1997............................... 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
2
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INVISION TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1996 1997
----------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash $2,363 $2,251
Restricted cash -- 1,365
Accounts receivable 5,987 5,476
Inventories 4,810 6,111
Prepaid expenses 292 1,634
----------- ----------
Total current assets 13,452 16,837
Property and equipment 1,804 1,872
Other assets -- 800
----------- ----------
$15,256 $19,509
----------- ----------
----------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $2,541 $3,960
Accrued expenses 1,020 1,569
Deferred revenue 2,443 3,986
Current maturities of obligations under capital leases 68 39
----------- ----------
Total current liabilities 6,072 9,554
----------- ----------
Long-term obligations under capital leases 110 110
----------- ----------
Stockholders' equity:
Common stock, $0.001 par value, 20,000 shares
authorized; 9,160 and 9,205 shares issued and
outstanding 9 9
Additional paid-in capital 28,919 28,958
Deferred stock compensation expense (355) (265)
Accumulated deficit (19,499) (18,857)
----------- ----------
Total stockholders' equity 9,074 9,845
----------- ----------
$15,256 $19,509
----------- ----------
----------- ----------
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
3
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INVISION TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------
1996 1997
------------ -------------
<S> <C> <C>
Revenues: $3,922 $9,377
Cost of revenues 2,453 4,708
------------ -------------
Gross profit 1,469 4,669
------------ -------------
Operating expenses:
Research and development 585 1,333
Sales and marketing 597 1,233
General and administrative 472 1,343
------------ -------------
Total operating expenses 1,654 3,909
------------ -------------
Income (loss) from operations (185) 760
Interest expense (1,040) (10)
Other income, net 10 23
------------ -------------
Income (loss) before provision for income taxes (1,215) 773
Provision for income taxes -- 131
------------ -------------
Net income (loss) $(1,215) $642
------------ -------------
------------ -------------
Net income (loss) per share $ (0.17) $0.06
------------ -------------
------------ -------------
Shares used in per share calculations (1) 7,081 10,272
</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)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------
1996 1997
--------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $(1,215) $642
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization 79 197
Amortization of bridge loan warrant 949 --
Stock compensation expense 99 90
Changes in assets and liabilities:
Restricted cash -- (1,365)
Accounts receivable (592) 511
Inventories 114 (1,301)
Prepaid expenses (41) (1,342)
Other assets (268) (800)
Accounts payable (1,206) 1,419
Accrued liabilities 199 549
Deferred revenues (452) 1,543
--------- --------
Net cash provided by (used in) operating activities (2,334) 143
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment (136) (265)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term debt 1,000 --
Repayments of capital lease financing -- (29)
Proceeds from issuance of common stock, net 13 39
--------- --------
Net cash provided by financing activities 1,013 10
--------- --------
Net decrease in cash for the period (1,457) (112)
Cash at beginning of period 1,927 2,363
--------- --------
CASH AT END OF PERIOD $ 470 $2,251
--------- --------
--------- --------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid $ 62 $ 2
SUPPLEMENTAL DISCLOSURES OF NON-CASH FINANCING AND INVESTING ACTIVITIES:
Warrants issued in connection with bridge loan financing $ 590 $ --
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements
5
<PAGE>
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 consolidated 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
consolidated 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).
Operating results for the three month period ended March 31, 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
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 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 March 31, 1997, even though their effect is antidilutive.
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No.128, "Earnings per Share."
This Statement is effective for the Company's 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 periods ended March 31, 1996 and 1997, the
Company's income (loss) per share would have been as follows:
THREE MONTHS ENDED
MARCH 31,
----------------------
1996 1997
-------- -------
Basic income (loss) per share $(16.42) $ 0.07
Diluted income (loss) per share $ (0.17) $ 0.06
6
<PAGE>
INVISION TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(CONTINUED)
3. INVENTORIES
The components of inventory consist of the following (in thousands):
December 31, March 31,
1996 1997
----------------- -----------
Raw material and purchased components $3,003 $3,582
Work-in-process 1,331 2,124
Finished goods 476 405
----------------- -----------
$4,810 $6,111
----------------- -----------
----------------- -----------
4. LINE OF CREDIT
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
eligible domestic accounts receivable or $4.5 million. Borrowings under this
agreement generally bear interest at the bank's prime rate plus 1.00% per
annum (9.25% at December 31, 1996). 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
0.75% per annum (9.00% at December 31, 1996). 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. 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.
5. SUBSEQUENT EVENT
On March 14, 1997 the Company filed a registration statement with the
Securities and Exchange Commission in connection with a proposed underwritten
public offering of shares of its Common Stock. On May 14, 1997, 1,875,000 of
such shares were sold by the Company with resulting net proceeds to the
Company estimated at $20.5 million. 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
and for other general corporate purposes and to pursue possible acquisitions.
7
<PAGE>
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.
OVERVIEW
InVision 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 107 systems, of which a
total of 37 had been shipped as of March 31, 1997. For the fiscal year ended
December 31, 1996 and the quarter ended March 31, 1997, the Company had
revenues of $15.8 million and $9.4 million, respectively, and at March 31,
1997 had orders in backlog in the amount of $68.6 million.
The Company considers research and development to be a vital part of its
operating discipline and continues to dedicate substantial resources to
research to enhance the performance, functionality and reliability of its CTX
5000 hardware and software. At March 31, 1997, the Company had 38 full-time
employees engaged in research and development activities, and also was using
the services of 9 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 year ended December 31, 1996 and the quarter ended March 31,
1997, the Company spent $4.3 million and $1.7 million, respectively, on
research and development activities, of which $1.5 million in 1996 and
$339,000 in the quarter ended March 31, 1997 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 quarter
of 1997, approximately $8.3 million, or 88.9%, of the Company's revenues were
generated from sales to the Company's three 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
8
<PAGE>
INVISION TECHNOLOGIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
quarter ended March 31, 1997 and the years ended December 31, 1996
and 1995, international sales represented 49.3%, 76.2% and 89.2%,
respectively, of the Company's revenues.
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
MARCH 31,
-----------------------
1996 1997
----------- ---------
Revenues 100.0% 100.0%
Cost of revenues 62.5 50.2
----------- ---------
Gross profit 37.5 49.8
----------- ---------
Operating expenses:
Research and development 14.9 14.2
Sales and marketing 15.2 13.1
General and administrative 12.0 14.3
----------- ---------
Total operating expenses 42.1 41.6
----------- ---------
Income (loss) from operations (4.6) 8.2
Interest expense (26.5) (0.1)
Other income, net 0.2 0.2
----------- ---------
Income (loss) before income taxes (30.9) 8.3
Provision for income taxes -- 1.4
----------- ---------
Net income (loss) (30.9)% 6.9%
----------- ---------
----------- ---------
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.
9
<PAGE>
INVISION TECHNOLOGIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
The quarter ended March 31, 1997 was the Company's first profitable
quarter since the inception of the Company. Revenues increased by 139% to
$9.4 million in the first quarter of 1997 from $3.9 million in the first
quarter of 1996. 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 218% to $4.7 million in the first quarter of
1997 from $1.5 million in the first quarter of 1996. Gross margins were 49.8%
in the first quarter of 1997 and 37.5% in the first 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 41.7% to $1.7
million in the first quarter of 1997 from $1.1 million in the first quarter
of 1996. Of these amounts, $339,000 and $538,000, respectively, were funded
by research and development contracts and grants from the FAA in the first
quarters of 1997 and 1996. As a percentage of revenues, total research and
development expenditures decreased to 17.8% in the first quarter of 1997 from
28.6% in the first quarter 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 107% to $1.2 million in the
first quarter of 1997 from $597,000 in the first quarter of 1996. As a
percentage of revenues, sales and marketing expenditures declined to 13.1% in
the first quarter of 1997 from 15.2% in the first quarter of 1996. The
increased level of expenditures in the first quarter of 1997 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.
10
<PAGE>
INVISION TECHNOLOGIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
General and administrative expenses increased by 185% to $1.3 million in
the first quarter of 1997 from $472,000 in the first quarter of 1996. As a
percentage of revenues, general and administrative expenses increased to
14.3% in the first quarter of 1997 from 12.0% in the first quarter of 1996.
The increase in general and administrative expenses 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 $10,000 in the first
quarter of 1997 from $1.0 million in the first quarter of 1996. Interest
expense in the first quarter of 1996 reflects the effect of a non-cash charge
of $949,000 resulting from the amortization of a bridge loan warrant discount
arising in December 1995.
INCOME TAXES. The provision for income taxes was $131,000 for the first
quarter of 1997 representing an effective tax rate of 17.0%. No provision for
income taxes was recorded in the first quarter of 1996. The Company's
effective tax rate of 17.0% for the first quarter 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 carryforwards. At December 31, 1996 the
Company had federal net operating loss carryforwards of approximately $11.0
million available to reduce future federal taxable income. The Company's net
operating loss carryforwards 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 carryforwards 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 $3.2 million of short-term borrowings. At March 31, 1997, the
Company had $2.3 million in cash and no outstanding borrowings.
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 1.00% per annum (9.25%
at March 31, 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 0.75%
per annum (9.00% at March 31, 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.
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 provided by operating activities was $143,000 in the first quarter
of 1997. Cash used in operating activities was $2.3 million in first quarter
of 1996. Net cash provided by operating activities in the first quarter of
11
<PAGE>
INVISION TECHNOLOGIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
1997 was principally due to the net income of $642,000, a $2.0 million
increase in accounts payable and accrued expenses and a $1.5 million increase
in deferred revenues, which more than offset a $1.4 million increase in
restricted cash, a $1.3 million increase in inventories and a $1.3 million
increase in prepaid expenses. Net cash used in operating activities for the
first quarter of 1996 was primarily due to the net loss of $1.2 million, a
$592,000 increase in accounts receivable, a $1.0 million decrease in accounts
payable and accrued liabilities and a $452,000 decrease in deferred revenues
which were partially offset by a non-cash charge for the amortization of the
warrant discount of $949,000.
Net cash used in investing activities was $265,000 in the first quarter
of 1997 and $136,000 in the first quarter 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 $10,000 in the first
quarter of 1997 and $1.0 million in the first quarter of 1996. The increase
in the first quarter of 1996, primarily due to $1.0 million in net proceeds
from short-term debt financing.
On March 14, 1997, InVision filed a registration statement with the
Securities and Exchange Commission in connection with the proposed
underwritten offering of shares of Common Stock. On May 14, 1997 1,875,000
of such shares were sold by the Company with resulting net proceeds to the
Company estimated at $20.5 million. The Company intends to use the net
proceeds from the offering to purchase capital equipment and undertake
facility improvements, to fund research and development, and for working
capital and other general corporate purposes and to pursue possible
acquisitions. The Company did not receive any proceeds from the sale of
Common Stock by the selling stockholders.
The Company believes that existing cash of $2.3 million as of March 31,
1997 and available borrowings under the Company's line of credit agreements,
together with the net proceeds from the Underwritten Offering, 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. During
1996, as the number of orders shipped and associated revenues increased, the
overall variability of the Company's gross profits decreased.
The first quarter of 1997 was the Company's first profitable quarter
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,
12
<PAGE>
INVISION TECHNOLOGIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
including the timing and announcement of orders, delays in shipments caused
by customer readiness or integration issues, the timing of new or enhanced
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:
On February 7, 1997, the Company effected a 2-for-1 stock
split in the form of a stock dividend.
Item 3: Defaults Upon Senior Securities - Not Applicable
Item 4: Submission of Matters to a Vote of Security Holders
- Not Applicable
Item 5: Other Information - Not Applicable
Item 6: Exhibits and Reports on Form 8-K
(a) Exhibits
(b) The Company filed no reports on Form 8-K during the
quarter ended March 31, 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: May 15, 1997 /S/ Curtis P. DiSibio
Curtis P. DiSibio
Chief Financial Officer and
Duly Authorized Officer
Date: May 15, 1997 /S/ Dr. Sergio Magistri
Dr. Sergio Magistri
President and
Chief Executive Officer and
Duly Authorized Officer
15
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ---------- -------------------------
<S> <C>
10.12* Lease, dated as of February 11, 1997, between the Registrant
and WHLNF Real Estate L.P.
10.17* Loan and Security Agreement, dated as of February 20, 1997,
between the Registrant and Silicon Valley Bank.
10.18* Revolving Promissory Note, dated February 20, 1997, between
the Registrant and Silicon Valley Bank.
10.19* Export-Import Bank Loan and Security Agreement, dated as of
February 20, 1997, between the Registrant and
Silicon Valley Bank.
10.20* Intellectual Property Security Agreement, dated as of
February 20, 1997, between the Registration and
Silicon Valley Bank.
11.1 Statement regarding calculation of net income (loss) per share.
27 Financial Data Schedule.
</TABLE>
___________
(*) Filed as the like-numbered exhibit to the Registrant's Registration
Statement on Form S-1 (Registration No. 333-23413) on March 14, 1997 and
incorporated herein by reference thereto.
<PAGE>
EXHIBIT 11.1
INVISION TECHNOLOGIES, INC.
STATEMENT REGARDING CALCULATION OF
NET INCOME (LOSS) PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS
ENDED MARCH 31,
1996 1997
---------- -----------
Net income (loss) $(1,215) $642
---------- -----------
---------- -----------
Shares used in per share calculations:
Common Stock 148 9,179
Common Stock issuable upon exercise of
options and warrants 825 1,093
Convertible Preferred Stock 6,108 --
---------- -----------
Shares used in per share calculations 7,081 10,272
---------- -----------
---------- -----------
Net income (loss) per share $(0.17) $0.06
---------- -----------
---------- -----------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL 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 MARCH 31, 1997 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 2,251
<SECURITIES> 0
<RECEIVABLES> 5,476
<ALLOWANCES> 0
<INVENTORY> 6,111
<CURRENT-ASSETS> 16,837
<PP&E> 1,872
<DEPRECIATION> 0
<TOTAL-ASSETS> 19,509
<CURRENT-LIABILITIES> 9,554
<BONDS> 0
0
0
<COMMON> 9
<OTHER-SE> 9,836
<TOTAL-LIABILITY-AND-EQUITY> 19,509
<SALES> 9,377
<TOTAL-REVENUES> 9,377
<CGS> 4,708
<TOTAL-COSTS> 4,708
<OTHER-EXPENSES> 3,909
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10
<INCOME-PRETAX> 773
<INCOME-TAX> 131
<INCOME-CONTINUING> 642
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 642
<EPS-PRIMARY> 0.06
<EPS-DILUTED> 0.06
</TABLE>
