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File Pursuant to Rule 424(b)(3)
Registration No. 333-62821
PROSPECTUS
180,000 SHARES
INVISION TECHNOLOGIES, INC.
Common Stock
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All of the shares of Common Stock offered hereby (the "Offering") are issuable
by InVision Technologies, Inc. (the "Company" or "InVision") to Donald & Co.
Securities Inc. (the "Selling Stockholder") pursuant to the exercise of a
warrant (the "Warrant") held by the Selling Stockholder, and are being offered
hereby by the Selling Stockholder. The Company's Common Stock is traded on the
Nasdaq National Market under the symbol "INVN." The last reported sales price
of the Company's Common Stock on the Nasdaq National Market on September 8, 1998
was $6.25 per share.
The Selling Stockholder, directly or through agents, broker-dealers or
underwriters, may sell the Common Stock offered hereby from time to time on
terms to be determined at the time of sale, in transactions on the Nasdaq
National Market or in privately negotiated transactions. The Selling
Stockholder and any agents, broker-dealers or underwriters that participate in
the distribution of the Common Stock may be deemed to be "underwriters" within
the meaning of the Securities Act of 1933, as amended (the "Act"), and any
commission received by them and any profit on the resale of the Common Stock
purchased by them may be deemed to be underwriting discounts or commissions
under the Act. See "Selling Stockholder" and "Plan of Distribution."
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THIS OFFERING INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" COMMENCING ON PAGE 3 HEREOF.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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No underwriting commissions or discounts will be paid by the Company in
connection with this offering. Estimated expenses payable by the Company in
connection with this offering are $6,500. The exercise price of the Warrant is
$6.60 per share payable to the Company. The Company will not receive any
proceeds from the sale by the Selling Stockholder of shares being offered
hereby.
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The date of this Prospectus is September 9, 1998.
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AVAILABLE INFORMATION
The Company is subject to the information reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Securities and Exchange Commission (the "SEC"). Such reports, proxy
statements and other information may be inspected and copied at the public
reference facilities maintained by the SEC at Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549, and at the SEC's regional offices
located at Seven World Trade Center, Suite 1300, New York, New York 10048, and
at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511. Copies of such material may be obtained by mail from the Public
Reference Section of the SEC at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. The SEC also maintains a Web site
that contains reports, proxy and information statements and other information
regarding registrants that file electronically with the SEC at the address
http://www.sec.gov. The Company's Common Stock is listed on the Nasdaq National
Market, and such reports, proxy statements and other information can also be
inspected and copied at the offices of The Nasdaq Stock Market, 1735 K Street,
N.W., Washington DC 20006.
The Company has filed with the SEC a registration statement on Form S-3
(herein referred to, together with all amendments and exhibits, as the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"). This Prospectus does not contain all of the information set
forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the SEC. For further information,
reference is hereby made to the Registration Statement. Copies of the
Registration Statement and the exhibits and schedules are available as described
above.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, filed or to be filed with the Commission under the
Exchange Act are hereby incorporated by reference into this Prospectus:
(a) The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997;
(b) The Company's Quarterly Report on Form 10-Q for the quarterly period
ended March 31, 1998;
(c) The Company's Quarterly Report on Form 10-Q for the quarterly period
ended June 30, 1998; and
(d) The description of the Common Stock contained in the Company's
Registration Statement on Form 8-A, filed April 18, 1996.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering shall be deemed to be incorporated by reference
herein and to be a part hereof from the date of filing of such documents. Any
statement contained in this Prospectus or in a document incorporated or deemed
to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any subsequently-filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, upon written or oral
request of such person, a copy of any and all of the documents that have been
incorporated by reference herein (not including exhibits to such documents
unless such exhibits are specifically incorporated by reference herein or into
such documents). Such request may be directed to InVision Technologies, Inc.,
Attention: Manager, Investor Relations, 7151 Gateway Blvd., Newark, California
94560, telephone (510) 739-2400.
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InVision intends to furnish its stockholders with annual reports containing
audited consolidated financial statements examined by its independent public
accountants and quarterly reports containing unaudited consolidated financial
information for the first three quarters of each fiscal year.
FORWARD LOOKING STATEMENTS
THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS WHICH INVOLVE RISKS AND
UNCERTAINTIES. WHEN USED IN THIS PROSPECTUS, THE WORDS "ANTICIPATE," "BELIEVE,"
"ESTIMATE," AND "EXPECT" AND SIMILAR EXPRESSIONS AS THEY RELATE TO THE COMPANY
OR ITS MANAGEMENT ARE INTENDED TO IDENTIFY SUCH FORWARD-LOOKING STATEMENTS. 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 CURRENT PRODUCTS AND NEW PRODUCTS IN
DEVELOPMENT, FLUCTUATIONS IN THE COMPANY'S QUARTERLY AND ANNUAL OPERATING
RESULTS, THE LOSS OF ORDERS OF THE COMPANY'S PRODUCTS, INCLUDING THE LOSS OF THE
COMPANY'S ORDER FROM THE FAA OR THE FAILURE TO OBTAIN ADDITIONAL ORDERS, 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 COMPANY'S PRODUCTS, BUDGETING LIMITATIONS OF THE
COMPANY'S CUSTOMERS AND PROSPECTIVE CUSTOMERS, AS WELL AS SUCH OTHER RISKS AS
ARE DESCRIBED UNDER "RISK FACTORS" AND IN THE COMPANY'S ANNUAL REPORT ON FORM
10-K FOR THE YEAR ENDED DECEMBER 31, 1997.
THE COMPANY
InVision Technologies, Inc. ("InVision" or "The Company") was incorporated
in Delaware in September 1990. Unless the context otherwise requires,
"InVision" and the "Company" refer to InVision Technologies, Inc., a Delaware
corporation, including its wholly-owned subsidiaries, Imatron Federated Systems,
Inc., and Quantum Magnetics, Inc. ("Quantum"). The Company's executive offices
are located at 7151 Gateway Blvd., Newark, California 94560, and its telephone
number is (510) 739-2400.
RISK FACTORS
AN INVESTMENT IN THE SHARES BEING OFFERED HEREBY INVOLVES A HIGH DEGREE OF
RISK. PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK
FACTORS, IN ADDITION TO OTHER INFORMATION CONTAINED OR INCORPORATED BY REFERENCE
IN THIS PROSPECTUS, IN EVALUATING AN INVESTMENT IN THE SHARES OF COMMON STOCK
OFFERED HEREBY.
HISTORY OF LOSSES; NO ASSURANCE OF CONTINUED PROFITABILITY
The Company commenced operations in September 1990, remained in the
development stage through 1994 and received its first revenues from product
sales in the first quarter of 1995. The Company experienced net losses for each
year from inception through December 31, 1996. The year ended December 31, 1997
was the Company's first year of profitability. As of June 30, 1998, the Company
had an accumulated deficit of approximately $13.7 million. Although the Company
has reported a profit in each quarter since January 1, 1997, there can be no
assurance that the Company will maintain profitability on a quarterly and annual
basis. The Company significantly expanded its manufacturing, research and
development, sales and marketing, and administrative capabilities in 1997 to
meet the increased demand for its product. The increase in the Company's
operating expenses caused by this expansion could have a material adverse effect
on the Company's business, financial condition or results of operations if
revenues do not increase at an equal or greater rate.
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SINGLE PRODUCT; UNCERTAINTY OF MARKET ACCEPTANCE
The CTX 5000 Series currently is the only product line offered by the
Company and the Company derives substantially all of its revenues from the sale
of CTX 5000 Series units. The Company's orders to date have been received from a
limited number of customers and the majority of these have been from a single
customer, the Federal Aviation Administration ("FAA"). The commercial success of
the CTX 5000 Series will depend upon its acceptance by domestic and
international airports, government agencies and airlines as a useful and cost-
effective alternative to less expensive, higher throughput (i.e. bags per hour
or "bph") competing products employing different technologies. The large capital
commitment (approximately $1.0 million each) required to purchase units in the
CTX 5000 Series may limit the marketability of the CTX 5000 Series. In addition,
the Company's failure to compete successfully with respect to throughput, the
ability to scan all sizes of baggage, the ease of integration of the CTX 5000
Series into existing baggage handling systems and other factors could delay,
limit or prevent market acceptance of the CTX 5000 Series. Moreover, the market
for explosive detection system ("EDS") technology is largely undeveloped, and
the Company believes that the overall demand for EDS technology will depend
significantly upon public perception of the risk of terrorist attacks. There can
be no assurance that the public will perceive the threat of terrorist bombings
to be substantial or that the airline industry and governmental agencies will
actively pursue EDS technology. As a result, there can be no assurance the
Company will be able to achieve market penetration, revenue growth or
profitability. See "--Competition."
FLUCTUATIONS IN OPERATING RESULTS
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 size of orders from, and shipments to, major
customers; budgeting and purchasing cycles of its customers; delays in product
shipments caused customer readiness or integration issues; the timing of new or
enhanced product offerings to the CTX 5000 Series by InVision or introduction of
new products by it or its competitors and the certification of certain of these
products; changes in pricing policies by InVision, its competitors or suppliers,
including possible decreases in average selling prices of the CTX 5000 Series in
response to competitive pressures; the proportion of revenues derived from
competitive bid processes; the mix between sales to domestic and international
customers; market acceptance of enhanced versions of the CTX 5000 Series; the
availability and cost of key components; and fluctuations in demand driven by
general conditions affecting the aviation security industry beyond the control
of the Company. InVision also may choose to reduce prices or to increase
spending in response to competition or to pursue new market opportunities, all
of which may have a material adverse effect on InVision's business, financial
condition or results of operations. InVision's systems revenues in any period
are derived from sales of multiple CTX 5000 Series systems to a limited number
of customers and are recognized upon shipment which, in view of the high sales
price of units in the CTX 5000 Series, causes minor variations in the number of
orders, or the timing of shipments, to substantially affect the Company's
quarterly revenues. Because a significant portion of the Company's quarterly
operating expenses are, and will continue to be, relatively fixed in nature,
such revenue fluctuations will cause the Company's quarterly and annual
operating results to vary substantially. Accordingly, the Company believes that
period-to-period comparisons of its results of operations are not meaningful and
cannot be relied upon as indicators of future performance. Because of all of the
foregoing factors, the Company's operating results may be below the expectations
of public market analysts and investors in some future quarters, which would
likely result in a decline in the trading price of the Common Stock.
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DEPENDENCE ON SUPPLIERS
Certain key components used in the Company's products have been designed by
the Company to its specifications and are currently available only from one or a
limited number of suppliers. The Company currently does not have long-term
agreements with these suppliers. Moreover, in view of the high cost of many of
these components, the Company does not maintain significant inventories of some
necessary components. If the Company's suppliers were to experience financial,
operational, production or quality assurance difficulties, the supply of
components to the Company would be reduced or interrupted. In the event that a
supplier were to cease operations, discontinue a product or withhold supply for
any reason, the Company may be unable to acquire such product from alternative
sources within a reasonable period of time. The Company also uses a variety of
independent third party manufacturers and subassemblers. The inability of the
Company to develop alternative sources for single or sole source components, to
find alternative third party manufacturers or subassemblers, or to obtain
sufficient quantities of these components could result in delays or
interruptions in product shipments, which could have a material adverse effect
on the Company's business, financial condition or results of operations.
DEPENDENCE ON LARGE ORDERS; CUSTOMER CONCENTRATIONS; LENGTHY SALES CYCLE
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. While the number of
individual customers may vary from period-to-period, the Company is nevertheless
dependent upon these multiple orders for a substantial portion of its revenues.
There can be no assurance that the Company will obtain such multiple orders on a
consistent basis. During the six months year ended June 30, 1998, approximately
$30.9 million, or 99%, of the Company's revenues were generated from sales to
the Company's five largest customers. During the year ended December 31, 1997,
approximately $50.2 million, or 89.0%, of the Company's revenues were generated
from sales to the Company's five largest customers. During the 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. To date, all
orders from United States customers have been entirely funded by the FAA, and
the Company's largest sales contract to date, for 69 CTX 5000 Series systems, is
with the FAA. There can be no assurance that such funding or sales will continue
in the future. The Company's inability to obtain sufficient multiple orders or
the failure of the FAA to continue such purchases or funding would have a
material adverse effect on the Company's business, financial condition or
results of operations. Moreover, the timing and shipment of such orders could
cause the operating results in any quarter to differ from the projections of
securities analysts, which could adversely affect the trading price of the
Common Stock. Losses arising from customer disputes regarding shipping
schedules, product condition or performance, or the Company's inability to
collect accounts receivable from any major customer could also have a material
adverse effect on the Company's business, financial condition or results of
operations.
The Company's revenues depend in significant part upon the decision of a
government agency to upgrade and expand existing facilities, alter workflows and
hire additional technical expertise in addition to procuring the CTX 5000
Series, all of which involve a significant capital commitment as well as
significant future support costs. The sales cycle of the CTX 5000 Series is
often lengthy due to the protracted approval process that typically accompanies
large capital expenditures and the time required to manufacture the CTX 5000
Series and install and assimilate the CTX 5000 Series. Typically, six to twelve
months may elapse between a new customer's initial evaluation of the Company's
systems and the execution of a contract. Another three months to a year may
elapse prior to shipment of the CTX 5000 Series as the customer site is prepared
and the CTX 5000 Series is manufactured. During this period the Company expends
substantial funds and management resources but recognizes no associated revenue.
See "--Fluctuations in Operating Results."
PUBLIC AGENCY CONTRACT AND BUDGET CONSIDERATIONS
Substantially all of InVision's customers and a high percentage of
Quantum's research and development customers to date have been public agencies
or quasi-public agencies. In contracting with public agencies, the Company is
subject to public agency contract requirements which vary from jurisdiction to
jurisdiction and which are subject to budgetary processes and expenditure
constraints. Budgetary allocations for explosive detection systems, including
the budget proposal pending before the U. S. Congress on the date of this
Prospectus to
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appropriate $100,000,000 to purchase EDS in fiscal 1999, are dependent, in part,
upon governmental policies which fluctuate from time to time in response to
political and other factors, including the public's perception of the threat of
commercial airline bombings. Many domestic and foreign government agencies have
experienced budget deficits that have led to decreased capital expenditures in
certain areas. The Company's results of operations may be subject to
substantial period-to-period fluctuations as a result of these and other factors
affecting capital spending. A reduction of funding for explosive detection
technology deployment could materially and adversely affect the Company's
business, financial condition or results of operations. Future sales to public
agencies will depend, in part, on the Company's ability to meet public agency
contract requirements, certain of which may be onerous or even impossible for
the Company to satisfy. In addition, public agency contracts are frequently
awarded only after formal competitive bidding processes, which have been and may
continue to be protracted, and typically contain provisions that permit
cancellation in the event that funds are unavailable to the public agency. There
can be no assurance that the Company will be awarded any of the contracts for
which its products are bid or, if awarded, that substantial delays or
cancellations of purchases will not result from protests initiated by losing
bidders.
LIMITED FIELD OPERATIONS; DEPENDENCE ON OPERATOR PERFORMANCE
As of June 30, 1998, 117 CTX 5000 systems had been shipped to 34 airports
in thirteen countries around the world. A majority of these units were
installed since January 1997, and the Company's customers have only limited
experience with the operation of the CTX 5000 Series in high-volume airport
operations. Many of the factors necessary to make the overall baggage scanning
system a success, such as the CTX 5000 Series' integration with the baggage
handling system, ongoing system maintenance and the performance of operators,
are beyond the control of the Company. In particular, once the CTX 5000 Series
identifies a threat, the operator must make a determination whether the threat
is actual or a false alarm and, therefore, whether or not to allow the bag to
continue onto the aircraft. Unsatisfactory performance of operators can lead to
reduced efficacy of the CTX 5000 Series. The failure of the CTX 5000 Series to
perform successfully in deployments, whether due to the limited experience of
the Company's customers with the CTX 5000 Series, operator error or any other
reason, may have an adverse effect on the market's perception of the efficacy of
the CTX 5000 Series, which in turn could have a material adverse effect on the
Company's business, financial condition or results of operations.
MANAGEMENT OF GROWTH
As of June 30, 1998, the Company had produced a total of 117 CTX 5000. As
a result of the FAA's initial order of 54 CTX 5000 systems, the Company
substantially increased its rate of manufacture of the CTX 5000 systems in 1997,
which has placed significant demands on the Company's management, working
capital and financial and management control systems. Failure to continue to
upgrade the Company's operating, management and financial control systems when
necessary, or difficulties encountered during such upgrades, could have a
material adverse effect on the Company's business, financial condition or
results of operations. The continued success of the increase in production
capability will depend in part upon the Company's ability to continue to improve
and expand its engineering and technical resources and to attract, retain and
motivate key personnel. The failure of the Company to maintain such production
capability or to increase its revenues sufficiently to compensate for the
increase in operating expenses resulting from the recent or any future expansion
would have a material adverse effect on the Company's business, financial
condition or results of operations. To accommodate the increase in the
manufacturing rate, the Company entered into a lease in February 1997 for a new,
substantially larger, manufacturing facility. The operations of this new
facility require the Company to incur substantially larger fixed costs than it
has experienced in the past. Failure to maintain an order rate sufficient to
fully utilize this new manufacturing facility could have a material adverse
effect on the Company's business, financial condition or results of operations.
NO ASSURANCE OF CONTINUED CERTIFICATION; RISK OF CERTIFICATION OF COMPETING
TECHNOLOGIES; RISK OF CHANGING STANDARDS
The FAA has the responsibility for setting and maintaining performance standards
for explosive detection systems for all U.S. airlines, both in the United States
and abroad. The FAA Final Criteria for Certification of EDS, published in
September 1993, requires, among other things, a throughput of 450 bph for an
explosive detection
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system. The Company's CTX 5000 currently has been tested by the FAA at less than
450 bph and therefore has not been certified as a single unit. The CTX 5000,
when combined in a system consisting of two units, was certified by the FAA in
1994. In 1998 the Company's latest EDS, the CTX 5500 DS system, was certified
by the FAA with the ability to process bags 30% faster than the CTX 5000 at
comparable cost. As of September 1, 1998 no other EDS has been certified by the
FAA. There currently is no requirement that U.S. airlines or airports (or
international airlines or airports) deploy FAA-certified explosive detection
systems or that U.S. airlines or airports (or most international airlines or
airports) deploy explosive detection systems at all. Should the standards be
lowered, resulting in other lower priced or higher throughput explosive
detection systems becoming certified, or should other competitive systems
otherwise become certified, the Company would lose a significant competitive
advantage. Under such circumstances, there can be no assurance that the
Company's product would be able to compete successfully with these systems.
Accordingly, the certification by the FAA of any competing EDS could have a
material adverse effect on the Company's business, financial condition or
results of operations. In addition, should the FAA increase its certification
standards, there can be no assurance that the CTX 5000 Series would meet such
standards. See " Industry Background." The Company intends to continue to
modify the CTX 5000 Series in an effort to make throughput enhancements, cost
reductions and other modifications to the CTX 5000 Series based upon the
availability of adequate funds. Any such modifications, including updated
versions of the CTX 5000 Series, may require FAA approval in order to retain
certification or may require re-certification. There can be no assurance that
any such modifications will be approved or, if required, certified by the FAA,
and the failure to gain approval or certification for such products could have a
material adverse effect on the Company's business, financial condition or
results of operations. The Company believes that its long-term success will
depend in part upon its ability to manufacture an EDS that meets or exceeds the
throughput standards of the FAA Final Certification Criteria without being
combined with another unit.
COMPETITION FOR FAA GRANT
The U.S. Government currently plays an important role in funding the
development of EDS technology and sponsoring its deployment in U.S. airports.
Through June 30, 1998, the Company had received $12.1 million from FAA grants
and contracts. The Company is also aware that Lockheed Martin Corporation was
awarded a grant of approximately $8.5 million in January 1996 from the FAA,
subsequently transferred to its spin-out, L-3 Communications Corporation
("L-3"), for the design and development of a CT-based EDS over a two-year
period. Although the Company intends to continue to compete for additional
grants as they are announced by the FAA or other agencies of the U. S.
Government, there can be no assurance that additional research and development
funds will become available in the future or that the Company will receive any
such additional funds. Notwithstanding the lack of funding, the Company intends
to continue to increase research and development expenditures substantially.
Failure by the FAA to continue to sponsor the Company's technology could have a
material adverse effect on the Company's business, financial condition or
results of operations. In addition, the grant to L-3 and any future grants to
the Company's other competitors may improve such competitors' ability to develop
and market high detection EDS technology and cause the Company's customers to
delay any purchase decisions, which could have a material adverse effect on the
Company's ability to market the CTX 5000 Series and on the Company's business,
financial condition or results of operations.
DEPENDENCE ON PROPRIETARY TECHNOLOGY
The Company in the past has received, and from time to time in the future
may receive, communications from third parties alleging infringements by the
Company or one of its suppliers of patents or other intellectual proprietary
rights owned by such third parties. There can be no assurance that any
infringement claims (or claims for indemnification resulting from infringement
claims against third parties, such as customers) will not be asserted against
the Company. If the Company's product is found to infringe a patent, a court
may grant an injunction to prevent making, selling or using the product in the
applicable country. Protracted litigation may be necessary to defend the
Company against alleged infringement of others' rights. Irrespective of the
validity or success of such claims, defense of such claims could result in
significant costs to the Company and the diversion of time and effort by
management, either of which by itself could have a material adverse effect on
the business, financial condition or results of operations of the Company.
Further, adverse determinations in such litigation could result in the Company's
loss of proprietary rights, subject the Company to significant liabilities
(including treble damages in
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certain circumstances), or prevent the Company from selling its products. If
infringement claims are asserted against the Company, the Company may seek to
obtain a license of such third party's intellectual property rights, which may
not be available under reasonable terms or at all. In addition, litigation may
be necessary to enforce patents issued to or licensed exclusively to the Company
and to protect trade secrets or know-how owned or licensed by the Company and,
whether or not the Company is successful in defending such intellectual
property, the Company could incur significant costs and divert considerable
management and key technician time and effort with respect to the prosecution of
such litigation, either of which by itself could have a material adverse effect
on the business, financial condition or results of operations of the Company.
INTERNATIONAL BUSINESS; RISK OF CHANGE IN FOREIGN REGULATIONS; FLUCTUATION IN
EXCHANGE RATES
The Company markets its products to customers outside of the United States
and, accordingly, is exposed to the risks of international business operations,
including unexpected changes in regulatory requirements, changes in foreign
control legislation, possible foreign currency controls, uncertain ability to
protect and utilize its intellectual property in foreign jurisdictions, currency
exchange rate fluctuations or devaluation, tariffs or other barriers,
difficulties in staffing and managing foreign operations, difficulties in
obtaining and managing vendors and distributors, and potentially negative tax
consequences. International sales are subject to certain inherent risks
including tariffs, embargoes and other trade barriers, staffing and operating
foreign sales and service operations and collecting accounts receivable. The
Company is also subject to risks associated with regulations relating to the
import and export of high technology products. The Company cannot predict
whether quotas, duties, taxes or other charges or restrictions upon the
importation or exportation of the Company's products in the future will be
implemented by the United States or any other country. Fluctuations in currency
exchange rates could cause the Company's products to become relatively more
expensive to customers in a particular country, leading to a reduction in sales
or profitability in that country. There can be no assurance that any of these
factors will not have a material adverse effect on the Company's business,
financial condition or results of operations.
PRODUCT LIABILITY RISKS; RISK OF FAILURE TO DETECT EXPLOSIVES; AVAILABILITY OF
INSURANCE
The Company's business exposes it to potential product liability risks
which are inherent in the manufacturing and sale of explosive detection systems.
There are many factors beyond the control of the Company that could lead to
liability claims, such as the reliability of the customer's operators, the
training of the operators after the initial installation and training period,
and the maintenance of the units by the customers. For these and other reasons,
including software and hardware limitations and malfunctions of the CTX 5000
Series, there can be no assurance that the systems will detect all explosives
hidden in the luggage scanned. The Company does not believe that it would be
liable for any such claims, but the cost of defending any such claims would be
significant and any adverse determination may be in excess of the Company's
insurance coverage. Moreover, the failure of the CTX 5000 Series to detect an
explosive would also result in negative publicity which could have a material
adverse effect on sales and may cause customers to cancel orders already placed,
either of which could have a material adverse effect on the Company's business,
financial condition or results of operations. Many of the Company's customers
require the Company to maintain insurance at certain levels. The Company
currently has product liability insurance in the amount of $150 million. There
can be no assurance that additional insurance coverage, if required by customers
or otherwise, could be obtained on acceptable terms, if at all.
UNCERTAINTY OF PRODUCT DEVELOPMENT
The Company's success will depend upon its ability to enhance its existing
products, and to develop new products to meet regulatory and customer
requirements and to achieve market acceptance. The enhancement and development
of these products will be subject to all of the risks associated with new
product development, including unanticipated delays, expenses, technical
problems or other difficulties that could result in the abandonment or
substantial change in the commercialization of these enhancements or new
products. Given the uncertainties inherent with product development and
introduction, there can be no assurance that the Company will be successful in
introducing products or product enhancements, including products that meet FAA
certification standards, on a timely basis, if at all, or that the Company will
be able to market successfully these products and product enhancements once
developed.
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RISKS ASSOCIATED WITH POTENTIAL ACQUISITIONS
An element of the Company's strategy is to review acquisition prospects
that would complement its existing product offerings, augment its market
coverage, enhance its technological capabilities or otherwise offer growth
opportunities. Future acquisitions by the Company could result in potentially
dilutive issuances of equity securities, the incurrence of debt and contingent
liabilities, and amortization expenses related to goodwill and other intangible
assets, any of which could have a material adverse effect on the Company's
business, financial condition or results of operations. Acquisitions entail
numerous risks, including difficulties in the assimilation of acquired
operations, technologies and products, diversion of management's attention from
other business concerns, risks of entering markets in which the Company has no
or limited prior experience and potential loss of key employees of acquired
organizations. The Company's management has limited experience in assimilating
acquired organizations. No assurance can be given as to the ability of the
Company to successfully integrate any businesses, products, technologies or
personnel that might be acquired in the future, and the failure of the Company
to do so could have a material adverse effect on the Company's business,
financial condition or results of operations.
CONCENTRATION OF OWNERSHIP; CONTROL BY MANAGEMENT
As of April 13, 1998, the Company's principal stockholder, HARAX Holding,
S.A. ("HARAX"), and its affiliates held approximately 21.6% of the Company's
Common Stock, and the present directors and executive officers of the Company
and their affiliates, in the aggregate, beneficially owned approximately 12.1%
of the outstanding Common Stock, in each case including shares issuable pursuant
to stock options exercisable within 60 days of April 13, 1998. Consequently,
HARAX together with the Company's directors and executive officers, acting in
concert, have the ability to significantly affect the election of the Company's
directors and have a significant effect on the outcome of corporate actions
requiring stockholder approval. In addition, HARAX, acting alone, will have the
power to significantly affect matters relating to the Company's affairs and
business.
ANTI-TAKEOVER PROVISIONS
The Company's Restated Certificate of Incorporation contains certain
provisions that may discourage bids for the Company. This could limit the price
that certain investors might be willing to pay in the future for shares of the
Common Stock.
YEAR 2000 COMPLIANCE
The CTX 5000 Series contains installed computer systems and software
products which are coded to accept only two digit entries in the date code
field. Beginning in the year 2000, these date code fields will need to accept
four digit entries to distinguish 21st century dates from 20th century dates.
While uncertainty exists concerning the potential effects associated with such
compliance, the Company does not believe that year 2000 compliance will result
in a material adverse effect on its financial condition or results of
operations.
The Company also currently uses software and related computerized
management information and financial reporting systems that will be affected by
the date change in the year 2000. The year 2000 issue exists because many
computer systems and applications currently utilize two-digit date fields,
rather than four-digit date fields, to define the applicable year. When the
millennium date change occurs, date-sensitive systems will recognize the year
2000 as the year 1900, or not at all. This inability to recognize or properly
treat the year 2000 may result in systems failure or cause systems to process
critical financial and operational information incorrectly.
Based on ongoing assessments, the Company has determined that it will be
required to modify or upgrade portions of its computer software so that its
computer systems will properly use and recognize dates beyond December 31, 1999.
Based on preliminary information compiled by the Company, the Company does not
believe that the costs of addressing the year 2000 will be material to Company.
Other factors that may affect the Company's costs in addressing the year 2000
issue include, but are not limited to, the availability and cost of personnel
trained in this area, the ability to locate and correct all relevant computer
codes, and similar uncertainties. The Company
9
<PAGE>
expects to complete all year 2000 programming changes during fiscal 1999. The
estimated costs of and time frame related to this project are based on estimates
of the Company's management, and there can be no assurance that actual costs
will not differ materially from the current expectations. In addition, the
Company's ability to interface with its customers, particularly with respect to
electronic data interchange programs, may be impacted by the failure of its
customers to make the appropriate upgrades or modifications to their programs to
address the year 2000 issue. Nevertheless, the Company does not expect that the
costs of addressing potential problems relating to the year 2000 issue will have
a material adverse impact on the Company's financial position, results of
operations or cash flows in future periods. Although the Company plans to
devote the necessary resources to resolve all significant year 2000 issues in a
timely manner, if such processing issues are not resolved in a timely manner,
the year 2000 issue could have a material impact on the operations and financial
conditions of the Company.
VOLATILITY OF STOCK PRICE
Since the Company's initial public offering in April 1996, the price of the
Company's Common Stock has fluctuated widely, with sales on The Nasdaq Stock
Market ranging from, on a post-split basis, $4.63 to $17.88. The market price of
the shares of Common Stock, like that of the common stock of many other high
technology companies, is highly volatile. The Company believes that factors
such as the crash of TWA Flight 800, the Report of the White House Commission on
Aviation Safety and Security, chaired by Vice President Gore, and the entering
into of the FAA contract for 69 CTX 5000 systems have greatly affected the
fluctuation in the Company's Common Stock trading price. In the future such
events, as well as announcements of technological innovations or new products by
the Company or its competitors and general market conditions, may have a
significant effect on the market price of the Common Stock. In addition, in
recent years the stock market in general, and the market for small
capitalization stocks in particular, has experienced extreme price fluctuations
which have often been unrelated to the operating performance of affected
companies. Such fluctuations could adversely affect the market price of the
Company's Common Stock.
SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS
Sales of substantial amounts of Common Stock in the public market could
have an adverse effect on the trading price of the Common Stock. Based on
shares outstanding as of April 13, 1998, the Company has outstanding
approximately 12,031,077 shares of Common Stock. Of such shares outstanding,
approximately 9,147,372 shares are freely tradable or may be sold immediately
pursuant to Rules 144 or 145 under the Securities Act. Of the remaining shares
outstanding, approximately 2,592,982 shares may be sold pursuant to Rule 144
subject to the volume limitations thereunder and approximately 290,723 may be
sold pursuant to Rule 145 subject to the volume limitations thereunder. The
volume limitations with respect to the 290,723 shares terminate on September 30,
1998.
The Company has entered into an agreement with a stockholder pursuant to
which 479,318 shares are currently registered for resale under the Securities
Act, has entered into an agreement with the Selling Stockholder pursuant to
which the 180,000 shares issuable pursuant to the Warrant and offered hereby are
registered for resale under the Securities Act, and has entered into agreements
with certain of its stockholders and others pursuant to which such persons have
the right to require the Company to register up to an aggregate of 213,940
additional shares of Common Stock for resale under the Securities Act.
10
<PAGE>
MATERIAL CHANGES
In May 1998 the Board of Directors of the Company adopted a stock
repurchase program, in which management of the Company is authorized to
repurchase up to 500,000 shares of the Company's Common Stock on the open market
at prevailing market prices or in negotiated transactions off the market. As of
June 30, 1998, the Company had repurchased approximately 81,000 shares of Common
Stock. The Company has not repurchased any shares since June 10, 1998 and there
can be no assurance that all of such shares will ultimately be repurchased by
the Company.
SELLING STOCKHOLDER
The following table sets forth certain information regarding the number of
shares of Common Stock owned beneficially by the Selling Stockholder as of June
30, 1998 and the number of shares which may be offered pursuant to this
Prospectus. This information is based upon information provided by the Selling
Stockholder. Because the Selling Stockholder may sell all, some or none of his
Common Stock being offered, no definitive estimate as to the number of shares
thereof that will be held by the Selling Stockholder after this offering can be
provided.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES
OWNED PRIOR TO BEING
NAME OFFERING (1) OFFERED
----- ------------------- -------
NUMBER PERCENT
-------- -------
<S> <C> <C> <C>
Donald & Co. Securities Inc. . . . . . . . . . 180,000 1.5% 180,000
</TABLE>
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(1) Applicable percentage of ownership at June 30, 1998 is based upon
approximately 12,009,672 shares of Common Stock outstanding. Beneficial
ownership is determined in accordance with the rules of the Securities and
Exchange Commission and includes sole or shared voting or investment power
with respect to shares shown as beneficially owned.
On April 30, 1996, the Company issued a warrant (the "Warrant") to purchase
180,000 shares of Common Stock to the Selling Stockholder in connection with the
Company's initial public offering of its Common Stock, in which the Selling
Stockholder acted as underwriter. The Warrant may be exercised at an exercise
price of $6.60 per share. The Warrant also contains provisions for the
adjustment of the exercise price and the aggregate number of shares issuable
upon exercise of the Warrant under certain circumstances, including stock
dividends, stock splits, reorganizations, reclassifications and consolidations,
and will expire on April 22, 2001. The foregoing number of shares subject to
the Warrant and exercise price have been adjusted to reflect a 2-for-1 Common
Stock split in the form of a stock dividend effected on February 7, 1997.
The Selling Stockholder was the lead underwriter in the Company's initial
public offering of its Common Stock which occurred in April 1996, was an
underwriter in the Company's public offering of its Common Stock in May 1997,
and is a market maker in the Company's Common Stock. In addition, from time to
time, a principal of the Selling Stockholder attends meetings of the Board of
Directors and advises the Board of Directors on market conditions and other
matters. The Selling Stockholder is also assisting the Company in connection
with the Company's stock repurchase program.
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<PAGE>
PLAN OF DISTRIBUTION
The shares of Common Stock offered by the Selling Stockholder may be sold
from time to time to purchasers directly by the Selling Stockholder acting as
principal for its own account in one or more transactions at a fixed price,
which may be changed, or at varying prices determined at the time of sale or at
negotiated prices. Alternatively, the Selling Stockholder may from time to time
offer the Common Stock through underwriters, dealers or agents who may receive
compensation in the form of underwriting discounts, commissions or concessions
from the Selling Stockholder and/or the purchasers of shares for whom they may
act as agent. In addition, the shares of Common Stock may be pledged from time
to time by the Selling Stockholder to a lender to secure one or more loans, and
defaults under that loan or loans may result in the pledgee acquiring title to
some or all of the shares and selling them either directly or through
underwriters, dealers or agents. Sales may be made on the Nasdaq National Market
or in private transactions. The Selling Stockholder is itself an underwriter
and a broker/dealer, and is a market maker in the Company's Common stock.
The Selling Stockholder and any underwriters, dealers, agents or pledgees
that participate in the distribution of the Common Stock offered hereby may be
deemed to be underwriters within the meaning of the Act and any discounts,
commissions or concessions received by them and any provided pursuant to the
sale of shares by them might be deemed to be underwriting discounts and
commissions under the Act.
In order to comply with the securities laws of certain states, if
applicable, the Common Stock will be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states the
Common Stock may not be sold unless it has been registered or qualified for sale
or an exemption from registration or qualification requirements is available and
is complied with.
Pursuant to an agreement with the Selling Stockholder, the Company will pay
substantially all of the expenses incident to the offering and sale to the
public of the Common Stock offered hereby, other than commissions, concessions
and discounts of underwriters, dealers or agents. Such expenses (excluding such
commissions and discounts) are estimated to be approximately $6,500.
LEGAL MATTERS
The validity of the Common Stock offered hereby has been passed upon for
the Company by Cooley Godward LLP, Palo Alto, California.
EXPERTS
The financial statements and schedules appearing in the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1997, have been
audited by PricewaterhouseCoopers LLP, independent accountants, as set forth in
their report thereon included therein and incorporated herein by reference.
Such financial statements and schedules are incorporated herein by reference in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
12
<PAGE>
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NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, THE SELLING STOCKHOLDER
OR BY ANY OTHER PERSON. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR
A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SHARES OF COMMON
STOCK OFFERED HEREBY, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION
TO BUY ANY OF THE SHARES OFFERED HEREBY TO ANY PERSON IN ANY JURISDICTION IN
WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL OR TO ANY PERSON TO WHOM IT
IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY OFFER OR SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Available Information . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Incorporation of Certain Documents by
Reference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Forward Looking Statements. . . . . . . . . . . . . . . . . . . . . . . . . 3
The Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Risk Factors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Material Changes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Selling Stockholder . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Plan of Distribution. . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
</TABLE>
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180,000 SHARES
INVISION TECHNOLOGIES, INC.
COMMON STOCK
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PROSPECTUS
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SEPTEMBER 9, 1998
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