<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 SEPTEMBER 30, 1998 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 of (I.R.S. Employer
incorporation or organization) Identification No.)
7151 GATEWAY BOULEVARD, NEWARK, CA 94560
(Address of principal executive offices, including zip code)
(510) 739-2400
(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 September 30, 1998, there were 12,068,827 shares of the Registrant's
Common Stock outstanding.
<PAGE>
INVISION TECHNOLOGIES, INC.
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
ITEM PAGE
- - ---- ----
<S> <C>
PART I: FINANCIAL INFORMATION
1. Condensed Consolidated Financial Statements (unaudited)
a. Condensed Consolidated Balance Sheets - September 30, 1998
and December 31, 1997 ....................................... 3
b. Condensed Consolidated Statements of Income - Three months
and nine months ended September 30, 1998 and 1997 .......... 4
c. Condensed Consolidated Statements of Cash Flows - Nine
months ended September 30, 1998 and 1997 .................... 5
d. Notes to Condensed Consolidated Financial Statements ........ 6
2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ................................... 9
PART II. OTHER INFORMATION
6. Exhibits and Reports on Form 8-K ...................................... 19
Signature Page ............................................................. 20
Exhibits ................................................................... 21
</TABLE>
2
<PAGE>
INVISION TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
(Unaudited)
September 30, December 3l,
1998 1997
------------- ------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 10,524 $ 14,111
Restricted cash 256 1,556
Short-term investments 2,045 5,079
Accounts receivable 22,980 16,847
Inventories 11,653 10,781
Other current assets 2,365 531
-------- --------
Total current assets 49,823 48,905
Long-term restricted cash 1,000 800
Property and equipment, net 8,136 7,180
Other assets 1,326 366
-------- --------
$ 60,285 $ 57,251
-------- --------
-------- --------
Liabilities and stockholders' equity
Current liabilities:
Accounts payable 4,122 5,097
Accrued liabilities 5,369 4,032
Short-term debt 3,608 4,168
Deferred revenue 769 3,376
Current maturities of long-term obligations 361 426
-------- --------
14,229 17,099
-------- --------
Long-term obligations 1,253 1,336
-------- --------
Stockholders' equity:
Common stock, $0.001 par value, 20,000 shares 12 12
authorized; 12,069 and 11,906 issued and outstanding
Additional paid-in capital 57,235 56,602
deferred compensation expense (148) (199)
Accumulated deficit (11,608) (17,599)
Treasury stock, at cost (81 shares in 1998) (688) -
-------- --------
Total stockholders' equity 44,803 38,816,
-------- --------
$ 60,285 $ 57,251
-------- --------
-------- --------
</TABLE>
The accompanying notes are an integral part of
these condensed consolidated financial statements.
3
<PAGE>
INVISION TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------- -----------------------
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues $ 16,464 $ 15,458 $ 47,776 $ 38,243
Cost of Revenues 8,906 7,731 26,194 19,132
-------- -------- -------- --------
Gross profit 7,558 7,727 21,582 19,111
-------- -------- -------- --------
Operating expenses:
Research and development 1,932 1,762 5,241 5,189
Sales and marketing 1,604 1,399 4,842 4,242
General and administrative 1,647 1,457 5,077 4,486
Acquisition costs - 685 - 685
-------- -------- -------- --------
Total operating expenses 5,183 5,303 15,160 14,602
-------- -------- -------- --------
Income from operations 2,375 2,424 6,422 4,509
Interest expense (158) (58) (240) (346)
Interest and other income, net 191 (132) 626 70
-------- -------- -------- --------
Income before provision for income taxes 2,408 2,234 6,808 4,233
Provision for income taxes 289 246 817 720
-------- -------- -------- --------
Net income $ 2,119 $ 1,988 $ 5,991 $ 3,513
-------- -------- -------- --------
-------- -------- -------- --------
Net Income per share:
Basic $ 0.18 $ 0.17 $ 0.50 $ 0.32
-------- -------- -------- --------
-------- -------- -------- --------
Diluted $ 0.17 $ 0.15 $ 0.47 $ 0.29
-------- -------- -------- --------
-------- -------- -------- --------
Weighted average shares outstanding:
Basic 12,048 11,877 12,040 10,886
Diluted 12,760 12,853 12,853 11,943
</TABLE>
The accompanying notes are an integral part of
these condensed consolidated financial statements.
4
<PAGE>
INVISION TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
Nine months ended
September 30,
----------------------
1998 1997
------- -------
<S> <C> <C>
Net cash used in operating activities $(3,739) $(2,220)
------- -------
Cash flows from investing activities:
Purchases of property and equipment (2,259) (4,928)
Sales (purchases) of short-term investments, net 3,034 (3,990)
Release of (additions to) restricted cash, net 1,100 (800)
Additions to other assets (960) -
------- -------
Net cash provided by (used in) investing activities 915 (9,718)
------- -------
Cash flows from financing activities:
Proceeds from debt financing 4,081 4,287
Repayments of debt financing (4,789) (2,376)
Repurchases of common stock (688) -
Proceeds from issuance of common stock, net 633 22,298
------- -------
Net cash provided by (used in) financing activities (763) 24,209
------- -------
Net increase (decrease) in cash and cash equivalents for the period (3,587) 12,271
Cash and cash equivalents at beginning of period 14,111 2,471
------- -------
Cash and cash equivalents at end of period $10,524 $14,742
------- -------
------- -------
Supplemental disclosures of cash flow information:
Interest paid $ 238 $ 150
Income taxes paid $ 757 $ 116
Supplemental disclosures of noncash financing and investing activities:
Property and equipment acquired under capital leases $ - $ 9
Sale of fixed assets in exchange for note receivable $ - $ 100
Purchase of intangibles and fixed assets for note payable $ - $ 330
Warrants issued in connection with financing agreements $ - $ 56
Issuance of common stock as compensation $ - $ 240
</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 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 InVision
Technologies Inc. and its subsidiaries (the "Company") as of December 31,
1997 and 1996 and for each of the three years in the period ended December
31, 1997, including notes thereto, included in the Company's Annual Report on
Form 10-K (Commission File No. 0-20815).
Operating results for the three month and nine month periods ended
September 30, 1998 may not necessarily be indicative of the results that may
be expected for the year ended December 31, 1998 or any other future period.
Certain prior period amounts have been reclassified to conform to the
current period presentation.
2. NET INCOME PER SHARE
In December 1997, the Company adopted Statement of Financial Accounting
Standards No. 128 ("FAS 128"), "Earnings Per Share." All historical earnings
per share information has been restated as required by FAS 128.
Basic earnings per share is computed by dividing income available to
common stockholders by the weighted-average common shares outstanding for the
period. Diluted earnings per share reflects the weighted-average common
shares outstanding plus the potential effect of dilutive securities or
contracts which are convertible to common shares such as options, warrants,
convertible debt and preferred stock.
The following is a reconciliation between the components of the
basic and diluted net income per share calculations for the periods presented
below (in thousands, except per share amounts):
<TABLE>
<CAPTION>
Three months ended September 30, Nine months ended September 30,
---------------------------------------------- ----------------------------------------------
1998 1997 1998 1997
---------------------- ---------------------- ---------------------- ----------------------
Per Per Per Per
Share Share Share Share
Income Shares Amount Income Shares Amount Income Shares Amount Income Shares Amount
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Basic net income per share:
Income available to
common stockholders $2,119 12,048 $0.18 $1,988 11,877 $0.17 $5,991 12,O40 $0.50 $3,513 10,886 $0.32
Effect of dilutive securities
Options 712 976 813 1,057
------ ------ ------ ------ ------ ------ ------ ------
Diluted net income per share:
Income available to common
stockholders plus assumed
conversions $2,119 12,760 $0.17 $1,988 12,853 $0.15 $5,991 12,853 $0.47 $3,513 11,943 $0.29
------ ------ ------ ------ ------ ------ ------ ------
</TABLE>
The computation of diluted net income per share for the three months and nine
months ended September 30, 1998 does not include shares issuable upon
exercise of options in the amounts of 341,038 and 271,492, respectively,
because to do so would have been anti-dilutive for the periods presented.
6
<PAGE>
INVISION TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
3. ACCOUNTS RECEIVABLE
The components of accounts receivable consist of the following (in
thousands):
<TABLE>
<CAPTION>
SEPT. 30, DEC. 31,
1998 1997
-------- --------
<S> <C> <C>
Billed $ 16,836 $ 11,009
Unbilled 6,144 5,838
-------- --------
$ 22,980 $16,847
-------- --------
-------- --------
</TABLE>
4. INVENTORIES
The components of inventory consist of the following (in thousands):
<TABLE>
<CAPTION>
SEPT. 30, DEC. 31,
1998 1997
-------- --------
<S> <C> <C>
Raw Materials $ 5,801 $ 6,817
Work-in-process 5,719 3,290
Finished goods 133 674
-------- --------
$ 11,653 $ 10,781
-------- --------
-------- --------
</TABLE>
5. PROPERTY AND EQUIPMENT
The components of property and equipment consist of the following (in
thousands):
<TABLE>
<CAPTION>
SEPT. 30, DEC. 31,
1998 1997
-------- --------
<S> <C> <C>
Machinery and equipment $ 4,618 $ 3,626
Self constructed assets 3,360 2,249
Furniture and fixtures 1,071 976
Leasehold improvements 2,933 2,872
-------- --------
11,982 9,723
Less: accumulated depreciation (3,846) (2,543)
-------- --------
$ 8,136 $ 7,180
-------- --------
-------- --------
</TABLE>
6. STOCKHOLDERS' EQUITY
In late October 1998, the Company offered employees and consultants the
opportunity to participate in an option repricing program. Under the
program, each employee and consultant could elect on or before November 9
that his or her existing option issued under the Company's Equity Incentive
Plan be converted into a repriced option. The per share exercise price of
each repriced option would be equal to the greater of the fair market value
of the Company's common stock on the conversion date (November 9, 1998) or
$6.93. In return for the lower exercise price, the repriced options issued
would be subject to a blackout period whereby no options could be exercised
between November 9, 1998 and May 8, 1999. The number of shares vested under
the converted option would vest immediately under the repriced option. All
remaining shares subject to the repriced option would
7
<PAGE>
INVISION TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
vest over a period that is equivalent to the vesting period remaining under
the converted option. On November 9, the fair market value of the Company's
common stock was $6.50 and options for a total of 313,986 shares were
repriced at $6.93 per share. The weighted average per share exercise price of
the outstanding shares subject to the options prior to conversion was $10.55
and the range of exercise prices was $7.69-$14.56.
In May 1997, the Company sold 1,875,000 shares of common stock in an
underwritten public offering at $12.00 per share generating net proceeds to
the Company of approximately $21.2 million including proceeds from the
underwriters over-allotment option exercised in June 1997.
In October 1998, the Company repurchased an additional 33,900 shares of
its common stock at prevailing market prices.
7. ACQUISITION OF QUANTUM MAGNETICS, INC.
On September 30, 1997, the Company acquired Quantum Magnetics, Inc.
("Quantum"), a developer of explosive systems based upon quadrupole resonance
technology. The transaction has been accounted for as a pooling of interests
effective September 30, 1997; therefore, all prior periods have been restated.
Prior to the acquisition, Quantum used a September 30 fiscal year end.
The financial statements of the Company have been restated to combine the
results of Quantum as if it had used a December 31 year end. Non-recurring
expenses associated with the acquisition, comprised primarily of outside
accounting and legal fees, amounted to $685,000 and have been included in
acquisition costs in the statement of income.
In July 1997, the Company sold a portion of a prior investment in
Quantum for net cash proceeds of $312,000 resulting in a loss of $402,000
which has been included in interest and other income, net in the statement of
income. The sale reduced the Company's ownership interest in Quantum in
order to comply with pooling-of-interests accounting rules.
8
<PAGE>
INVISION TECHNOLOGIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS WHICH
INVOLVE RISKS AND UNCERTAINTIES. WHEN USED IN THIS DISCUSSION, 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 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, RISKS INHERENT TO DOING
BUSINESS WITH PUBLIC AGENCIES WHICH ARE SUBJECT TO LEGISLATIVE BUDGETING AND
OTHER LIMITATIONS, 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, 1997 AND SUBSEQUENT QUARTERLY REPORTS ON FORM 10-Q.
OVERVIEW
InVision Technologies, Inc. ("InVision," or together with its
subsidiaries, the "Company") designs, manufactures and markets explosive
detection systems based on advanced "CT" or CAT Scan technology. InVision was
formed in September 1990 to design and develop the CTX 5000 and remained in
the development stage through December 1994. In March 1994, InVision 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 140 CTX Series systems of which a total of 132 had been shipped as
of September 30, 1998. Today the Company markets its more advanced CTX 5000
and CTX 5500 explosive detection systems (the "CTX 5000 Series") and has
other products under development.
On September 30, 1997, InVision acquired Quantum Magnetics, Inc.,
("Quantum") a privately held developer of explosive detection equipment based
on quadrupole resonance technology. The transaction has been accounted for
as a pooling of interests in the quarter ended September 30, 1997; therefore,
all prior periods have been restated to include Quantum's results. Quantum
is currently a development stage company with products in the prototype stage
and an order from the FAA to supply two QSCAN-500 advanced technology
systems. Quantum is also a leading supplier of research and development
services, in the area of magnetic sensing and detection technologies, to a
number of government agencies.
For the three month and nine month periods ended September 30, 1998, the
Company had revenues of $16.5 million and $47.8 million, respectively, and as
of September 30, 1998 had backlog equipment orders, service agreements and
R&D contracts of approximately $21.8 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
explosive detection systems based on CT technology. At September 30, 1998,
the Company had 106 full-time employees engaged in research and development
activities while also using the services of 23 specialized contract employees
and consultants in this area. Total research and development expenditures by
the Company are partially offset by amounts reimbursed by the Federal
Aviation Administration ("FAA") and other government and private agencies
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 nine months ended September 30, 1998 and 1997, the Company
spent $12.5 million and $9.6 million, respectively, on research and
development activities. Of these amounts, $7.3 million and $4.4 million,
respectively, were funded by the FAA and other government and private
agencies under development contracts and grants. To the extent that 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.
9
<PAGE>
INVISION TECHNOLOGIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
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 nine
months of 1998, approximately $31.7 million, or 66%, of the Company's
revenues, were generated from sales to the Company's largest customer, the
U.S. government. During the fiscal year ended December 31, 1997, revenues
from the Company's largest customer, the U.S. government, were approximately
$32.1 million, or 54%, 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 Series
primarily through direct sales personnel. Internationally, the Company
utilizes both a direct sales force and authorized agents to sell its
products. During the nine months ended September 30, 1998 and the year ended
December 31, 1997, international sales represented 34% and 46%, respectively,
of the Company's revenues.
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
system 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.
The Company recognizes revenue upon 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.
10
<PAGE>
INVISION TECHNOLOGIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
RESULTS OF OPERATIONS
The following table sets forth, certain income and expenditure items
from the Company's condensed consolidated statements of operations expressed
as a percentage of revenues for the periods indicated.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------- ---------------------
1998 1997 1998 1997
------ ------ ------ ------
<S> <C> <C> <C> <C>
Revenues 100.00% 100.00% 100.00% 100.00%
Cost of revenues: 54.09 50.01 54.83 50.03
------ ------ ------ ------
Gross Profit 45.91 49.99 45.17 49.97
------ ------ ------ ------
Operating expenses:
Research and development 11.73 11.40 10.97 13.57
Sales and marketing 9.74 9.05 10.13 11.09
General and administrative 10.00 9.43 10.63 11.73
Acquisition costs - 4.43 - 1.79
------ ------ ------ ------
Total operating expenses 31.47 34.31 31.73 38.18
------ ------ ------ ------
Income from operations 14.43 15.68 13.44 11.79
Interest expense (0.96) (0.38) (0.50) (0.90)
Interest and other income, net 1.16 (0.85) 1.31 0.18
------ ------ ------ ------
Income before provision for income taxes 14.64 14.45 14.25 11.07
Provision for income taxes 1.76 1.59 1.71 1.88
------ ------ ------ ------
Net income (loss) 12.88% 12.86% 12.54% 9.19%
------ ------ ------ ------
------ ------ ------ ------
</TABLE>
CURRENT QUARTER COMPARED TO PRIOR YEAR QUARTER
REVENUES. The Company's revenues are comprised of system revenues,
which include sales of the CTX 5000 Series, accessories, installation and
configuration, and maintenance related to product support.
Revenues were $16.5 million for the third quarter of 1998, an increase
of 6.5% from the $15.5 million in the third quarter of 1997. This increase
was primarily due to the initial shipments on the order from the FAA to
upgrade all 59 CTX 5000 systems previously purchased by the FAA to the
Company's second-generation CTX 5500 system. In the third quarter of 1998,
the Company shipped 15 units (10 units to the FAA and 5 units to
international customers) and the first 12 of the 59 CTX 5500 upgrades,
compared to 16 units (13 units to the FAA and 3 units to international
customers), in the third quarter of 1997. The Company typically ships against
a backlog of orders for its products. The backlog (excluding R&D contracts)
as of September 30, 1998 was $15.7 million, compared to $46.8 million as of
September 30, 1997.
Quantum research and development contracts were reported as revenues
prior to the acquisition by Invision. All Quantum research and development
revenues have been classified as a reduction to research and development
expense to conform with the Company's policy.
11
<PAGE>
INVISION TECHNOLOGIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
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 was $7.6 million in the
third quarter of 1998, a decrease of 2.2% from the $7.7 million in the third
quarter of 1997. Gross margins were 45.9% and 50.0%, respectively. The
decrease in gross margins from the same quarter in 1997 was primarily due to
higher manufacturing overhead costs as a result of the Company's relocation
to a new facility in late 1997.
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 research and development costs are
expensed as incurred. Research and development expenditures by the Company
are partially offset by amounts reimbursed by the FAA and other government
and private agencies under development contracts and grants. These services
are provided on both a cost and cost plus basis. 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.
Net research and development expenses would have been $2.2 million in
the third quarter of 1998 without the capitalization of software development
costs in accordance with Statement of Financial Accounting Standards No. 86
("FAS 86"), "Accounting for the Costs of Computer Software to be Sold,
Leased, or Otherwise Marketed." Under FAS 86, software production costs for
computer software that is to be used as an integral part of the product or
process are to be capitalized once technological feasibility has been
established for the software and all research and development activities for
the other components of the product or process have been completed. No
software development costs were capitalized in the third quarter of 1997
because research and development on the new product line had not been
completed. Before considering the impact of software capitalization, gross
research and development expenditures were $4.7 million in the third quarter
of 1998, an increase of 23.5% from the $3.8 million in the third quarter of
1997. Of these amounts, $2.5 million and $2.1 million, respectively, were
funded by research and development contracts and grants from the FAA and
other governmental and private entities. As a percentage of revenues, net
research and development expenditures were 11.7% in the third quarter of
1998, compared to 11.4% in the third quarter of 1997. The increase in
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 were $1.6 million in the third quarter
of 1998, an increase of 14.7% from the $1.4 million in the third quarter of
1997. As a percentage of revenues, sales and marketing expenditures were 9.7%
in the third quarter of 1998, compared to 9.1% in the third quarter of 1997.
The increase in sales and marketing expenditures in the 1998 quarters is
primarily the result of personnel additions.
12
<PAGE>
INVISION TECHNOLOGIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
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 were $1.6 million in the third
quarter of 1998, an increase of 13.0% from the $1.5 million in the third
quarter of 1997. As a percentage of revenues, general and administrative
expenses were 10.0% in the third quarter of 1998, compared to 9.4% in the
third quarter of 1997. The increase in general and administrative expenses is
primarily the result of personnel additions and increased professional and
consulting costs associated with the Company's growth, increased insurance
costs, and increased costs of operations associated with being a publicly
traded company.
INTEREST EXPENSE. Interest expense in the third quarters of 1998 and
1997 resulted primarily from short-term debt outstanding during each period.
INTEREST AND OTHER INCOME, NET. Interest and other income, net,
increased to $191,000 in the third quarter of 1998 from $(132,000) in the
third quarter of 1997. The 1998 amount consists primarily of interest income
for the quarter on cash and short-term investment balances in the quarter.
The 1997 amount consists primarily of interest income for the quarter on
cash and short-term balances in the quarter offset by a loss of $402,000 on
the sale of Quantum stock prior to the Quantum acquisition.
PROVISION FOR INCOME TAXES. The provision for income taxes was $289,000
in the third quarter of 1998, representing an effective tax rate of 12.0% for
the period. The provision for income taxes of $246,000 in the third quarter
of 1997 reflects the provision adjustment based on an effective tax rate of
17.0% for the year.
CURRENT NINE MONTH PERIOD COMPARED TO PRIOR NINE MONTH PERIOD
REVENUES. Revenues were $47.8 million for the nine month period ended
September 30, 1998, an increase of 24.9% from the $38.2 million in the same
period of 1997. This increase was primarily the result of the growth in unit
shipments generated from the 54 unit order by the FAA in December 1996 and
continuing shipments into international markets. In the nine month period of
1998, the Company shipped 48 units (32 units to the FAA and 16 units to
international customers), compared to 38 units (22 units to the FAA and 16
units to international customers) in the nine month period of 1997. The
Company typically ships against a backlog of orders for its products. The
backlog (excluding R&D contracts) as of September 30, 1998 was $15.7 million,
compared to $46.8 million as of September 30, 1997.
Quantum research and development contracts were reported as revenues
prior to the acquisition by Invision. All Quantum research and development
revenues have been classified as a reduction to research and development
expense to conform with the Company's policy.
GROSS PROFIT. Gross profit was $21.6 million in the nine month period
ended September 30, 1998, an increase of 12.9% from the $19.1 million in the
same period of 1997. Gross margins were 45.2% and 50.0%, respectively. The
decrease in gross margins was primarily due to higher manufacturing overhead
costs as a result of the Company's relocation to a new facility in late 1997,
and configurations of units shipped and volume discounts in the second
quarter of 1998 that resulted in lower average selling prices of systems
shipped during the quarter.
RESEARCH AND DEVELOPMENT. Research and development expenditures by the
Company are partially offset by amounts reimbursed by the FAA and other
government and private agencies under development contracts and grants.
These services are provided on both a cost and cost plus basis. 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.
13
<PAGE>
INVISION TECHNOLOGIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
Net research and development expenses would have been $6.0 million in
the nine month period ended September 30, 1998 without the capitalization of
software development costs in accordance with FAS 86. No software
development costs were capitalized in the nine month period of 1997 because
research and development on the new product line had not been completed.
Before considering the impact of software capitalization, gross research and
development expenditures were $13.3 million in the nine month period of 1998,
an increase of 38.6% from the $9.6 million in the same period of 1997. Of
these amounts, $7.3 million and $4.5 million, respectively, were funded by
research and development contracts and grants from the FAA and other
governmental and private entities. As a percentage of revenues, net research
and development expenditures decreased to 11.0% in the nine month period of
1998 from 13.6% in the same period of 1997. The increase in gross 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 expenses were $4.8 million in
the nine month period ended September 30, 1998, an increase of 14.1% from the
$4.2 million in the same period of 1997. As a percentage of revenues, sales
and marketing expenses decreased to 10.1% in the nine month period of 1998
from 11.1% in the same period of 1997. The increased level of spending in the
nine month period of 1998 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 were
$5.1 million in the nine month period ended September 30, 1998, an increase
of 13.2% from the $4.5 million in the same period of 1997. As a percentage of
revenues, general and administrative expenses decreased to 10.6% in the nine
month period of 1998 from 11.7% in the same period of 1997. The increased
level of spending in the nine month period of 1998 is primarily the result of
personnel additions and increased professional and consulting costs
associated with the Company's growth, increased insurance costs, and
increased costs of operations associated with being a publicly traded company.
INTEREST EXPENSE. Interest expense decreased to $240,000 in the nine
month period ended September 30, 1998 from $346,000 in the same period of
1997. Interest expense in the nine month period of 1997 included a non-cash
charge resulting from the amortization of a loan warrant discount.
INTEREST AND OTHER INCOME, NET. Interest and other income, net,
increased to $626,000 in the nine month period ended September 30, 1998 from
$70,000 in the same period of 1997. The 1998 amount consists primarily of
interest income for the period and results from the significantly higher cash
and short-term investment balances in the nine month period of 1998 compared
to the same period of 1997. The 1997 amount consists primarily of interest
income offset by a loss of $402,000 on the sale of Quantum stock prior to the
Quantum acquisition.
PROVISION FOR INCOME TAXES. The provision for income taxes in the nine
month periods ended September 30, 1998 and 1997 reflect an effective tax rate
of 12.0% and 17.0%, respectively. The Company's effective tax rate of 12.0%
in the nine month period of 1998 is lower than the statutory tax rates
primarily due to the utilization of net operating loss and other credit
carryforwards. At December 31, 1997 the Company had federal net operating
loss carryforwards of approximately $13.7 million available to reduce future
federal taxable income and $2.0 million available to reduce State taxable
income. The Company's net operating loss carry-forwards expire from 2005 to
2011.
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, the sale of $21.2 million in the Company's follow-on offering in
May 1997 and short-term borrowings under a working capital line of credit. At
September 30, 1998, the Company had $12.6 million in cash, cash equivalents
and short-term investments, compared to $19.2 million at December 31, 1997.
14
<PAGE>
INVISION TECHNOLOGIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
Net cash used in operating activities was $3.7 million in the nine month
period ended September 30, 1998, compared to $2.2 million in the same period
of 1997. Cash used in operating activities in the nine month period of 1998
primarily resulted from net income of $6.0 million, the non-cash effect from
depreciation and amortization of $1.3 million and an increase in accrued
liabilities, offset by an increase in accounts receivable due to the timing
of revenues (i.e., late in the third quarter of 1998), a decrease in deferred
revenues, an increase in other current assets, a decrease in accounts payable
and an increase in inventory.
Net cash provided by investing activities was $0.9 million in the nine
month period ended September 30, 1998, compared to $9.7 million used in
investing activities in the same period of 1997. Net cash provided by
investing activities primarily resulted from the sale of short-term
investments and release of restricted cash, partially offset by the purchase
of capital equipment and additions to other assets due to software
development costs capitalized in the period. The Company has no significant
capital spending or purchase commitments other than normal purchase
commitments and commitments under leases. The Company had $2.0 million in
short-term investments at September 30, 1998.
Net cash used in financing activities was $0.8 million in the nine month
period ended September 30, 1998, compared to the $24.2 million provided by
financing activities in the same period of 1997. Net cash used in financing
activities in the nine month period of 1998 primarily resulted from the
repurchase of common stock at prevailing market prices and the net repayment
of debt financing (principally, short-term borrowings under the line of
credit), partially offset by proceeds from sales under the employee stock
purchase plan and exercises of incentive stock options. In October 1998, the
Company repurchased an additional 33,900 shares of its common stock for
$177,000 at the prevailing market prices at the time of purchase. Future
repurchases of the Company's common stock would be based on market conditions
and evaluated on a case by case basis.
In April 1998, the Company renewed its two one-year revolving line of
credit agreements with Silicon Valley Bank. The first agreement provides for
maximum borrowings in an amount up to the lower of 80% of domestic eligible
accounts receivable or $4.5 million. Borrowings under this agreement bear
interest at the bank's prime rate (8.50% at September 30, 1998). The second
agreement is partially guaranteed by the Export-Import Bank of the United
States and provides for maximum borrowings in an amount up to the lower of
the sum of 90% of eligible export accounts receivable plus 70% of eligible
raw materials and work-in-process inventory designated for export customers
or $4.5 million. Borrowings under this agreement bear interest at the bank's
prime rate (8.50% at September 30, 1998). Borrowings under both agreements
are secured by all of the Company's assets other than its intellectual
property. The agreements expire in April 1999 and 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 both lines of credit may be used for general
corporate purposes. As of September 30, 1998, the Company had borrowings of
$3.0 million and a guarantee of performance under a sales contract to a
certain customer through issuance of a letter of credit totaling $0.5 million.
In April 1998, the Company renewed its committed equipment line of
credit with Silicon Valley Bank that transforms into a term loan (computer
equipment -36 months; furniture and fixtures - 60 months) after drawdown.
The agreement expires in April 1999 and provides for borrowings up to $1.75
million. Borrowings under this agreement bear interest at the bank's prime
rate (8.50% at September 30, 1998) and are secured by the assets purchased or
financed. As of September 30, 1998, the Company had borrowings of $1.25
million under the agreement.
The Company believes that existing cash and cash equivalents of $10.5
million as of September 30, 1998, short-term investments of $2.0 million, and
available borrowings under the Company's line of credit agreements will be
sufficient to finance its working capital and capital expenditure
requirements for at least the next 12 months.
15
<PAGE>
INVISION TECHNOLOGIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
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 quarter ended March 31, 1997 was the Company's first profitable
quarter since inception. Although the Company has reported a profit in each
subsequent quarter, there can be no assurance that the Company will continue
to be profitable on a quarterly basis or 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 product
offerings by the Company or its competitors and the certification of certain
of these products, 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 Company's ability to rapidly
increase production, and fluctuations in demand driven by general conditions
impacting the aviation security industry beyond the control of the Company.
The Company's revenues in any period are generally derived from a limited
number of customers, a high percentage of which are public agencies which are
subject to legislative budgeting and other limitations, including with
respect to its largest customer, the U.S. government, the risk that a
substantial portion of the $100 million of funds appropriated by Congress to
purchase explosive detection systems equipment in fiscal 1999 will not be
used to purchase the Company's products. 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.
The Company regularly evaluates acquisition opportunities and is likely
to make acquisitions in the future. 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, which could materially
adversely affect the Company's results of operations. The Company's
management has had limited experience in assimilating acquired organizations.
No assurance can be given as to the ability of the Company to integrate
successfully any operations, personnel or products that have been acquired or
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 results of operations.
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 are subject to budgetary processes and
expenditure constraints. Budgetary allocations for explosive detection
systems 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
16
<PAGE>
INVISION TECHNOLOGIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
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.
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. The Company also currently uses third party and some internally
developed software and related hardware in its manufacturing, information,
facilities and business systems that will be affected by the date change in the
year 2000. When the millennium date change occurs, these date sensitive systems
and products 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 system
failure or cause systems to process critical operational or financial
information incorrectly.
The Company has instituted a comprehensive Year 2000 project designed to
identify and assess the risks associated with its products, operations and
infrastructure, information systems, suppliers and customers that are not Year
2000 compliant, and to develop, implement, and test remediation and contingency
plans to mitigate these risks. The project comprises four phases: (1)
identification of risks; (2) assessment of risks; (3) development of remediation
and contingency plans; and (4) implementation and testing.
With respect to the Company's products in the CTX 5000 Series, the
Company has completed its identification and assessment of risks with respect
to product software and identified issues with the main computer operating
system. Updates are available from the supplier to resolve these problems
and initial tests of these updates have been successful. Upgrades for both
the CTX 5000 and CTX 5500 are currently being prepared and tested. No
problems have been identified with respect to secondary operating systems. A
hardware component review for imbedded chips, clocks and supplier testing for
Year 2000 compliance is in progress. Hardware components that are not Year
2000 compliant, if any, will be identified and upgraded. Initial review
suggests only minor hardware effects. The Company anticipates that the final
phase of the project, implementation and testing, will be completed for the
CTX 5500, both original systems and upgrade kits, by the end of the fourth
quarter of 1998, and for upgrade kits for the Company's first generation
product, the CTX 5000, by the end of the second quarter of 1999. We
recently demonstrated Year 2000 compliance of the CTX 5500 upgrade to the FAA
and met their requirements. Year 2000 upgrades are currently being beta tested
in several U.S. sites. Upon successful completion of the beta tests, straight
forward field upgrades will be performed on all of the Company's 5500
installed base over the next few months. InVision also has identified an
upgrade path for earlier CTX 5000 products, however, minor variations in
system configuration will require additional time to identify and implement
the upgrades. The cost to the Company of bringing its CTX 5500 product into
year 2000 compliance has been determined from beta tests to be minimal. The
cost of
17
<PAGE>
updating CTX 5000 systems is not yet fully determined but is expected not to
be material. Furthermore, any cost to InVision is expected to be reduced by
the significant number of CTX 5000 customers who have or are expected to make
the decision to purchase CTX 5500 upgrade kits to realize the operational
benefits of the next generation system in addition to the Year 2000
compliance features.
With respect to the Company's internal computerized systems in its
manufacturing, information, facilities and financial and administrative areas,
the Company is at the beginning stage of a formal inventory and identification
of risks. Outside consultants have been engaged to assist the Director of
Quality Assurance and the Executive Staff under the direction of the Chief
Financial Officer to complete this process, including the implementation of any
necessary solutions and the design of any necessary contingency plans. Although
the formal process is at an early stage, preliminary, informal assessments of
compliance by principal third party software and hardware vendors earlier this
year did not detect any significant compliance problems and the Company is
hopeful that all phases of this portion of the compliance project can be
completed by the end of the first quarter of 1999. However, the early stage of
this phase means that the Company can not yet predict whether significant
problems will be identified and cannot yet determine the extent of contingency
planning that may be required. The Company is also not in a position to state
the total cost of remediation of all Year 2000 issues although costs identified
to date have not been material and the Company does not expect total costs to be
material.
The Company has not yet completed its assessments, developed remediation
for all problems, developed any contingency plans, or completely implemented or
tested any of its remediation plans. As the Year 2000 project continues, the
Company may discover additional Year 2000 problems, may not be able to develop,
implement, or test remediation and contingency plans, or may find that the
costs of these activities exceed current expectations and become material. In
many cases, the Company is relying on assurances from suppliers that new and
upgraded information systems and other products will be Year 2000 compliant.
The Company plans to test such third-party products, but cannot be sure that its
test will be adequate or that, if problems are identified, they will be
addressed in a timely and satisfactory way. Because the Company uses a variety
of information systems and had additional systems embedded in its operations and
infrastructure, the Company cannot be sure that all of its systems will work
together in a Year 2000 compliant fashion. Furthermore, the Company cannot be
sure that it will not suffer business interruptions, either because of its own
Year 2000 problems or those of its customers or suppliers may make it difficult
or impossible for them to fulfill their commitments to the Company. If the
Company fails to satisfactorily resolve Year 2000 issues related to its products
in a timely manner, it could be exposed to liability to third parties,
including, in particular, those customers owning approximately one-half of the
installed systems, whose systems are covered by an express Year 2000 warranty.
The Company is continuing to evaluate Year 2000-related risks and will take such
further corrective actions, including the development of contingency plans, as
may be required.
18
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27 Financial Data Schedule
(b) The Registrant filed no Reports on Form 8-K during the quarter ended
September 30, 1998.
19
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
INVISION TECHNOLOGIES, INC.
Date: November 16, 1998 /s/ Sergio Magistri
-------------------
Dr. Sergio Magistri
President and Chief Executive Officer
(PRINCIPAL EXECUTIVE OFFICER)
Date: November 16, 1998 /s/ Curtis P. DiSibio
---------------------
Curtis P. DiSibio
Senior Vice President and Chief
Financial Officer
(PRINCIPAL FINANCIAL AND ACCOUNTING
OFFICER)
20
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEETS, STATEMENTS OF OPERATIONS AND STATEMENTS
OF CASH FLOW INCLUDED IN THE COMPANY'S QUARTERLY REPORT ON FORM 10-Q FOR THE
PERIOD ENDED SEPTEMBER 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
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<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 10524
<SECURITIES> 2045
<RECEIVABLES> 22980
<ALLOWANCES> 0
<INVENTORY> 11653
<CURRENT-ASSETS> 49823
<PP&E> 11982
<DEPRECIATION> 3846
<TOTAL-ASSETS> 60285
<CURRENT-LIABILITIES> 14229
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0
<COMMON> 12
<OTHER-SE> 44791
<TOTAL-LIABILITY-AND-EQUITY> 60285
<SALES> 47776
<TOTAL-REVENUES> 47776
<CGS> 26194
<TOTAL-COSTS> 15160
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 240
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<INCOME-TAX> 817
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