U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934.
For the fiscal year ended December 31, 1997
Commission File Number: 0-3207
Barringer Technologies Inc.
(Name of small business issuer in its charter)
Delaware 84-0720473
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
219 South Street, Murray Hill, NJ 07974
(Address, Including Zip Code, of Principal Executive Offices)
(908) 665-8200
(Issuer's Telephone Number)
Securities registered pursuant to Section 12(b) of the Exchange Act: NONE
Securities registered pursuant to Section 12(g) of the Exchange Act:
Common Stock, par value $.01 per share
Common Stock Purchase Warrants
Check whether the issuer (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
Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-B contained in this form and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB.
[X]
State issuer's revenue for its most recent fiscal year. $22,689,000.
The aggregate market value of voting stock held by nonaffiliates computed by
reference to the price at which the stock was sold, or the average bid and asked
price of such stock, is $73,086,000 as of March 11, 1998.
State the number of shares of each of the issuer's classes of common stock,
outstanding as of the latest practicable date.
Outstanding as of March 12, 1998
Common Stock, $.01 par value 5,547,354
<PAGE>
TABLE OF CONTENTS
Page
PART I
Item 1. Business............................................................ 3
Item 2. Properties.......................................................... 10
Item 3. Legal Proceedings................................................... 10
Item 4. Submission of Matters to a Vote of Security Holders................. 10
PART II
Item 5. Market for Common Equity and Related Stockholder Matters............ 10
Item 6. Management's Discussion and Analysis................................ 11
Item 7. Financial Statements and Supplemental Data.......................... 18
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure............................................... 18
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section of 16(a) of the Exchange Act.............. 18
Item 10. Executive Compensation.............................................. 20
Item 11. Security Ownership of Certain Beneficial Owners and Management...... 26
Item 12. Certain Relationships and Related Transactions...................... 28
Item 13. Exhibits and Reports on Form 8-K.................................... 29
<PAGE>
PART I
Item 1. Business.
Disclosure Regarding Forward Looking Statements
This Form 10-KSB (including, but not limited to, the information provided herein
in response to Item 1 and Item 6 of Form 10-KSB) contains forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended (the "Securities Act") and Section 21E of the Securities Exchange Act of
1934, as amended (the "Exchange Act"). Such statements include, but are not
limited to, the anticipated growth in the demand for products of Barringer
Technologies Inc. (the "Company"), the Company's opportunities to increase sales
through, among other things, the development of new applications of and markets
for the IONSCAN(R) technology, the development and marketability of new
products, the probability of the Company's success in the sale of its products
in current or future markets, the potential effect of government regulations and
directives changing security requirements, the ability of the IONSCAN(R) to
satisfy any certification protocol adopted by the FAA or any other government
agency, the amount and timing of domestic and foreign government appropriations
for the development and deployment of advanced detection technology, the
Company's liquidity and capital requirements and the financial impact of
possible acquisitions.
Forward-looking statements are inherently subject to risks and
uncertainties, many of which cannot be predicted with accuracy and some of which
might not even be anticipated. Future events and actual results, financial and
otherwise, could differ materially from those set forth in or contemplated by
the forward-looking statements contained herein. Important factors that could
contribute to such differences include, but are not limited to, the development
and growth of markets for the Company's products, the Company's dependence on
and the effect of governmental regulations on demand for the Company's products,
the impact of both foreign and domestic governmental budgeting decisions and the
timing of governmental expenditures, the reliance of the Company on its
IONSCAN(R) products, and the dependency of the Company on its ability to
successfully develop and market new products applications, the effects of
competition, and the effect of general economic and market conditions, as well
as conditions prevailing in the markets for the Company's products. Certain of
the factors summarized above are described in more detail in the Company's
Registration Statement on Form SB-2 (File no. 333-33129) and reference is hereby
made thereto for additional information with respect to the matters referenced
above.
Subsequent written and oral forward-looking statements attributable to
the Company or persons acting on its behalf are expressly qualified in their
entirety by the cautionary statements set forth above and contained elsewhere in
this Form 10-KSB.
(a) General
The Company was incorporated under the laws of the State of Delaware on
September 7, 1967.
The Company is the world's leading manufacturer (based on units sold)
of high sensitivity equipment used for detecting and identifying trace amounts
of plastic and other explosives and illegal drugs. The Company designs and
produces products that employ a proprietary application of ion mobility
spectrometry ("IMS") technology that can detect and identify targeted compounds
in amounts smaller than one-billionth of a gram in approximately six seconds.
The Company's current principal product, the IONSCAN(R), is a portable desktop
system used in explosives detection and drug interdiction applications. As of
December 31, 1997, the Company had sold over 700 units (including 335 during
1997) in 39 countries. The Company's revenues have grown from $2.8 million for
the year ended December 31, 1992 to $22.7 million for the year ended December
31, 1997, representing a compounded annual growth rate of 51.8% over the last
five years.
The markets for the Company's IONSCAN(R) currently include aviation
security, other transport security, facilities protection, forensics, military,
corrections, customs and law enforcement. The Company's customers include the
Federal Aviation Administration (the "FAA"), the U.S. Air Force, the U.S. Coast
Guard, the U.S. Drug Enforcement Agency (the "DEA") and the Federal Bureau of
Investigation (the "FBI"), as well as customs agencies in France, Canada,
Australia and Japan and various prison facilities in the U.S. and elsewhere. The
IONSCAN(R) is also installed at over 40 airports and transportation centers in
countries throughout the world, including Gatwick Airport and Heathrow Airport
in the United Kingdom, John F. Kennedy International Airport and Chicago O'Hare
International Airport in the United States and Kuala Lumpur Airport in Malaysia,
as well as the Eurotunnel. The Company believes that its principal competitive
advantages are the detection capability, reliability, versatility, cost
effectiveness, ease of use and portability of the IONSCAN(R). These advantages
enable the IONSCAN(R) to be used both in lieu of and in conjunction with bulk
imaging technologies, such as enhanced x-ray and computer aided tomography
("CATSCAN").
The Company believes that many of the markets it serves are
experiencing substantial growth, principally in reaction to heightened safety
concerns caused by the threat of terrorism and growing public awareness of
drug-related criminal activity. The Company believes that the deployment of
advanced detection equipment, such as the IONSCAN(R), will continue to increase
as the acceptance of using such equipment to combat these concerns increases. In
January 1998, the Company received a $5.4 million order from the FAA as part of
the FAA's publicly announced intention to further deploy advanced detection
technology at the nation's larger airports. In addition, during 1997, the
Company sold a number of IONSCAN(R)s to the U.S. Air Force for use in securing
certain U.S. Air Force bases in the U.S. and abroad. Also in 1997, the Company
sold $2.5 million of IONSCAN(R)s to a correctional agency to assist in stemming
the flow of illegal drugs to inmates.
The Company believes that there are numerous potential applications for
its trace detection technology. Currently, the principal applications are
explosives detection and drug interdiction.
Market Overview
Explosives Detection
In the past several years, a number of events have contributed to
increased public concern regarding the threat of terrorism and have focused
government attention on the limited effectiveness of currently deployed x-ray
and metal detection equipment and on the need for advanced explosives detection
technology. As a result, several advanced technologies have been adapted for use
in explosives detection applications. These technologies include bulk imaging
techniques, such as enhanced x-ray and CATSCAN, as well as trace detection
techniques, such as IMS, gas chromatography and chemoluminescence. Bulk imaging
techniques offer certain advantages over conventional x-ray technology, but are
generally expensive to deploy (as much as $1.0 million per installation), are
non-portable and generally reject a large number of objects as a result of
perceived anomalies that are later determined not to be explosives. By
comparison, trace detection equipment is capable of detecting and identifying
minute amounts of chemical substances and is generally more portable and less
expensive than bulk imaging equipment.
While implementation of advanced detection strategies has varied
significantly around the world, the Company believes that aviation authorities,
including the FAA and BAA plc, formerly the British Airport Authority (the
"BAA"), have generally recognized that no one detection technology provides a
complete solution to the problem of enhancing existing detection capabilities.
Consequently, trace detection technology is frequently deployed as a complement
to bulk imaging equipment to resolve anomalies identified by bulk detectors and
in applications where it is impractical to use the larger, less mobile bulk
imaging detectors, such as checking carry-on baggage. Trace detection technology
is also deployed in lieu of bulk imaging equipment in certain installations
because of its relatively low cost, particularly in smaller airports and in less
developed countries.
The development and deployment of advanced explosives detection
technology is being driven by recent government initiatives in the United States
and elsewhere in the world. For example, in response to the recommendations of
the White House Commission on Aviation Safety and Security (the "Gore
Commission"), in October 1996, the U.S. Congress appropriated $144 million for
the procurement of advanced explosives detection technology which the FAA is
using to deploy such technology in a limited number of the 400 busiest U.S.
airports. In addition, the BAA has installed enhanced detection technologies,
including trace detectors, in certain airports in Britain. Also, since the
enactment of the Aviation Security Act of 1990, the FAA has funded over $150
million for research and development of advanced explosives detection
technologies.
Trace detection technology has a broad range of other explosives
detection uses, including other transport security, facilities protection,
forensics, military and law enforcement. Government agencies, military forces
and private businesses have deployed trace detection equipment at facilities,
such as the World Trade Center, military bases, embassies and public utilities,
such as nuclear power plants, that are perceived as potential targets of
terrorist attacks. Law enforcement agencies, such as the FBI and the New York
City Police Department, and military forces also use trace detection technology
for forensic purposes. For example, the IONSCAN(R) was used in connection with
the investigations of the crash of TWA Flight 800 and the 1995 Oklahoma City
bombing.
Drug Interdiction
As a result of increased drug usage, a heightened public awareness of
drug-related criminal activity generally, and the use of more sophisticated
techniques by drug traffickers, government agencies have increased their
spending on drug interdiction efforts. For example, in fiscal year 1996, the
U.S. government spent $1.3 billion on drug interdiction efforts. The use of
conventional x-ray scanning, random searches and canines has had limited success
in suppressing illegal drug trafficking. Accordingly, customs and law
enforcement agencies have increasingly turned to advanced detection technology
to assist in their drug detection and interdiction efforts. For example, the
U.S. Coast Guard has deployed trace detection equipment onboard its ships to
search vessels at sea for illegal drugs. Similarly, prisons in the U.S. and
elsewhere are employing trace detection equipment to reduce drug use.
Other Products
In January 1998, the Company entered into an OEM arrangement with
Exploranium G.S. Limited ("Exploranium"), a Canadian corporation engaged in the
development and sale of products which utilize gamma ray spectrometry to detect
and identify radioactive materials present in nuclear contraband. Pursuant to
such arrangement, the Company has the exclusive right to market and sell such
products in the law enforcement and security fields worldwide (subject to
certain exceptions relating to military applications). The products, which are
marketed under the GAMMATRACE(TM) name, range in size from a small, hand-held
unit, which sells for approximately $10,000, to large vehicle drive-through
systems, which sell for approximately $70,000. The products are manufactured for
the Company by Exploranium. The Company is marketing the GAMMATRACE(TM) product
line through its existing direct sales organization and its network of
independent representatives.
In March 1998, the Company entered into a merger agreement and certain
related documents with DigiVision, Inc. ("DigiVision"), a San Diego-based
developer of video enhancement products, and certain of its shareholders
pursuant to which the Company intends to acquire all of the outstanding capital
stock of DigiVision. See Item 6, Management's Discussion and Analysis.
Sales and Marketing
The Company sells its products through a direct sales organization
comprised of 18 sales people located at its headquarters in New Jersey and at
offices in Toronto, London, Paris and Kuala Lumpur. In addition, the Company
utilizes a network of 45 independent sales and service representatives located
in Europe, the Middle East, Africa, Asia, South America and Australia. The
Company's sales and marketing efforts typically involve extensive customer
visits, demonstrations and field testing. Sales prospects generally are targeted
by the Company or its independent sales representatives, although the Company
also responds to requests for proposals.
Selling prices for the IONSCAN(R) typically range from $50,000 to
$80,000 per unit, depending principally on the configuration of the unit and the
purchaser's location. Once a sale is consummated, the Company provides training
at a customer's location to teach operators how to use the IONSCAN(R), including
proper sampling techniques. The Company generally provides a one-year parts and
labor warranty on its IONSCAN(R) instruments, although from time to time the
Company has provided extended warranties. To date, the Company's warranty claims
experience has not been significant.
The Company does not actively market its specialty instruments or its
contract research and development services. However, from time to time, the
Company responds to appropriate requests for proposals for such instruments and
services. Although sales of such instruments and services have been material to
the Company's historic results from time to time, as a result of the expected
increase in sales of the IONSCAN(R) and other products, management anticipates
that revenues from those activities will become increasingly less important to
the Company's overall results of operations.
For the year ended December 31, 1997, two of the Company's largest
customers accounted for more than 10.0% of the consolidated revenues of the
Company. Together these two customers accounted for an aggregate of 27.8% of the
Company's revenues for that period. For the year ended December 31, 1996, one
customer accounted for more than 10.0% of the consolidated revenues of the
Company.
Backlog
The Company measures its backlog of instrument revenues as orders for
which contracts or purchase orders have been signed, but that have not yet been
shipped and for which revenues have not yet been recognized. The Company
includes in its backlog only those customer orders that are scheduled for
delivery within the next 18 months. The Company typically ships its products
within three months of receiving an order. The Company follows the practice of
manufacturing to a sales forecast in order to have inventory available to meet
anticipated demand promptly. As a result, the Company has not historically
maintained a material backlog of orders for its instruments and, in the ordinary
course of business, intends to have sufficient inventory of IONSCAN(R)s on hand
to allow shipment upon receipt of an order. However, depending on the size and
timing of customer orders, the Company may, from time to time, have a backlog of
orders. Manufacturing and Assembly
The Company assembles IONSCAN(R)s from components supplied to it by
various suppliers and parts manufactured internally. Once the IONSCAN(R) is
assembled, the IONSCAN(R) is "burned in" for up to 400 hours using certain
chemicals to calibrate and tune the unit and to assure that it is functioning
properly. After successful completion of this procedure, the IONSCAN(R) is ready
for shipment to a customer.
Although many of the basic components of the IONSCAN(R), such as
chipboards, resistors, capacitors, liquid crystal displays and other similar
components, are readily available from a number of sources, the Company
typically purchases such components from single suppliers. A limited number of
components and sub-assemblies are manufactured for the Company, pursuant to the
Company's proprietary specifications, but the Company does not believe it is
dependent on any single source for these items. To date, the Company has not
experienced any material difficulty in obtaining any components or
sub-assemblies.
Competition
The Company competes with other entities, including Intelligent
Detection Systems, Inc., Ion Track Instruments Inc. and Thermedics Detection
Inc., a number of which have significantly greater financial, marketing and
other resources than the Company. Principal competitive factors include
selectivity (the ability of an instrument to identify the presence of a
particular substance), sensitivity (the ability of an instrument to detect small
amounts of a particular substance), false alarm rate, price, marketing, ease of
use and speed of analysis. The Company believes that it competes effectively
with respect to each of these factors.
The Company competes for government expenditures with equipment
manufacturers, such as InVision Technologies, Inc. and Vivid Technologies, Inc.,
utilizing other types of detection technologies, such as enhanced x-ray and
CATSCAN, as well as with manufacturers of other IMS equipment and manufacturers
using other trace particle detection technologies, such as gas chromatography
and chemiluminescence. Because trace particle detection equipment is used in
certain instances to verify detection results obtained by bulk imaging systems,
the IONSCAN(R) and other trace particle detection products are often used in
conjunction with bulk imaging technologies. As a result of recent government
initiatives, the Company anticipates that additional technologies, including
improved IMS technologies, will be developed and that new competitors will enter
the Company's markets.
The Company also competes with the use of canines to locate the
presence of explosives or drugs. Although canines have a highly developed sense
of smell and are able to follow a trail, the Company believes that its
IONSCAN(R) instruments are more effective and cost-efficient than canines,
because they can operate 24 hours a day, have greater selectivity than canines
and can identify the composition of the substance detected.
Government Regulation
Although the Company's business is not subject to significant
government regulation, government regulation plays a large role in determining
the demand for the IONSCAN(R). In the U.S. and most foreign countries, the
aviation industry is highly regulated and authorities, such as the FAA in the
U.S., have the ability to recommend or mandate use of enhanced explosives
detection equipment.
The FAA is currently developing a certification protocol for trace
particle detection equipment. Once the protocol is adopted, the Company believes
that only instruments meeting the FAA certification requirements will be
approved for use by airlines subject to FAA regulation. Although the final
protocol has yet to be adopted, based on early versions of the testing criteria,
as well as discussions with representatives of the FAA, the Company believes
that the IONSCAN(R) will meet the FAA's certification requirements, although no
assurance can be given. The FAA has approved the IONSCAN(R) for screening of
electronic carry-on items, such as cellular telephones, tape recorders and
laptop computers.
Product Development
The Company spent $1.6 million and $933,000 on research and development
activities for the years ended December 31, 1997 and 1996, respectively, of
which $849,000 and $703,000, respectively, were funded under various research
and development grants and contracts. Substantially all of the Company's
research and development activities have related to the development and
enhancement of the Company's IONSCAN(R) technology and the development of new
IONSCAN(R) products.
The Company is currently working on a number of enhancements to its
existing IONSCAN(R) products that would enhance ergonomics, increase ease of
use, decrease size and weight, lower manufacturing costs and thereby provide
greater value to customers. For example, the Company is currently attempting to
develop a hand-held version of the IONSCAN(R).
Certain of the Company's new product development activities are
described below.
Document Scanner
The Company received a development grant from the FAA in October 1996
to develop a document scanner that would scan boarding passes or other passenger
documents for the presence of explosives prior to boarding. The Company
delivered a prototype of the document scanner to the FAA in December 1996. The
Company expects to deliver additional document scanners to the FAA for beta
testing during 1998.
Automated Luggage System
The Company received a design grant from the FAA in March 1997 for the
design of an automated luggage system that would scan checked baggage for the
presence of drugs or explosives. The grant does not require the production of a
prototype at this time and no such prototype exists or is being built. However,
under the contract, the Company is required to develop a working design to
demonstrate proof of concept for delivery to the FAA during 1998.
There can be no assurance that the Company will successfully complete
the development of the products described above or that any such products would,
if successfully developed, achieve market acceptance or a significant level of
sales.
Patents, Trademarks and Proprietary Rights
Certain of the technology used in the IONSCAN(R) is licensed by the
Company from the Canadian government as described below. While the Company holds
patents relating to certain components, systems and techniques used in the
IONSCAN(R) and while certain other elements of the IONSCAN(R) are protected by
other intellectual property rights, the Company has no comprehensive patent or
similar exclusive intellectual property right covering the IONSCAN(R) in its
entirety. In addition, the basic IMS technology used in the IONSCAN(R) is not
proprietary and is available in the public domain. Accordingly, present and
potential competitors could use such basic technology to duplicate the
performance of the IONSCAN(R).
The initial development of the IONSCAN(R) was funded in part by
Transport Canada and Revenue Canada. Pursuant to an agreement with the Canadian
government, the Company has a worldwide license to use certain unpatented
technology developed from such work and pays Revenue Canada a royalty equal to
1.0% of certain IONSCAN(R) sales. The initial term of this license agreement
expires on March 31, 1999. However, the Company has entered into an agreement
with Revenue Canada, pursuant to which the Company has obtained the right to
renew such licensing arrangement on a year-by-year basis for up to ten
additional years. Revenue Canada has retained the right to use the technology
and to produce products incorporating such technology although, to date, Revenue
Canada has not attempted to do so.
The Company believes that the IONSCAN(R) registered trademark has
gained recognition in the markets for the Company's products and is a valuable
trademark. In addition, the Company is seeking to register its GAMMATRACE(TM)
trademark.
Employees
As of December 31, 1997, the Company had 119 full-time employees, of
whom 58 were engaged in manufacturing, 28 were engaged in product development
activities and 33 were engaged in sales, service and general administration.
Eighteen of such persons have advanced degrees (including nine doctorates). None
of the Company's employees is represented by any union, and the Company
considers its relationships with its employees to be satisfactory.
(b) Financial Information about Foreign and Domestic Operations and Export Sales
For information with respect to financial information about foreign and
domestic operations and export sales, reference is made to the information set
forth in Note 10 to the Consolidated Financial Statements of the Company
included herein, and see Item 6. "Management's Discussion and Analysis."
<PAGE>
Item 2. Properties.
The Company does not own any real property and currently conducts its
operations at the following leased premises:
Approx-
imate
Square Annual Lease
Location Description of Facility Footage Lease Cost Expiration
219 South Street Corporate headquarters, 6,780 $158,000 September
Murray Hill, New Jersey research, sales, customer 1998
07974 support and assembly
1730 Aimco Boulevard Research, manufacturing 28,380 $ 76,000* September
Mississauga, Ontario, and assembly, sales, 2005
Canada L4W 1V1 customer support and
administrative
Village Fret BAT-3453 Sales and customer 2,500 $ 40,000 February
BP 10614-4 support 2000
Rue du Te
95724, Roissy C.D.G.
France
Unit 3 at Manor Royal Sales and customer 1,560 $ 16,000 June 1998
Crawley, West Sussex support
England RH10 2QU
No. 21-1 Jalan 3176 D Sales and customer 1,000 $12,000 **
Desa Pandah support
55100 Kuala Lumpur
Malaysia
* Increases to $115,000 on September 1, 2000.
** Oral agreement terminable by either party upon thirty (30) days prior notice.
The Company is currently seeking to relocate its New Jersey operations
to, among other things, further its manufacturing and assembly capabilities. The
Company anticipates that it will seek to lease approximately 15,000 square feet
of space for those operations. Although the Company has no current agreements or
understandings with respect to the leasing of a particular location, the Company
believes that ample suitable space is available in the vicinity of its existing
operations at rental rates that are consistent with prevailing market rates.
Item 3. Legal Proceedings.
The Company is not a party to any material legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of the Company's security holders
during the fourth quarter of the year ended December 31, 1997.
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
Since November 12, 1996, the Common Stock has been included in the
Nasdaq National Market under the symbol "BARR." Prior to that, the Common Stock
was quoted in the Nasdaq SmallCap Market under the same symbol. The following
table sets forth, for the periods indicated, the high and low bid quotations for
the Common Stock as reported on the Nasdaq National Market or the Nasdaq
SmallCap Market, as applicable. Such quotations reflect inter-dealer prices,
without retail mark-up, mark-down or commissions and may not necessarily
represent actual transactions.
High Low
Fiscal 1996
First quarter $ 9/16 $ 5/16
Second quarter 4 3/16 7/16
Third quarter 13 7/8 2 7/8
Fourth quarter 10 5/8 6 5/8
Fiscal 1997
First quarter $10 3/4 $ 8 1/8
Second quarter 15 9 3/8
Third quarter 16 10 3/8
Fourth quarter 14 3/8 8 3/4
Fiscal 1998
First quarter (through March 27, 1998) $15 1/4 $11 5/8
On March 30, 1998, the last reported sale price of the Common Stock on
the Nasdaq National Market was $12 3/8 per share. As of March 30, 1998, the
Company had approximately 1,000 stockholders of record.
DIVIDEND POLICY
The Company has never declared or paid cash dividends on its Common
Stock. The Board of Directors currently intends to retain future earnings to
support its growth strategy and does not anticipate paying dividends in the
foreseeable future. Payment of future dividends, if any, will be at the
discretion of the Board of Directors after taking into account various factors,
including the Company's financial condition, results of operations, current and
anticipated cash needs and plans for expansion. The Company is prohibited from
paying cash dividends on the Common Stock unless full cumulative dividends have
been paid or set aside for payment on its Class A Convertible Preferred Stock
and Class B Convertible Preferred Stock at an annual rate of $0.16 per share,
which dividends, at the option of the Company, are payable in cash or shares of
Common Stock. .
RECENT SALES OF UNREGISTERED SECURITIES
None.
Item 6. Management's Discussion and Analysis
Overview
Barringer is the world's leading manufacturer (based on units sold) of
high sensitivity equipment used for detecting and identifying trace amounts of
plastic and other explosives and illegal drugs. The markets for the Company's
IONSCAN(R) currently include aviation security, other transport security,
facilities protection, forensics, military, corrections, customs and law
enforcement. The Company sold its first IONSCAN(R) in 1990 and, as of December
31, 1997, had sold over 700 units (including 335 during 1997). From 1991 to
1995, the Company incurred losses as its business continued to develop, except
during 1993 when the Company received a significant order for IONSCAN(R)s for
deployment at the Eurotunnel. In 1996, the Company achieved profitability
principally as a result of increased demand for and favorable market acceptance
of the IONSCAN(R). Prior to 1996, the Company sold most of its IONSCAN(R)s for
use in drug interdiction applications. However, in 1996, the Company's unit
sales were more evenly distributed between explosives detection and drug
interdiction applications. During the year ended December 31, 1997,
approximately 55.0% of the Company's unit sales were for explosives detection
applications primarily in the aviation security market. Approximately 14.8% of
the Company's 1997 revenues represented sales to the FAA. Management expects
that the aviation security market will continue to account for a substantial
portion of the Company's future revenues.
Revenues consist of (i) sales of IONSCAN(R)s, related accessories and
consumable supplies, maintenance, training, and billable repairs, (ii) sales of
other instruments, and (iii) funded product development grants and contracts.
For the years ended December 31, 1997 and 1996, approximately 96.0% and 86.1%,
respectively, of the Company's consolidated revenues were derived from the sale
of IONSCAN(R)s and related revenues. Selling prices for the IONSCAN(R) typically
range from $50,000 to $80,000 per unit, depending principally on the
configuration of the unit and the purchaser's location. Profitability associated
with any given sale, and the Company's gross margin for any given quarter, may
vary substantially due to unit configuration, the geographic location of the
purchaser and whether sales prices include a distributor mark-up. The Company
recognizes revenues from the sale of IONSCAN(R)s upon shipment. Accordingly,
changes in delivery dates for relatively few IONSCAN(R)s from one quarter to
another may have a significant impact on the Company's quarterly results of
operations.
Substantially all of the Company's revenues are denominated in U.S.
dollars. However, the Company operates in several foreign countries, including
Canada, the United Kingdom, France and Malaysia and, in those instances, the
Company recognizes revenues and incurs expenses denominated in the local
currency. To date, the Company has not experienced significant losses as a
result of foreign currency fluctuations. The Company generally does not hedge
its foreign currency exposure. In addition, approximately 34.3% and 68.6% of the
Company's total revenues for the years ended December 31, 1997 and 1996,
respectively, were derived from non-U.S. sources.
The Company manufactures to a sales forecast in order to have inventory
available to meet anticipated demand promptly and historically has not
maintained a backlog of orders. However, depending on the size and timing of
customer orders, the Company may, from time to time, have a backlog of orders.
Management's sales forecast is determined by an analysis of a number of factors,
including, among other things, the customer's need, the availability of budgeted
funds, the status of equipment demonstrations, the status of any required
approvals, the effects of competition and the complexity of the customer's
procurement process. See Item 1 "Business - Backlog."
In March 1998, the Company entered into a merger agreement and certain
related agreements with DigiVision and certain of its shareholders pursuant to
which the Company intends to acquire all of the outstanding capital stock of
DigiVision for an aggregate cash purchase price of approximately $750,000. See
Item 1 "Business - Other Products." The acquisition of DigiVision will not be
material to the Company. Accordingly, no separate financial statements of
DigiVision and no pro forma financial information relating to the proposed
acquisition have been included herein. However, upon consummation of the
acquisition, the Company may record a one-time charge to write-off certain
technology and in-process research and development to be acquired from
DigiVision. Although management of the Company cannot currently estimate the
amount of the charge, it is expected that such charge could represent a
substantial portion of the purchase price, including costs related to the
acquisition. The final allocation of the purchase price will be subject to the
completion of due diligence procedures, including appraisals and valuation
analyses, as necessary. The Company's proposed acquisition of DigiVision is
subject to a number of significant conditions precedent. The Company expects to
consummate the acquisition in the first half of 1998. However, no assurance can
be given that the acquisition will occur or as to the timing thereof.
Results of Operations
The following table sets forth certain income and expense items from
the Company's consolidated statements of operations expressed as a percentage of
revenues for the periods indicated.
Year Ended December 31,
1995 1996 1997
-----------------------------
Consolidated Statements of Operations Data:
Revenues 100.0% 100.0% 100.0%
Cost of revenues 56.5 49.1 39.7
------ ------- ------
Gross profit 43.5 50.9 60.3
------ ------- ------
Operating expenses:
Selling, general and administrative 51.9 34.2 35.1
Product development 5.5 2.1 3.2
----- ----- -----
Total operating expenses 57.4 36.3 38.3
----- ----- -----
Operating income (loss) (13.9) 14.6 22.0
Other (expense) income, net (4.6) 0.7 1.7
Income tax benefit -- 3.6 1.7
-------- ----- ------
Income (loss) from continuing operations (18.5) 18.9 25.4
Income from operation held for sale 5.5 -- --
------ ----- ------
Net income (loss) (13.0) 18.9 25.4
Preferred stock dividends (1.3) (0.4) --*
----- ----- ---
Net income (loss) attributable to common
stockholders (14.3)% 18.5% 25.4%
====== ====== ======
* Less than 0.1%.
Comparison of the Fiscal Year Ended December 31, 1997 to the Fiscal Year Ended
December 31, 1996
Revenues. For the fiscal year ended December 31, 1997, revenues
increased by $11.8 million, or 108%, to $22.7 million from $10.9 million for the
fiscal year ended December 31, 1996. Sales of IONSCAN(R)s and related products
increased by $12.3 million, or 131%, due to an increase of 156% in the number of
units sold, offset in part by a decline in average unit selling price. The
increase in unit sales was due to significant IONSCAN(R) sales to drug detection
markets, primarily to law enforcement agencies, and to a lesser extent,
increased sales to the aviation security market, primarily to the FAA. The
decrease in average selling prices resulted primarily from an increase in the
number of IONSCAN(R)s sold to U.S. government agencies, which typically are at
lower unit prices than sales to other customers. Sales of specialty instruments
decreased by approximately $697,000, or 85.2%, in 1997 as compared to 1996,
principally due to the completion in 1996 of a heavy water analyzer contract. As
sales of its IONSCAN(R)s have increased, the Company has placed less emphasis on
marketing its specialty instruments and anticipates that revenues from sales of
such instruments will continue to be insignificant to the Company's overall
results. Revenues derived from funded research and development increased by
approximately $146,000, or 20.8%, in 1997 as compared to 1996. Funded research
and development revenues increased as a result of the award by the FAA in March
1997 of a $700,000 contract to design an automated luggage explosives detection
system utilizing the Company's trace detection technology. The first phase of
this project, which involves a proof of concept, is expected to be completed
during 1998. Because of the increasing sales of IONSCAN(R)s, the Company
believes that revenues from funded research and development activities will
continue to be insignificant to the Company's overall results of operations.
Gross Profit. For the fiscal year ended December 31, 1997, gross profit
increased by $8.1 million, or 146%, to $13.7 million from $5.6 million in 1996.
As a percentage of revenues, gross profit increased to 60.3% in the fiscal
period ended December 31, 1997 from 50.9% in 1996. The improvement was primarily
attributable to larger, more efficient production runs of the IONSCAN(R) and a
related reduction in cost of materials due to higher volume purchases, coupled
with higher margins on international sales, offset in part by lower margins on
sales to U.S. government agencies. In addition, the Company has been able to
reduce its cost of materials as a result of higher volume purchases.
Selling, General and Administrative. For the fiscal year ended December
31, 1997, selling, general and administrative expenses increased by
approximately $4.2 million, or 114%, to $7.9 million from $3.7 million in 1996.
As a percentage of revenues, selling, general and administrative expenses
increased to 35.1% in 1997 from 34.2% in 1996. Selling and marketing expenses
increased by approximately $2.5 million, of which $1.6 million was due to
increased sales commissions attributable to a larger percentage of sales
originating through independent sales agents and distributors. The remaining
increase was attributable to the addition of sales and service personnel and
related costs to handle increased business volume. General and administrative
expenses increased by $1.7 million primarily as a result of increased payroll
and related costs and increased professional and consulting costs.
Product Development. For the fiscal year ended December 31, 1997,
product development expenses increased by $485,000, or 211%, to $715,000 from
$230,000 in 1996. As a percentage of revenues, product development expenses
increased to 3.2% (6.9% when combined with funded research and development) for
the fiscal year ended December 31, 1997 from 2.1% (8.5% when combined with
funded research and development) in 1996 as a result of a higher level of
internally funded new product development activity. Management expects to incur
increased product development expenses in future periods in connection with the
enhancement of existing products and the development of new products and
applications.
Operating Income. For the fiscal year ended December 31, 1997,
operating income increased by $3.4 million, or 213%, to $5.0 million from $1.6
million in 1996. As a percentage of revenues, operating income increased to
22.0% from 14.6% in 1996. The increase is due to the greater operating leverage
on higher levels of revenue.
Other Income and Expense. For the fiscal year ended December 31, 1997,
interest expense decreased by $219,000, or 96.1%, to $9,000 from $228,000 in
1996 as a result of the repayment of indebtedness out of the net proceeds of the
Company's November 1996 public offering. Investment income for the fiscal year
ended December 31, 1997 was $450,000 as compared to $72,000 in 1996, primarily
as a result of the investment of a portion of the net proceeds from the
Company's November 1996 public offering.
Income Taxes. For the fiscal year ended December 31, 1997, the Company
had a net tax benefit of $371,000, composed of foreign taxes of $404,000, offset
by a $775,000 net deferred tax benefit. Such deferred tax benefit was due in
part to a reduction in the deferred tax valuation allowance as a result of
changes in management's estimates of the utilization of U.S. tax loss
carryforwards caused primarily by improved operating results. Management
anticipates that further deferred tax benefits will be recognized in 1998.
Comparison of the Fiscal Year Ended December 31, 1996 to the Fiscal Year Ended
December 31, 1995
Revenues. Revenues for the fiscal year ended December 31, 1996
increased by $4.5 million, or 71.4%, to $10.9 million from $6.4 million for the
fiscal year ended December 31, 1995. Net sales of the IONSCAN(R) and related
products increased by approximately $4.9 million, or 93.5%, due to an increase
of 134% in the number of units sold offset in part by a decline in average unit
selling price. The increase in unit sales was due to increased sales of the
Model 400 which was introduced in the first quarter of 1995. The decrease in
average selling prices resulted from increased sales of the Model 400 which had
a lower average selling price than the Model 350. Net sales of other instruments
increased by approximately $223,000, or 41.6%, in 1996 as compared to 1995,
principally due to work performed on a heavy water analyzer contract, which was
awarded to the Company in mid-1995 and completed in the first half of 1996. In
addition, net sales benefitted from the sale of several other instruments. The
markets for heavy water analyzers and other instruments are limited, and
therefore management cannot predict whether the Company will receive any future
orders. Revenues derived from funded research and development decreased by
approximately $349,000, or 33.2%, in 1996 as compared to 1995. The reduced
revenues were attributable to the Company's contract with the Emergencies
Science Division, Environment Canada to design and build an airborne laser
fluorosensor system, a substantial portion of which was completed in 1995.
Gross Profit. Gross profit increased by $2.8 million, or 101%, to $5.6
million from $2.8 million for fiscal 1995. As a percentage of revenues, gross
profit increased to 50.9% from 43.5%. The improvement was primarily attributable
to higher margins on international sales, coupled with larger, more efficient
production runs of the IONSCAN(R) and related products. The sale at higher than
expected prices of several Model 350 units during the first six months of 1996,
the carrying value of which had been reduced in 1995, also contributed to the
improvement.
Selling, General and Administrative. Selling, general and
administrative expenses increased by approximately $429,000, or 13.0%, to $3.7
million from $3.3 million for fiscal 1995. In 1995, the Company recognized an
expense decrease of $226,000 attributable to a negotiated reduction in
professional fees and $147,000 of additional expense reduction recognized on the
termination of the Company's Canadian Pension Plan as of December 31, 1993.
Excluding these items, selling, general and administrative expenses in 1996
increased by $56,000, or 1.5%. As a percentage of revenues, selling, general and
administrative expenses decreased to 34.2% from 51.9%. The decrease as a
percentage of revenues was primarily attributable to spreading costs over
increased revenues. Selling expenses increased by $108,000, or 4.6%, in 1996 as
compared to 1995, primarily as a result of increased sales commissions on units
sold in the fourth quarter of 1996.
Product Development. Product development expenses decreased by
approximately $124,000, or 35.0%, to approximately $230,000 from $354,000 for
fiscal 1995. As a percentage of revenues, product development expenses decreased
to 2.1% from 5.5%. The level of product development at any time is primarily a
function of the availability of financial and personnel resources.
Other Income and Expense. Equity in earnings of Labco represents the
Company's share of Labco's operating results, in which the Company had a
non-controlling ownership during most of 1996. Prior to December 31, 1995, the
Company had a controlling interest in Labco, but from the first quarter of 1995
until the end of 1996, the Company presented Labco as an operation held for
sale. The Company's share of Labco's net income for 1996 was $117,000, as
compared to $258,000 for the same period in 1995 (where it is shown as Income
from operations under the caption "Operation held for sale"). The Company sold
its remaining interest in Labco in 1996. See Item 12 "Certain Relationships and
Related Transactions--Sale of Subsidiary."
In 1996, the Company earned investment income of $72,000.
Other expense, net of income, was $12,000 in 1996, as compared to
$52,000 in 1995. In 1996, the Company recognized $44,000 of gains from trading
securities held for Canadian pension funding purposes, partially offset by
miscellaneous expenses, including $43,000 of foreign exchange losses realized in
1996. In 1995, the Company realized foreign exchange losses of $79,000.
Income Taxes. For the year ended December 31, 1996, the Company had a
net tax benefit of $391,000 primarily due to a reduction in the deferred tax
valuation allowance as a result of changes in management's estimates of the
utilization of both U.S. and Canadian tax loss carryforwards caused primarily by
improved operating results.
Liquidity and Capital Resources
Cash provided by operations was $2.0 million in 1997, and cash used in
operations was $1.4 million in 1996 and $711,000 in 1995. Cash provided by
operations in 1997 resulted primarily from net income of $5.8 million, partially
offset by increases in accounts receivable and inventories. Accounts receivable
increased as a result of higher sales, particularly during the month of
December. Inventories also increased as the Company acquired the materials
necessary to support increased IONSCAN(R) production. Cash used in operating
activities during 1996 resulted primarily from increases in accounts receivable
and inventory, which more than offset net income of $2.1 million for the year.
Cash used in operating activities during 1995 resulted primarily from the loss
of $827,000 recorded by the Company for 1995.
Net cash provided by investing activities was $639,000 in 1997, and net
cash used in investing activities was $3.9 million in 1996 and $58,000 in 1995.
Cash provided by investing activities in 1997 resulted primarily from the sale
of investments, partially offset by capital expenditures. Cash used in investing
activities during 1996 resulted primarily from the investment of a portion of
the net proceeds of the Company's November 1996 public offering, offset in part
by the receipt of $574,000 in connection with the Company's sale of its
remaining interest in Labco. Cash used in investing activities during 1995
resulted primarily from the purchase of equipment, which was partially offset by
the receipt of an additional $300,000 in connection with the sale of Labco.
Cash provided by financing activities was $315,000 in 1997, $10.6
million in 1996 and $584,000 in 1995. Cash provided by financing activities
during 1997 resulted primarily from the net proceeds of certain option and
warrant exercises, offset in part by the repayment of indebtedness. Cash
provided by financing activities in 1996 resulted primarily from the Company's
November 1996 public offering, as well as the proceeds from the sale of $1.0
million of convertible subordinated debentures, offset in part by the repayment
of indebtedness. Cash provided by financing activities in 1995 resulted
primarily from the receipt of net proceeds from the private placement of
securities, offset in part by the repayment of certain indebtedness.
The Company's capital expenditures in 1997 aggregated approximately
$1.2 million. Such expenditures consisted primarily of software upgrades to
various manufacturing information systems, computer hardware modernization
relating to the Company's network system and the acquisition of additional
equipment. The Company believes that it will require approximately $1.0 million
in additional investment in tooling, equipment, and facility improvements to
meet its anticipated production levels for 1998.
In March 1998, the Company established a $5.0 million unsecured credit
facility with Fleet Bank, N.A. (the "Bank") to be used for general working
capital purposes, including the issuance of standby letters of credit (the
"Facility"). Drawings under the Facility may not be used to fund acquisitions
unless approved in advance by the Bank. Amounts drawn under the Facility bear
interest at a variable rate per annum selected by the Company and equal to
either the Bank's prime rate less 0.75% or LIBOR (determined on the basis of a
30-, 60- or 90-day interest period, as applicable) plus 2.0%. The Facility
expires on June 30, 1999, subject to renewal. The Facility is guaranteed by the
Company's primary U.S. subsidiary, Barringer Instruments Inc. ("BII"). Pursuant
to the Facility, the Company and BII are required to comply with certain
customary covenants, including certain financial tests. In addition, BII and the
Company's Canadian subsidiary, Barringer Research Limited ("BRL"), have agreed
not to pledge their assets to any other creditor without the Bank's prior
written consent.
The Company has substantial tax loss carryforwards to offset future tax
liabilities in the U.S.
As of December 31, 1997, the Company had cash and cash equivalents of
$8.2 million and marketable securities of $2.5 million. The Company believes
that its existing cash balances, marketable securities, income from operations
in future periods and the net proceeds from this Offering will be sufficient to
fund its working capital requirements for at least the next twelve months.
Inflation
Inflation was not a material factor in either the sales or the
operating expenses of the Company during the periods presented herein.
Year 2000 Issue
The year 2000 issue is the result of computer programs being written
using two digits rather than four to define the applicable year. Certain
computer programs may recognize a date using "00" as the year 1900 rather than
the year 2000. This could result in a system failure or miscalculations causing
disruptions of operations, including, among other things, a temporary inability
to process transactions, send invoices or engage in similar normal business
activity.
Based on a recent internal assessment, the Company has determined that
the cost to modify its existing software and/or to convert to new software will
not be significant. However, if customers, suppliers or others with whom the
Company does business experience problems relating to the year 2000 issue, the
Company's business, financial condition or results of operations could be
materially adversely affected.
Recent Pronouncements of the Financial Accounting Standards Board
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income," which establishes standards for reporting and display of
comprehensive income and its components in a full set of general-purpose
financial statements and will be effective for fiscal years beginning after
December 15, 1997. The Company will be reviewing this document to determine its
applicability to the Company and has elected not to adopt early application.
In June 1997, the FASB issued SFAS No.131, "Disclosures About Segments
of an Enterprise and Related Information," which supercedes SFAS No. 14,
"Financial Reporting for Segments of a Business Enterprise." SFAS 131
establishes standards for the way that public companies report information about
operating segments in annual financial statements and requires reporting of
selected information about operating segments in interim financial statements
issued to the public. It also establishes standards for disclosures regarding
products and services, geographic areas and major customers. SFAS 131 defines
operating segments as components of a company about which separate financial
information is available that is evaluated regularly by the chief operating
decision maker in deciding how to allocate resources and in assessing
performance. SFAS 131 is effective for financial statements for periods
beginning after December 15, 1997 and requires comparative information for
earlier years to be restated. Because of the relatively recent issuance of this
standard, management has been unable to fully evaluate the impact, if any, it
may have on future financial statement disclosures. Results of operations and
financial position, however, will be unaffected by implementation of this
standard.
Item 7. Financial Statements and Supplemental Data.
Financial statements and supplementary financial information are
contained on pages F-1 through F-22.
Item 8. Changes in and Disagreements with Accountants and Accounting and
Financial Disclosures.
Not applicable.
PART III
Item 9. Directors, Executive Officers, Promotors and Control Persons, Compliance
with Section 16(a) of the Exchange Act.
Directors and Executive Officers
The following table sets forth certain information regarding the
Company's executive officers and directors as of February 1, 1998.
Name Age Position
Stanley S. Binder(1) 56 Chairman of the Board, Chief Executive Officer
and President
John H. Davies(1) 61 Executive Vice President and Director,
President and Chief Executive Officer of BRL
Richard S. Rosenfeld 51 Vice President-Finance, Chief Financial
Officer, Treasurer and Assistant Secretary
Kenneth S. Wood 45 Vice President and Secretary, President of BII
John D. Abernathy(1)(2)(3) 60 Director
Richard D. Condon(2) 62 Director
John J. Harte(1)(3) 56 Director
James C. McGrath(2)(3) 55 Director
(1) Member of Executive Committee.
(2) Member of Audit and Finance Committee.
(3) Member of Executive Compensation Committee.
Mr. Stanley S. Binder joined the Company in July 1989 and has served as
Chairman of the Board since February 1991, Chief Executive Officer since July
1990 and President since July 1989. Mr. Binder also is an independent general
partner in the Special Situations Fund III, L.P. ("SSF III"), a substantial
investor in the Company. See Item 12, "Certain Relationships and Related
Transactions--General." Mr. Binder is chairman of the New Jersey Council of the
American Electronics Association and a member of the Board of Directors of the
American Electronics Association.
Mr. John H. Davies joined the Company in October 1967 and has served as
Executive Vice President of the Company since January 1992. Mr. Davies has been
the President and Chief Executive Officer of BRL since August 1989. Mr. Davies
has served as a director of the Company since February 1991.
Mr. Richard S. Rosenfeld, a certified public accountant, joined the
Company in January 1992 as Treasurer and Assistant Secretary. Since July 1993,
he has been Vice President-Finance and Chief Financial Officer of the Company.
Mr. Kenneth S. Wood joined the Company in April 1990 as Vice President
of Operations of BII. Since January 1992, he has served as Vice President of the
Company and the President of BII. He also has served as the Secretary of the
Company since March 1993. From July 1978 until April 1990, he was Program
Director for Lockheed Electronics, a company engaged in aerospace and defense
electronics.
Mr. John D. Abernathy, has served as a Director of the Company since
October 1993. Mr. Abernathy is a certified public accountant. Since January
1995, he has been Executive Director of the law firm of Patton Boggs, LLP. From
March 1994 to January 1995, he was an independent financial and management
consultant. From March 1991 to March 1994, he was the Managing Director of
Summit, Solomon & Feldesman, a law firm in dissolution since March 1993. From
July 1983 until June 1990, Mr. Abernathy was Chairman and Chief Executive
Partner of BDO Seidman, a public accounting firm. He also is a director of
Oakhurst Company, Inc., a distributor of automotive parts and accessories.
Mr. Richard D. Condon has served as a Director of the Company since
February 1992. Since January 1996, Mr. Condon has been a consultant to and
director of Amherst Process Instruments, Inc., a scientific instrumentation
company. From 1989 until December 1995, Mr. Condon was a consultant to and
director of Analytical Technology, Inc., Boston, Massachusetts, a scientific
instrumentation company.
Mr. John J. Harte has served as a Director of the Company since 1986.
He was Vice President, Special Projects of the Company from 1991 until January
1997. He is a certified public accountant and, since 1978, has been Vice
President of Mid-Lakes Distributing Inc., a manufacturer and distributor of
heating and air conditioning parts and equipment located in Chicago, Illinois.
Mr. Harte also serves as a director of IBNET Inc., a global internet company.
Mr. James C. McGrath, has served as a Director of the Company since
January 1994. Mr. McGrath is an international security consultant. Since July
1989, he has been President of McGrath International, Inc., a management
consulting firm specializing in the security field.
All directors hold office until the next annual meeting of stockholders
and until their successors have been duly elected and qualified. The Company's
Directors are elected by the holders of the Company's Common Stock, Class A
Convertible Preferred Stock and Class B Convertible Preferred Stock voting as a
single class. There are no family relationships among any of the directors or
executive officers.
Item 10. Executive Compensation
The following table sets forth certain compensation paid to the
President and Chief Executive Officer and each other executive officer of the
Company whose total annual salary and bonus for the year ended December 31, 1997
exceeded $100,000 (collectively, the "Named Executive Officers"):
<TABLE>
<CAPTION>
Summary Compensation Table
Annual Compensation Long-Term Compensation
Securities
Restricted Underlying All Other
Name and Fiscal Salary Bonus(1) Other Annual Stock Options/ LTIP Compensation
Principal Position Year ($) ($) Compensation Award(s) SARs Payouts ($)(2)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Stanley S. Binder 1997 $200,000 $350,000 -- -- 87,500 -- $9,500
President and Chief 1996 171,491 63,000 -- -- 55,000 -- 2,925
Executive Officer 1995 171,491 -- -- -- 45,000 -- 5,940
John H. Davies* 1997 $136,440 $180,000 -- -- 34,000 -- $6,811
Executive Vice 1996 125,275 43,200 -- -- 38,250 -- 6,317
President of the 1995 125,775 -- $12,149(3) -- 31,250 -- 6,317
Company
Kenneth S. Wood 1997 $130,000 $170,000 -- -- 31,500 -- $8,480
President of Barringer 1996 111,815 39,600 -- -- 33,750 -- 2,199
Instruments, Inc. 1995 111,815 -- -- -- 26,250 -- 2,283
Richard S. Rosenfeld 1997 $107,500 $115,000 -- -- 27,300 -- $7,085
Vice President-Finance, 1996 96,000 34,200 -- -- 27,500 -- 1,872
Chief Financial Officer 1995 96,000 -- -- -- 22,500 -- 4,410
</TABLE>
* Amounts converted to U.S. dollars at the average exchange rate for such year.
(1) Represents amounts accrued pursuant to the Company's annual incentive
compensation plan.
(2) Represents amounts contributed by the Company pursuant to the Company's
tax-qualified 401(k) deferred compensation plan ("401(k) Plan"). In 1997,
the 401(k) Plan provided that the Company would make matching contributions
to the participants in the 401(k) Plan equal to 100% of the first 5.0% of a
participant's salary contributed. In 1996 and 1995, the 401(k) Plan
provided that the Company would make matching contributions to the
participants in the 401(k) Plan equal to 100% of the first 2.0% of a
participant's salary contributed and 50.0% of the next 5.0% of a
participant's salary contributed. Company contributions to the 401(k) Plan
vest proportionately over a five-year period, commencing at the end of the
participant's first year with the Company.
(3) The other annual compensation for Mr. John Davies represented the payment
of previously accrued and unpaid vacation pay.
Effective January 1, 1998, the Company adopted the Barringer
Technologies Inc. Supplemental Executive Retirement Plan (the "SERP Plan"). The
SERP Plan provides eligible participants with certain retirement benefits
supplemental to the Company's 401(k) Plan. Pursuant to the SERP Plan, the
Company will make annual contributions to the account of each participant equal
to a variable percentage of the participant's base salary and annual cash bonus
depending on the Company's achievement of certain performance targets. The
actual percentage contribution will be determined by the Executive Compensation
Committee, subject to certain parameters. A participant will become vested under
the SERP Plan after five years of participation therein. A participant may elect
to receive benefits under the SERP Plan commencing at age 60 and is entitled to
receive either a lump-sum payment of his or her account balances upon retirement
or to use the account balance to purchase an annuity. In the event of the
termination of a participant's employment under certain circumstances set forth
in the SERP Plan, the participant will be entitled to receive his or her account
balance whether or not the participant has become vested under the SERP Plan.
Currently, each of the Named Executive Officers participates in the SERP Plan.
Option Grants
The following table summarizes certain information relating to the
grant of options to purchase Common Stock to each of the Named Executive
Officers:
Option/SAR Grants in Last Fiscal Year(1)
Number of Percent of Total
Securities Options/SARs
Underlying Granted to Exercise or
Options/SARs Employees ins Base Price
Name Granted(#)(2) Fiscal Year(3) ($/sh)
Stanley S. Binder 50,000 32.5% $ 9.375
37,500 11.780
John H. Davies 25,000 12.6 9.375
9,000 11.780
Kenneth S. Wood 22,500 11.7 9.375
9,000 11.780
Richard S. Rosenfeld 19,500 10.1 9.375
7,800 11.780
(1) The Company did not grant stock appreciation rights in 1997.
(2) Stock option grants were made in February and December 1997. Stock options
granted in the first tranche expire on February 28, 2007 and options
granted in the second tranche expire on December 22, 2007. Twenty-five
percent of each option grant is exercisable after the first anniversary of
the date of grant, 50.0% is exercisable after the second anniversary, 75%
is exercisable after the third anniversary and 100% is exercisable after
the fourth anniversary. (3) Options covering a total of 268,900 shares of
Common Stock were granted to employees in 1997.
Options Exercised in Last Fiscal Year and Fiscal Year-End Option Values
The following table sets forth information with respect to the Named
Executive Officers concerning the exercise of stock options during 1997 and
unexercised options held by such Named Executive Officers as of December 31,
1997.
Aggregated Option Exercises in 1997 and Fiscal Year-End Option Values
<TABLE>
<CAPTION>
Number of Unexercised
Securities Underlying Value of Unexercised
Shares Options/SARs in-the-money Options
Acquired On Value at Year-End(#) at Year-End($)(1)
Name Exercise(#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Stanley S. Binder -- -- 54,500 133,000 $701,938 $907,813
John H. Davies -- -- 37,875 65,625 487,828 558,839
Kenneth S. Wood -- -- 32,625 58,875 420,609 491,496
Richard S. Rosenfeld -- -- 27,250 50,050 350,969 413,022
</TABLE>
(1) Based on a closing bid price of $14.375 per share for the Common Stock as
of December 31, 1997.
BRL maintained a defined benefit pension plan for its Canadian
employees that was terminated on December 31, 1993. Mr. Davies was a participant
in that plan. His projected annual benefit at age 65 has been set at
approximately $54,000, which amount may be subject to change only in response to
changes in the Canadian pension regulatory scheme.
Stock Option Plans
1990 Option Plan
The Company maintained an option plan (the "1990 Option Plan") pursuant
to which the Company was authorized to grant options covering a total of 100,000
shares of Common Stock. As of December 31, 1996, options covering a total of
23,750 shares of Common Stock were outstanding thereunder and no further options
could be granted thereunder. All of such options expired in January 1997.
1997 Stock Compensation Program
In May 1997, the Company adopted the Barringer 1997 Stock Compensation
Program (the "Stock Compensation Program") in order to promote the interests of
the Company, its direct and indirect present and future subsidiaries and its
stockholders by providing eligible persons with the opportunity to acquire an
ownership interest, or to increase their ownership interest, in the Company as
an incentive to remain in the service of the Company. The Stock Compensation
Program authorizes the granting of incentive stock options, non-qualified stock
options, stock appreciation rights, performance shares and stock bonus awards to
employees and consultants of the Company and its subsidiaries, including those
employees serving as officers or directors of the Company (the "Employee
Plans"). The Stock Compensation Program also authorizes automatic option grants
to directors who are not otherwise employed by the Company (the "Independent
Director Plan"). In connection with the Stock Compensation Program, 600,000
shares of Common Stock are reserved for issuance, of which up to 500,000 shares
may be issued under the Employee Plans and up to 100,000 shares may be issued
under the Independent Director Plan. The Stock Compensation Program is
administered by the Executive Compensation Committee of the Board of Directors.
Options and awards granted under the Stock Compensation Program may
have an exercise or payment price as established by the Executive Compensation
Committee; provided that the exercise price of incentive stock options granted
under the Employee Plans may not be less than the fair market value of the
underlying shares on the date of grant. Options granted under the Independent
Director Plan must have an exercise price equal to the fair market value of the
underlying shares on the date of grant.
Unless otherwise provided at the date of grant, no option or award may
vest within one year of the date of grant and no option or award may be
exercised more than 10 years from the date of grant. Options granted under the
Independent Director Plan vest one year following the date of grant and expire
if not exercised on or before the fifth anniversary thereof. Unless otherwise
specified by the Executive Compensation Committee, options and awards (other
than pursuant to the Independent Director Plan) vest in four equal installments
on the first, second, third and fourth anniversaries of the date of grant.
Vesting of any option or award granted under the Stock Compensation Program may
be accelerated in certain circumstances, including upon the occurrence of a
"Change in Control Event" (as defined in the Stock Compensation Program).
Options and awards granted under the Stock Compensation Program are
nontransferable, except by will or by the laws of descent and distribution.
However, the Executive Compensation Committee may permit the recipient of a
non-incentive stock option granted under the Employee Plans and options granted
under the Independent Director Plan to transfer the option to a family member or
a trust created for the benefit of family members. During the lifetime of a
participant, an option may be exercised only by the participant or a permitted
transferee. In the event that a participant's employment or service terminates
as a result of death, all vested awards will be paid to the participant's estate
by the Company and the participant's estate or any permitted transferee will
have the right to exercise vested options for a period ending on the earlier of
the expiration dates of such options or one year from the date of death. If the
participant's employment or service terminates as a result of retirement or a
"disability" (as set forth in the Stock Compensation Program), all vested awards
will be paid to the participant by the Company and the participant or any
permitted transferee will have the right to exercise vested options for a period
ending on the earlier of the expiration dates of such options or one year from
the date of termination. If the participant's employment or service terminates
for cause, all options and awards will automatically expire upon termination. If
the participant's employment or service terminates other than as a result of
death, disability, retirement or termination for cause, the participant will
have the right to collect all vested awards immediately and the participant or
any permitted transferee will have the right to exercise vested options for a
period ending on the earlier of the expiration dates of such options or awards
or 30 days from the date of termination, subject to extension at the discretion
of the Administrator, or three months from the date of termination in the case
of options granted pursuant to the Independent Director Plan. In all cases, any
unvested options or awards will terminate as of the date of termination of
employment or service.
The Stock Compensation Program will terminate on February 28, 2007,
unless earlier terminated by the Board of Directors. No options or awards may be
granted under the Stock Compensation Program after its termination; however,
termination of the Stock Compensation Program will not affect the status of any
option or award outstanding on the date of termination.
Incentive stock options exercisable for an aggregate of 268,900 shares
of Common Stock have been granted to date under the Employee Plans. These
options expire 10 years after the date of grant and have a weighted average
exercise price of $10.57 per share. Such options are exercisable annually in 25%
increments beginning with the first anniversary of the date of grant. In
addition, pursuant to the terms of the Independent Director Plan, options
exercisable for an aggregate of 12,000 shares have been granted to the Company's
independent directors to date. These options become exercisable one year from
the date of grant, expire five years from the date of grant and have an exercise
price, subject to adjustment, of $13.875 per share.
Exercise Program
In connection with the options granted by the Company to its employees,
the Board of Directors has approved a stock option exercise program (the
"Exercise Program"). The Exercise Program permits all employees of the Company
and its subsidiaries who are granted stock options (pursuant to either qualified
or non-qualified plans) to finance the exercise of such options by causing the
Company to issue the shares underlying such options upon receipt by the Company
from the employee of a full-recourse demand note evidencing indebtedness to the
Company in an amount equal to the exercise price. Such loans, which are secured
by the underlying shares of Common Stock, are interest-free for one year from
the date on which the employee exercises his or her option, after which interest
accrues at the prime rate, which rate is changed monthly. The loans are repaid
with a portion of the proceeds from the sale of the Common Stock to be received
by the employees upon the exercise of their options. As of March 27, 1998,
Messrs. Binder and Wood were indebted to the Company in the amounts of
approximately $259,785 and $13,050, respectively, for loans made pursuant to the
Exercise Program. During 1997, the largest aggregate amount of indebtedness of
Messrs. Binder and Wood pursuant to such loans were $255,199 and $84,650,
respectively. The rate of interest charged on each such loan during 1997 was the
prime lending rate charged by Summit Bank.
Employment Agreements and Compensation Arrangements
The Company has entered into a five-year employment agreement with Mr.
Binder, the President and Chief Executive Officer of the Company (the
"Employment Agreement"), effective January 1, 1998, pursuant to which Mr. Binder
receives a base salary of $250,000 per annum, subject to certain adjustments and
to periodic increases as determined by the board of directors. In addition, Mr.
Binder is entitled to receive up to a total of three special bonuses during the
term of the Employment Agreement, in the amount of $65,000, $65,000 and $70,000,
respectively, in the event that the Company's EBITDA (as defined in the
Employment Agreement), exceeds certain targeted amounts for any fiscal year
during the term of the Employment Agreement. Pursuant to the Employment
Agreement, Mr. Binder is also entitled to participate in the Company's cash
bonus plan and to participate in the SERP Plan adopted by the Company for
certain senior executives. Also, under the terms of the Employment Agreement,
Mr. Binder received stock options covering 50,000 shares of Common Stock having
an exercise price of $11.78 per share (equal to the fair market value on the
date of grant). In the Employment Agreement, the Company has agreed to maintain
a $1.0 million term life insurance policy for Mr. Binder's benefit. Mr. Binder
is entitled to several perquisites, including a car allowance and reimbursement
for the cost of certain financial planning services.
In the event that Mr. Binder's employment is terminated pursuant to a
Without Cause Termination, or Mr. Binder terminates his employment for Good
Reason (as such terms are defined in the Employment Agreement), Mr. Binder will
be entitled to a severance payment equal to 2.99 times his then-current base
salary and to certain other severance benefits. In addition, upon the occurrence
of a Change in Control Event (as such term is defined in the Employment
Agreement), Mr. Binder has the right to terminate his employment within 180
days, in which event the termination will be treated as a termination for Good
Reason with the effects specified above. In addition, the Company has agreed to
pay Mr. Binder additional amounts, if necessary, to pay any excise tax Mr.
Binder may become subject to in the event that any payment made to him under the
Employment Agreement constitutes an "excess parachute payment" within the
meaning of Section 209G of the Internal Revenue Code of 1986, as amended.
Pursuant to the Employment Agreement, Mr. Binder has agreed to certain
confidentiality, work-for-hire and non-competition covenants.
The Company has entered into employment agreements with Messrs. Wood
and Rosenfeld which run for a term of one year from November 1, 1996, subject to
automatic renewal unless either the employee or the Company gives the other
party to the employment agreement 90 days' prior written notice of non-renewal.
Pursuant to the employment agreements, Messrs. Wood and Rosenfeld received
annual base salaries of $130,000 and $107,500, respectively, for 1997 and will
receive annual base salaries of $150,000 and 125,000, respectively, for 1998,
subject to periodic increases at the discretion of the Board of Directors, and
are entitled to participate in any cash bonus plan maintained by the Company.
Both of the employment agreements provide, among other things, that, in the
event of a termination of employment by the Company without cause, or a
termination by the employee in certain circumstances following a "change in
control" of the Company, the employee will be entitled to receive certain
severance benefits (payable in equal monthly installments) determined on a
formula basis. Both of the employment agreements also contain certain
confidentiality and non-competition provisions which continue in effect
following the termination of the employee's employment by the Company.
See "-- Directors' Compensation" for information regarding the
consulting agreement between the Company and Mr. Harte.
Directors' Compensation
Outside directors are entitled to an annual retainer of $3,000 per
quarter (plus a $500 quarterly fee for each committee chairperson) and a fee of
$1,000 for each meeting attended and $500 for each committee meeting attended
(regardless of whether or not the committee meeting is held on the same day as a
meeting of the Board of Directors). Pursuant to a consulting agreement with the
Company which terminated as of December 31, 1997, in lieu of his annual
retainer, Mr. Harte had received a fee of $2,000 per month for services rendered
to the Company, and a fee of $1,000 for each meeting he attended in his capacity
as a director. Pursuant to the terms of the Stock Compensation Program, each
director who has not been a full-time employee of the Company or any subsidiary
for at least the prior 12 months receives an option to purchase 3,000 shares of
Common Stock each year on the earlier of (i) the date of the Company's annual
meeting of stockholders, or (ii) June 1. Options granted to such directors under
the Stock Compensation Program have an exercise price equal to the fair market
value per share as of the date of grant. See "--Stock Option Plans."
Under the Company's 1991 Directors Warrant Plan (the "1991 Warrant
Plan"), each non-employee director, upon election or appointment to the Board,
was offered 3,750 warrants, at $0.40 per warrant, each of which was exercisable
within five years to purchase one share of Common Stock at an exercise price
determined by the Board at the time the warrants were issued, but not less than
the current market price for the shares underlying the warrants. The 1991
Warrant Plan required each such new director to use his or her first quarterly
director's fee to pay the purchase price for such warrants. The Board of
Directors terminated the 1991 Warrant Plan effective May 1997.
Compensation Committee Interlocks and Insider Participation
The Company's Executive Compensation Committee is comprised of Messrs.
Abernathy, Harte and McGrath. During the fiscal year ended December 31, 1996,
Mr. Harte was also the Vice President, Special Projects, of the Company.
Until November 1996, Mr. Harte was Chairman of the Board of Labco, and
Mr. Binder was a Director of Labco. Mr. Binder also served on the compensation
committee of Labco's Board of Directors. Except as described herein, no
executive officer of the Company and no member of the Compensation Committee is
a member of any other business entity that has an executive officer that sits on
the Company's Board or on the Executive Compensation Committee. In January 1996,
Mr. Binder received an option to purchase 10,000 shares of Labco common stock at
an exercise price equal to the fair market value of the Labco common stock on
the date of grant.
Section 16(a) Beneficial Ownership Reporting Compliance
Under Section 16(a) of the Exchange Act, the Company's directors,
executive officers, and persons holding more than ten percent of the Company's
Common Stock are required to report their initial ownership of the Company's
Common Stock and any changes in such ownership to the Securities and Exchange
Commission. These persons are also required to furnish the Company with a copy
of all Section 16(a) forms they file. The Company is obligated to disclose any
failures to, on a timely basis, file such reports. To the Company's knowledge,
based solely on a review of such reports and any amendments thereto which have
been furnished to the Company, the Company has not identified any reports
required to be filed during the year ended December 31, 1997 that were not filed
in a timely manner.
Item 11. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth, as of February 1, 1998, the number of
shares of Class A Convertible Preferred Stock, Class B Convertible Preferred
Stock and Common Stock owned by each Named Executive Officer, each director and
all directors and executive officers as a group and any persons (including any
"group" as used in Section 13(d)(3) of the Exchange Act) known by the Company to
own beneficially 5% or more of such securities. As of February 1, 1998, there
were 5,509,854 shares of Common Stock, 45,146 shares of Class A Convertible
Preferred Stock and 22,500 shares of Class B Convertible Preferred Stock issued
and outstanding. As of that date, none of the executive officers and directors
of the Company owned shares of the Company's Class A Convertible Preferred Stock
or Class B Convertible Preferred Stock. The business address for all of the
executive officers and directors of the Company is 219 South Street, Murray
Hill, New Jersey 07974.
Beneficial Beneficial Beneficial
Ownership Ownership Ownership of
of Class A of Class B Common Stock
Convertible Convertible Prior to
Preferred Stock Preferred Stock Offering(1)(2)
Number Percent Number Percent Number Percent
of of of of of of
Name Shares Class Shares Class Shares Class
Stanley S. Binder(4) -- -- -- -- 139,011 2.7%
John H. Davies(5) -- -- -- -- 121,667 2.2
John J. Harte(6) -- -- -- -- 51,100 *
Richard D. Condon(7) -- -- -- -- 32,250 *
John D. Abernathy(8) -- -- -- -- 29,204 *
James C. McGrath(9) -- -- -- -- 22,250 *
Kenneth S. Wood(10) -- -- -- -- 57,136 1.0
Richard S. Rosenfeld (11) -- -- -- -- 50,661 *
All directors and executive
officers as a group
consisting of eight
(8) persons -- -- -- -- 503,219 8.7
Austin W. Marxe(12) -- -- -- -- 1,026,822 18.0
153 E. 53rd St.
NY, NY 10022
Perkins Capital Management,
Inc.(13) -- -- -- -- 554,559 10.1
730 East Lake Street
Wayzata, MN 55391
Corbyn Investment Management,
Inc.(14) -- -- -- -- 400,100 7.3
2330 W. Joppa Road
Suite 108
Lutherville, MD 21093
Westcliff Capital Management,
LLC(15) -- -- -- -- 439,225 6.9
200 Seventh Avenue,
Suite 105
Santa Cruz, CA 95062
Richard S. Spencer III(15) -- -- -- -- 439,225 6.9
200 Seventh Avenue,
Suite 105
Santa Cruz, CA 95062
David R. Korus(15) -- -- -- -- 439,225 6.9
152 W. 57th Street
New York, NY 10019
Ronald and Kathleen Hanna 21,549 47.7% -- -- 7,795 *
135 South Horizon Circle
Prescott, AZ 86303
Max Gerber(16) -- -- 12,500 55.6% 4,536 *
26 Broadway
New York, NY 10004-1776
Paul Spitzberg(17) -- -- 10,000 44.4 3,639 *
16 Whiteowl Road
Tenafly, NJ 07670
* Less than 1%
(1) Assumes the exercise of all outstanding warrants for Common Stock, the
conversion of each outstanding share of Class A Convertible Preferred Stock
and Class B Convertible Preferred Stock into Common Stock and the exercise
of all options exercisable within 60 days of February 1, 1998 for each
person or entity.
(2) Certain amounts shown are subject to adjustment in certain circumstances.
(3) Assumes the exercise of the Underwriters' over-allotment option in full.
(4) Includes 72,875 shares of Common Stock issuable upon the exercise of
options exercisable within 60 days of February 1, 1998 and 12,500 shares of
Common Stock issuable upon exercise of warrants owned by Mr. Binder.
Excludes shares of Common Stock beneficially owned by SSF III of which Mr.
Binder is an independent general partner. Mr. Binder disclaims any
beneficial interest in such shares.
(5) Includes 50,372 shares of Common Stock issuable upon the exercise of
options exercisable within 60 days of February 1, 1998 and 12,500 shares of
Common Stock issuable upon the exercise of warrants owned by Mr. Davies.
(6) Includes 13,500 shares of Common Stock issuable upon the exercise of
options exercisable within 60 days of February 1, 1998.
(7) Includes 13,500 shares of Common Stock issuable upon the exercise of
options exercisable within 60 days of February 1, 1998 and 5,000 shares of
Common Stock issuable upon the exercise of warrants owned by Mr. Condon.
(8) Includes 13,500 shares of Common Stock issuable upon the exercise of
options exercisable with 60 days of February 1, 1998 and 6,250 shares of
Common Stock issuable upon the exercise of warrants owned by Mr. Abernathy.
(9) Includes 13,500 shares of Common Stock issuable upon the exercise of
options exercisable within 60 days of February 1, 1998 and 3,750 shares of
Common Stock issuable upon the exercise of warrants owned by Mr. McGrath.
(10) Includes 43,500 shares of Common Stock issuable upon the exercise of
options exercisable within 60 days of February 1, 1998.
(11) Includes 36,625 shares of Common Stock issuable upon the exercise of
options exercisable within 60 days of February 1, 1998 and 5,000 shares of
Common Stock issuable upon the exercise of warrants owned by Mr. Rosenfeld.
Also includes 3,636 shares of Common Stock owned by Mr. Rosenfeld's child.
(12) Includes (i) 502,580 shares of Common Stock and 256,667 shares of Common
Stock issuable upon the exercise of warrants owned by SSF III, and (ii)
174,242 shares of Common Stock and 93,333 shares of Common Stock issuable
upon the exercise of warrants owned by Special Situations Cayman Fund, L.P.
(the "Cayman Fund"). AWM Investment Company, Inc. ("AWM") is the sole
general partner of the Cayman Fund and the sole general partner of MGP
Advisors Limited ("MGP"), a general partner of SSF III. Mr. Marxe is the
President and Chief Executive Officer of AWM and the principal limited
partner of MGP. Accordingly, Mr. Marxe may be deemed to be the beneficial
owner of all of the shares of Common Stock held by SSF III and the Cayman
Fund. Mr. Binder is an independent general partner of SSF III. Mr. Binder
disclaims beneficial ownership of all shares held by SSF III.
(13) Consists of 319,150 shares of Common Stock owned by clients of Perkins
Capital Management, Inc. ("Perkins Capital") and 235,409 shares of Common
Stock held by The Perkins Opportunity Fund (the "Perkins Fund"), for which
Perkins Capital acts as investment adviser. Perkins Capital disclaims any
beneficial interest in the shares of Common Stock held by the Perkins Fund.
(14) Consists of 76,100 shares of Common Stock owned by Corbyn Investment
Management, Inc. and 324,000 shares of Common Stock owned by Greenspring
Fund, Inc.
(15) Includes 135,425 shares of Common Stock owned by Westcliff, LLC ("WL"),
47,175 shares of Common Stock owned by Westcliff Partners, L.P. ("WP") and
88,250 shares of Common Stock owned by Westcliff Long/Short, L.P. ("WLS").
Westcliff Capital Management, LLC ("WCM") is the investment adviser to and
a general partner of WP and WLS and WL is a general partner of WP and WLS.
Messrs. Spencer and Korus are the sole managers of WCM and WL.
(16) Includes 4,447 shares of Common Stock issuable upon conversion of the Class
B Convertible Preferred Stock.
(17) Includes 3,558 shares of Common Stock issuable upon conversion of the Class
B Convertible Preferred Stock.
Item 12. Certain Relationships and Related Transactions
General
In July 1996, the Company sold to SSF III, which is controlled by Mr.
Marxe and of which Mr. Binder is an independent general partner with
approximately a 0.01% interest in such partnership, and to the Special
Situations Cayman Fund, LP, an affiliate of SSF III (collectively, with SSF III,
"SSF"), $450,000 in principal amount of the Company's 6% Subordinated
Convertible Debentures due 1997 (the "Debentures"). The Debentures bore interest
at the rate of 6.0% per annum, were convertible into shares of Common Stock at a
conversion rate of $2.75 and, pursuant to their terms, matured 30 days after the
consummation of the Company's November 1996 public offering, unless converted
prior thereto. Certain officers and directors of the Company purchased an
additional $100,000 in aggregate principal amount of the Debentures.
All of the Debentures were converted into shares of Common Stock in December
1996.
Mr. Abernathy is currently the Executive Director of Patton Boggs, LLP,
a Washington, D.C. law firm. During 1997, the Company retained Patton Boggs, LLP
to represent the Company in various matters and has retained such firm in 1998.
Sale of Subsidiary
Prior to December 1995, the Company controlled Labco, a publicly traded
company that provides comprehensive laboratory-based analytical and consulting
services in the United States and Mexico, including environmental monitoring and
geochemical analysis for the hydrocarbon and mineral exploration industries. In
order to focus its resources on its core business and to increase working
capital, in December 1995 the Company entered into a Stock Purchase Agreement
with Labco (the "Stock Purchase Agreement") pursuant to which the Company sold
back to Labco 647,238 shares of Labco's common stock for an aggregate purchase
price of $809,000. The purchase price consisted of the cancellation of all
inter-company obligations and $300,000 in cash. After giving effect to the sale,
the Company continued to own 437,475 shares of Labco's common stock. However,
under the terms of the Stock Purchase Agreement, Labco retained an additional
88,260 shares of Labco common stock owned by the Company (the "Retained
Shares"), subject to the return of the Retained Shares to the Company upon Labco
meeting certain pre-tax earnings goals for 1996. The Company also agreed to
terminate all voting arrangements allowing it to vote shares of Labco common
stock not owned by it and agreed for a period of 24 months not to enter into any
such voting arrangements. See Note 13 of the Notes to Consolidated Financial
Statements.
In October 1996, the Company and Labco entered into a Termination
Agreement (the "Termination Agreement") pursuant to which Labco agreed to waive
its right of first refusal with respect to, and to terminate the other
restrictions on, the transfer of the Company's remaining Labco shares. The
Company agreed that, for a period of three months from the date of the
Termination Agreement, it would sell such shares at a price of at least $1.6875
per share (the "Target Price") in a distribution in which it would not knowingly
sell more than 75,000 shares to any one purchaser or group of related
purchasers. Under the Termination Agreement, for such three-month period, the
Company agreed to sell its Labco shares as provided above upon receipt of an
offer to acquire such shares at a price per share at least equal to the Target
Price. The restrictions described above also applied to any shares of Labco
common stock issuable to the Company upon the exercise of certain warrants held
by the Company. Labco registered the Company's Labco shares for resale pursuant
to the Securities Act to facilitate such sales.
In the Termination Agreement, the Company also agreed to surrender to
Labco the Retained Shares and to terminate all remaining inter-company
arrangements. In addition, upon the disposition by the Company of at least
250,000 of its shares of Labco common stock, Messrs. Binder and Harte agreed to
resign their positions with Labco.
As of December 31, 1996, the Company had sold its entire interest in
Labco and, pursuant to the terms of the Termination Agreement, Messrs. Binder
and Harte had resigned their respective positions with Labco.
Item 13. Exhibits and Reports on Form 8-K.
(a) Exhibits.
Exhibit
No. Description
Page
3.1 Certificate of Incorporation of the Company, as amended (previously filed
as Exhibit 3.1 to the Company's Registration Statement on Form SB-2 (File
No. 333-33129) and incorporated herein by reference).
3.2 By-laws of the Company (previously filed as Exhibit 3.2A to the Company's
Annual Report on Form 10-K/A-2 for the fiscal year ended December 31, 1994
(File No. 0-3207) and incorporated herein by reference).
10.1 Amended and Restated Employment Agreement, dated as of December 31, 1997,
between the Company and Stanley S. Binder (previously filed as Exhibit 10.1
to the Company's Registration Statement on Form SB-2 (File No. 333-33129)
and incorporated herein by reference).
10.2 Employment Agreement, dated November 1, 1996, between the Company and
Richard S. Rosenfeld (previously filed as Exhibit 10.2 to the Company's
Registration Statement on Form SB-2 (File No. 333-13703) and incorporated
herein by reference).
10.3 Employment Agreement, dated November 1, 1996, between the Company and
Kenneth S. Wood (previously filed as Exhibit 10.3 to the Company's
Registration Statement on Form SB-2 (File No. 333-13703) and incorporated
herein by reference).
10.4 Consulting Agreement, dated as of January 1, 1991, between the Company and
John J. Harte (previously filed as Exhibit 10.4 to the Company's
Registration Statement on Form SB-2 (File No. 333-13703) and incorporated
herein by reference).
10.5 Form of 1995 nonqualified stock option agreement (previously filed as
Exhibit 10.6 to the Company's Registration Statement on Form SB-2 (File No.
333-13703) and incorporated herein by reference).
10.6 Form of 1996 nonqualified stock option agreement (previously filed as
Exhibit 10.3 to the Company's Registration Statement on Form SB-2 (File No.
333-13703) and incorporated herein by reference).
10.7 Description of 1991 Warrant Plan (previously filed as Exhibit 10.8 to the
Company's Registration Statement on Form SB-2 (File No. 333-13703) and
incorporated herein by reference).
10.8 Description of Exercise Plan (previously filed as Exhibit 10.9 to the
Company's Registration Statement on Form SB-2 (File No. 333-13703) and
incorporated herein by reference).
10.9 Barringer Technologies Inc. 1997 Stock Compensation Program (previously
filed as Exhibit 10.9 to the Company's Registration Statement on Form SB-2
(File No. 333-33129) and incorporated herein by reference.)
10.10 License Agreement, dated February 27, 1989, between Canadian Patents and
Development Limited--Societe Canadienne Des Brevets Et D'Exploitation
Limite and Barringer Instruments Limited (the "License Agreement"),
Supplement #1, dated March 4, 1991, Assignment of License Agreement, dated
January 2, 1992, to Her Majesty the Queen in Right of Canada, as
Represented By the Minister of National Revenue and Supplemental Letter
Agreement, dated October 7, 1996 (previously filed as Exhibit 10.10 to the
Company's Registration Statement on Form SB-2 (File No. 333-13703) and
incorporated herein by reference).
10.11 Letter Agreement, dated July 25, 1997, by and between Barringer Research
Limited and Her Majesty the Queen in Right of Canada, as Represented By the
Minister of National Revenue (previously filed as Exhibit 10.11 to the
Company's Registration Statement on Form SB-2 (File No. 333-33129) and
incorporated herein by reference.)
10.12 Termination Agreement, dated October 7, 1996, between the Company and
Barringer Laboratories Inc. (previously filed as Exhibit 10.11 to the
Company's Registration Statement on Form SB-2 (File No. 333-13703) and
incorporated herein by reference).
10.13 Warrant Agreement by and between the Company and American Stock Transfer &
Trust Company (previously filed as Exhibit 4.1 to the Company's
Registration Statement on Form SB-2 (File No. 333-13703) and incorporated
herein by reference).
10.14 Form of Warrant issued to Janney Montgomery Scott Inc (previously filed
as Exhibit 4.2 to the Company's Registration Statement on Form SB-2 (File
No. 333-13703) and incorporated herein by reference).
10.15 Lease, dated as of February 17, 1993, between the Company and Murray Hill
Associates (previously filed as Exhibit 10.17 to the Company's Registration
Statement on Form SB-2 (File No. 333-13703) and incorporated herein by
reference).
10.16 Lease, dated as of July 27, 1995, between Barringer Research Limited and
Lehndorff Management Limited (previously filed as Exhibit 10.18 to the
Company's Registration Statement on Form SB-2 (File No. 333-13703) and
incorporated herein by reference).
10.17 Letter Agreement dated February 20, 1998 by and between the Company and
The Boyle Company (previously filed as Exhibit 10.17 to the Company's
Registration Statement on Form SB-2 (File No. 333-33129) and incorporated
herein by reference.)
10.18 Supplemental Executive Retirement Plan (previously filed as Exhibit 10.18
to the Company's Registration Statement on Form SB-2 (File No. 333-33129)
and incorporated herein by reference.)
10.19 Revolving Credit Note dated March 13, 1998 between the Company and Fleet
Bank, N.A. (previously filed as Exhibit 10.19 to the Company's Registration
Statement on Form SB-2 (File No. 333-33129 and incorporated herein by
reference).
10.20 Unlimited Guaranty of Payment and Performance dated March 13, 1998
between the Company and Fleet Bank, N.A. (previously filed as Exhibit 10.20
to the Company's Registration Statement on Form SB-2 (File No. 333-33129
and incorporated herein by reference).
10.21 Revolving Credit Loan Agreement dated March 13, 1998 among the Company,
Barringer Instruments, Inc., Barringer Research Limited and Fleet Bank,
N.A. (previously filed as Exhibit 10.21 to the Company's Registration
Statement on Form SB-2 (File No. 333-33129 and incorporated herein by
reference).
21.1 List of the Company's Subsidiaries (previously filed as Exhibit 21 to the
Company's Registration Statement on Form SB-2 (File No. 333-13703) and
incorporated herein by reference).
23.1 Consent of BDO Seidman, LLP, independent certified public accountants.
27.1 Financial Data Schedule for the year ended December 31, 1997.
27.2 Financial Data Schedule for the year ended December 31, 1996, restated.
27.3 Financial Data Schedule for the year ended December 31, 1995, restated.
27.4 Financial Data Schedule for the three months ended March 31, 1997,
restated.
27.5 Financial Data Schedule for the six months ended June 30, 1997, restated.
27.6 Financial Data Schedule for the nine months ended September 30, 1997,
restated.
27.7 Financial Data Schedule for the three months ended March 31, 1996,
restated.
27.8 Financial Data Schedule for the six months ended June 30, 1996, restated.
27.9 Financial Data Schedule for the nine months ended September 30, 1996,
restated.
(b) Reports on Form 8-K.
None
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
BARRINGER TECHNOLOGIES INC.
By: /s/ Stanley S. Binder
Stanley S. Binder, President
and Chief Executive Officer
Dated: March 31, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
/s/ Stanley S. Binder President, Chief March 31, 1998
- -------------------------
Stanley S. Binder Executive Officer
and Director
/s/ John D. Abernathy Director March 31, 1998
- -------------------------
John D. Abernathy
/s/ Richard D. Condon Director March 31, 1998
- --------------------------
Richard D. Condon
/s/ John H. Davies Director March 31, 1998
- ---------------------------
John H. Davies
/s/ John J. Harte Director March 31, 1998
- ----------------------------
John J. Harte
/s/ James C. McGrath Director March 31, 1998
- ----------------------------
James C. McGrath
/s/ Richard S. Rosenfeld Vice President-Finance, Chief March 31, 1998
- ---------------------------- Financial Officer and Treasurer
Richard S. Rosenfeld (Principal Financial Officer
and Principal Accounting Officer)
<PAGE>
BARRINGER TECHNOLOGIES INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Consolidated Financial Statements
Report of Independent Certified Public Accountants F-2
Consolidated Balance Sheets as of December 31, 1996 and 1997 F-3
Consolidated Statements of Operations for the Years Ended
December 31, 1995, 1996 and 1997 F-4
Consolidated Statements of Stockholders' Equity for the Years Ended
December 31, 1995, 1996 and 1997 F-5
Consolidated Statements of Cash Flows for the Years Ended December 31,
1995, 1996 and 1997 F-6
Notes to Consolidated Financial Statements F-7
Financial Statement Schedule
Schedule II - Valuation and Qualifying Accounts F-24
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Barringer Technologies Inc.
Murray Hill, New Jersey
We have audited the accompanying consolidated balance sheets of
Barringer Technologies Inc. as of December 31, 1996 and 1997 and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the three years in the period ended December 31, 1997. We have also
audited the schedule listed in the accompanying index. These financial
statements and schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and schedule are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements and
schedule. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
presentation of the financial statements and schedule. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Barringer
Technologies Inc. at December 31, 1996 and 1997, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1997 in conformity with generally accepted accounting principles.
Also, in our opinion, the schedule presents fairly, in all material
espects, the information set forth therein.
BDO Seidman, LLP
/S/ BDO SEIDMAN, LLP
Woodbridge, New Jersey
February 19, 1998 (March 13, 1998 as to Note 16)
F-2
<PAGE>
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except par value)
December 31,
1996 1997
------------------
ASSETS
Current assets:
Cash and cash equivalents $ 5,276 $ 8,188
Marketable securities 4,328 2,499
Trade receivables, less allowances of $63 and $109 3,521 7,908
Inventories (note 2) 2,270 3,049
Prepaid expenses and other 498 887
Deferred tax asset (note 6) 731 1,506
-------------------
Total current assets 16,624 24,037
Machinery and equipment, net (note 3) 595 1,505
Other 104 66
-------------------
$ 17,323 $ 25,608
===================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Note payable (note 4) $ 174 $ --
Accounts payable 1,009 1,324
Accrued liabilities 421 473
Accrued payroll and related taxes 522 1,520
Accrued commission 112 801
Foreign income taxes payable (note 6) 115 255
-------------------
Total current liabilities 2,353 4,373
Non-current liabilities 117 121
Commitments (note 7)
Stockholders' equity (note 5):
Convertible preferred stock, $1.25 par value, 1,000
shares authorized, none outstanding -- --
Preferred stock, $2.00 par value, 4,000 shares
authorized 270 shares
designated class A convertible preferred
stock, 60 and 45 shares outstanding, less discount
of $47 and $35, respectively 74 55
730 shares designated class B convertible preferred
stock, 123 and 23 shares outstanding, respectively 245 45
Common stock, $0.01 par value, 7,000 and 20,000 shares
authorized, respectively and 5,357 and 5,495 shares
outstanding, respectively 54 55
Additional paid-in capital 29,430 30,209
Accumulated deficit (14,522) (8,780)
Cumulative foreign currency translation adjustment (415) (457)
-------- --------
14,866 21,127
Less: common stock in treasury, at cost, 31 shares (13) (13)
-------- ----------
Total stockholders' equity 14,853 21,114
-------------------
$ 17,323 $ 25,608
===================
See notes to consolidated financial statements.
F-3
<PAGE>
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Year Ended December 31,
1995 1996 1997
--------------------------------
Revenues $6,374 $10,923 $22,689
Cost of revenues 3,601 5,363 9,008
------------------------------
Gross profit 2,773 5,560 13,681
Operating expenses:
Selling, general and administrative 3,305 3,734 7,971
Product development 354 230 715
------------------------------
Total operating expenses 3,659 3,964 8,686
------------------------------
Operating income (loss) (886) 1,596 4,995
Other income, (expense):
Interest expense (240) (228) (9)
Equity in earnings of unconsolidated
subsidiary -- 117 --
Gain on sale of investment in
unconsolidated subsidiary -- 123 --
Investment income -- 72 450
Other, net (52) (12) (53)
------ ------------ -------
(292) 72 388
Income (loss) before income tax benefit (1,178) 1,668 5,383
Income tax benefit (note 6) -- 391 371
------------------------------
Income (loss) from continuing operations (1,178) 2,059 5,754
Operation held for sale (note 13):
Income from operations 258 -- --
Gain on sale of portion of investment 93 -- --
------------------------------
351 0 0
------------------------------
Net income (loss) (827) 2,059 5,754
Preferred stock dividends (82) (39) (12)
------ ------- -------
Net income (loss) attributable to common
stockholders $ (909) $ 2,020 $ 5,742
======= ==================
Basic per share data (notes 1 and 14):
Income (loss) from continuing operations $(0.39) $ 0.55 $ 1.05
Income from operation held for sale 0.08 -- --
Gain on sale of operation held for sale 0.03 -- --
---------------------------
Net income (loss) $(0.28) $ 0.55 $ 1.05
====== ==================
Diluted per share data (notes 1 and 14):
Income (loss) from continuing operations $(0.39) $ 0.46 $ 0.92
Income from operation held for sale 0.08 -- --
Gain on sale of operation held for sale 0.03 -- --
---------------------------
Net income (loss) $(0.28) $ 0.46 $ 0.92
====== ==================
Weighted average common and common
equivalent shares outstanding:
Basic 3,283 3,695 5,456
==============================
Diluted 3,283 4,440 6,257
==============================
See notes to consolidated financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
BARRINGER TECHNOLOGIES INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands)
Common Preferred Class A Class B
stock stock pfd. stk. pfd. stk.
Total ----------------------------------------------------- Paid in Accum. Foreign Treas.
equity shrs am't shrs am't shrs am't shrs am't capital deficit Transl stock
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance--January 1, 1995 $1,186 $2,872 $29 $445 $555 $83 $101 $318 $635 $16,036 $(15,633) $4(524) $(13)
Sale of units in private
placement, net 888 383 4 884
Conversion of preferred
stock 0 159 2 (445) (555) (60) (120) 673
Change in warrant
exercise price in
payment of debt 10 10
1995 dividend on preferred
stock 0 65 82 (82)
Net loss (827) (827)
Translation adjustment 68 68
-----------------------------------------------------------------------------------------------------
Balance--December 31, 1995 1,325 3,479 35 0 0 83 101 258 515 17,685 (16,542) (456) (13)
Sale of securities, net of
expense ($741) 10,401 1,437 14 10,387
Conversion of preferred
stock 0 55 1 (23) (27) (135) (270) 296
Issuance and exercise of
stock options and
warrants 42 15 42
Conversion of debentures 1,000 364 4 996
Preferred stock dividends (15) 7 24 (39)
Net income 2,059 2,059
Translation adjustment 41 41
-----------------------------------------------------------------------------------------------------
Balance--December 31, 1996 14,853 5,357 54 0 0 60 74 123 245 29,430* (14,522) (415) (13)
Conversion of preferred
stock 0 41 (15) (19) (100) (200) 219
Issuance and exercise of
stock options and
warrants 490 97 1 489
Repayment of
stockholder loan 71 71
Net income 5,754 5,754
Translation adjustment (42) (42)
Preferred stock dividends (12) (12)
------- --------------------------------------------------------------------------------------------
Balance--December 31, 1997 $21,114 5,495 $55 0 $ 0 45 $55 23 $ 45 $30,209* $ (8,780) $(457) $(13)
========================================================================== ======== ===== ====
</TABLE>
* At December 31, 1997 and 1996 net of note receivable of $203 and $274,
respectively, from the sale of stock.
See notes to consolidated financial statements.
F-5
<PAGE>
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Year Ended December 31,
1995 1996 1997
------------------------------
Net income (loss) $ (827) $ 2,059 $ 5,754
Items not affecting cash:
Depreciation and amortization 362 115 272
Inventory write-down and receivable reserves 656 22 332
Income from and gain on sale of investment
in Labco (351) (240) --
Pension recovery (147) -- --
Deferred tax benefit -- (506) (775)
Prepaid pension cost (78) -- --
Other 71 50 30
Increase in non-cash working capital balances (397) (2,947) (3,655)
------ ------- -------
Cash provided by, (used in) operating
activities (711) (1,447) 1,958
------ ------- -------
Investing activities:
Purchase of machinery and equipment (358) (124) (1,190)
Sale of (investment in) marketable securities -- (4,328) 1,829
Proceeds on sale of investment in Labco 300 574 --
---------------------------
Cash provided by, (used in) investing
activities (58) (3,878) 639
------ ------- -------
Financing activities:
Proceeds on issuance of Convertible
Subordinated Debentures -- 1,000 --
Reduction in long-term debt -- (300) --
Decrease in bank debt and other (412) (570) (174)
Proceeds on issuance of equity securities 888 10,443 430
Repayment of stockholder loan -- -- 71
Rent inducement 108 -- --
Payment of dividends on preferred stock -- (15) (12)
---------------- -------
Cash provided by financing activities 584 10,558 315
---------------------------
Increase (decrease) in cash and cash equivalents (185) 5,233 2,912
Cash and cash equivalents--beginning of year 267 43 5,276
Less cash held for sale (39) -- --
------ ------------------
Cash and cash equivalents--end of year $ 43 $ 5,276 $ 8,188
===========================
Changes in components of non-cash
working capital balances related to
operations:
Trade receivables $ 38 $(2,010) $(4,433)
Inventories (281) (649) (1,065)
Other current assets 60 (248) (389)
Other assets (12) 39 38
Accounts payable and accrued liabilities (202) (79) 2,194
------ ------- -------
Increase in non-cash working capital balances $ (397) $(2,947) $(3,655)
====== ======= =======
See notes to consolidated financial statements.
F-6
<PAGE>
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Principles of Consolidation
The accompanying consolidated financial statements comprise the
accounts of the Company and its continuing subsidiary companies. All
intercompany transactions have been eliminated.
Principles of Translation
Assets and liabilities of the Company's foreign subsidiaries are
translated by using year-end exchange rates and statement of operation items are
translated at average exchange rates for the year. Translation adjustments are
accumulated in a separate component of stockholders' equity.
Inventories
Materials and supplies are carried at the lower of average cost or
replacement cost. Finished goods and work-in process are carried at the lower of
average cost or net realizable value.
Property and Equipment
Property and equipment are carried at cost. Depreciation of owned
equipment is computed on a straight-line basis over the estimated useful lives
of the related assets, generally from three to ten years. Leasehold improvements
are amortized over the term of the related lease, generally from five to ten
years, which approximates the useful lives of these improvements. Equipment
under capital leases is amortized on a straight-line basis over the term of the
lease, generally four to ten years, which approximates the estimated useful
lives of the leased equipment.
Per Share Data
In December, 1997, as required, the Company adopted Statement of
Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS 128") which
establishes standards for computing and presenting earnings per share. SFAS 128
replaces the presentation of primary earnings per share and fully diluted
earnings per share with basic earnings per share and diluted earnings per share,
respectively. Basic earnings per share excludes dilution and is computed by
dividing income available to common stockholders by the weighted average number
of common shares outstanding for the period. Diluted earnings per share is
computed assuming the conversion of convertible preferred stock and the exercise
or conversion of common equivalent shares, if dilutive, consisting of unissued
shares under options and warrants. In accordance with SFAS 128 all prior periods
presented have been restated to conform to the new presentation.
Statement of Cash Flows
<PAGE>
For purposes of the Statement of Cash Flows, the Company considers all
highly liquid investments with an original maturity of three months or less to
be cash equivalents.
Revenue Recognition
The Company recognizes revenue on the percentage of completion method
for its research and development contracts with progress measured based on the
ratio of costs incurred to the total estimated cost, and generally, when product
is shipped for all other sales. Where the Company receives contracts for the
design and construction of specialty instruments that require long manufacturing
times, the Company will also recognize revenue on the percentage of completion
method similar to its recognition method in the research and development
business.
For the years ended December 31, 1995 and 1996, the Company had
recognized revenues of $264,000 and $49,000 respectively, on jobs in process and
had incurred related costs of $183,000 and $25,000 respectively, of which
$210,000 and $0, respectively, were billed to customers. For the year ended
December31, 1997, the Company did not have any significant contracts in
progress.
Financial Instruments and Credit Risk Concentration
Financial instruments which potentially subject the Company to
concentrations of credit risk consist primarily of trade accounts receivable.
Concentrations of credit risk with respect to such receivables are limited to
primarily governmental agencies. Marketable securities consists primarily of
investments in U.S. government and agency obligations and commercial paper.
Long-Lived Assets
Long-lived assets, such as machinery and equipment, are evaluated for
impairment when events or changes in circumstances indicate that the carrying
amount of the assets may not be recoverable through the estimated undiscounted
future cash flows from the use of these assets. If and when any such impairment
exists, the related assets will be written down to fair value. This policy is in
accordance with Statement of Financial Accounting Standards No. 121, ("SFAS
121") "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets
to be Disposed of", which the Company adopted effective for the year ended
December 31, 1996. No write-downs have been necessary through December 31, 1997.
Stock-Based Compensation
The Company has adopted the disclosure only provisions of SFAS 123,
"Accounting for Stock-Based Compensation", but applies Accounting Principle
Board Opinion No. 25 "Accounting for Stock Issued to Employees", in accounting
and measuring compensation expense related to stock option plans. There was no
compensation expense related to the issuance of stock options to employees for
the years ended December 31, 1995, 1996 and 1997. In 1996, the Company recorded
compensation expense in the amount of $60,000 relating to stock options awarded
to the Company's independent directors (see note 5 for pro-forma disclosure
required by SFAS 123).
Fair Value of Financial Instruments
The carrying amounts reported in the consolidated balance sheets for
cash and cash equivalents, marketable securities, accounts receivable, accounts
payable, accrued liabilities and notes payable approximate fair value because of
the immediate or short-term maturity of these financial instruments. The Company
has the ability and intent to hold all marketable securities through their
respective maturity dates.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates. Many of the
Company's estimates and assumptions used in the financial statements relate to
the Company's products, which are subject to technology and market changes. It
is reasonably possible that changes may occur in the near term that would affect
management's estimates with respect to accounts receivable, inventories,
equipment and deferred income taxes.
Recent Pronouncements of the Financial Accounting Standards Board
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income," which establishes standards for reporting and display of
comprehensive income and its components in a full set of general-purpose
financial statements and will be effective for fiscal years beginning after
December 15, 1997. The Company will be reviewing this document to determine its
applicability to the Company and has elected not to adopt early application.
In June 1997, the FASB issued SFAS No.131, "Disclosures About Segments
of an Enterprise and Related Information," which supercedes SFAS No. 14,
"Financial Reporting for Segments of a Business Enterprise." SFAS 131
establishes standards for the way that public companies report information about
operating segments in annual financial statements and requires reporting of
selected information about operating segments in interim financial statements
issued to the public. It also establishes standards for disclosures regarding
products and services, geographic areas and major customers. SFAS 131 defines
operating segments as components of a company about which separate financial
information is available that is evaluated regularly by the chief operating
decision maker in deciding how to allocate resources and in assessing
performance. SFAS 131 is effective for financial statements for periods
beginning after December 15, 1997 and requires comparative information for
earlier years to be restated. Because of the relatively recent issuance of this
standard, management has been unable to fully evaluate the impact, if any, it
may have on future financial statement disclosures. Results of operations and
financial position, however, will be unaffected by implementation of this
standard.
2. Inventories
At December 31, 1996 and 1997, the Company had parts, subassemblies and
work in process of $1,483,000, and $2,748,000 and finished goods of $787,000,
and $301,000, respectively.
3. Machinery and Equipment
The major categories of machinery and equipment are as follows:
December 31,
1996 1997
--------------------------
Office equipment $ 395,000 $ 969,000
Machinery and equipment 1,857,000 1,986,000
Leasehold improvements 64,000 70,000
-------------------------------
2,316,000 3,025,000
Accumulated depreciation (1,721,000) (1,520,000)
----------- -----------
Totals $ 595,000 $ 1,505,000
===============================
4. Note Payable
The Company's Canadian subsidiary, Barringer Research Ltd. ("BRL"), had
a financing arrangement with the Ontario Development Corporation ("ODC") for a
$730,000 export line of credit. In January 1997, the Company paid all amounts
owed to the ODC and the facility was terminated.
BRL's line of credit arrangement with the Toronto-Dominion Bank
("Bank") was terminated by BRL in December 1996 upon the payment of all amounts
due to the Bank. During December 1996, the Company placed in an interest bearing
account $280,000 in order to secure a performance bond that was previously
issued by the Bank. At December 31, 1996, this deposit was restricted. On
February 12, 1997, the bond was canceled and the deposit released.
5. Stockholders' Equity
Public Offerings
On March 3, 1998, the Company filed with the Securities and Exchange
Commission a registration statement relating to a proposed underwritten public
offering by the Company of 2,000,000 shares of its Common Stock.
On November 12, 1996, the Company completed the sale of 1,250,000
shares ("Shares") of common stock and 1,250,000 Common Stock Purchase Warrants
("Warrants") in a public underwriting. On December 12, 1996, the underwriters
exercised their over-allotment option and acquired an additional 187,500 Shares
and 187,500 Warrants. The aggregate net proceeds to the Company, after all
expenses of the offering, was approximately $10,401,000.
Private Offerings
On May 9, 1995, the Company completed the private placement of its
securities to two institutional investors. The private placement consisted of
125 Units priced at $6,000 each for an aggregate sales price of $750,000. Each
Unit ("Unit") consisted of 2,500 shares of the Company's common stock and a five
year warrant to purchase 2,500 shares of the Company's common stock at $1.96 per
share. In addition, in order to induce the institutional investors to enter into
this transaction, an additional three year warrant to acquire 37,500 shares of
the Company's common stock at $1.96 per share was issued.
On June 30, 1995, the Company completed an additional private placement
in which it sold an additional 128 Units, including 22 Units to seven members of
senior management and the Company's Board of Directors, for proceeds aggregating
$168,000. This private placement did not include the additional three year
warrant.
On July 10, 1996, the Company completed the sale of $1,000,000 of its
6% Convertible Subordinated Debentures, ("Debentures") due 1997, in a private
transaction to private investors including members of management. These
debentures were convertible into shares of the Company's Common Stock at the
rate of $2.75 per share and mature on the earlier of (i) 30 days after the
completion of an underwritten public offering or a private placement by the
Company of its equity securities pursuant to which the Company receives net
proceeds in an aggregate amount in excess of $5,000,000, or (ii) July 9, 1997.
Interest is payable semi-annually. A portion of the net proceeds of the sale of
these debentures were used to repay the 12 1/2% Subordinated Convertible
Debentures due 1996. All of the Debentures were converted into 363,628 shares of
common stock in December 1996, as a result of the public offering.
Due from Officers/Shareholders
In connection with the exercise of options to acquire 190,000 shares of
the Company's Common Stock, two officers of the Company signed full recourse
interest bearing (no interest the first year, prime rate thereafter) unsecured
promissory demand notes aggregating $274,000 that was available to them under
the Company's stock option purchase program. Under that program the Company has
arranged for a market-maker in the Company's Common Stock, to coordinate the
orderly sale in the open market of a portion of the Common Stock to be received
by the employees upon the exercise of their options in an amount sufficient to
repay the loan and related interest. As of December 31, 1997, and 1996, $203,000
and $274,000, respectively, was outstanding.
Common Stock Outstanding or Reserved for Issuance
The following table sets forth the number of shares of Common Stock
outstanding as of December 31, 1997 as well as the number of shares of Common
Stock that would be outstanding in the event that all of the options and
warrants are exercised and all Series of Convertible Preferred Stock and
Debentures are converted into Common Stock.
Common stock
Exercise, outstanding or
conversion or reserved for
option price issuance
Common stock 5,495,354
Class A convertible preferred stock 0.361745 16,331
Class B convertible preferred stock 0.355839 8,006
Stock options (i) $1.00 to $14.00 691,025
Private placement warrants (ii) $1.96 387,499
Public warrants (iii) $9.847 342,825
Underwriter's warrants (iii) $10.276 125,000
Underlying warrants (iii) $9.847 31,250
Directors' warrants (iv) $7.11 to $8.01 7,500
---------
Total 7,104,790
=========
All outstanding warrants expire between May 9, 1998 and December 22, 2007.
(i) Stock Compensation Plans
From time to time, the Company has granted non-qualified options to
various employees and directors. The Company applies APB Opinion 25, "Accounting
for Stock Issued to Employees", and related Interpretations in accounting for
the plans. Under APB Opinion 25, because the exercise price of the Company's
stock options issued to employees equals the market price of the underlying
stock on the date of grant, no compensation is recognized.
SFAS 123, "Accounting for Stock-Based Compensation", requires the
Company to provide pro forma information regarding net income (loss) and
earnings (loss) per share as if compensation cost for the Company's stock option
plans had been determined in accordance with the fair value based method
prescribed in SFAS 123. The Company estimates the fair value of each stock
option at the grant date by using the Black-Scholes option-price model with the
following weighted average assumptions used for grants in 1995, 1996 and 1997;
no dividend yield; expected volatility of 46.5% in 1997 and 30% in 1996 and
1995; risk-free weighted average interest rates of 6.03% in 1997 and 7.11% in
1996 and 1995; and expected lives of 5 years for the options.
Under the accounting provisions of SFAS 123, the Company's net income
(loss), basic earnings (loss) per share and diluted earnings (loss) per share on
a pro-forma basis are as follows:
Year Ended December 31,
1995 1996 1997
-------------------------------
Net income (loss):
As reported $(827,000) $2,059,000 $5,754,000
Pro-forma $(884,000) $1,986,000 $5,567,000
Basic earnings (loss) per share from
continuing operations:
As reported $ (0.39) $ 0.55 $ 1.05
Pro-forma $ (0.40) $ 0.53 $ 1.02
Diluted earnings (loss) per share from
continuing operations:
As reported $ (0.39) $ 0.46 $ 0.92
Pro-forma $ (0.40) $ 0.44 $ 0.89
At the May 13, 1997 Annual Meeting of Stockholders, the Company's
stockholders approved the adoption of the Company's 1997 Stock Compensation
Program ("Program"). The Program authorizes the granting of incentive stock
options, non-qualified supplementary options, stock appreciation rights,
performance shares and stock bonus awards to employees and consultants of the
Company and its subsidiaries, including those employees serving as officers or
directors of the Company ("Employee Plans"). The Program also authorizes
automatic option grants to directors who are not otherwise employed by the
Company ("Independent Director Plan"). In connection with the Program, 600,000
shares of Common Stock are reserved for issuance, of which up to 500,000 shares
may be issued under the Employee Plans and up to 100,000 shares may be issued
under the Independent Director Plan. In the event that an option or award
granted under the Program expires, is terminated or forfeited or certain
performance objectives with respect thereto are not met prior to exercise or
vesting, then the number of shares of Common Stock covered thereby will again
become eligible for grant under the Program. The Company will receive no
consideration for grants of options or awards under the Program.
A summary of the status of the Company's outstanding options is
presented below:
<TABLE>
<CAPTION>
Year ended December 31,
1995 1996 1997
---------------------------------------------------------------------
Weighted Weighted Weighted
Average Average Average
Number of Exercise Number of Exercise Number of Exercise
Shares Price Shares Price Shares Price
<S> <C> <C> <C> <C> <C> <C>
Outstanding--
beginning of year 58,750 $12.38 240,125 $4.54 461,000 $2.19
Granted 181,375 2.00 253,000 1.00 280,900 10.70
Exercised 0 (1,250) 2.00 (19,937) 1.32
Forfeited 0 (30,875) 10.66 (30,938) 10.32
-------- -------------- --------
Outstanding--end of year 240,125 4.54 461,000 2.19 691,025 5.31
======== ======== ========
Options exercisable--end
of year 126,800 $6.38 164,200 $3.49 227,663 $1.94
Fair value of options
granted during the year $0.70 $0.40 $6.72
=====================================================================
</TABLE>
On February 28, 1997 and December 22, 1997, options to acquire 135,500
shares and 128,400 shares of the Company's common stock at $9.375 per share and
$11.78 per share, respectively, which was the market value at dates of grant,
were issued to officers and key employees of the Company, pursuant to the
Employee Plan. These options expire ten years from the dates of grant and are
exercisable as to 25% of the optioned shares after the first year, 50% after the
second year, 75% after the third year and 100% after the fourth year. On May 13,
1997, options to acquire 12,000 shares of the Company's common stock at $13.875
per share, which was the market value at date of grant, were issued to the
Company's independent directors pursuant to the Independent Director Plan. These
options expire on May 13, 2002 and are exercisable as to 100% after the first
year. In accordance with SFAS 123, the Company recorded compensation expense in
1997 of $60,000 in connection with the issuance of these options. The options
issued in 1996 expire on April 25, 2001 and are exercisable as to 25% of the
optioned shares immediately, 50% after the first year, 75% after the second year
and 100% after the third year. The options issued in 1995 expire on March 10,
2000 and are exercisable as to 40% of the optioned shares after the first year,
60% after the second year, 80% after the third year and 100% after the fourth
year.
The following table summarizes information about stock options
outstanding at December 31, 1997.
Options Outstanding
Weighted- Options Exercisable
Number Average Number
Outstanding at Remaining Exercisable at
Exercise December 31, Contractual Exercise December 31, Exercise
Price 1997 Life Price 1997 Price
----------------------------------------------------------------------
$ 1.00 237,125 3.3 years $ 1.00 118,563 $ 1.00
2.00 167,250 2.2 years 2.00 100,350 2.00
9.38 132,500 9.3 years 9.38 0 9.38
11.25 to 11.78 133,400 9.9 years 11.25 to 11.78 0 11.25 to 11.78
13.88 12,000 9.5 years 13.88 0 13.88
14.00 8,750 0.2 years 14.00 8,750 14.00
1.00 to 14.00 691,025 5.5 years $ 5.31 227,663 $ 1.94
(ii) Private Placement Warrants
In connection with the Company's private placement (see above) warrants
to purchase 420,000 shares of the Company's common stock at $1.96 per share were
sold to a group of private investors and senior management. During 1997, 32,500
of these warrants were exercised. The warrants expire between May 9, 1998 and
June 29, 2000.
(iii) Public Warrants
The public warrants (see above) are exercisable for three years and
entitle the registered holder to purchase one-quarter of a share of Common Stock
at an exercise price of $9.847 per share. The Warrant exercise price and the
number of shares issuable upon exercise of the Warrants are subject to
adjustment under certain circumstances. The Company may redeem outstanding
Warrants on not less than 30 days notice at a price of $0.25 per Warrant
(subject to adjustment under certain circumstances) if the closing bid price of
the Common Stock averages in excess of 200% of the exercise price for a period
of 30 days' ending within 15 days of the redemption notice date. During 1997,
66,200 of these warrants were exercised.
In connection with the November 1996 public offering, the underwriter
received a warrant ("Underwriter's Warrant") to purchase from the Company
125,000 shares of Common Stock at an exercise price of $10.276 per share
("Exercise Price") and 125,000 Warrants ("Underlying Warrant") at an exercise
price of $0.06 per Warrant. Each Underlying Warrant entitles the holder to
purchase one-quarter of a share of Common Stock at an exercise price of $9.847
per share. The Underwriter's Warrants are exercisable with respect to the Common
Stock for a period of four years commencing from November 12, 1997 and with
respect to the Underlying Warrants for a period of two years commencing from
November 12, 1997. These warrants contain certain registration rights. None of
these warrants was exercised in 1997.
(iv) Directors' warrants
On December 31, 1991, the Board of Directors adopted the 1991 Directors
Warrant Plan ("Plan"). Pursuant to the Plan, each non-employee director was sold
a five-year warrant to purchase 3,750 shares of Common Stock at an exercise
price equal to the current market price for such shares at the time of issuance
of the warrant. During 1997, 3,750 warrants were exercised. During 1996, 3,750
warrants expired. During 1995, no warrants were issued under the Plan. The Board
of Directors terminated the Plan effective May 1997.
Increase in Authorized Shares
At the May 13, 1997 Annual Meeting of Stockholders, the Company's
stockholders approved an amendment to the Company's Certificate of Incorporation
to increase the number of authorized shares of common stock of the Company from
7,000,000 to 20,000,000.
<PAGE>
6. Income Taxes
The provision (benefit) for income taxes related to continuing
operations are as follows:
Year Ended December 31,
1995 1996 1997
--------------------------------
Current tax expense (benefit):
Federal $ 0 $ 143,000 $ 983,000
State -- 27,000 285,000
Recognition of net operating losses--U.S. -- (170,000) (1,268,000)
Foreign (primarily Canada) -- 297,000 952,000
Recognition of net operating losses--Canada -- (182,000) (548,000)
-----------------------------
Total Current 0 115,000 404,000
-----------------------------
Deferred tax expense (benefit):
Federal 0 (130,000) (728,000)
State -- (22,000) (128,000)
Foreign (primarily Canada) -- (354,000) 81,000
---------------- -----------
Total deferred 0 (506,000) (775,000)
---------------- -----------
Total income tax benefit $ 0 $(391,000) $ (371,000)
================ ===========
Deferred tax assets are comprised of the following temporary
differences and carryforwards at December 31:
1996 1997
---- ----
Nondeductible allowances against trade
receivables $ 24,000 $ 20,000
Nondeductible reserves and accruals 178,000 104,000
Machinery and equipment 787,000 497,000
Tax benefit of Canadian operating loss and
investment credit carry forwards 217,000 --
Tax benefit of U.S. operating loss carry
forwards 5,672,000 4,404,000
Other 35,000 53,000
---------------------------
Gross deferred tax assets 6,913,000 5,078,000
Deferred tax assets valuation allowance (6,182,000) (3,572,000)
----------- -----------
Net deferred tax assets $ 731,000 $ 1,506,000
===========================
As a result of the Company's historical trend of losses, a valuation
allowance has been provided for a substantial portion of the U.S. and Canadian
deferred tax assets. At December 31, 1997, the net deferred tax asset of
$1,506,000, included approximately $405,000 and $1,101,000 related to the
Company's Canadian and U.S. operations, respectively. At December 31, 1996, the
net deferred tax asset of $731,000, included approximately $525,000 and $206,000
related to the Company's Canadian and U.S. operations, respectively. Based on
historical results and estimated 1998 earnings, which include earnings from
certain contracts, as well as available tax planning strategies, management
considers realization of the unreserved deferred tax asset more likely than not.
Additional reductions to the valuation allowance will be recorded when, in the
opinion of management, the Company's ability to generate taxable income is
considered more likely than not.
The Company's income tax provision (benefit) differed from the amount
of income tax determined by applying the applicable statutory U.S. federal
income tax rate to pretax income from continuing operations as a result of the
following (in thousands):
Year Ended December 31,
1995 1996 1997
--------------------------------
Income taxes (benefit) computed at the
U.S. statutory rate $(400) $ 567 $ 1,830
Income not subject to U.S. tax, net (126) (225) (239)
U.S. losses and expenses for which no tax
benefit has been recognized 518 25 7
Utilization of U.S. net operating losses -- (143) (777)
Decrease in beginning of the year deferred
tax asset valuation allowance -- (590) (1,217)
Other 8 (25) 25
------ ----- -------
Provision (benefit) for income taxes $ 0 $(391) $ (371)
================== =======
At December 31, 1997, the Company has net operating loss carry forwards
in the U.S. of approximately $11,000,000 and $7,084,000 for federal and state
income tax purposes, respectively, which expire in varying amounts through 2011.
7. Commitments
The Company rents facilities, automobiles and equipment under various
operating leases. Rental expenses under such leases amounted to $280,000,
$325,000 and $324,000 for 1995, 1996 and 1997, respectively.
At December 31, 1997, the aggregate minimum commitments pursuant to
operating leases, including a lease renewal are as follows:
Year ending December 31,
1998 $277,000
1999 165,000
2000 114,000
2001 123,000
2002 and thereafter 421,000
8. Employee Benefit Plans
The Company's Canadian subsidiary's defined benefit pension plan, which
covered its Canadian employees, was terminated at December 31, 1993. At the same
time, it established a money purchase plan that is structured after the 401(k)
salary deferral plan available to all U.S. employees and as such, does not
establish any corporate obligation other than a discretionary matching formula
to employee contributions. As a result of the termination, the Company
recognized a gain of $206,000 in 1993, representing the excess of the Plan's
projected benefit obligation over the accumulated benefit obligation and
recognized an additional gain in 1995 of $172,000, representing the excess of
the Plan's assets over the cost of providing the annuities to the participants
for the value of their termination benefits. This excess was placed into a money
purchase contract and used by the Company to provide for its matching
contributions under the new arrangement. This amount is being carried as a
deferred pension expense asset on the consolidated balance sheet.
The Company maintains a 401(k) salary deferral plan instituted for all
U.S. employees with more than one year of service. As a money purchase plan, it
does not establish any Company liability other than a matching formula to
employee contributions.
The aggregate cost of both plans for 1995, 1996, and 1997 was $82,000,
$87,000 and $103,000, respectively.
Effective January 1, 1998, the Company adopted the Barringer
Technologies Inc. Supplemental Executive Retirement Plan (the "SERP Plan"). The
SERP Plan provides eligible participants with certain retirement benefits
supplemental to the Company's 401(k) Plan. Pursuant to the SERP Plan, the
Company will make annual contributions to the account of each participant equal
to a variable percentage of the participant's base salary and annual cash bonus
depending on the Company's achievement of certain performance targets. The
actual percentage contribution will be determined by the Executive Compensation
Committee, subject to certain parameters. A participant will become vested under
the SERP Plan after five years of participation therein. Since the SERP Plan was
effective as of January 1, 1998, no contributions were made for 1997.
9. Supplemental Disclosures of Cash Flow Information
The Company made cash payments for interest of $189,000, $246,000 and
$17,000, for the years ended December 31, 1995, 1996 and 1997, respectively.
Additionally, income taxes of $0, $3,500 and $209,000, were paid for the years
ended December 31, 1995, 1996 and 1997, respectively.
In the years ended December 31, 1995 and 1996, the Company issued
Preferred Stock dividends in the amount $82,000 and $24,000 in the form of
65,417, and 7,949 shares of common stock, respectively. None were issued in
1997.
In December 1996, the entire $1,000,000 of the Company's 6% Convertible
Subordinated Debentures were converted into 363,628 shares of the Company's
common stock as a result of the public offering (see note 5).
10. Information Concerning the Company's Principal Activities
A summary of the Company's continuing operations by geographic area for
each of the three years in the period ended December 31, 1997 is as follows (in
thousands):
Year Ended December 31,
1995 1996 1997
------------------------------
Revenues:
United States $ 1,867 $ 4,122 $15,378
Canada 5,110 7,887 14,693
Europe 1,599 2,577 3,544
Eliminations (2,202) (3,663) (10,926)
------- ------- -------
Totals $ 6,374 $10,923 $22,689
=============================
Income (loss) from continuing operations:
United States $(1,548) $ 1,152 $ 4,075
Canada 270 869 1,447
Europe 100 38 232
------------------------------
$(1,178) $ 2,059 $ 5,754
======= ==================
Identifiable assets:
United States $4,253 $16,650 $20,913
Canada 6,248 7,750 8,312
Europe 696 1,256 1,382
Eliminations (6,462) (8,333) (4,999)
------- ------- -------
Totals $ 4,735 $17,323 $25,608
=============================
For the year ended December 31, 1997, export sales, including sales
from Canada to other countries, comprised 38.8% of total revenues and were made
primarily to Western Europe, Asia and Central and South America.
A summary of the Company's continuing operations by principal activity
for the year ended December 31, 1995 is as shown below. Starting in 1996 no
segment, other than the Instruments segment, was material to the Company's
consolidated operations and accordingly, segment reporting is no longer
required.
Res. Corp. &
Total Elimination & Dev. Instruments other
1995:
Revenues $ 6,374 $1,052 $5,250 $72
=============================
Operating income
(loss) $ (886) $ (311) $ 268 $ (843)
======= ===================
Interest expense
and other (292)
---------
Loss before income
taxes $(1,178)
========
Depreciation and
amortization $ 362 $ 45 $ 314 $ 3
=====================================================
Capital expenditures $ 359 $ 10 $ 349 --
=====================================================
Identifiable assets $ 4,735 $(6,462) $ 275 $7,589 $3,333
===================== ==============================
11. Sales to Major Customers
During 1997, two customers accounted for approximately 27.8% (14.8% and
13%) of consolidated revenues of the Company. During 1996, one customer
accounted for approximately 11% of consolidated revenues of the Company. During
1995, no customer accounted for more than 10% of the consolidated revenues of
the Company.
12. Fourth Quarter Adjustments
During the fourth quarter of 1997, the Company had no material
adjustments. During the fourth quarter of 1996, the Company recorded a deferred
tax benefit related to a decrease in the deferred tax asset valuation allowance
of $266,000. During the fourth quarter of 1995, the Company recorded adjustments
for estimated losses on inventories and receivables of approximately $450,000
and $200,000, respectively.
13. Sale of Subsidiary
During the first quarter of 1995, the Company started to actively seek
a purchaser for its then 47% interest in Barringer Laboratories, Inc ("Labco").
Pursuant to the terms of a Stock Purchase Agreement, dated December 8,
1995 ("Agreement"), by and between the Company and Labco, on December 13, 1995
the Company sold to Labco 647,238 shares of Labco's common stock for an
aggregate purchase price of $809,000, resulting in a gain of $93,000. After
giving effect to the sale of the Labco shares, the Company continued to own
432,475 shares of Labco stock representing a 26% ownership interest.
During 1996, the Company sold all of its remaining shares and warrants
in Labco and recognized a gain on such sales of $123,000. In addition to the
gain on the sale of its Labco investment, the Company recorded $117,000 of
income representing its proportionate share of Labco's net income for 1996.
<PAGE>
14. Earnings (Loss) Per Share
Basic and Diluted earnings (loss) per share for the years ended
December 31, 1997, 1996 and 1995 have been computed as follows:
For the Year Ended
December 31, 1997
Income Shares Per Share
(Numerator) (Denominator) Amount
Net income $5,754,000
Less: Preferred dividends (12,000)
Basic Earnings Per Share
Income attributable to common
stockholders 5,742,000 5,456,000 $1.05
=====
Effect of dilutive securities
Warrants and options 777,000
Convertible preferred dividends 12,000 24,000
----------------------------
Diluted Earnings Per Share
Income attributable to common
stockholders and assumed
conversions $5,754,000 6,257,000 $0.92
============================= =====
Options to purchase 24,268 shares of common stock, exercisable at
between $11.78 and $14.00 per share, were outstanding at December 31, 1997 but
were not included in the computation of diluted earnings per share because the
options' exercise price was greater than the average market price of the common
stock underlying the options.
For the Year Ended
December 31, 1996
Income Shares Per Share
(Numerator) (Denominator) Amount
Net income $2,059,000
Less: Preferred dividends (39,000)
Basic Earnings Per Share
Income available to common
stockholders 2,020,000 3,695,000 $0.55
=====
Effect of dilutive securities
Warrants and options 27,000 228,000
Convertible preferred dividends
and debentures 39,000 517,000
---------------------------
Diluted Earnings Per Share
Income available to common
stockholders and assumed
conversions $2,086,000 4,440,000 $0.46
=============================== =====
For the Year Ended
December 31, 1995
Income Shares Per Share
(Numerator) (Denominator) Amount
Net loss from continuing operations $(1,178,000)
Add: Preferred dividends (82,000)
Basic Loss Per Share
Loss attributable to common
stockholders (1,260,000) 3,283,000 $(0.39)
======
Effect of dilutive securities
Warrants and options
Convertible preferred dividends N/A N/A
Diluted Loss Per Share
Loss attributable to common
stockholders $(1,260,000) 3,283,000 $(0.39)
=========== ========= ======
15. Proposed Acquisition
In March 1998, the Company entered into a merger agreement and certain
related agreements with DigiVision, Inc. ("DigiVision"), a San Diego-based
developer of video enhancement products, and certain of its shareholders
pursuant to which the Company intends to acquire all of the outstanding capital
stock of DigiVision for an aggregate cash purchase price of approximately
$750,000. The acquisition of DigiVision will not be material to the Company.
Accordingly, no separate financial statements of DigiVision and no pro forma
financial information relating to the proposed acquisition have been included
herein. However, upon consummation of the acquisition, the Company may record a
one-time charge to write-off certain technology and in-process research and
development to be acquired from DigiVision. Although management of the Company
cannot currently estimate the amount of the charge, it is expected that such
charge could represent a substantial portion of the purchase price, including
costs related to the acquisition. The final allocation of the purchase price
will be subject to the completion of due diligence procedures, including
appraisals and valuation analyses, as necessary.
The Company's proposed acquisition of DigiVision is subject to a number
of significant conditions precedent. The Company expects to consummate the
acquisition in the first half of 1998. However, no assurance can be given that
the acquisition will occur or as to the timing thereof.
16. Subsequent Event
On March 13, 1998, the Company established a $5.0 million unsecured
credit facility with Fleet Bank, N.A. (the "Bank") to be used for general
working capital purposes, including the issuance of standby letters of credit
(the "Facility"). Drawings under the Facility may not be used to fund
acquisitions unless approved in advance by the Bank. Amounts drawn under the
Facility bear interest at a variable rate per annum selected by the Company and
equal to either the Bank's prime rate less 0.75% or LIBOR (determined on the
basis of a 30-, 60- or 90-day interest period, as applicable) plus 2.0%. The
Facility expires on June 30, 1999, subject to renewal. The Facility is
guaranteed by the Company's primary U.S. subsidiary, Barringer Instruments Inc.
("BII"). Pursuant to the Facility, the Company and BII are required to comply
with certain customary covenants, including certain financial tests. In
addition, BII and the Company's Canadian subsidiary, Barringer Research Limited
("BRL"), have agreed not to pledge their assets to any other creditor without
the Bank's prior written consent.
<PAGE>
BARRINGER TECHNOLOGIES INC
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31,
SCHEDULE II
Balance - Balance
beginning -end of
of period Addition Deduction Recovery period
--------- ----------- ----------- -----------------------
Allowance for doubtful
accounts and sales
allowances:
1997 $ 63,000 $ 46,000 $109,000
1996 41,000 52,000 30,000 63,000
1995 539,000 221,000 719,000 41,000
EXHIBIT 23.1
CONSENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
Barringer Technologies Inc.
Murray Hill, New Jersey
We hereby consent to the incorporation by reference in Registration
Statement Nos. 33-78888 and 333-11629 of Barringer Technologies Inc. on Forms
S-3 and Registration Statement Nos. 333-25573 and 333-35133 of Barringer
Technologies Inc. on Forms S-8, of our report dated February 19, 1998 (March 13,
1998 as to Note 16), relating to the consolidated financial statements and
schedule of Barringer Technologies Inc. appearing in the Company's Annual Report
on Form 10-KSB for the year ended December 31, 1997.
BDO SEIDMAN, LLP
\S\ BDO SEIDMAN, LLP
Woodbridge, New Jersey
March 30, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial
information extracted from Barringer Technologies
Inc.'s Form 10-KSB for the fiscal year ended
December 31, 1997 and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1000
<CURRENCY> U.S.
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1
<CASH> 8,188
<SECURITIES> 2,499
<RECEIVABLES> 8,017
<ALLOWANCES> 109
<INVENTORY> 3,049
<CURRENT-ASSETS> 24,037
<PP&E> 3,025
<DEPRECIATION> 1,520
<TOTAL-ASSETS> 25,608
<CURRENT-LIABILITIES> 4,373
<BONDS> 0
0
100
<COMMON> 55
<OTHER-SE> 20,959
<TOTAL-LIABILITY-AND-EQUITY> 25,608
<SALES> 22,689
<TOTAL-REVENUES> 22,689
<CGS> 9,008
<TOTAL-COSTS> 9,008
<OTHER-EXPENSES> 8,289
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9
<INCOME-PRETAX> 5,383
<INCOME-TAX> (371)
<INCOME-CONTINUING> 5,754
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,754
<EPS-PRIMARY> 1.05
<EPS-DILUTED> 0.92
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial
information extracted from Barringer Technologies
Inc.'s Form 10-KSB for the fiscal year ended
December 31, 1996 and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1000
<CURRENCY> U.S
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<CASH> 5,276
<SECURITIES> 4,328
<RECEIVABLES> 3,584
<ALLOWANCES> 63
<INVENTORY> 2,270
<CURRENT-ASSETS> 16,624
<PP&E> 2,316
<DEPRECIATION> 1,721
<TOTAL-ASSETS> 17,323
<CURRENT-LIABILITIES> 2,353
<BONDS> 0
0
319
<COMMON> 54
<OTHER-SE> 14,480
<TOTAL-LIABILITY-AND-EQUITY> 17,323
<SALES> 10,923
<TOTAL-REVENUES> 10,923
<CGS> 5,363
<TOTAL-COSTS> 5,363
<OTHER-EXPENSES> 3,904
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 228
<INCOME-PRETAX> 1,668
<INCOME-TAX> (391)
<INCOME-CONTINUING> 2,059
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,059
<EPS-PRIMARY> 0.55
<EPS-DILUTED> 0.46
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial
information extracted from Barringer Technologies
Inc.'s Form 10-K for the fiscal year ended
December 31, 1995 and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1000
<CURRENCY> U.S.
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<EXCHANGE-RATE> 1
<CASH> 43
<SECURITIES> 0
<RECEIVABLES> 1,574
<ALLOWANCES> 41
<INVENTORY> 1,621
<CURRENT-ASSETS> 3,672
<PP&E> 2,101
<DEPRECIATION> 1,515
<TOTAL-ASSETS> 4,735
<CURRENT-LIABILITIES> 3,302
<BONDS> 0
0
616
<COMMON> 35
<OTHER-SE> 674
<TOTAL-LIABILITY-AND-EQUITY> 4,735
<SALES> 6,374
<TOTAL-REVENUES> 6,374
<CGS> 3,601
<TOTAL-COSTS> 3,601
<OTHER-EXPENSES> 3,711
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 240
<INCOME-PRETAX> (1,178)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,178)
<DISCONTINUED> 351
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (827)
<EPS-PRIMARY> (0.28)
<EPS-DILUTED> (0.28)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial
information extracted from Barringer Technologies
Inc.'s Form 10-QSB for the quarter ended March 31,
1997 and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1000
<CURRENCY> U.S.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<CASH> 3,050
<SECURITIES> 4,876
<RECEIVABLES> 5,132
<ALLOWANCES> 62
<INVENTORY> 2,650
<CURRENT-ASSETS> 16,690
<PP&E> 2,249
<DEPRECIATION> 1,296
<TOTAL-ASSETS> 17,722
<CURRENT-LIABILITIES> 1,792
<BONDS> 0
0
116
<COMMON> 54
<OTHER-SE> 15,642
<TOTAL-LIABILITY-AND-EQUITY> 17,722
<SALES> 3,622
<TOTAL-REVENUES> 3,622
<CGS> 1,461
<TOTAL-COSTS> 1,461
<OTHER-EXPENSES> 1,389
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2
<INCOME-PRETAX> 770
<INCOME-TAX> (75)
<INCOME-CONTINUING> 845
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 845
<EPS-PRIMARY> 0.16
<EPS-DILUTED> 0.14
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial
information extracted from Barringer Technologies
Inc.'s Form 10-QSB for the quarter ended June 30,
1997 and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1000
<CURRENCY> U.S.
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<CASH> 3,896
<SECURITIES> 4,055
<RECEIVABLES> 6,509
<ALLOWANCES> 157
<INVENTORY> 3,424
<CURRENT-ASSETS> 19,253
<PP&E> 2,408
<DEPRECIATION> 1,342
<TOTAL-ASSETS> 20,385
<CURRENT-LIABILITIES> 2,839
<BONDS> 0
0
116
<COMMON> 55
<OTHER-SE> 17,254
<TOTAL-LIABILITY-AND-EQUITY> 20,385
<SALES> 9,438
<TOTAL-REVENUES> 9,438
<CGS> 3,955
<TOTAL-COSTS> 3,955
<OTHER-EXPENSES> 3,349
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5
<INCOME-PRETAX> 2,129
<INCOME-TAX> (131)
<INCOME-CONTINUING> 2,260
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,260
<EPS-PRIMARY> 0.42
<EPS-DILUTED> 0.36
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial
information extracted from Barringer Technologies
Inc.'s Form 10-QSB for the fiscal year ended
September 30, 1997 and is qualified in its
entirety by reference to such financial
statements.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1000
<CURRENCY> U.S.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1
<CASH> 6,097
<SECURITIES> 3,500
<RECEIVABLES> 7,120
<ALLOWANCES> 185
<INVENTORY> 3,177
<CURRENT-ASSETS> 20,464
<PP&E> 2,798
<DEPRECIATION> 1,427
<TOTAL-ASSETS> 21,897
<CURRENT-LIABILITIES> 2,550
<BONDS> 0
0
100
<COMMON> 55
<OTHER-SE> 19,069
<TOTAL-LIABILITY-AND-EQUITY> 21,897
<SALES> 15,343
<TOTAL-REVENUES> 15,343
<CGS> 6,684
<TOTAL-COSTS> 6,684
<OTHER-EXPENSES> 5,089
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9
<INCOME-PRETAX> 3,561
<INCOME-TAX> (256)
<INCOME-CONTINUING> 3,817
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,817
<EPS-PRIMARY> 0.70
<EPS-DILUTED> 0.61
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial
information extracted from Barringer Technologies
Inc.'s Form 10-QSB for the quarter ended March 31,
1996 and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1000
<CURRENCY> U.S.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<EXCHANGE-RATE> 1
<CASH> 49
<SECURITIES> 0
<RECEIVABLES> 2,377
<ALLOWANCES> 38
<INVENTORY> 1,655
<CURRENT-ASSETS> 4,532
<PP&E> 2,131
<DEPRECIATION> 1,573
<TOTAL-ASSETS> 5,518
<CURRENT-LIABILITIES> 3,801
<BONDS> 0
0
616
<COMMON> 35
<OTHER-SE> 955
<TOTAL-LIABILITY-AND-EQUITY> 5,518
<SALES> 2,354
<TOTAL-REVENUES> 2,354
<CGS> 1,236
<TOTAL-COSTS> 1,236
<OTHER-EXPENSES> 863
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 66
<INCOME-PRETAX> 189
<INCOME-TAX> 0
<INCOME-CONTINUING> 189
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 189
<EPS-PRIMARY> 0.05
<EPS-DILUTED> 0.05
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial
information extracted from Barringer Technologies
Inc.'s Form 10-QSB for the quarter ended June 30,
1996 and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1000
<CURRENCY> U.S.
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<CASH> 17
<SECURITIES> 0
<RECEIVABLES> 2,748
<ALLOWANCES> 90
<INVENTORY> 1,652
<CURRENT-ASSETS> 1,828
<PP&E> 2,154
<DEPRECIATION> 1,596
<TOTAL-ASSETS> 5,881
<CURRENT-LIABILITIES> 3,888
<BONDS> 0
0
556
<COMMON> 35
<OTHER-SE> 1,289
<TOTAL-LIABILITY-AND-EQUITY> 5,881
<SALES> 5,012
<TOTAL-REVENUES> 5,012
<CGS> 2,647
<TOTAL-COSTS> 2,647
<OTHER-EXPENSES> 1,691
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 130
<INCOME-PRETAX> 564
<INCOME-TAX> 0
<INCOME-CONTINUING> 564
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 564
<EPS-PRIMARY> 0.16
<EPS-DILUTED> 0.15
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial
information extracted from Barringer Technologies
Inc.'s Form 10-QSB for the quarter ended September
30, 1996 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1000
<CURRENCY> U.S
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1
<CASH> 198
<SECURITIES> 0
<RECEIVABLES> 2,097
<ALLOWANCES> 61
<INVENTORY> 2,296
<CURRENT-ASSETS> 5,727
<PP&E> 2,208
<DEPRECIATION> 1,683
<TOTAL-ASSETS> 6,376
<CURRENT-LIABILITIES> 3,798
<BONDS> 0
0
495
<COMMON> 35
<OTHER-SE> 1,932
<TOTAL-LIABILITY-AND-EQUITY> 6,376
<SALES> 7,352
<TOTAL-REVENUES> 7,352
<CGS> 3,648
<TOTAL-COSTS> 3,648
<OTHER-EXPENSES> 2,652
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 186
<INCOME-PRETAX> 983
<INCOME-TAX> (125)
<INCOME-CONTINUING> 1,108
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,108
<EPS-PRIMARY> 0.31
<EPS-DILUTED> 0.26
</TABLE>
