UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ______
Commission File Number: 0-28946
Vivid Technologies, Inc.
(Exact name of registrant as specified in its charter)
Delaware 04-3054475
(State of incorporation) (I.R.S. Employer Identification No.)
10E Commerce Way, Woburn, Massachusetts 01801
(Address of principal executive offices) (Zip Code)
(617) 938-7800
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No ___
As of May 1, 1997, 9,299,734 shares of the registrant's Common
Stock, $.01 par value, were issued and outstanding.
VIVID TECHNOLOGIES, INC. AND SUBSIDIARIES
INDEX
Page
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets
March 31, 1997 and September 30, 1996 3
Consolidated Statements of Operations
Three and Six Months Ended March 31, 1997
and 1996 4
Consolidated Statements of Cash Flows
Six Months Ended March 31, 1997
and 1996 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II - OTHER INFORMATION 14
SIGNATURES 16
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
VIVID TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
ASSETS
March 31, September 30,
1997 1996
CURRENT ASSETS:
Cash and cash equivalents $21,321,866 $ 1,661,724
Accounts receivable 3,562,338 3,720,478
Inventories 6,221,934 4,741,658
Deferred tax asset 261,000 181,000
Other current assets 783,417 444,902
Total current assets 32,150,555 10,749,762
PROPERTY AND EQUIPMENT, at cost:
Machinery and equipment 1,917,308 1,681,659
Furniture and fixtures 76,065 58,855
Leasehold improvements 160,934 143,776
Equipment under capital leases 198,580 198,580
2,352,887 2,082,870
Less- Accumulated depreciation
and amortization 1,309,479 1,097,717
1,043,408 985,153
Other assets, net 102,403 228,077
$33,296,366 $11,962,992
LIABILITIES AND STOCKHOLDERS' EQUITY
March 31, September 30,
1997 1996
CURRENT LIABILITIES:
Obligation under capital leases $ 4,916 $ 36,888
Accounts payable 1,710,885 1,493,874
Accrued expenses 2,371,999 3,432,914
Currently redeemable series A
preferred stock -- 2,343,750
Currently redeemable series C
preferred stock -- 3,436,900
Customer deposits 1,963,716 1,042,085
Total current liabilities 6,051,516 11,786,411
STOCKHOLDERS' EQUITY:
Convertible preferred stock,
$.01 par value--
Series B--
Authorized--no shares and 250,000
shares, respectively
Issued and outstanding--no shares
and 250,000 shares, respectively -- 2,500
Series D--
Authorized--no shares and 254,585
shares, respectively
Issued and outstanding--no shares
and 254,585 shares, respectively -- 2,546
Common stock, $.01 par value-
Authorized - 30,000,000 shares
Issued and outstanding -
9,283,334 and 1,740,520 shares,
respectively 92,833 17,405
Capital in excess of par value 25,479,794 594,279
Retained earnings (deficit) 1,672,223 (440,149)
Total stockholders' equity 27,244,850 176,581
$33,296,366 $11,962,992
The accompanying notes are an integral part of these consolidated
financial statements.
VIVID TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Six Months Ended
March 31, March 31,
1997 1996 1997 1996
Revenues $7,758,137 $3,224,656 $13,623,673 $6,242,003
Cost of revenues 3,159,728 1,398,264 5,687,257 2,657,413
Gross margin 4,598,409 1,826,392 7,936,416 3,584,590
Operating expenses:
Research and development 1,178,777 798,658 2,153,713 1,587,370
Selling and marketing 928,842 268,683 1,535,347 553,343
General and administrative 736,040 363,857 1,215,075 705,502
Litigation expenses 145,000 61,000 270,000 122,013
Total operating
expenses 2,988,659 1,492,198 5,174,135 2,968,228
Income from operations 1,609,750 334,194 2,762,281 616,362
Interest income, net 250,823 6,330 318,294 24,526
Income before provision
for income taxes 1,860,573 340,524 3,080,575 640,888
Provision for income taxes 552,401 -- 968,203 --
Net income $1,308,172 $ 340,524 $ 2,112,372 $ 640,888
NET INCOME PER COMMON AND
COMMON EQUIVALENT SHARE $ .13 $ .05 $ .23 $ .09
WEIGHTED AVERAGE NUMBER
OF COMMON AND COMMON
EQUIVALENT SHARES
OUTSTANDING 10,333,866 7,276,841 9,355,821 7,274,339
The accompanying notes are an integral part of these consolidated
financial statements.
VIVID TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
March 31,
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,112,372 $ 640,888
Adjustments to reconcile net income
to net cash used in
operating activities-
Depreciation and amortization 215,530 171,959
Changes in assets and liabilities-
Accounts receivable 158,140 (813,258)
Inventories (1,480,276) (523,625)
Deferred tax asset (80,000) --
Other current assets (338,515) (245,011)
Accounts payable 217,011 87,960
Accrued expenses (1,060,915) (135,431)
Customer deposits 921,631 --
Net cash provided by (used in)
operating activities 664,978 (816,518)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment, net (270,017) (289,551)
Decrease (increase) in other assets 121,906 (66,403)
Net cash used in investing activities (148,111) (355,954)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the sale of common stock 24,887,512 --
Proceeds from exercise of stock
purchase warrants 32,960 --
Proceeds from exercise of stock options 35,425 2,194
Redemption of series A and series C
preferred stock (5,780,650) --
Borrowings on line of credit -- 1,900,000
Payments on capital lease obligations (31,972) (90,531)
Net cash provided by financing
activities 19,143,275 1,811,663
NET INCREASE IN CASH AND
CASH EQUIVALENTS 19,660,142 639,191
CASH AND CASH EQUIVALENTS,
beginning of period 1,661,724 2,561,912
CASH AND CASH EQUIVALENTS,
end of period $21,321,866 $3,201,103
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for -
Interest $ 1,765 $ 9,219
Income tax $ 570,000 $ 108,000
Supplemental disclosure on non-cash
investing and financing activities
Assets acquired under capital leases $ -- $ 190,679
Conversion of Series B and Series D
preferred stock $ 5,046 $ --
Cashless exercise of stock
purchase warrants $ 545 $ --
The accompanying notes are an integral part of these consolidated
financial statements.
VIVID TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) Basis of Presentation
The consolidated financial statements of Vivid
Technologies, Inc. (the Company) presented herein have been
prepared pursuant to the rules of the Securities and Exchange
Commission for quarterly reports on Form 10-Q and do not
include all of the information and note disclosures required by
generally accepted accounting principles. These statements
should be read in conjunction with the consolidated financial
statements and notes thereto for the year ended September 30,
1996, included in the Company's Form S-1 Registration Statement
(File No: 333-14311) as filed with the Securities and Exchange
Commission.
The consolidated balance sheet as of March 31, 1997, the
consolidated statements of operations for the three months and
six months ended March 31, 1997 and 1996, and the consolidated
statements of cash flows for the six months ended March 31,
1997 and 1996, are unaudited but, in the opinion of management,
include all adjustments (consisting of normal, recurring
adjustments) necessary for a fair presentation of results for
these interim periods.
The results of operations for the six months ended March
31, 1997 are not necessarily indicative of the results to be
expected for the entire fiscal year ending September 30, 1997.
(2) Cash and Cash Equivalents
The Company considers all highly liquid securities with
original maturities of three months or less to be cash
equivalents.
The Company accounts for investments in accordance with
Statement of Financial Accounting Standards (SFAS) No. 115,
Accounting for Certain Investments in Debt and Equity
Securities. Under SFAS No. 115, investments for which the
Company has the positive intent and ability to hold to maturity
are reported at amortized cost, which approximates fair market
value, and are classified as held-to-maturity, and accordingly
the Company does not record gains or losses based on market
fluctuations. At September 30, 1996 the Company had no held-to-
maturity investments. At March 31, 1997 these investments
consisted of a certificate of deposit. Investments purchased
to be held for indefinite periods of time, and not intended to
be held until maturity, are classified as available-for-sale.
At September 30, 1996 and March 31, 1997, these investments
consist of a pooled fund, managed by a bank, which invests
primarily in United States Government fixed-income securities.
At March 31, 1997 these investments also included amounts
invested in corporate bonds. These investments are included in
cash equivalents and reported at cost, which approximates fair
market value.
(3) Inventories
Inventories are stated at the lower of cost (first-in,
first-out) or market and consist of the following:
March 31, September 30,
1997 1996
Raw materials $3,389,937 $3,336,696
Work-in-process 1,890,569 858,983
Finished goods 941,428 545,979
$6,221,934 $4,741,658
Finished goods consist of material, labor and
manufacturing overhead.
(4) Significant Customer and Concentration of Credit Risk
In the six months ended March 31, 1997 and 1996, the
Company had one customer who comprised 58% and 59% of revenues,
respectively. This customer had amounts due to the Company of
approximately $1,918,000 and $3,505,000 at March 31, 1997 and
September 30, 1996, respectively.
(5) Patent Litigation
In October 1994, EG&G Astrophysics Research Corporation
("EG&G") filed a patent infringement claim against the Company
in the United States District Court for the District of
Massachusetts, alleging that certain of the Company's products
infringed a patent held by EG&G. In December 1994, the Company
filed an answer denying any infringement and counterclaims
seeking to invalidate the EG&G patent and alleging that EG&G
infringed three patents owned or licensed by the Company. On
November 6, 1996, the Company and EG&G entered into a
Settlement Agreement relating to this litigation.
In May 1996, in response to allegations made by American
Science & Engineering ("AS&E") to third parties that the
Company was infringing AS&E's patents, the Company filed an
action in the United States District Court for the District of
Massachusetts seeking a declaratory judgment that the Company
is not infringing AS&E's patents. In August 1996, AS&E filed
an answer and counterclaim alleging that the Company is
infringing one or more of eight AS&E patents. In October 1996,
the court dismissed AS&E's infringement counterclaim, but
allowed AS&E to raise more specific infringement counterclaims
upon asserting factual support for such claims. In December
1996, AS&E filed a motion for leave to file an amended
counterclaim asserting that the Company was violating one AS&E
patent. In February 1997, the court dismissed AS&E's motion,
but again allowed AS&E to raise more specific infringement
counterclaims upon AS&E's asserting factual support for such
claims. In February 1997, AS&E filed a further memorandum in
support of its motion for leave to file an amended
counterclaim. In April 1997, the Court denied AS&E's motion
and dismissed its counterclaim without granting leave to file
an amended counterclaim.
(6) Initial Public Offering
A registration statement relating to the Company's initial
public offering of common stock was declared effective on
December 10, 1996. In connection with this offering, 2,300,000
shares of common stock were sold to the public (including
300,000 shares sold pursuant to an over-allotment option
exercised by the underwriters in January 1997). All shares
were sold by the Company at a price of $12.00 per share which
resulted in net proceeds (after deducting issuance costs
including underwriters commission) of approximately
$24,900,000. In December 1996, the Company used $5.8 million
of the net proceeds to redeem all of its outstanding shares of
non-convertible mandatorily redeemable Series A preferred stock
and Series C preferred stock. In connection with the Company's
initial public offering, all of its Series B preferred stock
and Series D preferred stock was converted into an aggregate of
5,045,850 shares of common stock.
(7) Recent Accounting Pronouncements
In October 1995, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards (SFAS) No.
123 "Accounting for Stock-Based Compensation," which becomes
effective for fiscal years beginning after December 15, 1995.
SFAS No. 123 establishes new financial accounting and reporting
standards for stock-based compensation plans. However,
entities are allowed to elect whether to measure compensation
expense for stock-based compensation under SFAS No. 123 or
Accounting Principles Board ("APB") Opinion No. 25, "Accounting
for Stock Issued to Employees." The Company has elected to
remain with the accounting under APB No. 25 and will make the
required pro forma disclosures of net income and earnings per
share as if the provisions of SFAS No. 123 had been applied in
its September 30, 1997 financial statements. The potential
impact of adopting this standard on the Company's pro forma
disclosures of net income and earnings per share has not been
quantified at this time.
In February 1997, the Financial Accounting Standards Board
issued SFAS No. 128 "Earnings Per Share" which establishes new
standards for calculating and presenting earnings per share.
The standard is effective for financial statements for periods
ending after December 15, 1997, with earlier application not
permitted. The Company will adopt this new standard in its
1998 financial statements, which will require the reporting of
diluted earnings per share and basic earnings per share.
Basic and diluted earnings per share using this standard
would have been $0.14 and $0.13, respectively, for the three
months ended March 31, 1997, and $0.19 and $0.05, respectively,
for the three months ended March 31, 1996. Basic and diluted
earnings per share using this standard would have been $0.65
and $0.23, respectively, for the six months ended March 31,
1997, and $0.35 and $0.09, respectively, for the six months
ended March 31, 1996. For the periods prior to the Company's
initial public offering on December 10, 1996, the Series B and
Series D convertible preferred stock are included in diluted
earnings per share. For the periods subsequent to the
Company's initial public offering the Series B and Series D
convertible preferred stock are included in both basic and
diluted earnings per share.
(8) Common Stock
During the first six months of fiscal 1997, the Company
granted options to purchase 251,500 shares of common stock at
exercise prices ranging from $9.50 to $16.25 per share which
vest over a period of five years.
PART I - FINANCIAL INFORMATION (Continued)
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
VIVID TECHNOLOGIES, INC. AND SUBSIDIARIES
The Company's results of operations have and may continue
to be subject to significant quarterly fluctuation due to
several factors, including the overall demand for explosives
detection systems, market acceptance of the Company's products,
timing of the announcement, introduction and delivery of new
products and product enhancements by the Company and its
competitors, variations in component costs, timing of customer
orders, adjustments of delivery schedules to accommodate
customers programs, the availability of components from
suppliers, the timing and level of expenditures in anticipation
of future sales, and pricing and other competitive conditions.
Customers may also cancel or reschedule shipments and
production difficulties could delay shipments. Relatively few
system sales to relatively few customers comprise a significant
portion of the Company's revenues in each quarter. Therefore,
small variations in the number of systems sold could have a
significant effect on the Company's results of operations.
Results of Operations
Revenues. Revenues for the second quarter of fiscal 1997
increased 141% to $7,758,137 from $3,224,656 for the second
quarter of fiscal 1996. Revenues for the current six month
period increased 118% to $13,623,673 from $6,242,003 for the
first six months of fiscal 1996. This increase in revenues was
the result of an increase in product sales which was partially
offset by a decrease in FAA development grants. The increase
in product sales was primarily attributable to the total number
of product shipments to Europe as well as the initial shipments
to Kuala Lumpur International Airport in Malaysia, partially
offset by lower average selling prices of the Company's
products.
In the six months ended March 31, 1997 and 1996, sales to
one customer accounted approximately 58% and 59% of revenues,
respectively. This customer is scheduled to complete the
deployment of checked baggage explosive detection systems by
the end of 1997. As a result, the Company expects that its
revenues from this customer will decrease and will become
increasingly dependent upon sales of upgrades, replacement
equipment and services. In the first six months of fiscal
1997, the Company received major orders to purchase an
aggregate of approximately 60 automated explosives detection
systems, including orders from Kuala Lumpur International
Airport and Chek Lap Kok Airport in Hong Kong, and a repeat
order from France (Service Technique des Bases Aeriennes). The
Company has shipped 14 of the 26 systems included in the Kuala
Lumpur order and expects that it will deliver the remainder of
these orders over the next three fiscal quarters.
In the first six months of fiscal 1997, 100% of product
revenues were generated internationally, approximately 70% in
Europe, and 30% in Asia. In the first six months of fiscal
1996, 100% of product revenues were generated in Europe.
Gross Margin. Gross margin increased as a percentage of
sales to 59% in the current quarter from 57% in the second
quarter of fiscal 1996. For the first six months of fiscal
1997, gross margin increased as a percentage of sales to 58%
from 57% for the first six months of fiscal 1996. The increase
in gross margin in fiscal 1997 was primarily attributable to
the decrease, commencing in the second quarter, in royalties
due to Hologic, Inc. for the exclusive license of certain
patents and technology from 5% to 3%, and decreased costs
attributable to improved manufacturing efficiencies recognized
in the current quarter. These decreases were partially offset
by a reduction in revenues associated with the Company's FAA
grant and lower average selling prices.
Research and Development Expenses. Research and
development expenses increased 48% to $1,178,777 (15% of
revenues) in the current quarter from $798,658 (25% of
revenues) in the second quarter of fiscal 1996. For the
current six month period, research and development expenses
increased 36% to $2,153,713 (16% of revenues) from $1,587,370
(25% of revenues) for the first six months of fiscal 1996. The
increase in research and development expenses in fiscal 1997
was primarily due to the addition of engineering personnel and
outside consultants working on the development of new products
and enhancements to existing products, including enhancements
to the APS system for carry-on baggage and the VIS-M (Matrix
configuration). As a percentage of revenues, research and
development expenses declined in the current year, reflecting
increased revenues in the first six months of fiscal 1997.
Selling and Marketing Expenses. Selling and marketing
expenses increased 246% to $928,842 (12% of revenues) in the
current quarter from $268,683 (8% of revenues) in the second
quarter of fiscal 1996. For the current six month period,
selling and marketing expenses increased 177% to $1,535,347
(11% of revenues) from $553,343 (9% of revenues) for the first
six months of fiscal 1996. The increase in selling and
marketing expenses in fiscal 1997 was primarily due to
additional sales and support personnel, including expansion of
operations in Europe and establishing operations and support
staff in the Asia/Pacific region in the current quarter, the
payment of commissions on sales in the Asia/Pacific region, and
to a lesser extent an increase in advertising, consulting,
trade shows and related travel costs. The Company anticipates
that it will continue to expand its selling and marketing
efforts in the remainder of fiscal 1997.
General and Administrative Expenses. General and
administrative expenses increased 102% to $736,040 (9% of
revenues) in the current quarter from $363,857 (11% of
revenues) in the second quarter of fiscal 1996. For the
current six month period, general and administrative expenses
increased 72% to $1,215,075 (9% of revenues) from $705,502 (11%
of revenues) for the first six months of fiscal 1996. The
increase in general and administrative expenses in fiscal 1997
was primarily attributable to an increase in personnel and
related costs as well as additional overhead costs related to
the Company's move to a new facility in March 1996, to support
its increased sales. The Company anticipates that it will
continue to increase its general and administrative costs in
the remainder of fiscal 1997.
Litigation Expenses. The Company incurred $145,000 and
$61,000 of litigation expenses in the second quarter of fiscal
1997 and 1996, respectively, primarily in connection with the
Company's patent litigation. Litigation expense for the first
six months of fiscal 1997 and 1996 was $270,000 and $122,013,
respectively. On November 6, 1996, the Company entered into an
agreement with EG&G to settle EG&G's patent infringement claim
against the Company. The litigation expenses in fiscal 1997
also include expenses incurred in connection with the Company's
litigation with AS&E. In October 1996, the court dismissed
AS&E's infringement counterclaims, but allowed AS&E to raise
more specific counterclaims upon AS&E asserting factual support
for such claims. In December 1996, AS&E filed a motion for
leave to file an amended counterclaim asserting that the
Company is violating one AS&E patent. The court subsequently
dismissed AS&E's motion, but again allowed AS&E to raise more
specific infringement counterclaims upon AS&E's asserting
factual support for such claims. In February 1997, AS&E filed
a further memorandum in support of its motion for leave to file
an amended counterclaim. In April 1997, the Court denied
AS&E's motion and dismissed its counterclaim without granting
leave to file an amended counterclaim.
As a result of the Company's settlement with EG&G in
November, and the recent court rulings against AS&E, the
Company expects litigation expenses to decline for the
remainder of fiscal 1997.
Interest Income. The Company recognized net interest
income of $250,823 in the current quarter compared to $6,330 in
the second quarter of fiscal 1996. Net interest income
increased to $318,294 in the current six month period from
$24,526 in the comparable period in fiscal 1996. The increase
in fiscal 1997 was primarily attributable to higher average
cash balances resulting from the receipt of net proceeds from
the Company's initial public offering.
Provision for Income Taxes. The Company's effective tax
rate for the first six months of fiscal 1997 was 31% compared
to no provision for income taxes in the corresponding period in
fiscal 1996. The provision for income taxes in fiscal 1996 was
a result of the Company's recognition of a deferred tax asset.
This reduction reflects management's determination, in
accordance with the Financial Accounting Standards Board's
Statement of Financial Accounting Standards ("SFAS") No. 109,
that it is more likely than not that this deferred tax asset
will be utilized. If the Company had not recognized this
deferred tax asset, the Company's effective tax rate in the
first six months of fiscal 1996 would have been 16%. The
Company expects that its effective tax rate will be slightly
lower than the statutory tax rates primarily due to the use of
tax credits and the tax benefits associated with the Company's
foreign sales corporation.
Liquidity and Capital Resources
The Company has funded its operations and capital
expenditures primarily through internally generated cash flow,
proceeds from the sale of securities and the availability of a
working capital line of credit. At March 31, 1997, the Company
had working capital of $26.1 million including $21.3 million in
cash and cash equivalents. The Company also has a $3.0 million
bank line of credit which expires in May 1997. The Company is
currently in negotiations with the bank regarding a new credit
facility with increased borrowing limits. At March 31, 1997,
the Company had no amounts outstanding under this line of
credit.
During the first six months of fiscal 1997, the Company's
net cash provided by operating activities was approximately
$700,000. During that period, net income adjusted for non-cash
expenses including depreciation and amortization totaling $2.3
million, and increased customer deposits of $900,000 were
partially offset by a $1.1 million decrease of accrued expenses
and $1.5 million increase in inventories. The increase in
inventories in the second quarter of fiscal 1997 reflects the
Company's increased sales activity including its expansion into
the Asia/Pacific region.
The Company's capital expenditures for the first six
months of fiscal 1997 were $270,000. While the Company does
not have any significant commitments for capital expenditures,
the Company anticipates that it will continue to purchase
equipment to support its anticipated growth.
During the first six months of fiscal 1997, net cash
provided by financing activities was $19.1 million. Net cash
provided by financing activities in the first six months of
fiscal 1997 was primarily attributable to the receipt of net
proceeds of approximately $24.9 million from the initial public
offering of the Company's common stock. The Company used
approximately $5.8 million of the net proceeds of the offering
to redeem all of its outstanding shares of mandatorily
redeemable non-convertible preferred stock.
The Company does not currently have any significant
capital commitments and believes that existing sources of
liquidity, including the net proceeds of its initial public
offering, funds expected to be generated from operations and
its line of credit will provide adequate cash to fund the
Company's anticipated working capital and other cash needs
through at least the next twelve months. However, for a brief
discussion of the factors that could adversely affect the
Company's financial position and results of operations, see the
opening paragraph of Item 2 above.
Recent Accounting Pronouncements
In October 1995, the Financial Accounting Standards Board
issued SFAS No. 123 "Accounting for Stock-Based Compensation,"
which becomes effective for fiscal years beginning after
December 15, 1995. SFAS No. 123 establishes new financial
accounting and reporting standards for stock-based compensation
plans. However, entities are allowed to elect whether to
measure compensation expense for stock-based compensation under
SFAS No. 123 or Accounting Principles Board ("APB") Opinion No.
25, "Accounting for Stock Issued to Employees." The Company
has elected to remain with the accounting under APB No. 25 and
will make the required pro forma disclosures of net income and
earnings per share as if the provisions of SFAS No. 123 had
been applied in its September 30, 1997 financial statements.
The potential impact of adopting this standard on the Company's
pro forma disclosures of net income and earnings per share has
not been quantified at this time.
In February 1997, the Financial Accounting Standards Board
issued SFAS No. 128 "Earnings Per Share" which establishes new
standards for calculating and presenting earnings per share.
The standard is effective for financial statements for periods
ending after December 15, 1997, with earlier application not
permitted. The Company will adopt this new standard in its
1998 financial statements, which will require the reporting of
diluted earnings per share and basic earnings per share.
Basic and diluted earnings per share using this standard
would have been $0.14 and $0.13, respectively, for the three
months ended March 31, 1997, and $0.19 and $0.05, respectively,
for the three months ended March 31, 1996. Basic and diluted
earnings per share using this standard would have been $0.65
and $0.23, respectively, for the six months ended March 31,
1997, and $0.35 and $0.09, respectively, for the six months
ended March 31, 1996. For the periods prior to the Company's
initial public offering on December 10, 1996, the Series B and
Series D convertible preferred stock are included in diluted
earnings per share. For the periods subsequent to the
Company's initial public offering the Series B and Series D
convertible preferred stock are included in both basic and
diluted earnings per share.
PART II - OTHER INFORMATION
VIVID TECHNOLOGIES, INC. AND SUBSIDIARIES
Item 1. Legal Proceedings.
Patent Litigation. In October 1994, EG&G Astrophysics
Research Corporation ("EG&G") filed a patent infringement claim
against the Company in the United States District Court for the
District of Massachusetts, alleging that certain of the
Company's products infringed a patent held by EG&G. In
December 1994, the Company filed an answer denying any
infringement and counterclaims seeking to invalidate the EG&G
patent and alleging that EG&G infringed three patents owned or
licensed by the Company. On November 6, 1996, the Company and
EG&G entered into a Settlement Agreement relating to this
litigation.
In May 1996, in response to allegations made by American
Science & Engineering ("AS&E") to third parties that the
Company was infringing AS&E's patents, the Company filed an
action in the United States District Court for the District of
Massachusetts seeking a declaratory judgment that the Company
is not infringing AS&E's patents. In August 1996, AS&E filed
an answer and counterclaim alleging that the Company is
infringing one or more of eight AS&E patents. In October 1996,
the court dismissed AS&E's infringement counterclaim, but
allowed AS&E to raise more specific infringement counterclaims
upon asserting factual support for such claims. In December
1996, AS&E filed a motion for leave to file an amended
counterclaim asserting that the Company was violating one AS&E
patent. The court subsequently dismissed AS&E's motion, but
again allowed AS&E to raise more specific infringement
counterclaims upon AS&E's asserting factual support for such
claims. In February 1997, AS&E filed a further memorandum in
support of its motion for leave to file an amended
counterclaim. In April 1997, the Court denied AS&E's motion
and dismissed its counterclaim without granting leave to file
an amended counterclaim.
Item 2. Changes in Securities.
From January 1, 1997 through March 31, 1997, options to
purchase a total of 25,950 shares of Common Stock, granted
under the Registrant's 1989 Combination Stock Option Plan, were
exercised at prices ranging from $0.10 to $1.00 per share at an
aggregate price of $8,775. The issuance of these securities
was exempt from registration pursuant to Rule 701 promulgated
under Section 3(b) of the Securities Act of 1933.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security-Holders.
None.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits furnished:
(11) Statement Re: Computation of Earnings Per Share.
(27) Financial Data Schedule.
(b) Reports on Form 8-K.
None.
VIVID TECHNOLOGIES, INC. AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
Vivid Technologies, Inc.
(Registrant)
May 13, 1997 /s/ S. David Ellenbogen
Date S. David Ellenbogen
Chief Executive Officer
May 13, 1997 /s/ William J. Frain
Date William J. Frain
Chief Financial Officer and
Treasurer
(Principal Financial and Chief
Accounting Officer)
Exhibit 11
VIVID TECHNOLOGIES, INC. AND SUBSIDIARIES
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
(Unaudited)
Three Months Ended Six Months Ended
March 31, March 31,
1997 1996 1997 1996
PRIMARY:
Net income $ 1,308,172 $ 340,524 $2,112,372 $ 640,888
Weighted average common
stock outstanding 9,201,213 1,676,535 3,188,822 1,675,883
Conversion of Series B and
Series D convertible
preferred stock -- 5,045,850 5,045,850 5,045,850
Stock issued within twelve months
of initial public offering -- 144,542 57,817 144,542
Common stock equivalents 1,132,653 409,914 1,063,332 408,064
Primary weighted average
number of common and common
equivalent shares
outstanding 10,333,866 7,276,841 9,355,821 7,274,339
Per share amount $ .13 $ .05 $ .23 $ .09
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<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> MAR-31-1997
<CASH> 21,321,866
<SECURITIES> 0
<RECEIVABLES> 3,562,338
<ALLOWANCES> 0
<INVENTORY> 6,221,934
<CURRENT-ASSETS> 32,150,555
<PP&E> 2,352,887
<DEPRECIATION> 1,309,479
<TOTAL-ASSETS> 33,296,366
<CURRENT-LIABILITIES> 6,051,516
<BONDS> 0
0
0
<COMMON> 92,833
<OTHER-SE> 27,152,017
<TOTAL-LIABILITY-AND-EQUITY> 33,296,366
<SALES> 13,623,673
<TOTAL-REVENUES> 13,623,673
<CGS> 5,687,257
<TOTAL-COSTS> 10,861,392
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3,080,575
<INCOME-TAX> 968,203
<INCOME-CONTINUING> 2,112,372
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,112,372
<EPS-PRIMARY> .23
<EPS-DILUTED> .23
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