<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: December 18, 1997
ROBOTIC VISION SYSTEMS, INC.
(Exact name of Registrant as specified in charter)
Delaware 0-8623 11-2400145
(State or other (Commission File No.) (IRS Employer
jurisdiction of Identification
incorporation) Number)
425 Rabro Drive East, Hauppauge, New York 11788
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (516) 273-9700
================================================================================
<PAGE>
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Vanguard:
(i) Report of Arthur Andersen LLP, Independent Public
Accountants
(ii) Balance Sheet as of December 31, 1996
(iii) Statement of Operations for the year ended December 31,
1996
(iv) Statement of Changes in Stockholders' Equity for the
year ended December 31, 1996
(v) Statement of Cash Flows for the year ended December 31,
1996
(vi) Notes to Financial Statements
(vii) Report of Arthur Andersen LLP, Independent Public
Accountants
(viii) Balance Sheet as of September 30, 1997
(ix) Statement of Operations for the year ended September
30, 1997
(x) Statement of Changes in Stockholders' Equity for the
year ended September 30, 1997
(xi) Statement of Cash Flows for the year ended September
30, 1997
(xii) Notes to Financial Statements
(b) Pro Forma Financial Information
(i) Introduction to Unaudited Pro Forma Condensed Combined
Financial Information;
(ii) Unaudited Summary of Pro forma Condensed Combined
Statements of Operations for the years ended September
30, 1997, 1996 and 1995;
(iii) Unaudited Pro Forma Condensed Combined Balance Sheet as
of September 30, 1997;
(iv) Unaudited Pro Forma Condensed Combined Statement of
Operations for thee year
<PAGE>
ended September 30, 1997;
(v) Unaudited Pro Forma Condensed Combined Statement of
Operations for thee year ended September 30, 1996; and
(vi) Unaudited Pro Forma Condensed Combined Statement of
Operations for thee year ended September 30, 1995;
(vii) Notes to Unaudited Pro Forma Condensed Financial
Information
(c) Exhibits
(i) Agreement and Plan of Merger and Reorganization dated
as of October 30, 1997 by and among Robotic Vision
Systems, Inc., RVSI Southwest Acquisition Corp. and
Vanguard Automation, Inc.*
- ------------
* Heretofore filed.
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Vanguard Automation, Inc.:
We have audited the accompanying balance sheet of VANGUARD AUTOMATION, INC. (a
Delaware corporation) as of December 31, 1996, and the related statements of
operations, changes in stockholders' equity and cash flows for the year then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit 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 are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Vanguard Automation, Inc. as of
December 31, 1996, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
/s/ ARTHUR ANDERSEN LLP
Tucson, Arizona,
June 30, 1997, (except with respect to the matter discussed in Note 16, as to
which the date is December 9, 1997).
<PAGE>
VANGUARD AUTOMATION, INC.
BALANCE SHEET
AS OF DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
ASSETS
<S> <C>
CURRENT ASSETS:
Cash and cash equivalents (Note 2) $ 1,588
Accounts receivable, net of allowance for doubtful accounts of $100 (Note 13) 2,973
Inventories (Notes 2, 3 and 14) 3,042
Costs and estimated earnings in excess of billings on uncompleted contracts (Note 2) 630
Prepaid expenses and other current assets 115
-------
Total current assets 8,348
PROPERTY AND EQUIPMENT, net (Notes 2, 4, 7 and 14) 2,165
OTHER ASSETS 35
-------
Total assets $10,548
=======
LIABILITIES AND STOCKHOLDERS' EQUITY
<CAPTION>
<S> <C>
CURRENT LIABILITIES:
Accounts payable (Notes 8, 14 and 15) $ 4,183
Accrued expenses (Notes 2 and 5) 1,799
Billings in excess of costs and estimated earnings on uncompleted contracts (Note 2) 197
Related party credit line (Notes 8, 14 and 15) 2,000
Related party short-term debt (Notes 8, 14 and 15) 240
Current portion of long-term debt and capital lease obligation (Note 7) 114
-------
Total current liabilities 8,533
-------
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATION, less current portion (Note 7) 523
-------
DEFERRED GAIN (Note 6) 237
-------
COMMITMENTS AND CONTINGENCIES (Notes 10, 11 and 15)
STOCKHOLDERS' EQUITY (Notes 8, 9 and 15):
Series A redeemable convertible preferred stock; $.001 par value, $5,507
redemption and liquidation value; 9,796,709 shares authorized; 9,177,933
shares issued and outstanding 9
Series AA redeemable convertible preferred stock, $.001 par value; $7,992
redemption and liquidation value; 12,238,346 authorized; 10,800,000 shares
issued and outstanding 11
Common stock, $.001 par value; 65,500,000 shares authorized; 9,050,000 shares
issued and outstanding 9
Additional paid-in capital 14,340
Accumulated deficit (13,114)
-------
Total stockholders' equity 1,255
-------
Total liabilities and stockholders' equity $10,548
=======
</TABLE>
The accompanying notes are an integral part of this balance sheet.
<PAGE>
VANGUARD AUTOMATION, INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS)
REVENUES (Notes 2 and 13) $10,977
COST OF REVENUES (Note 2) 10,971
-------
Gross profit 6
-------
OPERATING EXPENSES (Notes 2, 6, 8, 10 and 15):
Sales and marketing 607
Product development 3,429
General and administrative 4,549
-------
Total operating expenses 8,585
-------
Operating loss (8,579)
-------
OTHER EXPENSE:
Interest expense, net (170)
Miscellaneous (102)
-------
Total other expense (272)
-------
Loss before income taxes (8,851)
INCOME TAXES (Notes 2 and 12) -
-------
Net loss $(8,851)
=======
The accompanying notes are an integral part of this financial statement.
<PAGE>
VANGUARD AUTOMATION, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
Series A Series AA
Redeemable Redeemable Preferred
Convertible Convertible Stock Additional Total
Preferred Preferred Subscription Common Paid-in Accumulated Stockholders'
Stock Stock Receivable Stock Capital Deficit Equity
----------- ----------- ------------- ------ ---------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCES, December 31, 1995 $ 6 $ - $ (68) $ 9 $ 4,294 $ (4,263) $ (22)
Issuance of stock (Note 8) 3 11 - - 10,046 - 10,060
Net loss - - - - - (8,851) (8,851)
Preferred stock subscription paid - - 68 - - - 68
------- ------ ----- ---- -------- --------- -------
BALANCES, December 31, 1996 $ 9 $ 11 $ - $ 9 $14,340 $(13,114) $ 1,255
======= ====== ===== ==== ======== ======== =======
</TABLE>
The accompanying notes are an integral part of this financial statement.
<PAGE>
VANGUARD AUTOMATION, INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (8,851)
Adjustments to reconcile net loss to net cash used in operating activities-
Loss on disposal of property and equipment 14
Depreciation and amortization 717
Recognition of deferred gain (57)
Expenses paid through issuance of common stock 35
Expenses paid through issuance of debt 230
Increase (decrease) in cash resulting from changes in-
Accounts receivable (2,297)
Inventories (2,756)
Costs and estimated earnings in excess of billings on uncompleted contracts 1,032
Prepaid expenses and other current assets (81)
Other assets 8
Accounts payable 2,877
Accrued expenses (337)
Billings in excess of costs and estimated earnings on uncompleted contracts (651)
--------
Net cash used in operating activities (10,117)
--------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment (1,446)
Proceeds from disposal of property and equipment 8
--------
Net cash used in investing activities (1,438)
--------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on related party credit line 4,430
Repayments of related party credit line (2,430)
Borrowings on related party short-term debt 500
Repayments of related party short-term debt (500)
Borrowings on long-term debt 245
Repayments of long-term debt (48)
Principal repayment of capital lease obligations (71)
Cash received on preferred stock subscription receivable 68
Issuance of series A preferred stock 2,025
Issuance of series AA preferred stock 8,000
--------
Net cash provided by financing activities 12,219
--------
NET INCREASE IN CASH AND CASH EQUIVALENTS 664
CASH AND CASH EQUIVALENTS, beginning of year 924
--------
CASH AND CASH EQUIVALENTS, end of year $ 1,588
========
SUPPLEMENTAL STATEMENT OF CASH FLOW INFORMATION:
Interest paid $ 142
========
NONCASH OPERATING TRANSACTIONS:
Expenses paid through issuance of related party short-term debt $ 70
Common stock issued for services provided 35
Litigation settlement through issuance of long-term debt 160
NONCASH INVESTING TRANSACTIONS:
Related party short-term debt borrowings for purchase of 170
property and equipment
Capital lease obligations for purchase of property and equipment 99
</TABLE>
The accompanying notes are an integral part of this financial statement.
<PAGE>
VANGUARD AUTOMATION, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
(1) ORGANIZATION AND OPERATIONS:
Vanguard Automation, Inc. (the Company) designs, produces and markets automated
manufacturing equipment used in the assembly of certain types of semiconductor
packaging processes, commonly referred to as Ball Grid Array (BGA). The Company
transitioned to the BGA business primarily during the later part of 1996 and is
now focusing exclusively on BGA business. Subsequent to 1996, the Company sold
substantially all of its remaining contracts related to its prior custom
business (See Note 16).
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
REVENUE RECOGNITION
The Company recognizes revenue from the sale of its BGA products on the date of
shipment, assuming all significant contractual performance requirements have
been met and realization is reasonably assured. Subsequent to product shipment,
the Company incurs certain installation costs which are estimated and accrued at
the time the sale is recorded.
Revenues on custom contracts are recognized on the basis of the Company's
estimates of the percentage of completion of individual contracts, commencing
when progress reaches a point where experience is sufficient to estimate final
results with reasonable accuracy. The portion of the total contract price that
is recognized is obtained by applying the ratio that the actual labor costs
incurred to date bear to the total estimated labor costs of the contract.
Contract costs include all direct material and labor costs and those indirect
costs related to contract performance, such as indirect labor, supplies, tools,
repairs, and depreciation. Selling, general, and administrative costs are
charged to expense as incurred. Provisions for estimated losses on uncompleted
contracts are made in the period in which such losses are determined. Changes
in job performance, job conditions, and estimated profitability, including those
arising from final contract settlements, may result in revisions to costs and
income and are recognized in the period in which the revisions are determined.
An amount equal to contract costs attributable to claims, if any, is charged
against revenues when realization is probable and the amount can be reliably
estimated.
The asset "costs and estimated earnings in excess of billings on uncompleted
contracts" represents revenue recognized in excess of amounts billed. The
liability "billings in excess of costs and estimated earnings on uncompleted
contracts" represents billings in excess of revenue recognized.
<PAGE>
-2-
CASH AND CASH EQUIVALENTS
The Company considers all short-term investments with an original maturity of
three months or less when purchased to be cash equivalents.
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined using
the first-in, first-out (FIFO) method.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Property and equipment held under
capital leases are stated at the lower of the present value of minimum lease
payments at the beginning of the lease term or the fair value at the inception
of the lease. Property and equipment held under capital leases are amortized
using the straight-line method over the lesser of the lease terms or the
estimated useful lives of the related assets.
Depreciation is provided for using the straight-line method over the estimated
useful lives of the respective assets as follows:
Building and improvements 7 years
Machinery, equipment and vehicles 5-7 years
Office equipment 5-7 years
Computers and software 3-5 years
Other 1 year
PRODUCT DEVELOPMENT
Expenditures for product development are charged to operations in the year
incurred.
WARRANTY RESERVES
Costs estimated to be incurred with respect to product warranties are provided
for at the time of sale based upon estimates derived from experience factors.
INCOME TAXES
The Company uses the asset and liability method of accounting for income taxes.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
<PAGE>
-3-
RECENTLY ISSUED ACCOUNTING STANDARDS
Statement of Financial Accounting Standards (SFAS) No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,
which was adopted by the Company in 1996, did not have a material effect on the
Company's financial position or its results of operations upon adoption. SFAS
No. 123, Accounting for Stock-Based Compensation, was also adopted by the
Company in 1996. Pursuant to the provisions of SFAS No. 123, the Company will
continue to account for transactions with its employees pursuant to Accounting
Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees
(see Note 9).
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 at December 31, 1996, and
the reported amounts of revenues and expenses during the year then ended.
Actual results could differ from those estimates.
The Company's most significant estimates relate to accounts receivable,
inventory valuation reserves, and warranty reserves.
(3) INVENTORIES:
Inventories at December 31, 1996, consist of the following (in thousands):
BGA machines inventory $2,057
Stock room inventory 1,535
------
3,592
Less: Inventory reserve (550)
------
$3,042
======
(4) PROPERTY AND EQUIPMENT:
Property and equipment at December 31, 1996, consist of the following (in
thousands):
Land (Note 7) $ 490
Building and improvements (Note 7) 396
Machinery, equipment and vehicles (Note 7) 1,211
Office equipment (Note 7) 437
Computers and software 1,241
Other 535
------
4,310
Less: Accumulated depreciation and
amortization (2,145)
------
Net property and equipment $2,165
======
<PAGE>
-4-
(5) ACCRUED EXPENSES:
Accrued expenses at December 31, 1996, consist of the following (in thousands):
Project loss and warranty reserves $1,004
Unamortized deferred gain (current) 57
Due to stockholders/employees -
Accrued compensation expenses 444
Accrued legal and other related costs (Note 10) 185
Other accrued expenses 109
------
$1,799
======
(6) DEFERRED GAIN:
In 1992, the Company sold property (consisting of land, a building, and certain
improvements) to the majority stockholder for $747,000. The majority
stockholder assumed the related debt on the property of $688,000 and paid
$59,000 in cash. No gain was recognized on the transaction. The Company then
entered into a capital lease agreement with the majority stockholder which
required the Company to pay the stockholder an amount equal to the monthly debt
service requirements on the assumed debt plus 10% through March 2015.
In February 1995, the majority stockholder sold the leased property to an
unrelated third party who then entered into an operating lease with the Company.
This transaction was recorded similar to a sale leaseback in which the Company
recorded an unrecognized gain of $399,279. The gain is being amortized over the
seven year life of the operating lease. The amortization of the gain was
$57,000 in 1996. The long-term and short-term unrecognized gain was $237,500
and $57,000, respectively, at December 31, 1996.
(7) LONG-TERM DEBT AND CAPITAL LEASE OBLIGATION:
Long-term debt and capital lease obligation at December 31, 1996 consist of the
following (in thousands):
LONG-TERM DEBT
Note payable to an industrial development authority in
monthly installments of $1,669, including interest at 6%
through March 2001, collateralized by equipment. $ 104
Note payable to an industrial development authority in
monthly installments of $1,110, including interest at 6%
through July 2002, collateralized by equipment. 90
Note payable to a bank in monthly installments of $2,015
plus interest at prime plus 2% subject to 10.75% floor
(10.75% at December 31, 1996) through May 1999,
collateralized by land. 231
<PAGE>
-5-
Note payable to an unrelated third party in monthly
installments of $5,062, including interest at 8.65% through
January 2000, unsecured. 160
Capital lease obligation in monthly installments of
$2,228, including interest through April 1999,
collateralized by office equipment. 52
-----
Total long-term debt and capital lease obligation 637
Less: Current portion (114)
-----
Long-term debt and capital lease obligation,
excluding current portion $ 523
=====
The aggregate maturities of long-term debt and capital lease obligation, net of
interest are as follows (in thousands):
Long-Term Capital Lease
Debt Obligation Total
--------- ------------- -----
1997 $ 93 $21 $114
1998 101 26 127
1999 265 5 270
2000 31 - 31
2001 51 - 51
Thereafter 44 44
---- ----
$585 $52 $637
==== === ====
(8) STOCKHOLDERS' EQUITY:
SERIES A PREFERRED STOCK
Holders of record of Series A Redeemable Convertible Preferred Stock (Series A
Preferred Stock) are entitled to dividends, if any, as the Board of Directors of
the Company may declare. Dividends are noncumulative and are payable at $.06
per share.
The Series A Preferred Stock is convertible at the option of the holder into
shares of common stock at a conversion ratio of one-to-one, subject to
adjustment. The Series A Preferred Stock is redeemable at any time after
January 1, 1997, upon receipt of written request of at least 66% of the then
outstanding Series A Preferred Stock shareholders at a redemption price of $.60
per share.
<PAGE>
-6-
Upon any voluntary or involuntary liquidation, dissolution or winding up of the
affairs of the Company, the holders of record of Series A Preferred Stock are
entitled to a liquidation preference, senior to common stock and junior to
Series AA Preferred Stock and Series AA-2 Preferred Stock (see Note 16), in an
amount equal to $.60 per share plus any declared and unpaid dividends on such
share.
Holders of Series A Preferred Stock are entitled to voting rights equal to the
number of votes available to a holder of the number of shares of common stock
into which shares of Series A Preferred Stock are convertible on the record date
of the vote (see Note 16).
During 1996, the Company issued 2,736,487 shares of $.001 Series A Preferred
Stock for $2,035,000 cash. Proceeds were utilized for general working capital
requirements.
Although the preferred stock is redeemable at the option of the holder, it was
converted upon completion of the merger of the Company (see Note 16).
Therefore, it is presented as a component of stockholders' equity.
SERIES AA PREFERRED STOCK
Holders of record of Series AA Redeemable Convertible Preferred Stock (Series AA
Preferred Stock) are entitled to dividends, if any, as the Board of Directors of
the Company may declare. Dividends are noncumulative and are payable at $.07
per share subject to certain provisions and potential adjustments.
The Series AA Preferred Stock is convertible at the option of the holder, or
mandatorily in certain events, into shares of common stock at a conversion ratio
of one-to-one, subject to adjustment. The Series AA Preferred Stock is
redeemable at the option of the holder upon the earlier of the sale, merger or
liquidation of the Company or September 2001 at a redemption price of $.74 per
share subject to certain provisions and potential redemption price adjustments.
Upon any voluntary or involuntary liquidation, dissolution or winding up of the
affairs of the Company, the holders of Series AA Preferred Stock are entitled to
a liquidation preference, senior to common stock and Series A Preferred Stock
and equal with Series AA-2 Preferred Stock (see Note 16) in an amount equal to
$.74 per share, plus any declared and unpaid dividends on such share.
Holders of Series AA Preferred Stock are entitled to voting rights equal to the
number of votes available to a holder of the number of shares of common stock
into which shares of Series AA Preferred Stock are convertible on the record
date of the vote (see Note 16).
In September 1996, the Company issued 10,800,000 shares of $.001 Series AA
Preferred Stock for $8,000,000 cash. Proceeds were utilized for repayment of
certain vendor payables, repayment of $1,400,000 related party credit line and
$500,000 related party short-term debt and other working capital requirements.
<PAGE>
-7-
Although the preferred stock is redeemable at the option of the holder, it was
converted upon completion of the merger of the Company (see Note 16).
Therefore, it is presented as a component of stockholders' equity.
COMMON STOCK
In December 1996, the Board of Directors authorized the Company to issue 100,000
shares of common stock to an outside consultant as consideration for entering
into an employment agreement with the Company. Under the terms of the
agreement, 50,000 shares were issued as of the date of the execution of the
employment agreement in February 1997 at which time the Company recorded expense
of $35,000. The remaining 50,000 shares will vest and be issued in January
1998.
WARRANTS
During 1996, the Company issued warrants to a related party for the purchase of
2,000,000 shares of common stock at an exercise price of $1 per share as
consideration for providing a $2,000,000 credit line (see Note 14). No expense
has been recorded in the accompanying statements of operations related to the
grant of these warrants. as the exercise price exceeds the fair market value.
(9) STOCK OPTIONS:
The Company has a long-term incentive plan which permits the issuance of stock
options to management, key employees and certain consultants. Under the plan,
3,450,000 shares of common stock have been reserved for grant. The exercise
price of the options may not be less than the fair market value of a share of
common stock on the grant date. Options generally vest 25% per year over four
years from the date of grant and expire ten years after the grant date.
A summary of the status of the Company's Long-Term Incentive Plan as of December
31, 1996, and changes during the years then ended, is presented below:
Weighted
Average
Number Exercise
of Shares Price
---------- --------
Outstanding, beginning of year 972,500 $.50
Granted 498,000 .70
Forfeitures (190,000) .50
---------
Outstanding, end of year 1,280,500 .58
=========
Options exercisable, end of year 455,125 .50
Weighted average fair value of options
granted during year $.38
<PAGE>
???
-8-
As of December 31, 1996, options outstanding under the plan had exercise prices
ranging from $.50 to $.70 with a weighted average price of $.58, and a weighted
average remaining term of approximately eight years prior to expiration.
The Company measures the compensation cost of its Long-Term Incentive Plan using
the intrinsic value based method of accounting prescribed in APB Opinion No. 25,
Accounting for Stock Issued to Employees. Accordingly, no compensation cost has
been recognized for its Long-Term Incentive Plan. Had the Company's
compensation cost been determined using the minimum value method of accounting
prescribed by SFAS No. 123, Accounting for Stock-Based Compensation, net loss
would have been changed to the following pro forma amount (in thousands):
Net loss as reported $(8,851)
Net loss pro forma (9,009)
The fair value of each option grant was estimated on the date of grant using the
minimum value method with the following weighted average assumptions used for
grants in 1996 and 1995: risk-free interest rates of 6% and an expected option
term of ten years.
(10) COMMITMENTS AND CONTINGENCIES:
OPERATING LEASES
The Company leases a portion of its manufacturing facilities and equipment under
noncancelable operating leases. Future minimum payments under noncancelable
operating leases at December 31, 1996, are as follows (in thousands):
1997 $ 240
1998 217
1999 196
2000 205
2001 217
Thereafter 37
------
$1,112
======
See Note 16 of Notes to Financial Statements.
LEGAL MATTERS
The Company is involved in litigation and claims arising in the normal course of
operations. In the opinion of management the disposition of these matters will
not have a material adverse effect on the Company's financial position.
<PAGE>
-9-
(11) RETIREMENT BENEFIT PLAN:
The Company has a 401(k) profit sharing plan (the Plan). All employees meeting
certain eligibility requirements may participate in the Plan. Subject to limits
imposed by Internal Revenue Service regulations, participants may voluntarily
contribute up to 15% of their annual wages. The Plan provides for certain
matching contributions by the Company in such amounts as may be determined by
the Board of Directors, but not in excess of the amount permitted by the
Internal Revenue Code. The Company may also elect to make discretionary profit
sharing contributions. Participants vest immediately in their contributions.
The Company's matching contributions and discretionary contributions vest over
two years. The Company made contributions to the Plan of $96,000 in 1996.
(12) INCOME TAXES:
As described in Note 2, the Company provides income taxes in accordance with
SFAS No. 109, Accounting for Income Taxes, which requires use of the liability
method in accounting for deferred income taxes. Adoption of SFAS No. 109 did
not have a significant impact on the financial position of the Company, as a
full valuation allowance was provided against the net deferred tax asset
position due to the uncertainty of the ultimate realization of such assets.
Income tax expense consists of the following (in thousands):
Current:
Federal $ -
State -
Deferred:
Federal -
State -
-------
Total $ -
=======
The principal differences between the U.S. statutory and effective income tax
rates were as follows:
U.S. statutory income tax (benefit) expense rate (34.0)%
Net operating loss not utilized (utilized) 34.0
-------
Effective tax rate 0.0%
=======
The components of the Company's net deferred taxes were as follows (in
thousands):
Deferred tax assets:
Net operating loss carryforwards $ 4,505
Contract valuation reserve 100
Accounts receivable reserve 40
Warranty reserve 174
Inventory reserve 220
Other 173
-------
Total deferred tax assets 5,212
-------
<PAGE>
-10-
Deferred tax liabilities:
Depreciation 75
Deferred gain 120
-------
Net deferred tax asset 5,017
-------
Valuation allowance (5,017)
-------
Net deferred taxes $ -
=======
The Company has established a valuation reserve as it has not determined that it
is more likely than not that the deferred tax asset is realizable, based upon
the Company's past earnings history.
As of December 31, 1996, the Company has net operating loss carryforwards of
approximately $10,000,000 which expire in the years 2008 through 2011. In
September 1996, there was a significant change in ownership which resulted in a
change in control under Section 382 of the Internal Revenue Code (IRC). As a
result of this change in control, the Company's ability to use its net operating
loss carryforwards to offset future income will be subject to annual limitations
under IRC Section 382 (see Note 16).
(13) SIGNIFICANT CUSTOMERS AND CREDIT CONCENTRATION:
The Company sells its products primarily to large industrial companies and
collateral is not requested. The Company maintains reserves for potential
credit losses based upon the credit risk of specific customers, historical
trends and other information. To reduce credit risk and to fund manufacturing
costs, the Company may require periodic prepayments on equipment orders. The
Company has not experienced significant credit losses.
For the year ended December 31, 1996, export sales, primarily to the Far East,
totaled approximately $4,500,000 which represents 41% of revenues.
The Company's sales to major customers were as follows (in thousands):
Customer A $1,454
Customer B 2,104
Customer C 2,612
(14) RELATED PARTY TRANSACTIONS:
CREDIT LINE
In April 1996, the Company entered into an agreement with a significant
stockholder which provided the Company with a $1,000,000 line of credit maturing
in July 1997, bearing interest at the prime rate (8.25% at December 31, 1996),
secured by all of the assets of the Company. As consideration for providing
this line of credit, the stockholder received warrants for the purchase of
1,000,000 shares of the common stock of the Company at an exercise price of $1
per share (see Note 8).
<PAGE>
-11-
In June 1996, the first amendment to the agreement increased the amount of the
line of credit to $2,000,000. As consideration for the increase, warrants for
the purchase of an additional 1,000,000 shares of the common stock of the
Company were issued to the Company stockholder at an exercise price of $1 per
share (see Note 8).
In August 1996, the second amendment to the agreement provided for additional
borrowings of $1,500,000, creating maximum of $3,500,000 outstanding, with
amounts greater than $2,000,000 payable on demand. Amounts borrowed in excess
of $2,000,000 have been paid as of December 31, 1996.
SHORT-TERM DEBT
In September 1996, the Company entered into an agreement with a stockholder
which provided the Company with a $500,000 note maturing in October 1996,
bearing interest at 8%, secured by all of the assets of the Company. There are
no amounts outstanding under this note as of December 31, 1996.
In August 1996, the Company entered into a debt agreement with a significant
supplier, related through common stockholders, which provided the Company with
$170,000 for the purchase of fabrication machinery. The note bears interest at
10.25% and is secured by underlying equipment, and is payable in monthly
installments from July 1997 until maturity in December 1997.
In December 1996, the Company entered into a debt agreement with an outside
consultant who is also a stockholder for $70,000 as settlement for services
provided to the Company prior to employment. The note bears no interest and is
unsecured. Payments of $6,363 are due beginning February 1997 until maturity in
December 1997.
INVENTORIES AND ACCOUNTS PAYABLE
The Company purchases the majority of materials utilized in the production of
standard BGA products from a vendor who is a related party through common
stockholders. As of December 31, 1996, this vendor held inventory on its
premises with an estimated total cost of approximately $571,000 which is
included in inventory as of December 31, 1996. Accounts payable to this vendor
approximate $3,000,000 as of December 31, 1996.
(15) SUBSEQUENT EVENTS:
In December 1996, the Board of Directors authorized the Company to issue 100,000
shares of common stock to an outside consultant as consideration for entering
into an employment agreement with the Company. Under the terms of the
agreement, 50,000 shares were issued as of the date of the execution of the
employment agreement in February 1997 of which time the Company recorded expense
of $35,000. The remaining 50,000 shares will vest and be issued in January
1998.
<PAGE>
-12-
In February 1997, the Company sold its remaining custom products contract and
other related assets to Automated Tooling Systems Southwest, Inc. (ATS) for
$500,000 cash. ATS also assumed certain facility lease obligations of the
Company (aggregating $309,000 at the date of sale), for which the Company
remains contingently liable. The Company realized a gain of $357,000 on the
transaction.
In June 1997, the Company entered into a debt agreement with a significant
related party vendor in the principal sum of $2,000,000 to provide long-term
financing for certain vendor payables, with interest at the prime rate payable
in monthly installments and principal due upon maturity in March 1998.
In June 1997, the Company received $7,673,000, net of costs, in consideration
for the sale of 7,045,455 shares of Series AA-2 Redeemable Convertible Preferred
Stock (Series AA-2 Preferred Stock). The Series AA-2 Preferred Stock is
identical to and entitles holders to the same rights, preferences, and
privileges as Series AA Preferred Stock, subject to the same qualifications,
limitations and restrictions except dividends are payable at $.11 per share,
shares are redeemable at the option of the holder at the earlier of sale, merger
or liquidation of the Company or June 2002 at a price of $1.10 per share subject
to certain provisions and potential redemption price adjustments and liquidation
preference is equal to $1.10 per share, plus any declared and unpaid dividends
on such share.
In connection with the issuance of the Series AA-2 Preferred Stock, the Company
amended its articles of incorporation and changed its authorized capital to
include 65,500,000 shares of common stock, 9,796,709 shares of Series A
Preferred Stock, 12,238,346 shares of Series AA Preferred Stock and 12,000,000
shares of Series AA-2 Preferred Stock.
In addition, the Company also issued 618,776 additional shares of Series A
Preferred Stock and 1,438,346 additional shares of Series AA Preferred Stock in
full satisfaction of all potential contingent performance shares related to the
prior series of Series A and AA Preferred Stock offerings. The proceeds from
this offering will be utilized for repayment of certain related party vendor
payables, not to exceed $1,700,000, repayment of $2,000,000 related party credit
line and other working capital requirements. The following table sets forth at
December 31, 1996 the actual stockholders' equity and as adjusted to give effect
to the issuance of these shares of preferred stock as if issued on December 31,
1996:
As
Actual Adjusted
--------- ---------
Series A preferred stock $ 9 $ 10
Series AA preferred stock 11 12
Series AA-2 preferred stock - 7
Common stock 9 9
Additional paid-in capital 14,340 22,081
Accumulated deficit (13,114) (13,114)
-------- --------
Total stockholders' equity $ 1,255 $ 9,005
======== ========
<PAGE>
-13-
(16) SALE OF COMPANY:
On October 30, 1997, the Company entered into an Agreement and Plan of Merger
and Reorganization (Merger Agreement) with Robotic Vision Systems, Inc. (RVSI).
Pursuant to the terms of the Merger Agreement, each Company shareholder will
receive 0.090770 shares of RVSI common stock for each share of Company stock
(all on an as converted basis). In addition, the Company's outstanding stock
options and warrants will be exchanged for Rights to Purchase RVSI's common
stock in the same 0.090770 share ratio. On November 28, 1997, the Shareholders
of the Company approved the merger of the Company with RVSI, subject to
completion of all closing conditions. The actual closing of the merger was
effected on December 9, 1997. As a result of the merger, the Company is now a
wholly-owned subsidiary of RVSI, and because a change in control has occurred,
the Company's net operating losses incurred prior to the merger will be subject
to additional net operating loss utilization limitations for federal income tax
reporting (see Note 12).
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Vanguard Automation, Inc.:
We have audited the accompanying balance sheet of VANGUARD AUTOMATION, INC. (a
Delaware corporation) as of September 30, 1997, and the related statements of
operations, changes in stockholders' equity and cash flows for the year then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit 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 are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Vanguard Automation, Inc. as of
September 30, 1997, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
/s/ ARTHUR ANDERSEN LLP
Tucson, Arizona,
November 21, 1997, (except with respect to the matter discussed in Note 15, as
to which the date is December 9, 1997).
<PAGE>
VANGUARD AUTOMATION, INC.
BALANCE SHEET
AS OF SEPTEMBER 30, 1997
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
ASSETS
<S> <C>
CURRENT ASSETS:
Cash and cash equivalents (Note 2) $ 3,346
Accounts receivable, net of allowance for doubtful accounts of $1,700 (Note 13) 2,690
Inventories (Notes 2, 3 and 14) 5,305
Prepaid expenses and other current assets 110
--------
Total current assets 11,451
PROPERTY AND EQUIPMENT, net (Notes 2, 4, 7 and 14) 1,835
OTHER ASSETS 74
--------
Total assets $ 13,360
========
LIABILITIES AND STOCKHOLDERS' EQUITY
<CAPTION>
<S> <C>
CURRENT LIABILITIES:
Accounts payable (Note 14) $ 1,782
Accrued expenses (Note 5) 4,603
Customer deposits 688
Related party short-term debt (Notes 8, 14 and 15) 2,336
Current portion of long-term debt (Note 7) 98
--------
Total current liabilities 9,507
--------
LONG-TERM DEBT, less current portion (Note 7) 414
--------
DEFERRED GAIN AND OTHER LIABILITIES (Note 6) 210
--------
COMMITMENTS AND CONTINGENCIES (Notes 10, 11 and 15)
STOCKHOLDERS' EQUITY (Notes 8, 9 and 15):
Series A redeemable convertible preferred stock; $.001 par value; $5,878
redemption and liquidation value; 9,796,709 shares authorized, issued and
outstanding 10
Series AA redeemable convertible preferred stock, $.001 par value; $9,056
redemption and liquidation value; 12,238,346 shares authorized, issued and
outstanding 12
Series AA-2 redeemable convertible preferred stock, $.001 par value; $7,750
redemption and liquidation value; 12,000,000 shares authorized; 7,045,455 shares
issued and outstanding 7
Common stock, $.001 par value; 65,500,000 shares authorized; 9,100,000
shares issued and outstanding 9
Additional paid-in capital 22,039
Accumulated deficit (18,198)
Treasury stock (650)
--------
Total stockholders' equity 3,229
--------
Total liabilities and stockholders' equity $ 13,360
========
</TABLE>
The accompanying notes are an integral part of this balance sheet.
<PAGE>
VANGUARD AUTOMATION, INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1997
(IN THOUSANDS)
REVENUES (Notes 2 and 13): $18,218
COST OF REVENUES (Note 2): 17,932
-------
Gross profit 286
-------
OPERATING EXPENSES (Notes 2, 6, 8, 10 and 15):
Sales and marketing 964
Product development 2,055
General and administrative 5,127
-------
Total operating expenses 8,146
-------
Operating loss (7,860)
-------
OTHER INCOME (EXPENSE):
Interest expense, net (311)
Miscellaneous income 660
-------
Total other income 349
-------
Loss before income taxes (7,511)
-------
INCOME TAXES (Notes 2 and 12): -
-------
Net loss $(7,511)
=======
The accompanying notes are an integral part of this financial statement.
<PAGE>
VANGUARD AUTOMATION, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED SEPTEMBER 30, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
Series A Series AA Series AA-2
Redeemable Redeemable Redeemable
Convertible Convertible Convertible Additional Total
Preferred Preferred Preferred Common Paid-in Accumulated Treasury Stockholders'
Stock Stock Stock Stock Capital Deficit Stock Equity
----------- ----------- ----------- ------ ----------- ------------ --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, as of September 30,
1996 $ 9 $ 11 $ - $ 9 $ 14,340 $ (10,687) $ - $ 3,682
Issuance of 7,045,455
shares of
Series AA-2 Preferred Stock - - 7 - 7,666 - - 7,673
Issuance of 618,776 shares
of
Series A Preferred Stock 1 - - - (1) - - -
Issuance of 1,438,346
shares of
Series AA Preferred Stock - 1 - - (1) - - -
Issuance of common stock
pursuant to employment
agreement - - - - 35 - - 35
Purchase of treasury stock - - - - - - (650) (650)
Net loss - - - - - (7,511) - (7,511)
----- ------ ------ ----- -------- --------- ------- -------
BALANCE, as of September 30,
1997 $ 10 $ 12 $ 7 $ 9 $ 22,039 $ (18,198) $(650) $ 3,229
===== ====== ====== ==== ======== ========= ===== =======
</TABLE>
The accompanying notes are an integral part of this financial statement.
<PAGE>
VANGUARD AUTOMATION, INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED SEPTEMBER 30, 1997
(IN THOUSANDS)
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(7,511)
Adjustments to reconcile net loss to net cash used in operating activities-
Gain on disposal of custom contracts and other assets (812)
Depreciation and amortization 1,075
Expenses paid through issuance of common stock 35
Expenses paid through issuance of debt 497
Recognition of deferred gain (57)
Increase (decrease) in cash resulting from changes in-
Accounts receivable 106
Inventories (3,750)
Prepaid expenses and other current assets (33)
Other assets (8)
Accounts payable 1,894
Accrued expenses 1,656
Customer deposits 688
Other liabilities (21)
-------
Net cash used in operating activities (6,241)
-------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment (1,046)
Proceeds from sale of custom contracts and other assets 952
-------
Net cash used in investing activities (94)
-------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments on long-term debt (85)
Proceeds from sale of Series AA-2 preferred stock 7,673
Purchase of treasury stock (650)
Related party credit line (2,388)
Related party short-term debt (223)
-------
Net cash provided by financing activities 4,327
-------
NET DECREASE IN CASH AND CASH EQUIVALENTS (2,008)
CASH AND CASH EQUIVALENTS, beginning of year 5,354
-------
CASH AND CASH EQUIVALENTS, end of year $ 3,346
=======
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest $ 369
=======
NONCASH OPERATING TRANSACTIONS:
Accounts payable settlement through issuance of related party note payable (Note 14) $ 2,000
Expenses paid through issuance of related party short-term debt 337
Litigation settlement through issuance of long-term debt 160
</TABLE>
The accompanying notes are an integral part of this financial statement.
<PAGE>
VANGUARD AUTOMATION, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(1) ORGANIZATION AND OPERATIONS:
Vanguard Automation, Inc. (the Company) designs, produces and markets automated
manufacturing equipment used in the assembly of certain types of semiconductor
packaging processes, commonly referred to as Ball Grid Array (BGA). The Company
transitioned to the BGA business during the later part of 1996 and is now
focusing exclusively on BGA business.
In February 1997, the Company sold its remaining custom products contract and
other related assets to Automated Tooling Systems Southwest, Inc. (ATS) for
$500,000 cash. ATS also assumed certain facility lease obligations of the
Company (aggregating $309,000 at the date of sale), for which the Company
remains contingently liable. The Company realized a gain of $357,000 on the
transaction.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
REVENUE RECOGNITION
The Company recognizes revenue from the sale of its BGA products on the date of
shipment, assuming all significant contractual performance requirements have
been met and realization is reasonably assured. Subsequent to product shipment,
the Company incurs certain minor installation costs which are estimated and
accrued at the time the sale is recorded.
CASH AND CASH EQUIVALENTS
The Company considers all short-term investments with an original maturity of
three months or less when purchased to be cash equivalents.
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined using
the first-in, first-out (FIFO) method.
<PAGE>
-2-
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Property and equipment held under
capital leases are stated at the lower of the present value of minimum lease
payments at the beginning of the lease term or the fair value at the inception
of the lease. Property and equipment held under capital leases are amortized
using the straight-line method over the lesser of the lease terms or the
estimated useful lives of the related assets.
Depreciation is provided for using the straight-line method over the estimated
useful lives of the respective assets as follows:
Machinery and equipment 5-7 years
Furniture, fixtures and other equipment 3-7 years
Demonstration equipment 1-3 years
Leasehold improvements 7 years
PRODUCT DEVELOPMENT
Expenditures for product development are charged to operations as incurred.
WARRANTY RESERVES
Costs estimated to be incurred with respect to product warranties are provided
for at the time of sale based upon estimates derived from the Company's
experience.
INCOME TAXES
The Company uses the asset and liability method of accounting for income taxes.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
RECENTLY ISSUED ACCOUNTING STANDARD
During 1995, the Financial Accounting Standards Board issued SFAS No. 123,
Accounting for Stock-Based Compensation, which defines a fair value based method
of accounting for an employee stock option or similar equity instrument and
encourages all entities to adopt that method of accounting for all of their
employee stock compensation plans. However, it also allows an entity to
continue to measure compensation cost related to continue to measure
compensation cost related to stock options issued to employees under these plans
using the method of accounting prescribed by Accounting Principles Board Opinion
No. 25 (APB No. 25),
<PAGE>
-3-
Accounting for Stock Issued to Employees. Entities electing to continue
accounting for stock-based compensation under APB No. 25 must make pro forma
disclosures of net loss as if the fair value based method of accounting defined
in SFAS No. 123 has been applied. Pursuant to the provisions of SFAS No. 123,
the Company will continue to account for transactions with its employees
pursuant to APB No. 25 (see Note 9).
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, disclosure of contingent
assets and liabilities, and the reported amounts of revenues and expenses during
the year then ended. Actual results could differ from those estimates.
The Company's most significant estimates relate to accounts receivable,
inventory valuation reserves, and warranty reserves.
(3) INVENTORIES:
Inventories at September 30, 1997, consist of the following (in thousands):
BGA machines $ 3,586
Raw materials and components 2,451
-------
6,037
Less: Inventory reserve (732)
-------
$ 5,305
=======
(4) PROPERTY AND EQUIPMENT:
Property and equipment at September 30, 1997, consist of the following (in
thousands):
Land (Note 7) $ 490
Machinery and equipment (Note 7) 787
Furniture, fixtures and other equipment 1,817
Demonstration equipment 1,056
Leasehold improvements (Note 7) 369
-------
4,519
Less: Accumulated depreciation and
amortization (2,684)
-------
Net property and equipment $ 1,835
=======
<PAGE>
-4-
(5) ACCRUED EXPENSES:
Accrued expenses at September 30, 1997, consist of the following (in thousands):
Warranty and service reserves $1,925
Project reserves 900
Accrued compensation expenses 562
Accrued legal and other related costs (Note 10) 248
Other accrued expenses 968
------
$4,603
======
(6) DEFERRED GAIN:
In 1992, the Company sold property (consisting of land, a building, and certain
improvements) to the majority stockholder for $747,000. The majority
stockholder assumed the related debt on the property of $688,000 and paid
$59,000 in cash. No gain was recognized on the transaction. The Company then
entered into a capital lease agreement with the majority stockholder which
required the Company to pay the stockholder an amount equal to the monthly debt
service requirements on the assumed debt plus 10% through March 2015.
In February 1995, the majority stockholder sold the leased property to an
unrelated third party who then entered into an operating lease with the Company.
This transaction was recorded similar to a sale leaseback in which the Company
recorded an unrecognized gain of $399,279. The gain is being amortized over the
seven year life of the operating lease. The long-term and short-term
unrecognized gain at September 30, 1997 was $194,750 and $57,000, respectively.
(7) LONG-TERM DEBT:
Long-term debt at September 30, 1997, consists of the following (in thousands):
Note payable to an industrial development authority in
monthly installments of $1,669, including interest at 6%
through March 2001, collateralized by equipment. $ 94
Note payable to an industrial development authority in
monthly installments of $1,110, including interest at 6%
through July 2002, collateralized by equipment. 83
Note payable to a bank in monthly installments of $2,015
plus interest at prime (8.25% at September 30, 1997) plus
2% subject to 10.75% floor through May 1999, collateralized
by land. 212
<PAGE>
-5-
Note payable to an unrelated third party in monthly
installments of $5,062, including interest at 8.65% through
January 2000, unsecured. 123
----
Total long-term debt 512
Less: current portion (98)
----
Long-term debt, less current portion $414
====
The aggregate maturities of long-term debt are as follows (in
thousands):
1998 $ 98
1999 272
2000 41
2001 54
2002 47
Thereafter ----
$512
====
(8) STOCKHOLDERS' EQUITY:
SERIES A PREFERRED STOCK
Holders of record of Series A Redeemable Convertible Preferred Stock (Series A
Preferred Stock) are entitled to dividends, if any, as the Board of Directors of
the Company may declare. Dividends are noncumulative and are payable at $.06
per share.
The Series A Preferred Stock is convertible at the option of the holder into
shares of common stock at a conversion ratio of one-to-one, subject to
adjustment. The Series A Preferred Stock is redeemable at any time after
January 1, 1997, upon receipt of written request of at least 66% of the then
outstanding Series A Preferred Stock shareholders at a redemption price of $.60
per share.
Upon any voluntary or involuntary liquidation, dissolution or winding up of the
affairs of the Company, the holders of record of Series A Preferred Stock are
entitled to a liquidation preference, senior to common stock and junior to
Series AA Preferred Stock and Series AA-2 Preferred Stock, in an amount equal to
$.60 per share plus any declared and unpaid dividends on such share.
Holders of Series A Preferred Stock are entitled to voting rights equal to the
number of votes available to a holder of the number of shares of common stock
into which shares of Series A Preferred Stock are convertible on the record date
of the vote.
Although the preferred stock is redeemable at the option of the holder, it was
converted upon completion of the merger of the Company (see Note 15).
Therefore, it is presented as a component of stockholders' equity.
<PAGE>
-6-
SERIES AA PREFERRED STOCK
Holders of record of Series AA Redeemable Convertible Preferred Stock (Series AA
Preferred Stock) are entitled to dividends, if any, as the Board of Directors of
the Company may declare. Dividends are noncumulative and are payable at $.07
per share subject to certain provisions and potential adjustments.
The Series AA Preferred Stock is convertible at the option of the holder, or
mandatorily in certain events, into shares of common stock at a conversion ratio
of one-to-one, subject to adjustment. The Series AA Preferred Stock is
redeemable at the option of the holder upon the earlier of the sale, merger or
liquidation of the Company or September 2001 at a redemption price of $.74 per
share subject to certain provisions and potential redemption price adjustments.
Upon any voluntary or involuntary liquidation, dissolution or winding up of the
affairs of the Company, the holders of Series AA Preferred Stock are entitled to
a liquidation preference, senior to common stock and Series A Preferred Stock
and equal with Series AA-2 Preferred Stock in an amount equal to $.74 per share,
plus any declared and unpaid dividends on such share.
Holders of Series AA Preferred Stock are entitled to voting rights equal to the
number of votes available to a holder of the number of shares of common stock
into which shares of Series AA Preferred Stock are convertible on the record
date of the vote.
Although the preferred stock is redeemable at the option of the holder, it was
converted upon completion of the merger of the Company (see Note 15).
Therefore, it is presented as a component of stockholders' equity.
SERIES AA-2 PREFERRED STOCK
In June 1997, the Company received $7,673,000, net of costs, in consideration
for the sale of 7,045,455 shares of Series AA-2 Redeemable Convertible Preferred
Stock (Series AA-2 Preferred Stock). The Series AA-2 Preferred Stock is
identical to and entitles holders to the same rights, preferences, and
privileges as Series AA Preferred Stock, subject to the same qualifications,
limitations and restrictions except dividends are payable at $.11 per share,
shares are redeemable at the option of the holder at the earlier of sale, merger
or liquidation of the Company or June 2002 at a price of $1.10 per share subject
to certain provisions and potential redemption price adjustments and the
liquidation preference is equal to $1.10 per share, plus any declared and unpaid
dividends on such share.
In connection with the issuance of the Series AA-2 Preferred Stock, the Company
amended its Articles of Incorporation and changed its authorized capital to
include 65,500,000 shares of common stock, 9,796,709 shares of Series A
Preferred Stock, 12,238,346 shares of Series AA Preferred Stock and 12,000,000
shares of Series AA-2 Preferred Stock.
<PAGE>
-7-
In addition, the Company also issued 618,776 additional shares of Series A
Preferred Stock and 1,438,346 additional shares of Series AA Preferred Stock in
full satisfaction of all potential contingent performance shares related to the
prior series of Series A and AA Preferred Stock offerings. The proceeds from
this offering were utilized for repayment of certain related party vendor
payables, of approximately $1,700,000, repayment of $2,000,000 related party
credit line and other working capital requirements.
Although the preferred stock is redeemable at the option of the holder, it was
converted upon completion of the merger of the Company (see Note 15).
Therefore, it is presented as a component of stockholders' equity.
COMMON STOCK
In December 1996, the Board of Directors authorized the Company to issue 100,000
shares of common stock to an outside consultant as consideration for entering
into an employment agreement with the Company. Under the terms of the
agreement, 50,000 shares were issued as of the date of the execution of the
employment agreement in February 1997 at which time the Company recorded expense
of $35,000. The remaining 50,000 shares will vest and be issued in January
1998.
In July 1997, the Company repurchased 1,000,000 shares of its common stock from
its former chief technology officer. Additionally, the Company purchased an
option to repurchase an additional 1,000,000 shares of common stock at $.70 per
share. These shares were purchased as part of a severance agreement. As of
September 30, 1997, the Company had not exercised this option.
WARRANTS
During 1996, the Company issued warrants to a related party for the purchase of
2,000,000 shares of common stock at an exercise price of $1 per share as
consideration for providing a $2,000,000 credit line. No expense has been
recorded in the accompanying statement of operations related to the grant of
these warrants, as the exercise price exceeded the fair market value. As of
September 30, 1997, none of these warrants have been exercised.
(9) STOCK OPTIONS:
The Company has a long-term incentive plan which permits the issuance of stock
options to management, key employees and certain consultants. Under the plan,
3,450,000 shares of common stock have been reserved for grant. The exercise
price of the options may not be less than the fair market value of a share of
common stock on the grant date. Options generally vest 25% per year over four
years from the date of grant and expire ten years after the grant date. The
plan shall remain in effect until terminated by the Committee.
<PAGE>
-8-
A summary of the status of the Company's long-term incentive plan as of
September 30, 1997, and changes during the years then ended, is presented below:
Weighted
Average
Number Exercise
of Shares Price
---------- --------
Outstanding, beginning of year 980,250 $.533
Granted 1,586,501 .700
Forfeitures (608,500) .584
---------
Outstanding, end of year 1,958,251 .652
=========
Options exercisable, end of year 463,500 .516
The weighted average fair value of options granted during the year was $.38. As
of September 30, 1997, options outstanding under the plan had exercise prices
ranging from $.50 to $.70 with a weighted average price of $.652, and a weighted
average remaining term of approximately eight years prior to expiration.
The Company measures the compensation cost of its long-term incentive plan using
the intrinsic value based method of accounting prescribed in APB Opinion No. 25,
Accounting for Stock Issued to Employees. Accordingly, no compensation cost has
been recognized for its long-term incentive plan. Had the Company's
compensation cost been determined using the minimum value method of accounting
prescribed by SFAS No. 123, Accounting for Stock-Based Compensation, net loss
would have been changed to the following pro forma amount (in thousands):
Net loss as reported $(7,511)
Net loss pro forma (8,016)
The fair value of each option grant was estimated on the date of grant using the
minimum value method with the following weighted average assumptions used for
grants in 1997 and 1996: risk-free interest rate of 6% and an expected option
term of ten years.
<PAGE>
-9-
(10) COMMITMENTS AND CONTINGENCIES:
OPERATING LEASES
The Company leases a portion of its manufacturing facilities and equipment under
noncancelable operating leases. Future minimum payments under noncancelable
operating leases at September 30, 1997, are as follows (in thousands):
Facilities Equipment Total
---------- --------- -----
1998 $189 $10 $199
1999 192 - 192
2000 201 - 201
2001 211 - 211
2002 90 - 90
Thereafter - - -
---------- --------- -----
$883 $10 $893
---------- ========= =====
LEGAL MATTERS
The Company is involved in litigation and claims arising in the normal course of
operations. In the opinion of management the disposition of these matters will
not have a material adverse effect on the Company's financial position or
results of operations.
(11) RETIREMENT BENEFIT PLAN:
The Company has a 401(k) profit sharing plan (the Plan). All employees meeting
certain eligibility requirements may participate in the Plan. Subject to limits
imposed by Internal Revenue Code, participants may voluntarily contribute up to
15% of their annual wages. The Plan provides for certain matching contributions
by the Company in such amounts as may be determined by the Board of Directors,
but not in excess of the amount permitted by the Internal Revenue Code. The
Company may also elect to make discretionary profit sharing contributions.
Participants vest immediately in their contributions. The Company's matching
contributions and discretionary contributions vest over two years. The Company
made contributions to the Plan of $84,000 in fiscal year 1997.
(12) INCOME TAXES:
As described in Note 2, the Company provides income taxes in accordance with
SFAS No. 109, Accounting for Income Taxes, which requires use of the liability
method in accounting for deferred income taxes.
<PAGE>
-10-
Income tax expense for the year ended September 30, 1997, is as follows (in
thousands):
Current:
Federal $ -
State -
Deferred
Adjustment of valuation allowance -
------
Total $ -
======
The principal differences between the U.S. statutory and effective income tax
rates at September 30, 1997, were as follows:
U.S. statutory income tax (benefit) expense rate (34.0)%
Unutilized net operating loss 34.0
------
Effective tax rate 0.0%
======
The components of the Company's net deferred taxes at September 30, 1997, were
as follows (in thousands):
Deferred tax assets:
Net operating loss carryforwards $ 4,904
Contract valuation reserve 360
Accounts receivable reserve 680
Warranty reserve 392
Inventory reserve 293
Other 539
-------
Total deferred tax assets 7,168
-------
Deferred tax liabilities:
Depreciation 50
-------
Net deferred tax asset 7,118
-------
Valuation allowance (7,118)
-------
Net deferred taxes $ -
=======
The Company has established a valuation reserve as it has not determined that it
is more likely than not that the deferred tax asset is realizable, based upon
the Company's past earnings history.
As of September 30, 1997, the Company has net operating loss carryforwards of
approximately $12,000,000 which expire in the years 2008 through 2012. In
September 1996, there was a significant change in ownership which resulted in a
change in control under Section 382 of the Internal Revenue Code (IRC). As a
result of this change in control, the Company's ability to use its net operating
loss carryforwards to offset future income will be subject to annual limitations
under IRC Section 382 (see Note 15).
<PAGE>
-11-
(13) SIGNIFICANT CUSTOMERS AND CREDIT CONCENTRATION:
The Company sells its products primarily to large industrial companies and
collateral is not requested. The Company maintains reserves for potential
credit losses based upon the credit risk of specific customers, historical
trends and other information. To reduce credit risk and to fund manufacturing
costs, the Company may require periodic prepayments on equipment orders.
Although the Company has not experienced significant credit losses in the past,
it has provided a specific reserve of $1,400,000 against one disputed
international distributor's accounts receivable.
For the year ended September 30, 1997, export sales, primarily to the Far East,
totaled approximately $11,632,000 which represents 64% of revenues,
respectively.
The Company's sales to major customers during the year ended September 30, 1997,
were as follows (in thousands):
Customer A $10,883
Customer B 3,852
(14) RELATED PARTY TRANSACTIONS:
SHORT-TERM DEBT
In 1996, the Company entered into an agreement with a significant stockholder
which provided the Company with a $2,000,000 credit line maturing in July 1997,
bearing interest at the prime rate, secured by all of the assets of the Company.
As consideration for providing this line of credit, the stockholder received
warrants for the purchase of 2,000,000 shares of the common stock of the Company
at an exercise price of $1 per share (see Note 8).
In December 1996, the Company entered into a $70,000 debt agreement with an
outside consultant who is also a stockholder as settlement for services provided
to the Company prior to employment. The note bears no interest and is
unsecured. Payments of $6,363 are due beginning February 1997 until maturity in
December 1997.
In September 1996, the Company entered into an agreement with a stockholder
which provided the Company with a $500,000 note maturing in October 1996,
bearing interest at 8%, secured by all of the assets of the Company. There are
no amounts outstanding under this note as of September 30, 1997.
In August 1996, the Company entered into a debt agreement with a significant
supplier, related through common stockholders, which provided the Company with
$170,000 for the purchase of fabrication machinery. The note bears interest at
10.25%, is secured by underlying equipment, and is payable in monthly
installments from July 1997 until maturity in December 1997.
<PAGE>
-12-
In June 1997, the Company entered into a debt agreement with a significant
related party supplier in the principal sum of $2,000,000 to provide financing
for certain supplier payables, with interest at the prime rate payable in
monthly installments with principal due upon maturity in March 1998.
ACCOUNTS PAYABLE
The Company purchases the majority of materials utilized in the production of
standard BGA products from a supplier who is a related party through common
stockholders. Accounts payable to this supplier was $188,000 at September 30,
1997.
(15) SUBSEQUENT EVENT:
On October 30, 1997, the Company entered into an Agreement and Plan of Merger
and Reorganization (Merger Agreement) with Robotic Vision Systems, Inc. (RVSI).
Pursuant to the terms of the Merger Agreement, each Company shareholder will
receive 0.090770 shares of RVSI common stock for each share of Company stock
(all on an as converted basis). In addition, the Company's outstanding stock
options and warrants will be exchanged for Rights to Purchase RVSI's common
stock in the same 0.090770 share ratio. On November 28, 1997, the Shareholders
of the Company approved the merger of the Company with RVSI, subject to
completion of all closing conditions. The actual closing of the merger was
effected on December 9, 1997. As a result of the merger, the Company is now a
wholly-owned subsidiary of RVSI, and because a change in control has occurred,
the Company's net operating losses incurred prior to the merger will be subject
to additional net operating loss utilization limitations for federal income tax
reporting (see Note 12).
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL INFORMATION
The following unaudited condensed combined financial information sets forth the
combined financial position and combined results of operations of Robotic Vision
Systems Inc. ("RSVSI") and Vanguard Automation, Inc. ("Vanguard") assuming the
Merger was accounted for using the "pooling of interests" method of accounting
and that the Merger was consummated (i) as of September 30, 1997, for the
unaudited pro forma condensed combined balance sheet and (ii) as of the
beginning of the earliest period presented in the unaudited pro forma condensed
combined statements of operations.
For all periods presented in the unaudited pro forma condensed combined
statements of operations, the weighted average number of common and common
equivalent shares gives effect to the issuance of 0.9077 of a share of RVSI
common stock in exchange for each outstanding share of Vanguard voting stock.
The unaudited pro forma information combines the historical balance sheets of
RVSI and Vanguard as of September 30, 1997 and the historical statements of
operations of RVSI for the years ended September 30, 1997, 1996 and 1995 with
the historical statements of operations of Vanguard for the twelve months ended
September 30, 1997 and the years ended December 31, 1996, and 1995,
respectively.
The following unaudited pro forma condensed combined information is presented
for illustration purposes only and is not necessarily indicative of the
financial position or results of operations which would actually have been
reported had the Merger been in effect during those periods or which may be
reported in the future. The statements should be read in conjunction with the
historical financial statements and notes thereto of Vanguard which have been
included elsewhere herein in this 8-K filing. The statements should also be read
in conjunction with the historical financial statements of RVSI included in the
Annual Report on Form 10-K.
<PAGE>
SUMMARY OF UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS (In
thousands, except per share amounts)
FOR THE YEAR ENDED SEPTEMBER 30,
----------------------------------
1997 1996 1995
--------- ---------- ----------
REVENUES $ 169,342 $ 153,975 $ 145,415
COST OF REVENUES 93,847 85,160 77,267
--------- ---------- ----------
GROSS PROFIT 75,495 68,815 68,148
--------- ---------- ----------
OPERATING COSTS AND EXPENSES:
Selling, general and administrative 48,259 44,861 38,528
Research and development 25,465 21,834 16,164
Non-recurring costs 69 2,661 1,305
Interest (income) expense, net 309 (222) 59
--------- ---------- ----------
74,102 69,134 56,056
--------- ---------- ----------
INCOME BEFORE INCOME TAXES 1,393 (319) 12,092
INCOME TAX BENEFIT (PROVISION) (745) 1,154 56
--------- ---------- ----------
NET INCOME $ 648 $ 835 $ 12,148
========= ========== ==========
NET INCOME PER SHARE $ 0.03 $ 0.04 $ 0.58
========= ========== ==========
WEIGHTED AVERAGE NUMBER OF
COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING 23,967 23,385 21,030
========= ========== ==========
See accompanying notes to unaudited pro forma condensed combined financial
information.
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
SEPTEMBER 30, 1997
(In thousands)
<TABLE>
<CAPTION>
RVSI VANGUARD
SEPTEMBER 30, SEPTEMBER 30, COMBINED
1997 1997 SEPTEMBER 30,
HISTORICAL HISTORICAL ADJUSTMENTS 1997
-------------- ------------- ----------- ---------------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 5,465 $ 3,346 $ $ 8,811
Investments - - -
Accounts receivable, net 47,873 2,690 50,563
Inventories 33,958 5,305 (168) (b) 39,095
Deferred income taxes 10,643 - 10,643
Prepaid expenses and other current assets 1,319 110 1,429
-------------- -------------- -------------- ---------------
Total current assets 99,258 11,451 (168) 110,541
PROPERTY, PLANT AND EQUIPMENT, Net 12,672 1,835 14,507
GOODWILL, Net 6,207 - 6,207
INVESTMENTS - - -
OTHER ASSETS 8,594 74 8,668
-------------- -------------- -------------- ---------------
TOTAL ASSETS $ 126,731 $ 13,360 $ (168) $ 139,923
============== ============== ============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Loans payable and current portion of
long-term debt $ 8,189 $ 2,434 $ $ 10,623
Accounts payable 21,538 1,782 23,320
Accrued expenses and other current liabilities 15,079 4,603 (59) (b) 20,723
1,100 (c)
Advance contract payments received 1,128 688 1,816
-------------- -------------- -------------- ---------------
Total current liabilities 45,934 9,507 1,041 56,482
LONG-TERM DEBT 6,000 414 6,414
DEFERRED INCOME TAXES 1,823 - 1,823
OTHER LIABILITIES 517 210 727
-------------- -------------- -------------- ---------------
Total liabilities 54,274 10,131 1,041 65,446
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock - RVSI ($0.01 par value) 211 - 33 (a) 244
Voting stock - Vanguard ($0.001 par value) - 38 (38) (a) -
Additional paid-in capital 145,229 22,039 (645) (a) 166,623
Accumulated deficit (73,150) (18,198) (109) (b) (92,557)
(1,100) (c)
Cumulative translation adjustment 167 - 167
-------------- -------------- -------------- ---------------
72,457 3,879 (1,859) 74,477
Less: Treasury stock, at cost - (650) 650 (a) -
-------------- -------------- -------------- ---------------
Total stockholders' equity 72,457 3,229 (1,209) 74,477
-------------- -------------- -------------- ---------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 126,731 $ 13,360 $ (168) $ 139,923
============== ============== ============== ===============
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
information.
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FISCAL YEAR ENDED SEPTEMBER 30, 1997
(In thousands)
<TABLE>
<CAPTION>
RVSI VANGUARD
YEAR ENDED YEAR ENDED COMBINED
SEPTEMBER 30, DECEMBER 31, YEAR ENDED
1997 1997 SEPTEMBER 30,
HISTORICAL HISTORICAL ADJUSTMENTS 1997
---------------- ---------------- ---------------- -----------------
<S> <C> <C> <C> <C>
REVENUES $ 152,103 $ 18,218 $ (979) (b) $ 169,342
COST OF REVENUES 76,761 17,932 (846) (b) 93,847
---------------- ---------------- ---------------- -----------------
GROSS PROFIT 75,342 286 (133) 75,495
---------------- ---------------- ---------------- -----------------
OPERATING COSTS AND EXPENSES:
Selling, general and administrative 42,828 5,431 48,259
Research and development 23,410 2,055 25,465
Merger expenses 69 - 69
Interest (income) expense, net (2) 311 309
---------------- ---------------- ---------------- -----------------
66,305 7,797 - 74,102
---------------- ---------------- ---------------- -----------------
INCOME (LOSS) BEFORE INCOME TAXES 9,037 (7,511) (133) 1,393
INCOME TAX (PROVISION) BENEFIT (792) - 47 (b) (745)
---------------- ---------------- ---------------- -----------------
NET INCOME (LOSS) $ 8,245 $ (7,511) $ (86) $ 648
================ ================ ================ =================
NET INCOME PER SHARE $ 0.38 $ 0.03
================ =================
WEIGHTED AVERAGE NUMBER OF
COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING 21,721 23,967
================ =================
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
information.
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FISCAL YEAR ENDED SEPTEMBER 30, 1996
(In thousands)
<TABLE>
<CAPTION>
RVSI VANGUARD
YEAR ENDED YEAR ENDED COMBINED
SEPTEMBER 30, DECEMBER 31, YEAR ENDED
1996 1996 SEPTEMBER 30,
HISTORICAL HISTORICAL ADJUSTMENTS 1996
---------------- --------------- ----------- ------------
<S> <C> <C> <C> <C>
REVENUES $ 143,540 $ 10,977 $ (542) (b) $ 153,975
COST OF REVENUES 74,669 10,971 (480) (b) 85,160
---------------- ----------------- ------------ ------------
GROSS PROFIT 68,871 6 (62) 68,815
---------------- ----------------- ------------ ------------
OPERATING COSTS AND EXPENSES:
Selling, general and administrative 39,603 5,258 44,861
Research and development 18,405 3,429 21,834
Merger expenses 2,661 - 2,661
Interest (income) expense, net (392) 170 (222)
---------------- ----------------- ------------ ------------
60,277 8,857 - 69,134
---------------- ----------------- ------------ ------------
INCOME (LOSS) BEFORE INCOME TAXES 8,594 (8,851) (62) (319)
INCOME TAX BENEFIT 1,132 - 22 (b) 1,154
---------------- ----------------- ------------ ------------
NET INCOME (LOSS) $ 9,726 $ (8,851) $ (40) $ 835
================ ================= ============ ============
NET INCOME PER SHARE $ 0.45 $ 0.04
================ ============
WEIGHTED AVERAGE NUMBER OF
COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING 21,386 23,385
================ ============
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
information.
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FISCAL YEAR ENDED SEPTEMBER 30, 1995
(In thousands)
<TABLE>
<CAPTION>
RVSI VANGUARD
YEAR ENDED YEAR ENDED COMBINED
SEPTEMBER 30, DECEMBER 31, YEAR ENDED
1995 1995 SEPTEMBER 30,
HISTORICAL HISTORICAL ADJUSTMENTS 1995
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
REVENUES $ 122,125 $ 23,290 $ - $ 145,415
COST OF REVENUES 59,891 17,376 - 77,267
---------------- ---------------- ---------------- ----------------
GROSS PROFIT 62,234 5,914 - 68,148
---------------- ---------------- ---------------- ----------------
OPERATING COSTS AND EXPENSES:
Selling, general and administrative 34,257 4,271 38,528
Research and development 15,751 413 16,164
Merger expenses 1,305 - 1,305
Interest (income) expense, net 18 41 59
---------------- ---------------- ---------------- ----------------
51,331 4,725 - 56,056
---------------- ---------------- ---------------- ----------------
INCOME BEFORE INCOME TAXES 10,903 1,189 - 12,092
INCOME TAX BENEFIT (PROVISION) 92 (36) 56
---------------- ---------------- ---------------- ----------------
NET INCOME $ 10,995 $ 1,153 $ - $ 12,148
================ ================ ================ ================
NET INCOME PER SHARE $ 0.55 $ 0.58
================ ================
WEIGHTED AVERAGE NUMBER OF
COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING 19,872 21,030
================ ================
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
information.
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL INFORMATION
(a) The pro forma adjustment to reflect the exchange of Vanguard voting
stock, for RVSI common stock.
(b) The pro forma adjustment to reflect the elimination of intercompany
transactions between Vanguard and a subsidiary of RVSI.
(c) The pro forma adjustment to reflect the estimated total expenses related
to the Merger.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: January 16, 1998 ROBOTIC VISION SYSTEMS, INC.
(Registrant)
By: /s/Robert H. Walker
Robert H. Walker
Executive Vice President
