<PAGE> 1
As Filed with the Securities and Exchange Commission on April 23, 1999
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
ROBOTIC VISION SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Delaware 3823 11-2400145
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Number) Identification No.)
organization)
5 Shawmut Road
Canton, Massachusetts 02021
(781) 821-0830
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
PAT V. COSTA
Chairman, President and Chief Executive Officer
Robotic Vision Systems, Inc.
5 Shawmut Road
Canton, Massachusetts 02021
(781) 821-0830
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies of all communications and notices to:
IRA I. ROXLAND, Esq.
Cooperman Levitt Winikoff Lester & Newman, P.C.
800 Third Avenue
New York, New York 10022
Tel: (212) 688-7000
Fax: (212) 972-9487
----------------------
Approximate date of commencement of proposed sale to the public: As soon
as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, check the following box. |X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.|_|
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, please check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
----------------------
<PAGE> 2
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
CALCULATION OF REGISTRATION FEE
- -----------------------------------------------------------------------------------------------------------
Title of each class Proposed maximum Proposed maximum
of securities to be Amount to be offering price aggregate offering Amount of
registered registered per unit (1) price(1) registration fee
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common stock, $.01 par 10,437,361shs.(2)(3) $ 2.125 $ 22,179,392.13 $6,165.87
value, issuable upon the
exercise of prepaid
common stock purchase
warrants
- -----------------------------------------------------------------------------------------------------------
Common stock, $.01 par 1,222,222 shs.(3) $ 2.125 $ 2,597,221.75 $ 722.03
value, issuable upon the
exercise of incentive
common stock purchase
warrants
- -----------------------------------------------------------------------------------------------------------
Total $6,887.90
- -----------------------------------------------------------------------------------------------------------
</TABLE>
- ----------
(1) Estimated solely for the purpose of calculating the registration fee based
upon the average of the high and low price of the Company's common stock,
$.01 par value, on the Nasdaq National Market on April 13, 1999.
(2) The number of shares issuable upon exercise of the prepaid warrants cannot
be determined because the formula is based on fluctuating market prices.
Therefore, the number of such shares being registered for resale is the
maximum number of shares registrant believes it may issue upon exercise,
based on a good-faith estimate. Such estimate is not intended to
constitute a prediction as to the number of shares of common stock into
which the prepaid warrants will be exercised.
(3) Pursuant to Rule 416, the number of shares to be registered hereunder is
subject to adjustment to prevent dilution resulting from stock splits,
stock dividends and similar transactions.
----------------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until the Registration Statement
shall become effective on such date as the Securities and Exchange Commission,
acting pursuant to said Section 8(a), may determine.
<PAGE> 3
The information in this preliminary prospectus is not complete and may be
changed. The securities may not be sold until the registration statement filed
with the Securities and Exchange Commission is effective. This preliminary
prospectus is not an offer to sell nor does it seek an offer to buy these
securities in any jurisdiction where the sale is not permitted.
- --------------------------------------------------------------------------------
Subject to Completion
Preliminary Prospectus Dated April 23, 1999
================================================================================
Prospectus
ROBOTIC VISION SYSTEMS, INC.
11,659,583 shares of Common Stock
- --------------------------------------------------------------------------------
We design, manufacture, market and sell automated 1- dimensional,
2-dimensional and 3-dimensional machine vision-based products and systems for
inspection, measurement and identification. We are a leader in advanced
electro-optical sensor technology.
Our common stock is traded on the Nasdaq National Market under the symbol
ROBV. The closing price of our common stock on April 20, 1999 was $2-1/4 per
share.
----------------------
The selling stockholders named on page 51 of this prospectus may offer all
of the shares covered by this prospectus for sale. We will receive none of the
proceeds from any of these sales.
----------------------
Please read the Risk Factors beginning on page 7 of this prospectus before
making a decision to invest in our securities.
----------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. It is illegal for any person to tell you
otherwise.
----------------------
, 1999
<PAGE> 4
TABLE OF CONTENTS
Page
----
Summary.................................................................. 3
Risk Factors............................................................. 6
Market Information....................................................... 11
Dividend Policy.......................................................... 11
Selected Consolidated Financial Data..................................... 12
Management's Discussion and Analysis
of Financial Condition
and Results of Operations....................................... 14
Business................................................................. 27
Management............................................................... 34
Principal Stockholders................................................... 42
Description of Our Securities............................................ 44
Selling Stockholders..................................................... 47
Legal Matters............................................................ 50
Experts.................................................................. 50
Available Information.................................................... 51
Index to Consolidated Financial Statements............................... F-1
2
<PAGE> 5
SUMMARY
The following summary highlights selected information from this prospectus
and may not contain all the information that is important to you. To understand
our business and this offering fully, you should read this entire prospectus
carefully, including the Risk Factors and the consolidated financial statements
and accompanying notes.
Our Business
We design, manufacture and sell products and systems that do the
following:
o automate the inspection of semiconductors and semiconductor packages
o provide machine-vision- based scrutiny of a broad range of commercial and
industrial products where high volume quality assurance can best be
accomplished by computer-based inspection
o read two-dimensional bar codes of any size or complexity on virtually any
surface
o accurately scan and record bar code labels on packages moving at high
speeds
o provide specialty lighting for machine vision applications
Collectively, these capabilities give computers the power of sight.
Our products range from state-of-the-art machine vision systems on a
circuit board, which are priced at under $10,000, to $500,000 wafer inspection
systems with fully automated output capabilities. Certain of our products are
sold by our own sales force; other products are sold either through
manufacturers' representatives or to original equipment manufacturers for
incorporation into customized systems.
3
<PAGE> 6
We operate our business through our semiconductor equipment group
principally located in Hauppauge, New York, with additional facilities in
Arizona and Wisconsin, and through our Acuity CiMatrix division located in
Canton, Massachusetts.
Our History
We were incorporated in New York in 1976 and reincorporated in Delaware in
1977. Our executive offices are located at 5 Shawmut Road, Canton, Massachusetts
02021; our telephone number is (781) 821-0830.
The Offering
<TABLE>
Common stock offered for
sale by the selling
<S> <C>
stockholders 11,659,583 shares(1)
Common stock to be
outstanding
after offering 31,316,816 shares(2)
</TABLE>
- ----------
(1) Represents the maximum number of shares covered by this prospectus. See
Description of our Securities and Selling Stockholders.
(2) This number assumes the exercise of all of the prepaid warrants and the
incentive warrants. This number excludes 3,688,373 shares of our common
stock issuable as of December 31, 1998 upon exercise of then outstanding
options granted under our stock option plans. An additional 1,666,120
shares are reserved for future grants under our stock option plans.
Use of Proceeds
We will not receive any proceeds from the sale of the common stock offered
by the selling stockholders or from the exercise of the prepaid warrants. We
will receive the proceeds from the exercise of the incentive warrants, which
will amount to $4,913,332 if all of the incentive warrants are exercised. We
4
<PAGE> 7
intend to apply any net proceeds for working capital and other general corporate
purposes.
Summary Consolidated Financial Data
You should read the following summary consolidated financial data in
conjunction with the audited consolidated financial statements and the unaudited
consolidated financial statements, and their accompanying notes, which are
contained elsewhere in this prospectus. You should also read Selected
Consolidated Financial Data and Management's Discussion and Analysis of
Financial Condition and Results of Operations, which are both contained
elsewhere in this prospectus.
Statement of Operations Data:
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
Fiscal Year Ended September 30, December 31,
------------------------------------------------------------ ----------------------
1994 1995 1996 1997 1998 1997 1998
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues $ 102,056 $ 145,415 $ 153,975 $ 169,342 $ 169,007 $ 53,788 $ 29,405
Income (loss) $ 2,853 $ 12,092 $ (319) $ 1,393 $ (40,505) $ 3,651 $ (2,272)
before income
taxes
Provision (benefit)
for income taxes $ 1 $ (56) $ (1,154) $ 745 $ -- $ 108 $ --
Net income (loss) $ 2,852 $ 12,148 $ 835 $ 648 $ (40,505) $ 3,543 $ (2,272)
Basic net income
(loss) per share $ 0.16 $ 0.65 $ 0.04 $ 0.03 $ (1.65) $ 0.14 $ (0.09)
Diluted net income
(loss) per share $ 0.15 $ 0.58 $ 0.04 $ 0.03 $ (1.65) $ 0.14 $ (0.09)
</TABLE>
Selected Balance Sheet Data:
(In Thousands)
<TABLE>
<CAPTION>
At September 30,
----------------------------------------------------------- At December 31,
1994 1995 1996 1997 1998 1998
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Total assets $ 50,410 $ 83,520 $ 107,471 $ 139,923 $ 121,571 $ 113,910
Current assets $ 40,867 $ 71,755 $ 88,370 $ 110,541 $ 72,227 $ 65,990
Total liabilities $ 33,459 $ 39,171 $ 43,858 $ 64,346 $ 84,774 $ 79,385
Stockholders equity $ 16,951 $ 44,349 $ 63,613 $ 75,577 $ 36,797 $ 34,525
Working capital (deficit) $ 10,853 $ 34,590 $ 45,751 $ 55,159 $ (9,488) $ (10,366)
</TABLE>
5
<PAGE> 8
RISK FACTORS
Before you invest in our common stock, you should be aware that there are
various risks, including those described below. You should carefully consider
these risk factors together with all other information included in this
prospectus, before you decide whether to purchase shares of our common stock.
We have experienced recent losses and working capital shortages.
We incurred net operating losses of $2,272,000 and $40,505,000 for the
three month fiscal period ended December 31, 1998 and the fiscal year ended
September 30, 1998, respectively. Our working capital deficit at these dates was
$10,366,000 and $9,488,000, respectively.
The semiconductor industry in which we operate is cyclical.
The semiconductor industry has historically experienced significant market
fluctuations and periodic downturns. The demand for semiconductor capital
equipment, including our lead inspection systems, is presently quite low
compared to 1997 and early 1998 levels. Reduced demand adversely affects our
revenues and earnings. Until semiconductor industry conditions improve, our
revenues and earnings will continue to be adversely affected.
Our quarterly operating results may fluctuate
We have experienced, and in the future may be expected to continue to
experience, substantial variations in our quarterly results of operations as a
result of a number of factors, many of which are outside of our control. In
particular, our operating results may vary because of downturns in the
semiconductor industry, changes in economic conditions, or technology changes
affecting our principal products. Any of these factors could cause our operating
results to fluctuate significantly from quarter to quarter.
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<PAGE> 9
We must repay or replace our banks by March 18, 2000
We must either repay our total bank indebtedness prior to March 18, 2000,
negotiate an extension of our bank credit facility or obtain replacement
financing. We cannot assure investors that we will be able to do so.
Our sales are concentrated
Our sales have been historically concentrated in a small number of
customers. The specific customers change over time. Sales to Intel accounted for
approximately 20% and 23%, respectively, of our revenues during the fiscal years
ended September 30, 1998 and 1997. No other customers accounted for more than
10% of sales during such fiscal years. No customer accounted for more than 10%
of sales during the three months ended December 31, 1998. The loss or any
significant reduction in Intel's orders for our products may materially
adversely affect our operations and prospects.
International sales represent a significant portion of our
revenues
International sales accounted for approximately 53% and 64% of our
revenues for the three months ended December 31, 1998 and the fiscal year ended
September 30, 1998, respectively. Our international business may be affected by
changes in demand resulting from fluctuations in currency exchange rates, trade
restrictions and duties, and other political and economic factors such as the
recent Asian economic crisis. To the extent foreign currencies weaken relating
to the U.S. dollar, our products will become more expensive in these countries.
As with the recent Asian economic crisis, this could adversely affect our sales
volume and profitability.
We may not be able to protect our proprietary rights
We rely primarily on a combination of patent registrations, trade secrets,
confidentiality procedures, contractual provisions
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<PAGE> 10
and copyright and trademark laws to protect our proprietary rights. We seek to
protect our software and other written materials under trade secret and
copyright laws, which afford only limited protection.
Despite our efforts to protect our proprietary rights, unauthorized
parties may attempt to copy aspects of our products or to obtain and use
information that we regard as proprietary. The laws of some foreign countries
may not protect our proprietary rights to as great an extent as do the laws of
the United States, if at all. We are unable to assure investors that our means
of protecting our proprietary rights will be adequate, or that other parties
will not assert infringement claims against us.
We compete with larger and well-financed companies
The markets for our products are extremely competitive. Some of our
competitors are more established and have greater financial, technological,
production, and marketing resources than we do. Competition could intensify if
new companies enter such markets or if existing competitors expand their product
lines. Maintaining our competitive position will require continued investment by
us in research and development and sales and marketing.
Our success is dependent on our key personnel who we may not be able to retain
and we may not be able to hire enough additional personnel to meet our needs
Our success depends in large part upon our ability to hire and retain
qualified technical and management personnel. We have a limited number of
employment agreements with our technical and management personnel. Hiring
replacement or additional employees with the combination of skills and
attributes required to carry out our needs is extremely competitive. Our
inability to hire and retain such personnel could materially adversely effect
our growth and profitability.
Prepaid warrant exercises may cause substantial dilution
The number of shares of common stock that we are required to issue upon
exercise of our prepaid warrants is determined by
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<PAGE> 11
taking the lower of $4.02 or 95% of the average of the bid price of our common
stock during a minimum 20-day trading period prior to exercise. Accordingly, if
the market price of our common stock should be significantly below $4.02 at the
time of exercise, the number of shares of common stock issuable upon the prepaid
warrants' exercise could be significant.
The large number of shares issuable upon exercise of warrants could adversely
affect the price of our common stock
A substantial number of shares of our common stock are issuable upon
exercise of both the prepaid warrants and the incentive warrants. These shares
are covered by this prospectus. Future sales of these shares, or the
anticipation of such sales, could adversely affect the market price of our
common stock and could materially impair our future ability to raise capital
through an offering of equity securities.
We may be compelled to relinquish our Nasdaq listing
Nasdaq rules require that we seek approval by our stockholders for any
issuance of shares of our common stock upon exercise of the prepaid warrants
which would exceed 19.9% of our total issued and outstanding common stock. If
such approval is not obtained on or before June 30, 1999, the holders of the
prepaid warrants have the right, at their option, to require us to relinquish
the listing of our common stock on the Nasdaq National Market. We are unable to
assure investors that the liquidity and market price of our common stock will
not be adversely affected as a result of such delisting.
The Year 2000 issue could adversely affect our operations
The Year 2000 issue is the result of computer programs only being able to
use two digits rather than four to define the applicable year. Thus,
date-sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000. We are addressing the impact of the Year 2000 issue on our
business operations, as well as our products and services. Areas that could be
adversely impacted by the Year 2000 problem include the following:
9
<PAGE> 12
o Internal operating systems, including sales, purchasing, production,
engineering and finance
o Products, including installed base and new products
o Supplies from third-party vendors
System failure or miscalculation could result in our inability to process
transactions, send invoices, accept customer orders or timely provide customers
with products and services.
Forward-looking statements
This prospectus contains certain forward-looking statements and
information relating to our business. We have identified forward-looking
statements in this prospectus using words such as "believes," "intends,"
"expects," "predicts," "may," "will," "should," "contemplates," "anticipates,"
or similar statements. These statements are based on our beliefs as well as
assumptions we made using information currently available to us. Because these
statements reflect our current views concerning future events, these statements
involve certain risks, uncertainties and assumptions. Actual future results may
differ significantly from the results discussed in the forward-looking
statements.
10
<PAGE> 13
MARKET INFORMATION
Our common stock is quoted on the Nasdaq National Market under the symbol
ROBV. The following table sets forth the high and low closing prices for our
common stock for the periods indicated:
<TABLE>
<CAPTION>
Fiscal Quarter Ended High Low
-------------------- ---- ---
<S> <C> <C>
March 31, 1999 $ 3-15/16 $ 2-5/16
December 31, 1998 4-1/2 2-1/8
September 30, 1998 4-7/8 2
June 30, 1998 12-3/4 3-1/2
March 31, 1998 14-3/8 10
December 31, 1997 17-1/2 10-1/4
September 30, 1997 16-7/8 11-3/4
June 30, 1997 11-7/8 8-3/8
March 31, 1997 18-1/4 10-3/4
December 31, 1996 15-3/8 10
</TABLE>
DIVIDEND POLICY
We have never paid any cash dividends and intend, for the foreseeable
future, to retain any future earnings for the development of our business. Our
bank credit agreement restricts our ability to pay dividends. Our future
dividend policy will be determined by our board of directors on the basis of
various factors, including our results of operations and financial condition.
11
<PAGE> 14
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data below should be read in
conjunction with our consolidated financial statements and the accompanying
notes and Management's Discussion and Analysis of Financial Condition and
Results of Operations, both elsewhere in this prospectus. The data as of
September 30, 1998 and 1997 and for each of the three years in the period ended
September 30, 1998 have been derived from, and should be read in conjunction
with, our audited consolidated financial statements and accompanying notes,
which are contained elsewhere in this prospectus. The data as of September 30,
1995 and 1994 and for each of the two years in the period ended September 30,
1995 have been derived from our audited financial statements which are not
contained in this prospectus. The data as of December 31, 1998 and for the three
months ended December 31, 1998 and 1997 have been derived from our unaudited
consolidated financial statements and accompanying notes, which are contained
elsewhere in this prospectus. We believe that the unaudited consolidated
financial statements include all adjustments, consisting only of normal
recurring adjustments, that we consider necessary for a fair presentation of the
financial information contained in such financial statements. Our results of
operations for the three months ended December 31, 1998 are not necessarily
indicative of our results of operations for the entire year.
Statement of Operations Data:
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
Fiscal Year Ended September 30, December 31,
------------------------------------------------------------ ----------------------
1994 1995 1996 1997 1998 1997 1998
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues $ 102,056 $ 145,415 $ 153,975 $ 169,342 $ 169,007 $ 53,788 $ 29,405
Income (loss) $ 2,853 $ 12,092 $ (319) $ 1,393 $ (40,505) $ 3,651 $ (2,272)
before income
taxes
Provision (benefit)
for income taxes $ 1 $ (56) $ (1,154) $ 745 $ -- $ 108 $ --
Net income (loss) $ 2,852 $ 12,148 $ 835 $ 648 $ (40,505) $ 3,543 $ (2,272)
Basic net income
(loss) per share $ 0.16 $ 0.65 $ 0.04 $ 0.03 $ (1.65) $ 0.14 $ (0.09)
Diluted net income
(loss) per share $ 0.15 $ 0.58 $ 0.04 $ 0.03 $ (1.65) $ 0.14 $ (0.09)
</TABLE>
12
<PAGE> 15
Selected Balance Sheet Data:
(In Thousands)
<TABLE>
<CAPTION>
At September 30,
--------------------------------------------------------- At December 31,
1994 1995 1996 1997 1998 1998
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Total assets $ 50,410 $ 83,520 $ 107,471 $ 139,923 $ 121,571 $ 113,910
Current assets $ 40,867 $ 71,755 $ 88,370 $ 110,541 $ 72,227 $ 65,990
Total liabilities $ 33,459 $ 39,171 $ 43,858 $ 64,346 $ 84,774 $ 79,385
Stockholders equity $ 16,951 $ 44,349 $ 63,613 $ 75,577 $ 36,797 $ 34,525
Working capital (deficit) $ 10,853 $ 34,590 $ 45,751 $ 55,159 $ (9,488) $ (10,366)
</TABLE>
13
<PAGE> 16
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Three Months Ended December 31, 1998 and 1997
Subsequent to the issuance of the Company's unaudited condensed
consolidated financial statements for the three months ended December 31, 1998,
the Company's Management determined that $450,000 of the gain recorded in
connection with the sale of Aircraft Safety should have been deferred pending
receipt of the proceeds upon resolution of contingencies relating to the
retention of certain employees by Goodrich ($375,000) and the novation of a
certain government contract held by Aircraft Safety to Goodrich ($75,000). As a
result, the unaudited condensed consolidated financial statements for the three
month period ended December 31, 1998 have been restated from the amounts
previously reported. This change had no effect on the loss from operations of
$4,235,000 for the three months ended December 31, 1998.
Our revenues were $29.4 million in the three months ended December 31,
1998 compared to $53.8 million in the three months ended December 31, 1997, a
decline of 45%. Our significantly lower revenues year-to-year reflect the effect
of the severe semiconductor industry downturn which began in early calender
1998. In the three months ended December 31, 1998, revenues for our
semiconductor equipment group were less than half the level of the year earlier
period. Revenues for the Acuity CiMatrix division for 1-D and 2-D bar code
reading and machine vision products were also down 10% from the year earlier
period. In the three months ended December 31, 1998, revenues for our
semiconductor equipment group represented 60% of total revenues, compared to 76%
of total revenues in the three months ended December 31, 1997. Revenues of $29.4
million in the three months ended December 31, 1998, were 3.5% higher than the
fourth quarter of fiscal 1998 revenues of $28.4 million. Although revenues for
our semiconductor equipment group were down slightly from the fourth quarter of
fiscal 1998, we had a 40% increase in orders for these products over the
preceding quarter. Revenues for our Acuity CiMatrix division were up
approximately 15% sequentially, primarily as a result of demand for its 1-D
tunnel applications for postal service and material handling applications. In
addition, we began delivering our new machine vision platform, Visionscape,
during the three months ended December 31, 1998. Overall, our orders were 30%
higher than the fourth quarter of fiscal 1998 and were approximately 110% of
revenues in the three months ended December 31, 1998.
Our gross profit margin was 42.8% of revenues in the three months ended
December 31, 1998 compared to 48.4% of revenues in the three months ended
December 31, 1997. The lower gross profit margin year-to-year primarily reflects
the impact of a proportionately high level of fixed manufacturing costs on the
significantly lower level of revenues. However, the gross profit margin in the
three months ended December 31, 1998 improved 7.4%
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<PAGE> 17
from the gross profit margin of 35.4% of revenues, excluding inventory
provisions, in the fourth quarter of fiscal 1998. The sequential improvement was
largely a result of a more favorable product mix, particularly for our
semiconductor equipment group, largely as a result of new products introduced
during fiscal 1998.
Our research and development expenses were $5.6 million, or 19.0% of
revenues, in the three months ended December 31, 1998, compared to $6.6 million,
or 12.3% of revenues, in the three months ended December 31, 1997. We have
continued to invest in new product development, including new semiconductor
inspection and component handling systems, as well as enhancing our 1-D bar code
reading products and expanding our new machine vision platform, Visionscape. In
December 1998, our Acuity Cimatrix division introduced the MXi, the
firsthand-held imager for reading digital direct part marks, 1-D bar codes and
new, digital 2-D symbologies, such as the data matrix code. This product is a
result of a joint venture with Polaroid which began in 1997. The MXi was
co-designed and will be manufactured by Polaroid for our exclusive distribution.
Initial deliveries of the MXi are expected to commence in the second half of
fiscal 1999. In the three months ended December 31, 1998, we capitalized $1.4
million in software development costs under Statement of Financial Accounting
Standards No. 86,compared to $1.7 million in the three months ended December 31,
1997.
Our selling, general and administrative expenses were $11.2 million, or
38.1% of revenues, in the three months ended December 31, 1998, compared to
$14.9 million, or 27.7% of revenues, in the three months ended December 31,
1997. The lower level of expenses reflects a combination of the expense
reduction steps taken by us in fiscal 1998, together with lower variable selling
costs on the lower level of revenues.
Primarily as a result of the expense reduction steps taken by us since
April 1998, total operating expenses have been lowered from $23.0 million in the
second quarter of fiscal 1998 to $16.8 million in the first quarter of fiscal
1999. Compared to the fourth quarter of fiscal 1998, operating expenses in the
first quarter of fiscal 1999 were down $2.5 million.
15
<PAGE> 18
In December 1998, we sold our Aircraft Safety product line to a subsidiary
of B.F. Goodrich for $4,500,000, consisting of $4,050,000 in cash paid at
closing and $450,000 payable upon resolution of two items as noted in the next
paragraph. We no longer considered this technology a key component of our
product portfolio or future strategic direction. We sold certain inventory,
equipment and intellectual property in the transaction, resulting in an initial
gain of $2.8 million. Proceeds from the sale were used for working capital
requirements and to repay $2.0 million of outstanding bank debt.
During the second quarter of fiscal 1999, the contingency relating to a
portion of the employee retention ($250,000) was resolved and in the third
quarter of fiscal 1999, the remaining contingency relating to the employee
retention was resolved ($125,000). These amounts will be recorded as additional
gain in these quarters. At April 20, 1999, the contract novation had not been
completed.
Net interest expense was $0.8 million in the three months ended December
31, 1998, compared to $0.2 million in the three months ended December 31, 1997.
The increase in interest expense primarily reflects the significantly higher
level of bank borrowings in the three months ended December 31, 1998.
There was no tax provision in the three months ended December 31, 1998 due
to the loss for that fiscal quarter. The tax provision for the three months
ended December 31, 1997 reflected minimum federal and state income taxes.
Excluding the $2.8 million gain from the sale of our Aircraft Safety
product line, our net loss for the three months ended December 31, 1998 was $5.1
million, or $0.20 per share, compared to net income of $3.5 million, or $0.14
per share, for the three months ended December 31, 1997. Including the $2.8
million gain, our total net loss for the three months ended December 31, 1998
was $2.3 million, or $0.09 per share.
Fiscal Years Ended September 30, 1998 and 1997
Our revenues were $169.0 million for the fiscal year ended September 30,
1998, compared to $169.3 million for the fiscal year ended September 30, 1997.
Primarily as a result of a severe downturn in the semiconductor capital
equipment industry, our revenues declined from $53.8 million in the first
quarter of fiscal 1998 to a low of $28.4 million in the fourth quarter of fiscal
1998. Our semiconductor equipment group's operations were adversely affected by
a significant decline in orders, and cancellations of previously placed orders,
for semiconductor inspection and handling equipment. The weak semiconductor
industry conditions were largely a result of the Asian economic crisis and
excess industry capacity. In addition, revenues for
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our Acuity CiMatrix division declined approximately 10% year-to-year, largely as
a result of lower revenues to customers in Asia and Europe.
Before inventory provisions, our gross profit margin, as a percentage of
revenues, was 42.9% for the fiscal year ended September 30, 1998, compared to a
gross profit margin of 44.6% of revenues for the fiscal year ended September 30,
1997. In addition, our gross profit margin for the fiscal year ended September
30, 1998 was reduced by a provision for excess and obsolete inventories of $16.6
million, or 9.8% of revenues. The gross profit margin declined sequentially in
fiscal 1998 as result of proportionately high fixed manufacturing costs relative
to lower shipment levels, as well as the affect of a lower margin product mix.
In the third and fourth quarters of fiscal 1998, we took provisions of
$4.5 million and $12.1 million, respectively, for excess and obsolete
inventories primarily for our semiconductor inspection and handling equipment.
These provisions largely reflected reduced demand for older generation products
as a result of the severe semiconductor industry downturn.
During fiscal 1998, we took multiple steps to reduce our expenses and to
lower the level of revenues necessary for break-even results of operations.
These steps included a 10% workforce reduction in April 1998, a 15% workforce
reduction in June 1998 and an additional 16% workforce reduction in September
1998, as well as curtailing discretionary spending and capital expenditures. In
June 1998, we combined our Acuity 2-D machine vision operations with our
CiMatrix 1-D and 2-D barcode reading and data collection operations. Primarily
as a result of these steps, we took a total of $6.6 million in non-recurring
charges in fiscal 1998. These charges included $3.8 million for severance
payments to terminated employees, $1.5 million for costs associated with
changing distributors in Asia, a $1.1 million non-cash write-down of previously
capitalized software development costs associated with currently inactive
products and $0.2 million in costs associated with the consolidation of the
Acuity and CiMatrix operations. As a result of these measures, our research and
development expenses and selling, general and administrative expenses, combined,
were reduced from
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$23.0 million in the second quarter to $19.3 million in the fourth quarter of
fiscal 1998.
Our research and development expenses were $28.1 million, or 16.6% of
revenues, in fiscal 1998, compared to $25.5 million, or 15.0% of revenues, in
fiscal 1997. The higher level of research and development expenses reflected our
continued investment in new products, including new semiconductor inspection and
component handling systems, as well as new visual inspection and data collection
products. During fiscal 1998, we capitalized $7.4 million of its software
development costs, in accordance with SFAS No. 86, compared to $4.8 million in
fiscal 1997.
Our selling, general and administrative expenses were $58.9 million, or
34.8% of revenues, in fiscal 1998, compared to $48.3 million, or 28.5% of
revenues, in fiscal 1997. The year-to-year increase in expenses is largely
related to personnel additions to our sales and marketing organizations,
primarily in the first half of fiscal 1998. In addition, legal costs associated
with patent infringement and fraud litigation which we initiated against General
Scanning, now known as GSI Lumonics, and its View Engineering subsidiary were
$4.5 million in fiscal 1998.
We incurred merger costs of $0.6 million in the first quarter of fiscal
1998 related to our acquisition of Vanguard Automation.
Net interest expense was $2.3 million in fiscal 1998 compared to $0.3
million in fiscal 1997. The increase in interest expense is a result of the
significantly higher level of bank borrowings in fiscal 1998. Proceeds from bank
borrowings during fiscal 1998 were primarily used to fund working capital
requirements and results of operations.
There was no tax provision in fiscal 1998 as a result of the loss for the
period. In fiscal 1997, we had a tax provision of $0.7 million relating to
minimum federal and state income taxes.
For fiscal 1998, we had a net loss, before inventory provisions and
non-recurring charges, of $17.3 million, or a loss of $0.70 per share. Including
inventory provisions of $16.6 million and non-recurring charges of $6.6 million,
our net
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loss for fiscal 1998 was $40.5 million, or a loss of $1.65 per share. In fiscal
1997, we had net income of $0.6 million, or $0.03 per share.
Fiscal Years Ended September 30, 1997 and 1996
Our revenues of $169.3 million for the year ended September 30, 1997
represent an increase of $15.4 million or 10.0%, over revenues of $154.0 million
for the year ended September 30, 1996. The increase in revenues was primarily
attributable to increased shipments of our LS-3000 Series and GS-5000 Series
semiconductor lead inspection systems.
The gross profit margin for the fiscal year ended September 30, 1997 was
46%, as compared to 45% for the fiscal year ended September 30, 1996.
Continued development of our LS-3000 and GS-5000 series of lead scanning
systems, computerized visual inspection equipment, and barcode scanning and data
collection equipment, as well as the ID-1 aircraft wing ice detection system,
primarily accounted for $25.5 million in research and development expense, net
of capitalized software development costs, during the year ended September 30,
1997, as compared to $21.8 million during fiscal 1996. In our fiscal year ended
September 30, 1997, we capitalized $4.8 million of software development costs as
compared to $2.6 million over the comparable 1996 period in accordance with the
provisions of SFAS No. 86. Capitalized software development costs for the fiscal
year ended September 30, 1997 include $0.8 million of costs related to certain
acquired subsidiaries. These subsidiaries had not capitalized any software
development costs in prior years because prior to their respective acquisitions
by us, they had not utilized detailed program designs in the software
development process. In general, the software development costs incurred by
these subsidiaries between the time working models were available and the
related software projects were released to customers were not material.
Our selling, general and administrative costs of $48.3 million increased
by $3.4 million or 7.6%, for the year ended September 30, 1997 as compared to
$44.9 million in the prior fiscal year, primarily as a result of increased
marketing
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and distribution costs. For the year ended September 30, 1997, our net interest
expense was $0.3 million compared to net interest income of $0.2 million in the
comparable period in 1996. The decrease is a result of using a significant
portion of our cash to finance growing accounts receivable and inventory as our
revenue increased.
Our net income for the year ended September 30, 1997 was $0.6 million or
$0.03 per share, as compared to net income of $0.8 million, or $0.04, for the
year ended September 30, 1996.
During the fiscal year ended September 30, 1997, we recorded a net
provision for income taxes of $0.7 million. The current year provision primarily
relates to minimum federal and state income taxes which were partially offset by
a decrease in the valuation allowance relating to deferred tax assets which
emanated from a change in the legal structure of certain subsidiaries which
eliminated certain limitations on our utilization of net operating losses of
acquired subsidiaries. During the fiscal year ended September 30, 1996, we
recorded a net benefit from income taxes of $1.2 million. This benefit primarily
resulted from a decrease in the valuation allowance relating to deferred tax
assets which emanated from our profitable operations in fiscal 1996, and the
extent to which we substantiated projected future earnings.
Our net deferred tax assets at September 30, 1997 and 1996 of $8.8 million
and $8.1 million, respectively, are equivalent to the benefit to be derived from
net operating loss carryforwards, and net deductible temporary differences that
were expected to be utilized to offset future taxable income projected as of the
respective balance sheet dates. The valuation allowance as of September 30, 1997
relates primarily to net operating loss carryforwards and tax credit
carryforwards of Acuity and CiMatrix which are subject to annual limitations.
Liquidity and Capital Resources
Our cash balance increased $0.2 million, to $2.7 million, in the three
months ended December 31, 1998, as a result of $1.6 million of net cash used in
operating activities, $0.1 million of net cash used for additions to plant and
equipment, $4.0 million
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of net cash provided by the sale of a product line and $2.1 million of net cash
used in financing activities. The $1.6 million of net cash used in operating
activities was primarily a result of the operating loss for the quarter, after
non-cash depreciation and amortization charges.
Our cash balance declined from $8.8 million at September 30, 1997 to $2.4
million at September 30, 1998, as a result of $18.7 million of net cash used in
operating activities, $9.1 million of net cash used for additions to plant and
equipment and $21.5 million of net cash provided by financing activities. The
$18.7 million of net cash used in operating activities was primarily a result of
the loss for the year, less non-cash depreciation and amortization charges.
Additions to plant and equipment were $0.1 million in the three months
ended December 31, 1998, which were substantially below depreciation charges of
$1.5 million in the period. The increase in other long-term assets of $1.7
million primarily represents capitalized software development costs in the three
months ended December 31, 1998. During fiscal 1998, we had net additions to
plant and equipment of $9.1 million, which exceeded depreciation charges of $6.1
million. The additions to plant and equipment were primarily for equipment used
in research and development activities, as well as customer support activities.
Accounts payable were $19.4 million at December 31, 1998, as compared with
$21.4 million at September 30, 1998 and $23.3 million at September 30, 1997,
respectively. The reduction in accounts payable in fiscal 1998 was a result of
the significantly lower level of inventory purchases made by us in the second
half of fiscal 1998. As a result of our negative cash flow from operations
during fiscal 1998 and the three months ended December 31, 1998, we had a
substantial portion of our accounts payable balances which were beyond normal
vendor payment terms at December 31, 1998.
In March 1998, we entered into a $37.5 million revolving credit agreement
with three domestic banks. This agreement replaced $19.5 million in existing
lines of credit and $6.9 million in borrowings outstanding under a term loan.
The revolving credit agreement is secured by essentially all of our tangible and
intangible assets, has a term which expires on
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March 18, 2000 and currently carries interest at the bank's prime rate, plus two
percent. The agreement has financial covenants which include minimum
profitability, minimum liquidity and minimum net worth. At December 31, 1998, we
had borrowings of $35.5 million outstanding under our revolving credit
agreement. On April 22, 1999, the Company renegotiated the terms of its credit
agreement with its three banks. The new agreement sets the facility at $35.4
million and establishes new covenants for the balance of the term of the
agreement, March 18, 2000.
Accounts receivable at December 31, 1998 declined by $1.8 million from
$32.4 million at September 30, 1998 to $30.6 million as a result of our
continued focus on asset management. By way of comparison, our accounts
receivable at September 30, 1997 were $50.6 million. This reduction in accounts
receivable largely reflects our lower level of revenues in the fourth quarter of
fiscal 1998, as well as the first quarter of fiscal 1999.
Inventories were $31.3 million at December 31, 1998, compared to $36.2
million at September 30, 1998, a reduction of $4.9 million, as we continued to
consume short-term excess levels, particularly in our semiconductor equipment
group. Inventories in fiscal 1998 were reduced $2.9 million, which included a
total of $16.6 million in inventory provisions. Excluding the inventory
provisions, the increase in inventories in fiscal 1998 was largely a result of
revenues declining significantly below expectations, beginning late in the
second quarter, which resulted in higher than planned ending inventory levels.
We minimized our level of inventory purchases in the second half of fiscal 1998,
which reduced inventories $3.6 million, excluding the inventory provisions.
The increase in other long-term assets of $8.4 million largely reflects an
increase in capitalized software development costs during fiscal 1998, net of
amortization, of $4.6 million, and an intangible asset of $3.75 million
reflecting the technology license and non-competition agreement obtained as a
result of our settlement agreement with General Scanning, Incorporated,
discussed below. We have classified our net
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deferred tax asset as a long-term asset as a result of the loss for fiscal 1998
and the current uncertainty of realizing this tax benefit in the near-term.
In June 1998, we and GSI executed a settlement agreement of our claims
against GSI, which we had asserted in an action initiated by us in the United
States District Court for the Eastern District of New York, arising out of GSI's
acquisition of View Engineering in August 1996, in which we claimed that GSI had
used information improperly obtained from us in connection with the acquisition.
GSI denied all such claims. Under the settlement agreement, GSI has agreed not
to compete for ten years in the inspection of interconnect leads of
semiconductor packages. Under the settlement, GSI licensed its 2-D and 3-D
vision technology solely to us exclusively for our use in the inspection of
semiconductor interconnection leads. In consideration for the technology license
and non-competition agreement, we agreed to pay GSI $3.75 million, of which
$1.50 million represents 271,493 shares of our common stock and the balance of
$2.25 million is evidenced by a subordinated note payable with a maturity date
of five years.
Accrued expenses decreased from $21.1 million at September 30, 1998 to
$19.6 million at December 31, 1998 primarily as a result of cash payments of
$1.1 million for severance charges recorded in fiscal 1998. Included in accrued
expenses at December 31, 1998 are 1.0 million of expected future cash outlays
associated with the non-recurring charges of $6.6 million in fiscal 1998.
In February 1999, we completed a private placement of $11.0 million in
stated value of prepaid warrants from which we derived net proceeds of
approximately $10.0 million.
We believe that through a combination of proceeds from the February 1999
prepaid warrant financing, obtaining additional external capital and cash flow
from operations, we will have sufficient liquidity through at least
December 31, 1999 to fund our cash requirements.
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Recent Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 130, "Reporting Comprehensive Income", and SFAS No. 131, "Disclosure
about Segments of an Enterprise and Related Information", both of which will be
effective for RVSI in fiscal year 1999. SFAS No. 130 establishes standards for
the reporting and display of comprehensive income and its components (revenues,
expenses, gains and losses) in a full set of general purpose financial
statements. SFAS No. 131 establishes standards for the way that public business
enterprises report selected information about operating segments. SFAS No. 131
also establishes standards for related disclosures about products and services,
geographic areas, and major customers. The adoption of SFAS No. 130 in fiscal
1999 resulted in additional disclosure for RVSI in our consolidated financial
statements for the three months ended December 31, 1998. The adoption of SFAS
No. 131 in fiscal 1999 will require additional disclosures in our consolidated
financial statements for the year ending September 30, 1999.
In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures
about Pensions and Other Post-retirement Benefits", which RVSI is required to
implement no later than fiscal year 1999. SFAS No. 132 is an amendment to SFAS
Nos. 87, 88 and 106. The statement standardizes disclosure requirements for
pension and post-retirement benefits to the extent practicable, requires
additional information on changes in the benefit obligations and fair values of
plan assets that will facilitate financial analysis and eliminates certain other
disclosures. The implementation of SFAS No. 132 is not expected to have a
material effect on our consolidated financial statements.
In April 1998, the Accounting Standards Executive Committee issued
Statement of Position ("SOP") 98-5, "Reporting on the Costs of Start-Up
Activities", which RVSI is required to implement no later than fiscal year 2000.
SOP 98-5 establishes standards that require start-up and organization costs to
be expensed as incurred. The implementation of SOP 98-5 is not expected to have
a material effect on our consolidated financial statements.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities", and is effective for RVSI in the first
quarter of fiscal year 2000. SFAS No. 133 establishes accounting and reporting
standards for derivative
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instruments, including derivative instruments embedded in other contracts, and
for hedging activities. We believe the adoption of SFAS No. 133 will not have a
material effect on our consolidated financial statements.
Effect of Inflation
We believe that the effect of inflation has not been material during each
of the years ended September 30, 1998, 1997 and 1996, respectively.
Year 2000 Status
We are aware of the potential for business disruption due to the Year 2000
issue, and have taken steps to assess and address these issues. We are
addressing Y2K compliance in three major areas: internal operating systems,
including sales, purchasing, production, engineering, and finance; products,
including installed base and new products; and third parties, vendors. Based on
current internal audits, management believes that it has established a Y2K plan
which will address these issues.
In order to assess Y2K compliance in our internal operating systems, we
first took an inventory of all such systems and identified those which are
critical to our operations. All such systems have been or will be tested for Y2K
compliance by April 1999. Based on the results of testing to date, it is
estimated that about 75% of these systems are Y2K compliant. All non-compliant
systems will be brought into compliance by July 1999, either by upgrades or
replacement.
With the exception of one minor product which we purchase from a third
party and resell, all of our products currently being shipped, as well as a
large part of our installed base, are Y2K compliant. We expect that this
non-compliant product will be brought into compliance by June 1999. Customers of
that part of our older installed base which is not Y2K compliant will be offered
upgrade options, or replacements, which are Y2K compliant.
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The area of Y2K compliance which poses the greatest risk to us is our
vendors, because of our lack of control over their products and operations. In
order to assess their compliance, we are in the process of surveying all major
vendors. We expect this process to be completed by June 1999, and any compliance
issues to be addressed by September 1999.
Costs associated with our Y2K compliance program are not anticipated to be
substantially different than normal, recurring costs, and are not expected to
materially affect financial results.
While we believe that our Y2K compliance program is on plan for assessing
and addressing any Y2K issues, full compliance can not be assured until this
effort is complete. In particular, despite our best efforts, we may be unable to
establish with certainty the compliance of third party vendors, including those
outside the United States. It is possible that the non-compliance of a key
vendor could have a material, adverse effect on our operations.
As this program progresses, we will be better able to assess our Y2K
status in all of the areas outlined above, and focus our efforts on any Y2K
issues which become identified. By June 1999, we will also develop contingency
plans to be put into place in the event that any of our corrective actions fail
to fully address the Y2K issues.
Market Risk
Financial instruments that potentially subject us to concentrations of
credit-risk consist principally of cash equivalents and trade receivables. We
place our cash equivalents with high-quality financial institutions, limit the
amount of credit exposure to any one institution and have established investment
guidelines relative to diversification and maturities designed to maintain
safety and liquidity. Our trade receivables result primarily from sales to
semiconductors manufacturers located in North America, Japan, the Pacific Rim
and Europe. Receivables are mostly from major corporations, distributors or are
supported by letters of credit. We maintains reserves for potential credit
losses and such losses have been immaterial.
We are exposed to the impact of fluctuation in interest rates, primarily
through our borrowing activities. Our policy has been to use U.S. dollar
denominated borrowings to fund our working capital requirements. The interest
rates on our current borrowings fluctuate with current market rates. The extent
of risk associated with an increase in the interest rate on our borrowings is
not quantifiable or predictable because of the variability of future interest
rates and our future financing requirements. At December 31, 1998, we had bank
borrowings outstanding of $35.5 million and a long-term note payable of $2.25
million which have a variable interest rate. Using a yield to maturity analysis
and assuming an increase in the interest rate on these borrowings of 78 basis
points (10% fluctuation in the rate), interest rate variability on these
borrowings would not have a material effect on our financial results.
We are also exposed to the impact of foreign currency fluctuations.
During fiscal 1998, most local currencies of our international subsidiaries
weakened against the U.S. dollar. Since we translate foreign currencies into
U.S. dollars for reporting purposes, these weakened currencies have a negative,
though immaterial, impact on our results. We also believe that our exposure to
currency exchange fluctuation risk is insignificant because our international
subsidiaries sell to customers, and satisfy their financial obligations, almost
exclusively in their local currencies. During fiscal 1998, we did not engage in
foreign currency hedging activities. Based on a hypothetical ten percent
adverse movement in foreign currency exchange rates, the potential losses in
future earnings, fair value of risk-sensitive instruments, and cash flows are
immaterial, although the actual effects may differ materially from the
hypothetical analysis.
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We estimate the fair value of our notes payable and long-term liabilities
based on quoted market prices for the same or similar issues or on current rates
offered to us for debt of the same remaining maturities. For all other balance
sheet financial instruments, the carrying amount approximates fair value.
BUSINESS
General
We design, manufacture, market and sell automated 1- dimensional,
2-dimensional and 3-dimensional machine vision-based products and systems for
inspection, measurement and identification. We are a leader in advanced
electro-optical sensor technology.
Principal Products and Product Development
Semiconductor Equipment Group
Our Semiconductor Equipment Group is comprised of our Electronics
division, as well as our wholly owned subsidiaries, Systemation Engineered
Products and Vanguard Automation, Inc.
The Electronics division supplies inspection equipment to the
semiconductor industry. The division's LS, GS and CS Series lead scanning
systems offer automated, high-speed, 3-D semiconductor package lead inspection
with the added feature of non-contact scanning of the packages in their shipping
trays ("in-tray scanning"). The systems use a laser-based, non-contact, 3-D
measurement technique to inspect and sort quad flat packs, thin quad flat packs,
chip scale packages ("CSP"), ball grid arrays ("BGA") and thin small outline
packs in their carrying trays. The system measurements include coplanarity,
total package height, true position spread and span, as well as lead angle,
width, pitch and gap.
Systemation offers tape-and-reel component processing systems designed to
handle and inspect CSP and BGA packages. We believe that Systemation's expertise
in designing and
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manufacturing systems that handle components in tubes provides us with the means
to further expand the breadth of our product offerings to the semiconductor
market. Systemation is also the primary supplier of tape-and-reel systems to the
electronics division.
Vanguard is a leading supplier of BGA and CSP equipment for the
semiconductor and connection industries. Customers for Vanguard's proprietary
BGA and CSP equipment include over a dozen of the top semiconductor
manufacturers in the world.
Acuity CiMatrix Division
In June 1998, we combined our Acuity Imaging division, which was comprised
of Acuity Imaging and Northeast Robotics, Acuity's wholly owned subsidiary, with
our CiMatrix division, which was comprised of Computer Identics and
International Data Matrix, both our wholly owned subsidiaries. The combined
operations is called the Acuity CiMatrix division.
The Acuity CiMatrix division designs, manufactures and markets 1-D and 2-D
data collection products and barcode reading systems, as well as 2-D machine
vision systems and lighting products for use in industrial automation. These
products are used by a broad range of businesses, including customers in the
semiconductor, electronics, automotive, pharmaceutical, consumer products,
postal services and material handling industries. The Acuity CiMatrix division
also supplies certain machine vision products to our Semiconductor Equipment
Group. In addition, we own the patent to the data matrix code, a 2-D code
resembling a scrambled checkerboard. Due to its small size relative to the 1-D
bar code label, the data matrix code can be directly marked on parts and
components greatly enhancing a manufacturer's capability for serialization and
traceability.
Machine vision systems use an image processing computer, software and
electronic cameras to perform such functions as measurement, flaw detection and
inspection of manufactured products. Our data collection and bar code reading
systems use similar functionality to read and collect data from 1-D and 2-D bar
codes for purposes such as sortation, manufacturing quality control,
traceability and security.
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In September 1998, Acuity CiMatrix introduced Visionscape, the first
machine vision product platform on a single PCI board for the Pentium/Windows
PC. This product family is designed to meet the needs of both original equipment
manufacturers, which incorporate vision products into their systems, as well as
for direct use by manufacturers on their factory floor.
In December 1998, Acuity CiMatrix introduced the MXi, the first hand-held
imager for reading digital direct part marks, 1-D barcodes and new, digital 2-D
symbologies, such as the Data Matrix code. This product is a result of a joint
venture with Polaroid which began in 1997. The MXi was co-designed and will be
manufactured by Polaroid for our exclusive distribution.
Manufacturing
Each of our production facilities are capable of fabricating and
assembling total electronic and electromechanical systems and subsystems.
Facilities include assembly and wiring operations that have the ability to
produce complex wiring harnesses, as well as intricate electronic subassemblies.
We maintain comprehensive test and inspection programs to ensure that all
systems meet exacting customer requirements for performance and quality
workmanship prior to delivery.
Marketing and Sales
Our Semiconductor Equipment Group's marketing strategy focuses on
cultivating long-term relationships with the leading manufacturers of electronic
and semiconductor inspection and quality control equipment. Its marketing
efforts rely heavily on direct sales methods. The selling cycle for products,
generally, is between six to nine months from initial customer contact to
closure. A lengthier process is often the case in the purchase of an initial
unit. Subsequent purchases require less time and often result in multiple
orders. Group sales activities in the domestic market are handled by direct
sales personnel. The group also maintains sales capabilities in both Europe and
the Far East through independent sales representatives and distributors,
providing access to all major markets for electronic and
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semiconductor test equipment. Sales and technical support offices are maintained
in Singapore and Taiwan.
The Acuity CiMatrix division markets its products through a combination of
direct sales personnel, distributors and system integrators. For sales made
through distributors, the Acuity CiMatrix Division supports these activities
with direct sales management and technical support personnel. Besides sales and
support offices in various locations in the United States, the Acuity CiMatrix
Division also maintains sales and support offices in the United Kingdom, France
and Germany.
Sources of Supply
To support our internal operations and to extend our overall capacity, we
purchases a wide variety of components, assemblies and services from proven
outside manufacturers, distributors and service organizations. We have not
experienced any significant difficulty in obtaining adequate supplies to perform
under our contracts.
A number of our components and sub-systems are purchased from single
sources. We believe that alternative sources of supply could be obtained, if
necessary, without major interruption in production. In addition, certain
products or sub-systems developed and marketed by the Acuity CiMatrix division
are incorporated into the Semiconductor Equipment Group's product offerings.
Proprietary Protection
At March 31, 1999, we owned over 100 issued U.S. patents, with expiration
dates ranging from 1999 to 2014. We also have various U.S. and foreign
registered trademarks.
We do not believe that our present operations are materially dependent
upon the proprietary protection that may be available to us by reason of any one
or more of such patents. Moreover, as its patent position has not been tested,
with the exception of the litigation referred to elsewhere in this prospectus,
we can
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give no assurance as to the effectiveness of the protection afforded by patent
rights.
Customers
Intel Corporation accounted for 20%, 23% and 13% of our revenues during
our fiscal years ended September 30, 1998, 1997 and 1996, respectively. No other
customer accounted for more than 10% of sales during the fiscal years ended
September 30, 1998, 1997 and 1996, respectively. No customer accounted for more
than 10% of sales during the three month fiscal period ended December 31, 1998.
Revenues from unaffiliated customers generated by our European
subsidiaries were $2,787,000, $14,556,000, $16,812,000 and $16,226,000 for the
three months ended December 31, 1998 and the years ended September 30, 1998,
1997 and 1996, respectively.
Total revenues from customers outside the U.S. were $15,506,000,
$108,711,000, $115,854,000 and $97,483,000 for the three months ended December
31, 1998 and the years ended September 30, 1998, 1997 and 1996, respectively.
Backlog
At December 31, 1998 our backlog was $19.0 million as compared to $16.9
million and $43.2 million at September 30, 1998 and September 30, 1997,
respectively. We believe that most of our backlog at December 31, 1998, will be
delivered in fiscal 1999. We do not believe that our backlog at any particular
time is necessarily indicative of our long-term future business.
Competition
We believe that machine vision has evolved into a new industry over the
past several years, in which a number of machine vision-based firms have
developed successful industrial applications for the technology. We are aware
that a large number of companies, estimated to be upward of 100 firms, entered
the industry in the 1980's and that most of these were small private
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concerns. Over the last several years the number of competitors has narrowed to
less than 25. We believe this is attributable, to a large extent, to
consolidation within the industry. We believe that we are a significant factor
in the machine vision industry based upon the breadth of our product lines, our
customer base, and our level of revenues.
Research and Development
Our sponsored research and development efforts over recent years have been
largely devoted to continued development of advanced 2-D and 3-D vision
technology and applications software for use in various inspection and process
control automation systems. Research and development has also included activity
related to automatic identification technology development. Research and
development expenditures, net of capitalized software development costs, were
$5,590,000, $28,121,000, $25,465,000 and $21,834,000 for the three months ended
December 31, 1998 and the years ended September 30, 1998, 1997 and 1996,
respectively. In the three months ended December 31, 1998 and in the fiscal
years ended September 30, 1998, 1997 and 1996, RVSI capitalized $1,429,000,
$7,397,000, $4,842,000 and $2,630,000, respectively, of its software development
costs in accordance with the provisions of Statement of Financial Accounting
Standards No. 86.
Environmental Regulation
We believe that compliance with federal, state, local and, where
applicable, foreign environmental regulations does not have any material effect
on our capital expenditures, earnings or competitive position.
Employees
At December 31, 1998 we employed 685 persons, of whom 290 were engineering
and other technical personnel. None of our employees is a member of a labor
union.
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<PAGE> 35
Facilities
Our executive offices, as well as our Acuity CiMatrix division, are
located in a 60,000 square foot facility in Canton, Massachusetts. The Acuity
CiMatrix division also maintains a 50,000 square foot engineering facility in
Nashua, New Hampshire and its Northeast Robotics operations are located in a
12,000 square foot facility in Weare, New Hampshire. Our electronics division is
located in a 65,000 square foot facility located in Hauppauge, New York.
Systemation's operations are located in a 90,000 square foot facility located in
New Berlin, Wisconsin and Vanguard's operations are located in a 38,000 square
foot facility in Tucson, Arizona.
We also maintain sales and service offices across the United States to
support our various operations. The Acuity CiMatrix division has sales and
service offices in the United Kingdom, France and Germany. We maintain sales and
service offices in Singapore and Taiwan to support our semiconductor equipment
group's operations.
All of our facilities are leased, with lease expiration dates ranging from
1999 to 2013.
Legal Proceedings
We initiated two actions in the United States District Court for the
Central District of California against GSI and its View subsidiary, alleging
infringement by View of a number of our patents relating to View's assembly and
distribution of View's own 3-D machine vision products. In June 1998, the Court,
in the first of these actions, involving the coplanarity inspection of ball grid
array semiconductor package substrates, found infringement by View and granted
our request for injunctive relief against View. This ruling has been appealed by
View to the United States Appeals Court for the Federal Circuit. The second of
these actions is presently expected to come to trial on or about June 1, 1999.
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<PAGE> 36
MANAGEMENT
Executive Officers and Directors of the Registrant
Set forth below is information concerning each of our directors and
executive officers.
<TABLE>
<CAPTION>
Name Age Positions and Offices
- ---- --- ---------------------
<S> <C> <C>
Pat V. Costa 55 Chairman of the Board,
President, and Chief
Executive Officer
Howard Stern 61 Senior Vice President and
Director
Frank D. Edwards 44 Chief Financial Officer and
Secretary
Curtis W. Howes 48 Vice President
John S. O'Brien 45 Vice President
Earl H. Rideout 52 Senior Vice President
Neal H. Sanders` 49 Vice President
Frank A. DiPietro 72 Director
Jay M. Haft 63 Director
Tomas Kohn 58 Director
Donald J. Kramer 66 Director
Mark J. Lerner 46 Director
Robert H. Walker 63 Director
</TABLE>
PAT V. COSTA has served as our president, chief executive officer and
chairman since 1984. Previously and from 1977, Mr. Costa was employed by GCA
Corporation, most recently in the capacity of executive vice president. GCA was
engaged in the manufacturing of various electronic instrumentation equipment and
systems.
HOWARD STERN has been our senior vice president and technical director
since 1984. Previously and from 1981, he was our vice president.
FRANK D. EDWARDS joined us in March 1999 as our corporate vice president
of finance, secretary and chief financial officer. Prior to joining us and since
1986, he was employed by Electronic
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<PAGE> 37
Designs, Inc. Most recently, until that company's merger with Bowmar Instrument
Corporation in October 1998, he was senior vice president and chief financial
officer and a member of its board.
CURTIS W. HOWES joined us in May 1997 as corporate vice president of
automatic identification. From 1991 to 1997, he was employed by Intermec
Corporation, most recently as general manager of Intermec's imaging systems
division, which designed, manufactured and sold vision-based products for
symbology reading.
JOHN S. O'BRIEN joined us in February 1997 as corporate vice president of
human resources. Previously and from 1990, he was vice president, human
resources and chief financial officer of Charles River Data Systems, an imbedded
systems developer and manufacturer.
EARL H. RIDEOUT has been corporate senior vice president of our
semiconductor equipment group since January 1997. Previously and from 1989 he
was vice president/general manager of our electronics division.
NEAL H. SANDERS joined us in February 1999 as corporate vice president of
corporate communications and investor relations. From 1980 through 1998, he held
comparable positions at Analog Devices, Inc., Bolt Beranek and Newman, Inc.,
Information Analysis, Inc. and Microdyne Corporation.
FRANK A. DIPIETRO began his career with General Motors in 1944. During his
forty-six year career with GM, he was actively involved in automobile assembly
and manufacturing engineering systems. He retired in 1990 and continues as a
consultant in laser systems in several industries, most recently for the
University of Michigan in evaluating laser applications in the global auto
industry. At the time of his retirement, Mr. DiPietro held the position of
director of manufacturing engineering, Chevrolet-Pontiac-Canada car group, for
GM. In 1996, he was elected to the position of director-at-large for the Society
of Manufacturing Engineers.
JAY M. HAFT has been a practicing attorney for over 30 years and a
strategic and financial consultant for growth stage
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<PAGE> 38
companies. Mr. Haft also serves as chairman of Noise Cancellation Technologies,
Inc. and Extech, Inc. both public companies whose respective securities are
traded on the Nasdaq Small Cap Market. He is a managing general partner of Gen
Am "1" Venture Fund, an international venture capital fund. Mr. Haft is also a
director of numerous other public and private corporations. From 1989 until
1994, he was a partner of Parker Duryee Rosoff & Haft in New York, New York. He
is currently of counsel to such firm.
TOMAS KOHN has been a professor of management at Boston University's
School of Management in the undergraduate, MBA, and executive MBA programs since
1988. Dr. Kohn is the chairman of Conduit del Ecuador, a steel tubing
manufacturer, and a member of the board of Ideal-Alambrec, a steel wire
manufacturer, both in Quito, Ecuador. He has held these positions since 1974 and
1972, respectively. From 1987 until our acquisition of Computer Identics in
1996, Dr. Kohn was a member of Computer Identics' board, and its chairman since
1992. From 1986 until 1995, Dr. Kohn was a member of the board of N.V. Bekaert
S.A., the world's largest independent steel wire manufacturer. N.V. Bekaert was
a major shareholder of Computer Identics.
DONALD J. KRAMER was chairman of Acuity from 1994 until our acquisition of
Acuity in 1995. Mr. Kramer served as a director of Itran Corp. from 1982 until
its merger with Automatix in 1994, at which time the merger survivor assumed the
Acuity name. Mr. Kramer is a private investor and was a special limited partner
of TA Associates, a private equity capital firm located in Boston,
Massachusetts, from January 1990 to March 1996. For the previous five years, Mr.
Kramer was a general partner of TA Associates. In January 1997, Mr. Kramer was
elected to the board of publicly-owned Micro Component Technology, Inc. Mr.
Kramer is also a director of several privately held companies.
MARK J. LERNER has been president of Morgen, Evan & Company, Inc., an
investment banking firm which focuses on Japanese-U.S. transactions, since 1992.
Previously and from 1990, he was a managing director at Chase Manhattan Bank
where he headed the Japan corporate finance group. From 1982 to 1990 Mr. Lerner
worked in the investment banking division of Merrill Lynch as head of its Japan
group, coordinating its New York-based Japanese activities with professionals in
Tokyo and London.
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<PAGE> 39
ROBERT H. WALKER was, before his retirement in March 1998, our executive
vice president and secretary-treasurer, a position he had held since 1986. From
1984 to 1986 he was our senior vice president. From 1983 to 1985 he also served
as our treasurer. Mr. Walker is also a director of Tel Instrument Electronics
Corporation, a publicly-owned company.
Compensation
Set forth below is the aggregate compensation for services rendered in all
capacities during our fiscal years ended September 30, 1998, 1997 and 1996 by
our chief executive officer. Each of our four other most highly compensated
executive officers whose compensation exceeded $100,000 during our fiscal year
ended September 30, 1998 and two other executive officers who would have been
disclosed had they been employed at the fiscal year end.
Summary Compensation Table
<TABLE>
<CAPTION>
Long Term Compensation
-----------------------------------
Annual Compensation Awards Payouts
---------------------------- ---------------------- ---------
Other All
Name and Annual Restricted Long Term Other
Principal Compen- Stock Number of Incentive Compen-
Position Year Salary Bonus(1) sation Awards Options Payouts sation(2)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Pat V. Costa 1998 $315,016 $55,000 -- -- -- -- $2,400
Chief executive 1997 293,478 $50,000 -- -- -- -- $2,375
officer 1996 252,801 $85,000 -- -- -- -- $2,250
John J. Arcari(3) 1998 $175,008 $ 5,000 -- -- -- -- --
Former chief
financial officer
Curtis W. Howes 1998 $138,231 $20,000 -- -- -- -- $ 300
Vice president
Earl H. Rideout 1998 $150,010 $25,000 -- -- -- -- $2,400
Senior vice 1997 143,318 $25,000 -- -- -- -- $2,400
president 1996 122,747 $40,000 -- -- -- -- $2,250
Howard Stern 1998 $165,006 $30,000 -- -- -- -- $2,400
Senior vice 1997 159,625 $30,000 -- -- -- -- $2,375
president 1996 144,544 $60,000 -- -- -- -- $2,250
Steven J. Bilodeau(4) 1998 $232,497 $50,000 -- -- -- -- $2,400
Former executive 1997 206,545 $45,000 -- -- -- -- $2,375
vice president 1996 167,280 $75,000 -- -- -- -- $2,250
Robert H. Walker(5) 1998 $151,362 $35,000 -- -- -- -- $2,400
Former senior 1997 159,625 $35,000 -- -- -- -- $2,375
vice president 1996 142,229 $60,000 -- -- -- -- $2,250
</TABLE>
- -----------
(1) Represents amounts earned in the prior fiscal year which were paid in the
fiscal year shown. There were no bonuses earned for the fiscal year ended
September 30, 1998.
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<PAGE> 40
(2) Represents accrued and vested payments under our retirement plan.
(3) Mr. Arcari joined us in August 1997 as our vice president-finance. Mr.
Arcari resigned in March 1999.
(4) Mr. Bilodeau resigned in June 1998.
(5) Mr. Walker retired in March 1998.
Option Grants In Last Fiscal Year
Set forth below is information with respect to our grants of stock options
to each of the named persons in the summary compensation table, above.
<TABLE>
<CAPTION>
Percent of
Number of Total Options
Securities Granted
Underlying to Employees Exercise
Options In Fiscal Price Per Expiration Present
Name Granted Year Share Date Value(1)
- ---- ---------- ------------- --------- ---------- --------
<S> <C> <C> <C> <C> <C>
Curtis W. Howes 16,667 $4.13 5/05/03 $14,601
Curtis W. Howes 16,667 4.13 7/01/03 16,808
Earl H. Rideout 7,743 4.13 7/22/05 11,182
Earl H. Rideout 34,263 3.19 9/01/04 66,662
Howard Stern 30,000 4.13 6/26/08 71,523
Steven J. Bilodeau 10,000 4.13 6/26/01 16,714
Robert H. Walker 15,000 4.13 6/26/04 37,784
------- ------- -----
130,340 4.7%
</TABLE>
- --------
(1) Computed in accordance with the Black-Scholes option pricing model
utilizing the following assumptions: volatility of 70%, risk-free interest
rate of 4.3% and an expected life of five years.
Option Exercises In Last Fiscal Year
And Fiscal Year End Option Values
Set forth below is further information with respect to the unexercised and
exercised options to purchase our common stock under our stock option plans:
<TABLE>
<CAPTION>
Value of Unexercised
Shares Number of Unexercised In-the Money Options
Acquired Options at September 30, 1998 at September 30, 1998(2)
on Value ----------------------------- ---------------------------
Name Exercise Realized(1) Exercisable Unexercisable Exercisable Unexercisable
- ---- -------- ----------- ----------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Pat V. Costa -- -- 207,326 309,699 $200,131 --
John J. Arcari -- -- 20,000 80,000 -- --
Curtis W. Howes -- -- -- 33,334 -- --
Earl H. Rideout -- -- 32,994 42,006 $ 38,056 --
Hoard Stern 20,830 $ 30,786 15,000 60,970 -- --
Steven J. Bilodeau -- -- 37,973 172,027 -- --
Robert H. Walker -- -- 26,113 38,228 -- --
</TABLE>
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<PAGE> 41
- -----------
(1) Based on the exercise of 13,061 shares at $2.56 fair market value on the
date of exercise less the $1.00 per share cost to exercise and the
exercise of 7,769 shares at $2.56 fair market value on the date of
exercise less the $1.00 per share cost to exercise.
(2) Based on the September 30, 1998 fair market value of $2.69 less the cost
to exercise.
Pension Benefits
The following table sets forth the estimated annual plan benefits payable
upon retirement in 1999 at age sixty-five after fifteen, twenty, twenty-five,
thirty and thirty-five years of credited service.
<TABLE>
<CAPTION>
Years of Service
---------------------------------------------------------------------------------------
Remuneration 15 20 25 30 35
- ------------ ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$100,000...... $19,824 $26,432 $33,041 $33,041 $33,041
125,000...... 25,525 34,033 42,541 42,541 42,541
150,000...... 31,225 41,633 52,041 52,041 52,041
175,000...... 33,505 44,673 55,841 55,841 55,841
200,000...... 33,505 44,673 55,841 55,841 55,841
225,000...... 33,505 44,673 55,841 55,841 55,841
250,000...... 33,505 44,673 55,841 55,841 55,841
300,000...... 33,505 44,673 55,841 55,841 55,841
400,000...... 33,505 44,673 55,841 55,841 55,841
500,000...... 33,505 44,673 55,841 55,841 55,841
</TABLE>
The amount of compensation covered by our pension plan is determined in
accordance with rules established by the Internal Revenue Service and includes
all dollar items shown on the summary compensation table with the exception of
401(k) contributions. Effective with the fiscal year beginning October 1, 1998,
for purposes of calculating the pension benefit, earnings are limited to
$160,000, as adjusted for any cost of living increases authorized by the
Internal Revenue Code of 1986, as amended. This earnings limit will continue to
be $160,000 for calendar year 1999.
At September 30, 1998, Messrs. Costa, Rideout and Stern had, respectively,
14, 10 and 27 years of credited service.
A participant in the pension plan will receive retirement income based on
23% of his final average salary up to his
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<PAGE> 42
applicable social security covered compensation level plus 38% of any excess,
reduced proportionately for less than twenty-five years of credited service at
normal retirement at age 65, subject to the $160,000 limit described above.
Final average salary is defined in the pension plan as the average of a
participant's total compensation during the five consecutive calendar years in
the ten calendar year period prior to his normal retirement date which produces
the highest average. A participant is 100% vested in his accrued pension benefit
after five years of service as defined in the pension plan.
Employment Agreements
Mr. Pat Costa is employed as our chief executive officer and president
under an indefinite term agreement which currently provides for an annual base
salary of $315,000. Pursuant to the terms of his employment agreement, Mr. Costa
has been granted certain rights in the event of the termination of his
employment or a change in control of us. Specifically, in the event of
termination for any reason other than for cause and other than voluntarily, Mr.
Costa will be entitled to the continuance of salary and certain fringe benefits
for a period of twelve months and may exercise all outstanding stock options
which are exercisable during the twelve-month period following termination at
any time within such twelve-month period. In the event of the occurrence of a
change in our control (as defined in his employment agreement) and, further, in
the event that Mr. Costa is not serving in the positions of our chief executive
officer, president and chairman, other than for cause, within one year
thereafter, Mr. Costa will be entitled to exercise all outstanding stock
options, regardless of when otherwise exercisable, during the six-month period
following the termination date of his employment.
We have also granted certain rights in the event of termination of
employment to Messrs. Edwards, Howes, Rideout and Stern. In the event of
involuntary termination other than for cause, each officer will be given six
months severance pay and continued benefits. In addition, we have agreed to
provide a maximum of one hundred days' advance written
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<PAGE> 43
notice to Mr. Stern in the event we should desire to terminate his employment
other than for cause. In such event, he shall be entitled to exercise all
outstanding stock options, regardless of when otherwise exercisable, during a
specified period following such termination.
Certain Relationships and Related Transactions
Mr. Jay M. Haft, a director, is of counsel to Parker Duryee Rosoff & Haft,
our general counsel prior to March 1, 1997.
Mr. Mark J. Lerner, a director, is President of Morgen, Evan. Mr. Lerner,
through Morgen, Evan, provided consultation services relative to our
international marketing and sales efforts. In accordance with an agreement dated
December 1993 (which was prior to his becoming a director), during the fiscal
years ended September 30, 1996, September 30, 1997 and September 30, 1998, we
compensated Mr. Lerner, through Morgen, Evan, in cash in the amounts of $87,369,
$62,390 and $9,800, respectively, as well as with four-year warrants, at
exercise prices of $12.88, $13.13 and $2.57, respectively, to acquire an
aggregate of 42,434, 2,565 and 18,000 shares of our common stock, respectively.
All warrants were issued at the fair market value of our common stock on the
date of grant. We believe that the compensation we paid to Morgen, Evan was no
greater than what we would have had to pay to an unaffiliated person for
substantially similar services.
Compensation Committee Interlocks and Insider Participation
During the fiscal year ended September 30, 1998, the following officers
participated in discussions concerning executive officer compensation: Pat V.
Costa, John J. Arcari, Howard Stern and Robert H. Walker. Each of the named
participants recused himself in discussions concerning his own compensation.
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<PAGE> 44
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the ownership
of our common stock as of March 31, 1999 by
o each director
o each person known by us to own beneficially 5% or more of our common
stock
o each officer named in the summary compensation table elsewhere in
this prospectus
o all directors and executive officers as a group
<TABLE>
<CAPTION>
Number of Shares
Name and Address of Common Stock Percent
of Beneficial Owner Beneficially Owned (1) of Class
- ------------------- ---------------------- --------
<S> <C> <C>
Pat V. Costa 238,927(2) 1.0%
Frank A. DiPietro 54,770(3) *
Jay M. Haft 487,546(4) 2.0%
Tomas Kohn 49,155(5) *
Donald J. Kramer 22,654(6) *
Mark J. Lerner 88,451(7) *
Howard Stern 72,978(8) *
Robert H. Walker 77,825(9) *
John J. Arcari 20,000(10) *
Steven J. Bilodeau 42,974(10) *
Curtis W. Howes 7,168(11) *
Earl H. Rideout 33,302(12) *
</TABLE>
42
<PAGE> 45
<TABLE>
<S> <C> <C>
Fisher Capital, Ltd., Wingate
Capital Ltd., Citadel Limited
Partnership, GLB Partners,
L.P., Citadel Investment Group,
L.L.C., Wellington Partners
Limited Partnership, Kensington
Global Strategies Fund Ltd. and
Kenneth Griffin(13) 2,118,217(14) 7.9%
c/o Citadel Limited Partnership
225 West Washington St.
9th Floor
Chicago, IL 60606
All current executive
officers and directors as
a group (14 persons) 1,203,417(15)(16) 7.9%
</TABLE>
- ----------
* Denotes less than 1%.
(1) Except as otherwise indicated, includes shares underlying currently
exercisable options and warrants as well as those options and warrants
which will become exercisable within 60 days of March 31, 1999. Except as
otherwise indicated, the named persons herein have sole voting and
dispositive power with respect to beneficially owned shares.
(2) Includes 207,326 shares underlying options and 1,601 vested shares held
under our retirement investment plan.
(3) Includes 1,000 shares underlying options; also includes 31,770 shares
owned of record by Mr. DiPietro's spouse.
(4) Includes 23,000 shares underlying options; also includes, 398,100 shares
owned of record by Mr. Haft's spouse and 7,666 shares held indirectly in a
retirement trust.
(5) Includes 1,000 shares underlying options; also includes 1,684 shares owned
of record by Mr. Kohn's spouse.
(6) Includes 9,802 shares underlying options; also includes 10,000 shares held
indirectly in an irrevocable trust with Mr. Kramer's spouse as trustee.
Mr. Kramer disclaims any interest in these shares.
(7) Includes 82,451 shares underlying warrants held by Morgen, Evan & Company,
Inc., of which Mr. Lerner is the principal owner; also includes 6,000
shares underlying options.
(8) Includes 20,000 shares underlying options and 6,148 vested shares held
under our retirement investment plan.
(9) Includes 26,113 shares underlying options and 17,632 shares indirectly in
a retirement account.
(10) Represents shares underlying options.
(11) Includes 6,668 shares underlying options.
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<PAGE> 46
(12) Includes 32,994 shares underlying options and 308 vested shares held
under our retirement investment plan.
(13) Represents shares held by a "group," within the meaning of Section
13(d)(3) of the Securities Exchange Act, as reflected in Schedule 13G,
filed with the SEC on March 3, 1999. According to this Schedule, Fisher
Capital, Ltd. and Wingate Capital Ltd., as well as Wellington Partners
Limited Partnership and Global Strategies Fund Ltd., are controlled by
Citadel Limited Partnership, which in turn is controlled by GLB Partners,
L.P., Citadel Investment Group and Kenneth Griffin.
(14) Includes 1,741,294 shares underlying certain prepaid common stock
purchase warrants, based upon an assumed exercise price of $4.02 per
share, and 376,923 shares underlying certain incentive stock purchase
warrants, whose respective terms are discussed elsewhere in this
prospectus. The prepaid warrants are not exercisable prior to August 19,
1999; the incentive warrants are currently exercisable at an exercise
price of $4.02 per share.
(15) Includes an aggregate of 481,995 shares underlying options and warrants.
(16) Includes an aggregate of 8,057 vested shares held in our investment
retirement plan.
DESCRIPTION OF OUR SECURITIES
Common Stock
We are currently authorized to issue up to 50,000,000 shares of our common
stock, $.01 par value. As of March 31, 1999, 24,889,611 shares of our common
stock were issued and outstanding, and held of record by approximately 4,763
persons.
Holders of shares of our common stock are entitled to such dividends as
may be declared from time to time by the board in its discretion, on a ratable
basis, out of funds legally available therefrom, and to a pro rata share of all
assets available for distribution upon liquidation, dissolution or other winding
up of our affairs. All of the outstanding shares of our common stock are fully
paid and non-assessable.
Warrants
As of March 31, 1999, there were issued and outstanding $11,000,000 in
stated value of prepaid warrants held of record by four persons, each allowing
the holder to acquire an
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<PAGE> 47
indeterminate number of shares based on the market price of our common stock at
the date of exercise. Each prepaid warrant is exercisable at the lower of $4.02
per share or 95% of the average of the three lowest closing bid prices of RVSI
common stock during the 20-day trading period ending on the date of notice of
exercise, which 20-day trading period is subject to extension as set forth in
the prepaid warrants.
The prepaid warrants bear an annual premium of 7% per annum, payable in
cash or, at our option, in shares of its common stock, and are initially
exercisable, to the extent of 25% of the total number of shares issuable,
commencing on the 180th day following their issuance, increasing by increments
of 25% every 90 days thereafter so that after the passage of 450 days following
the date of original issuance, the prepaid warrants will have become fully
exercisable.
The prepaid warrants are subject to call at our option if both, during the
20-day trading day period immediately preceding the date of our notice of
redemption the average closing bid price, and on the date of our notice of
redemption the closing bid price, of our common stock is less than $4.02 per
share, subject to anti-dilution adjustment, at a cash price equal to 120% of the
exercise amount of the prepaid warrants, inclusive of earned premium, called for
redemption. Such call right may be exercised by us up to four times during the
term of the prepaid warrants. The prepaid warrants are also subject to
redemption by us, at our option, if their exercise price falls below $2.50 per
share.
There were also issued and outstanding as of March 31, 1999 incentive
common stock purchase warrants to purchase an additional 1,222,222 shares of our
common stock at an exercise price of $4.02 per share. See "Selling
Stockholders."
Limitation of Liability
As permitted by the General Corporation Law of the State of Delaware, our
restated certificate of incorporation provides that our directors shall not be
personally liable to us or our stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability
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<PAGE> 48
o for any breach of the director's duty of loyalty to us or our
stockholders
o for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law
o under section 174 of the Delaware law, relating to unlawful payment
of dividends or unlawful stock purchases or redemption of stock
o for any transaction from which the director derives an improper
personal benefit.
As a result of this provision, we and our stockholders may be unable to
obtain monetary damages from a director for breach of his or her duty of care.
Our restated certificate of incorporation provides for the indemnification
of our directors and officers, and, to the extent authorized by our board in its
sole and absolute discretion, employees and agents, to the full extent
authorized by, and subject to the conditions set forth in the Delaware law. We
currently maintain liability insurance for the benefit of our directors and
officers.
Delaware Anti-Takeover Law
We are subject to the provisions of section 203 of the Delaware law.
Section 203 prohibits publicly held Delaware corporations from engaging in a
"business combination" with an "interested stockholder" for a period of three
years after the date of the transaction in which the person became an interested
stockholder, unless the business combination is approved in a prescribed manner.
A "business combination" includes mergers, asset sales and other transactions
resulting in a financial benefit to the interested stockholder. Subject to
certain exceptions, an "interested stockholder" is a person who, together with
affiliates and associates, owns, or within three years did own, 15% or more of
the corporation's voting stock. These provisions could have the effect of
delaying, deferring or preventing a change of control of us or reducing the
price that
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<PAGE> 49
certain investors might be willing to pay in the future for shares of our common
stock.
Shareholder Rights Plan
We have a shareholder rights plan. The plan is intended to deter coercive
or partial offers which will not provide fair value to all stockholders and
enhance our ability to represent all stockholders and thereby maximize
stockholder values.
Pursuant to a rights agreement with American Stock Transfer & Trust
Company, as rights agent, one right was issued for each outstanding share of our
common stock on May 26, 1998. Each right entitles the registered holder to
purchase one-third of a share of common stock, at a price of $18.00 per
one-third of a share. The rights generally will not become exercisable unless
and until, among other things, any person, other than the purchasers of the
prepaid warrants, acquires 15% or more of our outstanding common stock. The
rights are redeemable under certain circumstances at $.005 per right and will
expire, unless earlier redeemed or extended, on May 26, 2008.
Transfer Agent
The transfer agent for our common stock is American Stock Transfer & Trust
Company.
SELLING STOCKHOLDERS
The registration statement, of which this prospectus forms a part, relates
to our registration, for the account of the selling stockholders, of an
aggregate of 10,437,361 shares of our common stock underlying the prepaid
warrants and 1,222,222 shares of our common stock underlying the incentive
warrants. These shares are being registered pursuant to registration rights
granted by us to the selling stockholders in February 1999 in connection with
their acquisition of the prepaid warrants and the incentive warrants.
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<PAGE> 50
The prepaid warrants are not exercisable until August 19, 1999 and
thereafter only in 25% cumulative quarter-annual installments. For purposes of
presenting information concerning the sale of the underlying shares of common
stock by the selling stockholders, we have assumed that the prepaid warrants
were exercised in full on April 6, 1999 and that the number of shares issuable
upon such exercise would have been approximately 5,218,680 shares based on an
exercise price (as described below) of $2.11 per share. Pursuant to an agreement
with the holders of the prepaid warrants, we agreed to register twice such
number of shares. The actual number of shares being sold by the selling
stockholders may be less than 10,437,361 shares (to a minimum of 2,736,318
shares) to the extent the exercise price of the prepaid warrants is greater than
$1.06 per share. If the exercise price of the prepaid warrants is lower than
$1.06 per share, we have agreed to file another registration statement to
register additional shares for the account of the selling stockholders.
The exercise price of the prepaid warrants is equal to the lower of (i)
95% of the average of the three lowest closing bid prices of the common stock
for the 20 trading days prior to the date of exercise (which 20-day trading
period shall increase by one day for each 30 day period subsequent to August 19,
1999 for which the exercise price is computed) or (ii) $4.02.
We believe, based on information supplied by the following persons, that
except as noted, the persons named in this table have sole voting and investment
power with respect to all shares of common stock which they beneficially own.
The last column in this table assumes the sale of all of our shares offered by
this prospectus.
<TABLE>
<CAPTION>
Shares
Owned Common Stock
Prior to Offered By Shares Owned
Names of Selling Offering Beneficial After Offering
-------- --------------
Stockholders Number Owner Number Percent
- ---------------- --------- ------------ ------ -------
<S> <C> <C> <C> <C>
Fisher Capital Ltd. 4,562,272(1) 4,562,272(1) - -
Omnicron Partners Ltd. 1,002,697(2) 1,002,697(2) - -
Wingate Capital Ltd. 2,456,608(3) 2,456,608(3) - -
Zanett Lombardier Ltd. 3,008,091(4) 3,008,091(4) - -
</TABLE>
48
<PAGE> 51
<TABLE>
<S> <C> <C> <C> <C>
Claudio Guazzoni 161,411(5) 161,411(5) - -
David McCarthy 161,411(5) 161,411(5) - -
Samuel L. Milbank 107,609(5) 107,609(5) - -
Pacific Alliance Ltd. 94,484(5) 94,484(5) - -
Heriot Holdings Limited 105,000(5) 105,000(5) - -
</TABLE>
- ----------
(1) Represents 4,317,272 shares of common stock underlying the prepaid
warrants and 245,000 shares of common stock underlying the incentive
warrants.
(2) Represents 948,851 shares of common stock underlying the prepaid warrants
and 53,846 shares of common stock underlying the incentive warrants.
(3) Represents 2,324,685 shares of common stock underlying the prepaid
warrants and 131,923 shares of common stock underlying the incentive
warrants.
(4) Represents 2,846,553 shares of common stock underlying the prepaid
warrants and 161,538 shares of common stock underlying the incentive
warrants.
(5) Represents shares of common stock underlying the incentive warrants.
The sale of the selling stockholders' shares may be effected from time to
time in transactions, which may include block transactions by or for the account
of the selling stockholders, in the over-the-counter market or in negotiated
transactions, or through the writing of options on the selling stockholders'
shares, a combination of these methods of sale, or otherwise. Sales may be made
at fixed prices which may be changed, at market prices prevailing at the time of
sale, or at negotiated prices.
The selling stockholders may effect the transactions by selling their
shares directly to purchasers, through broker-dealers acting as agents for the
selling stockholders, or to broker-dealers who may purchase shares as principals
and thereafter sell the selling stockholders' shares from time to time in the
over-the-counter market, in negotiated transactions, or otherwise. These
broker-dealers, if any, may receive compensation in the form of discounts,
concessions or commissions from the selling stockholders and/or the purchaser
for whom such
49
<PAGE> 52
broker-dealers may act as agents or to whom they may sell as principals or both,
which compensation as to a particular broker-dealer may be in excess of
customary commissions.
The selling stockholders and broker-dealers, if any, acting in connection
with these sales might be deemed to be "underwriters" within the meaning of
section 2(11) of the Securities Act. Any commission they receive and any profit
upon the resale of the securities might be deemed to be underwriting discounts
and commissions under the Securities Act.
Sales of any shares of common stock by the selling stockholders may
depress the price of the common stock in any market that may develop for the
common stock.
Any securities covered by this prospectus that qualify for sale pursuant
to SEC Rule 144 under the Securities Act may be sold under that Rule rather than
pursuant to this prospectus.
There can be no assurance that the selling stockholders will sell any or
all of the shares of common stock covered by this prospectus.
LEGAL MATTERS
The validity of the shares of our common stock covered by this prospectus
has been passed upon by Cooperman Levitt Winikoff Lester & Newman, P.C., New
York, New York. Certain members of this firm own shares of our common stock.
EXPERTS
The consolidated financial statements of Robotic Vision Systems, Inc. and
subsidiaries as of September 30, 1998 and 1997, and for each of the three years
in the period ended September 30, 1998, and the related financial statement
schedule included in this prospectus have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their reports appearing herein, and has been
so included in reliance upon the report of such firm given upon their authority
as experts in accounting and auditing.
50
<PAGE> 53
AVAILABLE INFORMATION
We have filed a registration statement, including exhibits, schedules and
amendments, with the SEC pursuant to the Securities Act with respect to this
offering of our securities. This prospectus is part of the registration
statement but does not contain all of the information in the registration
statement. We refer you to the registration statement for further information
about us, our securities and this offering. Statements in this prospectus about
documents filed as exhibits to the registration statement are necessarily
summaries of these documents, and each of these statements is qualified in its
entirety by reference to the copy of the applicable document filed with the SEC.
The registration statement is available for inspection at the SEC's Public
Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. The public may
obtain information about the operation of the Public Reference Room by calling
the SEC at 1-800-SEC-0330. In addition, the SEC maintains an Internet site that
contains the registration statement. The address of the SEC's Internet site is
http://www.sec.gov.
51
<PAGE> 54
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULE
Page
----
Independent Auditors' Report F-2
Consolidated Balance Sheets as
of September 30, 1998 and 1997 F-3
Consolidated Statements of Operations
for the Years Ended September 30,
1998, 1997 and 1996 F-4
Consolidated Statements of Stockholders'
Equity for the Years Ended September 30,
1998, 1997 and 1996 F-5
Consolidated Statements of Cash Flows for
the Years Ended September 30, 1998,
1997 and 1996 F-6
Notes to Consolidated Financial Statements
for the Years Ended September 30, 1998,
1997 and 1996 F-7
Schedule II: Valuation and Qualifying Accounts F-23
Condensed Consolidated Balance Sheets as of December 31,
1998 (unaudited) and September 30, 1998 F-24
Condensed Consolidated Statements of Operations for the
Three Months Ended December 31, 1998 and
1997 (unaudited) F-25
Condensed Consolidated Statements of Cash Flows for the
Three Months Ended December 31, 1998 and
1997 (unaudited) F-26
Notes to Condensed Consolidated Financial Statements for the Three
Months Ended December 31, 1998 and 1997 (unaudited) F-27
F-1
<PAGE> 55
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Robotic Vision Systems, Inc. and subsidiaries:
We have audited the accompanying consolidated balance sheets of Robotic
Vision Systems, Inc. and subsidiaries (the "Company") as of September 30, 1998
and 1997, and the related consolidated statements of income, stockholders'
equity, and cash flows for each of the three years in the period ended September
30, 1998. Our audits included the financial statement schedule listed index on
page F-1. These financial statements and financial statement schedule are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements and financial statement schedule based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements 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 audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of the Company at September 30,
1998 and 1997, and the results of their operations and their cash flows for each
of the three years in the period ended September 30, 1998 in conformity with
generally accepted accounting principles. Also, in our opinion, such financial
statement schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.
/s/ Deloitte & Touche LLP
Boston, Massachusetts
January 18, 1999
F-2
<PAGE> 56
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1998 AND 1997
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents............................................................... $ 2,421 $ 8,811
Accounts receivable, net................................................................ 32,367 50,563
Inventories............................................................................. 36,213 39,095
Deferred income taxes................................................................... -- 10,643
Prepaid expenses and other current assets............................................... 1,226 1,429
---------- ----------
Total current assets................................................................ 72,227 110,541
Plant and equipment, net................................................................ 17,591 14,507
Deferred income taxes................................................................... 8,820 --
Goodwill, net of accumulated amortization of $840 and $290.............................. 5,847 6,207
Other assets............................................................................ 17,086 8,668
---------- ----------
$ 121,571 $ 139,923
---------- ----------
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable and current portion of long-term debt..................................... $ 38,038 $ 10,623
Accounts payable........................................................................ 21,388 23,320
Accrued expenses and other current liabilities.......................................... 21,073 19,623
Advance contract payments received...................................................... 1,216 1,816
---------- ----------
Total current liabilities........................................................... 81,715 55,382
Long-term debt.......................................................................... 3,059 6,414
Deferred income taxes................................................................... -- 1,823
Other liabilities....................................................................... -- 727
---------- ----------
Total liabilities................................................................... 84,774 64,346
---------- ----------
Commitments and contingencies (Note 11).................................................
Stockholders' Equity:
Common stock, $0.01 par value; shares authorized 50,000 shares issued and outstanding;
1998--24,870 and 1997--24,438....................................................... 249 244
Additional paid-in capital............................................................ 168,493 166,623
Accumulated deficit................................................................... (131,962) (91,457)
Cumulative translation adjustment..................................................... 17 167
---------- ----------
Total stockholders' equity.......................................................... 36,797 75,577
---------- ----------
$ 121,571 $ 139,923
---------- ----------
---------- ----------
</TABLE>
See notes to consolidated financial statements
F-3
<PAGE> 57
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED SEPTEMBER 30, 1998, 1997 AND 1996
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Revenues..................................................................... $ 169,007 $ 169,342 $ 153,975
Cost of revenues............................................................. 96,443 92,412 82,108
Inventory provisions......................................................... 16,562 1,435 3,052
---------- ---------- ----------
Gross profit................................................................. 56,002 75,495 68,815
---------- ---------- ----------
Operating costs and expenses:
Research and development expenses............................................ 28,121 25,465 21,834
Selling, general and administrative expenses................................. 58,877 48,259 44,861
Merger expenses.............................................................. 623 69 2,661
Non-recurring charges........................................................ 6,615 -- --
Interest income.............................................................. (92) (767) (1,148)
Interest expense............................................................. 2,363 1,076 926
---------- ---------- ----------
Total operating costs and expenses....................................... 96,507 74,102 69,134
---------- ---------- ----------
Income (loss) before income taxes............................................ (40,505) 1,393 (319)
Provision (benefit) for income taxes......................................... -- 745 (1,154)
---------- ---------- ----------
Net income (loss)............................................................ $ (40,505) $ 648 $ 835
---------- ---------- ----------
---------- ---------- ----------
Net income (loss) per share:
Basic.................................................................... $ (1.65) $ 0.03 $ 0.04
Diluted.................................................................. $ (1.65) $ 0.03 $ 0.04
Weighted Average shares:
Basic.................................................................... 24,613 23,718 22,092
Diluted.................................................................. 24,613 23,967 23,385
</TABLE>
See notes to consolidated financial statements
F-4
<PAGE> 58
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED SEPTEMBER 30, 1998, 1997 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK
----------------------- ADDITIONAL UNREALIZED CUMULATIVE
NUMBER PAID-IN ACCUMULATED DEFERRED GAIN ON TRANSLATION
OF SHARES AMOUNT CAPITAL DEFICIT COMPENSATION INVESTMENTS ADJUSTMENT
---------- ----------- ----------- ------------ ----------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, OCTOBER 1,
1995.................... 20,440 $ 204 $ 138,763 $ (94,766) $ (60) $ -- $ 208
Shares issued in
conjunction with the
exercise of stock
options and warrants.... 1,511 15 5,821 -- -- -- --
Shares issued in
connection with private
placement of subsidiary,
net of offering costs... 1,233 12 10,116 -- -- -- --
Shares issued in
connection with the
acquisition of Northeast
Robotics, Inc, accounted
for as a purchase....... 139 1 2,675 -- -- -- --
Warrants issued for
professional services... -- -- 74 -- -- -- --
Other stock
transactions............ 9 1 158 -- 60 -- --
Change in year end of
pooled companies........ -- -- -- (618) -- -- --
Change in net unrealized
holding gains........... -- -- -- -- -- 147 --
Translation adjustment.... -- -- -- -- -- -- (33)
Net income................ -- -- -- 835 -- -- --
---------- ----- ----------- ------------ --- ----- -----
BALANCE, SEPTEMBER 30,
1996.................... 23,332 233 157,607 (94,549) -- 147 175
Shares issued in
connection with the
exercise of stock
options and warrants.... 384 4 1,839 -- -- -- --
Other stock
transactions............ (104) (1) (488) -- -- -- --
Shares issued in
connection with private
placement of subsidiary,
net of offering costs... 826 8 7,665 -- -- -- --
Change in year end of
pooled companies........ -- -- -- 2,444 -- -- --
Change in net unrealized
holding gains........... -- -- -- -- -- (147) --
Translation adjustment.... -- -- -- -- -- -- (8)
Net income................ -- -- -- 648 -- -- --
---------- ----- ----------- ------------ --- ----- -----
BALANCE, SEPTEMBER 30,
1997.................... 24,438 244 166,623 (91,457) -- -- 167
Shares issued in
connection with the
exercise of stock
options and warrants.... 161 2 373 -- -- -- --
Shares issued in
connection with license
agreement and
non-competition
agreement............... 271 3 1,497 -- -- -- --
Translation adjustment.... -- -- -- -- -- -- (150)
Net loss.................. -- -- -- (40,505) -- -- --
---------- ----- ----------- ------------ --- ----- -----
BALANCE, SEPTEMBER 30,
1998.................... 24,870 $ 249 $ 168,493 $ (131,962) $ -- $ -- $ 17
---------- ----- ----------- ------------ --- ----- -----
---------- ----- ----------- ------------ --- ----- -----
<CAPTION>
TOTAL
STOCKHOLDERS'
EQUITY
-------------
<S> <C>
BALANCE, OCTOBER 1,
1995.................... $ 44,349
Shares issued in
conjunction with the
exercise of stock
options and warrants.... 5,836
Shares issued in
connection with private
placement of subsidiary,
net of offering costs... 10,128
Shares issued in
connection with the
acquisition of Northeast
Robotics, Inc, accounted
for as a purchase....... 2,676
Warrants issued for
professional services... 74
Other stock
transactions............ 219
Change in year end of
pooled companies........ (618)
Change in net unrealized
holding gains........... 147
Translation adjustment.... (33)
Net income................ 835
-------------
BALANCE, SEPTEMBER 30,
1996.................... 63,613
Shares issued in
connection with the
exercise of stock
options and warrants.... 1,843
Other stock
transactions............ (489)
Shares issued in
connection with private
placement of subsidiary,
net of offering costs... 7,673
Change in year end of
pooled companies........ 2,444
Change in net unrealized
holding gains........... (147)
Translation adjustment.... (8)
Net income................ 648
-------------
BALANCE, SEPTEMBER 30,
1997.................... 75,577
Shares issued in
connection with the
exercise of stock
options and warrants.... 375
Shares issued in
connection with license
agreement and
non-competition
agreement............... 1,500
Translation adjustment.... (150)
Net loss.................. (40,505)
-------------
BALANCE, SEPTEMBER 30,
1998.................... $ 36,797
-------------
-------------
</TABLE>
See notes to consolidated financial statements
F-5
<PAGE> 59
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 30, 1998, 1997 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss)................................................................... $ (40,505) $ 648 $ 835
Adjustments to reconcile net income (loss) to net cash (used in) provided by
operating activities:
Deferred income taxes............................................................. -- (93) (2,881)
Depreciation and amortization..................................................... 8,769 5,895 3,938
Gain on disposal of business...................................................... -- (812) --
Other............................................................................. (164) (218) 1,318
Changes in operating assets and liabilities (net of effects of business acquired):
Accounts receivable............................................................. 18,196 (20,084) (7,304)
Inventories..................................................................... 2,882 (14,093) (6,781)
Prepaid expense and other current assets........................................ 203 (514) (873)
Other assets.................................................................... (7,024) (4,811) (2,845)
Accounts payable................................................................ (1,932) 10,709 2,433
Accrued expenses and other current liabilities.................................. 1,450 4,732 3,297
Advanced contract payments received............................................. (600) (10) (674)
Other liabilities............................................................... -- (82) (164)
--------- --------- ---------
Net cash (used in) provided by operating activities............................. (18,725) (18,733) (9,701)
--------- --------- ---------
INVESTING ACTIVITIES:
Proceeds from maturity of investments............................................... -- 2,319 1,000
Additions to plant and equipment, net............................................... (9,137) (7,915) (6,972)
Proceeds from sale of business...................................................... -- 952 --
Payment for purchase of business.................................................... -- (3,144) (77)
--------- --------- ---------
Net cash used in investing activities........................................... (9,137) (7,788) (6,049)
--------- --------- ---------
FINANCING ACTIVITIES:
Proceeds from the issuance of common stock and warrants -- private equity placement
(less offering costs)............................................................. -- 7,673 10,093
Proceeds from the exercise of stock options and warrants............................ 375 1,271 2,428
Purchase of treasury stock.......................................................... -- (650) --
Net proceeds from (payments of) short-term borrowings............................... 28,911 (2,833) 9,752
Proceeds from long-term borrowings.................................................. -- 8,000 245
Repayment of long-term borrowings................................................... (7,828) (1,864) (5,918)
--------- --------- ---------
Net cash provided by financing activities....................................... 21,458 11,597 16,600
--------- --------- ---------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS........................ 14 189 71
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS................................ (6,390) (14,735) 921
CASH AND CASH EQUIVALENTS:
Beginning of year................................................................. 8,811 23,546 18,859
--------- --------- ---------
End of year....................................................................... $ 2,421 $ 8,811 $ 19,780
--------- --------- ---------
--------- --------- ---------
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid....................................................................... $ 2,311 $ 1,027 $ 841
--------- --------- ---------
--------- --------- ---------
Taxes paid.......................................................................... 244 $ 218 $ 1,415
--------- --------- ---------
--------- --------- ---------
NONCASH INVESTING AND FINANCING ACTIVITIES:
Issuance of common stock and subordinated note payable in connection with technology
license agreement and non-competition agreement................................... $ 3,750 -- --
--------- --------- ---------
--------- --------- ---------
Income tax benefit relating to the exercise of stock options........................ 16 $ 572 $ 3,408
--------- --------- ---------
--------- --------- ---------
Liabilities incurred in connection with acquisition of business..................... -- $ 902 --
--------- --------- ---------
--------- --------- ---------
Property and equipment acquired under capital leases................................ -- $ 22 $ 99
--------- --------- ---------
--------- --------- ---------
Issuance of common stock to acquire Northeast Robotics, Inc......................... -- -- $ 2,676
--------- --------- ---------
--------- --------- ---------
</TABLE>
See notes to consolidated financial statements
F-6
<PAGE> 60
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 1998, 1997 AND 1996
1. BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
a. DESCRIPTION OF BUSINESS--Robotic Vision Systems, Inc. ("RVSI") and
subsidiaries (the "Company") designs, manufactures, markets and sells
automated one dimensional ("1-D"), two dimensional ("2-D") and three
dimensional ("3-D") machine vision based products and systems for
inspection, measurement and identification, and is a leader in advanced
electro-optical sensor technology.
b. OPERATIONS--The Company incurred a loss for the fiscal year ended
September 30, 1998 primarily due to the effects of a substantial decline
in revenues resulting from a downturn in the semiconductor capital
equipment industry. Prior to the restatement of the Company's
consolidated financial statements for the acquisition of Vanguard
Automation, Inc. as a pooling of interests, the Company had been
consistently profitable, earning $8.2 million in fiscal 1997 and $9.7
million in fiscal 1996.
During fiscal 1998, management took a series of steps to reduce expenses
and restructure operations in response to this industry downturn. In the
second, third and fourth quarters of fiscal 1998, the Company instituted
workforce reductions aggregating 39%, curtailed discretionary spending
and capital expenditures, combined its Acuity CiMatrix operations and
sold the assets and technology of its aircraft safety product line (which
did not have significant operations) in December 1998. Concurrently, the
Company has successfully introduced a range of new products designed to
broaden sales beyond the semiconductor industry.
In March 1998, the Company entered into a new bank financing agreement
(Note 9) that contains restrictive covenants with which the Company has
not been in compliance. All instances of noncompliance have been waived
by the banks through January 29, 1999; however, absent continuation of
waivers, the Company will be in noncompliance at the end of the waiver
period.
Management continues to control expenses, inventory levels and capital
expenditures; is working with existing lenders to amend the Company's
existing bank financing agreement to provide new covenants; and is
pursuing a number of new debt or equity financing alternatives. The
Company has signed a term sheet with an institutional investor for a
preferred equity financing which includes a beneficial conversion feature
and also provides for warrants. Proceeds of the financing will be drawn
down in two rounds with the first round available immediately for $6.0
million and the second round available in three months for $6.8 million.
The Company expects to complete the first round of this transaction in
the near term. Management believes that through a combination of proceeds
from the preferred equity financing, obtaining additional external
financing, its domestic banks continuing to waive non-compliance of
restrictive covenants and cash flow from operating activities, the
Company will have sufficient liquidity through at least September 30,
1999 to fund its cash requirements (See unaudited subsequent event Note
17).
c. PRINCIPLES OF CONSOLIDATION--The consolidated financial statements
include the financial statements of Robotic Vision Systems, Inc. and its
subsidiaries, all of which are wholly-owned. All significant intercompany
transactions and balances have been eliminated in consolidation. The
effects of changes in fiscal years of pooled companies (Vanguard
Automation, Inc in fiscal 1998 and Systemation Engineered Products, Inc.
and Computer Identics in fiscal 1996) are recorded as adjustments to
accumulated deficit.
d. REVENUES AND COST OF REVENUES--The Company recognizes revenue on its
standard electronic inspection and measurement products upon shipment.
Revenue from the licensing of software is recognized when the software is
delivered if collectibility is probable and there are no significant
vendor obligations. Engineering service and support revenue is recognized
when such
F-7
<PAGE> 61
1. BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
services are rendered. Warranty costs associated with products sold with
warranty protection, as well as other post-contract support obligations,
are estimated based on the Company's historical experience and recorded
in the period the product is sold.
e. CASH AND CASH EQUIVALENTS--Cash and cash equivalents includes money
market accounts and certain debt securities issued by the United States
government purchased with an original maturity of three months or less.
f. INVENTORIES--Inventories are stated at the lower of cost (using the
first-in, first-out cost flow assumption) or market.
g. PLANT AND EQUIPMENT--Plant and equipment is recorded at cost less
accumulated depreciation and amortization. Depreciation is computed by
the straight-line method over estimated lives ranging from two to eight
years. Leasehold improvements are amortized over the lesser of their
respective estimated useful lives or lease terms.
h. INTANGIBLE ASSETS--Goodwill is being amortized over 15 years; a
technology license and non-competition agreement are being amortized over
10 years. The Company reviews its long-lived assets, including goodwill
and other identifiable intangibles for impairment whenever events or
changes in circumstances indicate that the carrying amount of the assets
may not be fully recoverable.
i. SOFTWARE DEVELOPMENT COSTS--Software development costs are capitalized
in accordance with SFAS No. 86. Capitalized software development costs
are amortized primarily over a five-year period, which is the estimated
useful life of the software. Amortization begins in the period in which
the related product is available for general release to customers.
j. RESEARCH AND DEVELOPMENT COSTS--The Company charges research and
development costs for Company-funded projects to operations as incurred.
Research and development costs which are reimbursable under
customer-funded contracts are treated as contract costs.
k. INCOME TAXES--The Company accounts for income taxes under the provisions
of SFAS No. 109, "Accounting for Income Taxes," which requires
recognition of deferred tax assets and liabilities for the expected
future tax consequences of events that have been included in the
Company's consolidated financial statements or tax returns. Under this
method, deferred tax assets and liabilities are determined based on the
differences between the financial accounting and tax bases of assets and
liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse.
l. FOREIGN CURRENCY TRANSLATION--Assets and liabilities of the Company's
European subsidiaries are translated at the exchange rate in effect at
the balance sheet date. Income statement accounts are translated at the
average exchange rate for the year. The resulting translation adjustments
are excluded from operations and accumulated as a separate component of
stockholders' equity. Transaction gains (losses) are included in net
income and totaled $106,000, $(267,000) and $(52,000) in 1998, 1997 and
1996, respectively.
m. NET INCOME (LOSS) PER COMMON SHARE--In 1998, the Company adopted
Statement of Financial Accounting Standards No. 128, Earnings Per Share
(SFAS 128). Under SFAS 128, basic income (loss) per common share is
computed using the weighted average number of common shares outstanding
during each year. Diluted net income per common share reflects the effect
of the Company's outstanding options (using the treasury stock method),
except where such options would be anti-dilutive. Prior year's net income
per share have been restated to conform to SFAS 128.
F-8
<PAGE> 62
1. BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
n. FAIR VALUE OF FINANCIAL INSTRUMENTS--The following methods and
assumptions were used to estimate the fair value of each class of
financial instruments:
a) Cash and Cash Equivalents--The carrying amounts approximate fair
value because of the short maturity of these instruments.
b) Receivables--The carrying amount approximates fair value because of
the short maturity of these instruments.
c) Debt--The carrying amounts approximate fair value based on borrowing
rates currently available to the Company for loans with similar
terms.
o. USE OF ESTIMATES--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
The Company's most significant estimates relate to the deferred income
tax valuation allowance, allowance for doubtful accounts receivable,
reserve for excess and obsolete inventory, and warranty reserve.
p. RECLASSIFICATIONS--Certain amounts in the 1996 and 1997 financial
statements have been reclassified to conform with the 1998 presentation.
q. RECENT ACCOUNTING PRONOUNCEMENTS--In June 1997, the Financial Accounting
Standards Board ("FASB") issued SFAS No. 130, "Reporting Comprehensive
Income", and SFAS No. 131, "Disclosure about Segments of an Enterprise
and Related Information", both of which will be effective for the Company
in fiscal year 1999. SFAS No. 130 establishes standards for the reporting
and display of comprehensive income and its components (revenues,
expenses, gains and losses) in a full set of general purpose financial
statements. SFAS No. 131 establishes standards for the way that public
business enterprises report selected information about operating
segments. SFAS No. 131 also establishes standards for related disclosures
about products and services, geographic areas, and major customers. The
implementation of SFAS Nos. 130 and 131 will require some additional
disclosures in the Company's consolidated financial statements for the
year ended September 30, 1999.
In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures
about Pensions and Other Postretirement Benefits", which the Company is
required to implement no later than fiscal year 1999. SFAS No. 132 is an
amendment to SFAS Nos. 87, 88 and 106. The statement standardizes
disclosure requirements for pension and postretirement benefits to the
extent practicable, requires additional information on changes in the
benefit obligations and fair values of plan assets that will facilitate
financial analysis and eliminates certain other disclosures. The
implementation of SFAS No. 132 is not expected to have a material effect
on the Company's consolidated financial statements.
In April 1998, the Accounting Standards Executive Committee issued
Statement of Position ("SOP") 98-5, "Reporting on the Costs of Start-Up
Activities", which the Company is required to implement no later than
fiscal year 2000. SOP 98-5 establishes standards that require start-up
and organization costs to be expensed as incurred. The implementation of
SOP 98-5 is not expected to have a material effect on the Company's
consolidated financial statements.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities", and is effective for the Company in
the first quarter of fiscal year 2000. SFAS
F-9
<PAGE> 63
1. BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
No. 133 establishes accounting and reporting standards for derivative
instruments, including derivative instruments embedded in other
contracts, and for hedging activities. The Company believes the adoption
of SFAS No. 133 will not have a material effect on its consolidated
financial statements.
2. ACQUISITIONS
a. VANGUARD AUTOMATION, INC.
On December 9, 1997, the Company acquired the outstanding shares of
Vanguard Automation, Inc. ("Vanguard") for approximately 3,391,000
shares of the Company's common stock, having a market value at the date
of the merger of approximately $45,776,000. Outstanding Vanguard stock
options were converted into stock options to purchase approximately
152,000 shares of the Company's common stock. Outstanding Vanguard
warrants were converted into warrants to purchase approximately 182,000
shares of the Company's common stock. Vanguard produces and markets
automated manufacturing equipment used in the assembly of certain types
of semiconductor packaging processes, including ball grid array and chip
scale packages. This acquisition has been accounted for as a pooling of
interests and, accordingly, the consolidated financial statements have
been restated to include the accounts of Vanguard for all periods
presented. Expenses of $623,000, relating primarily to investment
banking, legal and accounting fees, were incurred relating to this
merger and charged to expense in fiscal 1998.
The accompanying September 30, 1996 consolidated financial statements
include Vanguard's amounts for the years ended December 31, 1996. The
accompanying consolidated financial statements for the year ended
September 30, 1997 include the operations of Vanguard on a common fiscal
year. Vanguard's net loss for the period October 1, 1996 through
December 31, 1996 of $2,444,000, included twice in the accompanying
consolidated statements of operations for the fiscal years ended
September 30, 1997 and 1996 as a result of conforming fiscal years, has
been included as an adjustment to consolidated accumulated deficit in
fiscal 1997.
Detailed below is the effect on the Company's results of operations for
fiscal 1997 and fiscal 1996 as a result of the Company's acquisition of
Vanguard.
<TABLE>
<CAPTION>
(In thousands, except per share amounts) RVSI VANGUARD ELIMINATIONS COMBINED
- ---------------------------------------------- ---------- ----------- ------------- ----------
<S> <C> <C> <C> <C>
1997
Revenues...................................... $ 152,103 $ 18,218 $ (979) $ 169,342
Net income (loss)............................. 8,245 (7,511) (86) 648
Net income per share.......................... 0.38 0.03
1996
Revenues...................................... $ 143,540 $ 10,977 $ (542) $ 153,975
Net income (loss)............................. 9,726 (8,851) (40) 835
Net income per share.......................... 0.45 0.04
</TABLE>
b. TRIGON
On June 30, 1997, the Company acquired Trigon Technologies, Inc.
("Trigon"), a privately owned company located in Farmington Hills,
Michigan. Trigon markets a line of 2-D machine vision products for the
semiconductor industry. The purchase price was $3,000,000 in cash plus
contingent consideration based upon the sales level of certain products
sold by Trigon, over a five-year period.
F-10
<PAGE> 64
2. ACQUISITIONS (CONTINUED)
This acquisition has been accounted for as a purchase and, accordingly,
the results of Trigon are included in the consolidated statements of
operations of the Company since the date of acquisition and the purchase
price (including acquisition costs) has been allocated to net assets
acquired based upon their fair values. Goodwill relating to the
acquisition of $2,997,000 is being amortized over 15 years. The
historical results of operations of Trigon were not material to the
operations of the Company.
c. SYSTEMATION ENGINEERED PRODUCTS, INC.
On October 1, 1996, the Company acquired the outstanding shares of
Systemation Engineered Products, Inc. ("SEP") for 1,740,000 shares of
the Company's common stock, having a market value at the date of the
merger of approximately $22,838,000. SEP designs manufactures, markets
and sells specialized high speed production machinery for the
electronics component industry. SEP's product lines include tape and
reel packaging equipment and automatic optical inspection systems. This
acquisition has been accounted for as a pooling of interests and,
accordingly, the consolidated financial statements have been restated to
include the accounts of SEP for all periods presented. The accompanying
consolidated financial statements for the years ended September 30,
1998, 1997 and 1996 include the operations of SEP on a common fiscal
year. Expenses of $904,000 were incurred related to this merger.
d. COMPUTER IDENTICS CORPORATION
On August 30, 1996, the Company acquired the outstanding shares of
Computer Identics Corporation ("CI") for approximately 2,127,000 shares
of the Company's common stock, having a market value at the date of the
merger of approximately $30,580,000. Outstanding CI stock options were
converted into options to purchase approximately 186,000 shares of the
Company's common stock. Outstanding CI warrants were converted into
warrants to purchase approximately 39,000 shares of the Company's common
stock. CI designs, manufactures, markets and sells standard barcode
products, data collection networks and systems for data collection and
material handling/industrial markets. This acquisition has been
accounted for as a pooling of interests and accordingly, the
consolidated financial statements have been restated to include the
accounts of CI for all periods presented. Expenses of $1,547,000 were
incurred related to this merger.
e. NORTHEAST ROBOTICS, INC.
On May 30, 1996, the Company consummated a merger with Northeast
Robotics, Inc. ("NER"), a privately owned company located in New Boston,
New Hampshire, pursuant to which NER became a wholly owned subsidiary of
the Company (the "NER Merger"). NER markets a line of patented
illumination products to perform reliably in difficult imaging
applications involving highly reflective or uneven surfaces. As a
consequence of the NER Merger, the Company issued approximately 139,000
shares of its common stock (which had a market value of approximately
$2,676,000 on the date the NER Merger was consummated) to the
shareholders of NER in exchange for all of the outstanding shares of NER
common stock.
This acquisition has been accounted for as a purchase and, accordingly,
the results of NER are included in the consolidated statements of
operations of the Company since the date of acquisition and the purchase
price (including acquisition costs) has been allocated to net assets
acquired based upon their fair values. Goodwill relating to the
acquisition of $2,688,000 is being amortized over 15 years. The
historical results of operations of NER were not material to the
operations of the Company.
f. INTERNATIONAL DATA MATRIX, INC.
F-11
<PAGE> 65
2. ACQUISITIONS (CONTINUED)
On October 23, 1995, the Company acquired the outstanding shares of
International Data Matrix, Inc. ("IDM") for approximately 370,000 shares
of the Company's common stock, having a market value at the date of the
merger of approximately $8,183,000. IDM was a manufacturer and supplier
of two dimensional bar code reading systems. This acquisition has been
accounted for as a pooling of interests and accordingly, the
consolidated financial statements have been restated to include the
accounts of IDM for all periods presented. Expenses of $445,000 were
incurred related to this merger.
3. ACCOUNTS RECEIVABLE
Accounts receivable at September 30, 1998 and 1997 consisted of the
following:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------------
<S> <C> <C>
1998 1997
--------- ---------
Billed accounts receivable...................................................... $ 30,923 $ 47,638
Unbilled accounts receivable.................................................... 2,444 5,641
--------- ---------
Total........................................................................... 33,367 53,279
Less allowance for doubtful accounts receivable................................. (1,000) (2,716)
--------- ---------
Accounts receivables, net....................................................... $ 32,367 $ 50,563
--------- ---------
--------- ---------
</TABLE>
Unbilled receivables primarily relate to sales recorded on standard products
which have been shipped, but have not yet been finally accepted by the
customer. The Company has no significant remaining obligations relating to
these unbilled receivables and collectibility is probable. The Company
believes that all of its unbilled receivables at September 30, 1998 will be
billed and collected during the next twelve months.
4. INVENTORIES
Inventories at September 30, 1998 and 1997 consisted of the following:
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
(IN THOUSANDS)
Raw materials................................................................... $ 17,124 $ 20,638
Work in process................................................................. 10,429 13,158
Finished goods.................................................................. 8,660 5,299
--------- ---------
Total....................................................................... $ 36,213 $ 39,095
--------- ---------
--------- ---------
</TABLE>
Inventory Provisions -- During the third and fourth quarters of fiscal 1998,
the Company took provisions of $4.5 million and $12.1 million, respectively,
primarily for excess and obsolete inventories related principally to its
semiconductor inspection and handling equipment. These provisions largely
reflected reduced demand of older generation products as a result of the
severe semiconductor industry downturn. These amounts have been recorded as
"inventory provisions" as part of the presentation of cost of sales in the
accompanying consolidated financial statements.
F-12
<PAGE> 66
5. INCOME TAXES
The components of income (loss) before income tax provision (benefit), for
the fiscal years ended September 30, 1998, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---------- --------- ---------
<S> <C> <C> <C>
(IN THOUSANDS)
Domestic................................................................ $ (36,758) 2,114 $ (118)
Foreign................................................................. (3,747) $ (721) $ (201)
---------- --------- ---------
Total............................................................... $ (40,505) $ 1,393 $ (319)
---------- --------- ---------
---------- --------- ---------
</TABLE>
The income tax provision (benefit) for the fiscal years ended September 30,
1998, 1997 and 1996 consisted of the following:
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
(IN THOUSANDS)
Current:
Federal............................................................ $ -- $ 737 $ 4,279
State.............................................................. -- 110 1,024
Foreign............................................................ -- (9) 38
Utilization of net operating loss carryforwards.................... -- -- (3,614)
--------- --------- ---------
-- 838 1,727
--------- --------- ---------
Deferred:
Federal............................................................ (18,044) 1,187 (3,802)
State.............................................................. (2,140) 246 (465)
Change in valuation allowance...................................... 20,184 (1,526) 1,386
--------- --------- ---------
-- (93) (2,881)
--------- --------- ---------
Total.......................................................... $ -- $ 745 $ (1,154)
--------- --------- ---------
--------- --------- ---------
</TABLE>
The income tax benefits related to the exercise of stock options reduces
taxes currently payable or increases net deferred tax assets, and is
credited to additional paid-in capital.
A reconciliation between the statutory U.S. Federal income tax rate and the
Company's effective tax rate for the fiscal years ended September 30, 1998,
1997 and 1996 is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
U.S. Federal statutory rate................................................... (34.0)% 34.0% (34.0)%
Increases (reductions) due to:
State taxes--net of Federal tax benefit................................... (4.0) 13.7 223.5
Utilization of net operating loss carryforwards........................... -- -- 1,132.9
Anticipated future utilization of net operating loss carryforwards........ -- (88.9) (457.1)
Net operating loss not producing current tax benefits..................... 34.6 203.5 985.3
Exempt income of foreign sales corporation................................ (55.1) (6.9)
Worthless stock deduction relating to liquidation of foreign
subsidiaries............................................................ (55.1)
Other--net................................................................ 3.4 1.4 60.3
--------- --------- ---------
Total................................................................. 0.0% 53.5% (361.8)%
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-13
<PAGE> 67
5. INCOME TAXES (CONTINUED)
The net deferred tax asset at September 30, 1998, 1997 and 1996 is comprised
of the following:
<TABLE>
<CAPTION>
1998 1997 1996
---------- --------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Deferred Tax Assets (Liabilities):
- -------------------------------------------------------------------
Net operating loss carryforwards................................... $ 27,257 $ 17,021 $ 16,941
Tax credit carryforwards........................................... 2,315 2,655 2,853
Accrued liabilities................................................ 2,754 2,277 1,881
Inventories........................................................ 6,899 2,427 2,712
Receivables........................................................ 418 1,078 486
Property and equipment............................................. 361 (129) (367)
Merger expenses.................................................... 329 271 706
Software development costs......................................... (3,538) (2,043) (543)
Other.............................................................. 4 176 (75)
---------- --------- ----------
36,799 23,733 24,594
Less valuation allowance....................................... (27,979) (14,913) (16,439)
---------- --------- ----------
Total...................................................... $ 8,820 $ 8,820 $ 8,155
---------- --------- ----------
---------- --------- ----------
</TABLE>
As of September 30, 1998, the Company had U.S. Federal net operating loss
carryforwards of approximately $72,527 of which $30,420 are subject to
annual limitations because of the changes in ownership, as defined in the
Internal Revenue Code. Such loss carryforwards expire in the fiscal years
1999 through 2013. The utilization of the carryforwards to offset future tax
liabilities is dependent upon the Company's ability to generate sufficient
taxable income during the carryforward periods. The Company has recorded a
valuation allowance to reduce the net deferred tax asset to an amount that
management believes is more likely than not to be realized. The change in
the valuation allowance in fiscal 1998 relates primarily to the fiscal 1998
operating loss.
6. PLANT AND EQUIPMENT
Plant and equipment at September 30, 1998 and 1997 consisted of the
following:
<TABLE>
<CAPTION>
1998 1997
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Land............................................................................. $ 490 $ 490
Machinery and equipment.......................................................... 10,475 7,711
Furniture, fixtures and other equipment.......................................... 13,163 10,068
Demonstration equipment.......................................................... 7,531 7,334
Leasehold improvements........................................................... 2,492 1,940
--------- ---------
Total.................................................................... 34,151 27,543
Less accumulated depreciation and amortization................................... (16,560) (13,036)
--------- ---------
Plant and equipment--net................................................. $ 17,591 $ 14,507
--------- ---------
--------- ---------
</TABLE>
F-14
<PAGE> 68
7. OTHER ASSETS
Other assets at September 30, 1998 and 1997 consisted of the following:
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
(IN THOUSANDS)
Software development costs, net of accumulated amortization of $3,492 and $2,251,
respectively................................................................... $ 11,812 $ 7,233
License and non-competition agreement, net of amortization of $94................ 3,656 --
Other............................................................................ 1,618 1,435
--------- ---------
Total.................................................................... $ 17,086 $ 8,668
--------- ---------
--------- ---------
</TABLE>
Certain software development costs totaling $7,397, $4,842 and $2,630 have
been capitalized during the fiscal years ended September 30, 1998, 1997 and
1996 respectively. Amortization expense relating to software development
costs for the fiscal years ended September 30, 1998, 1997, and 1996 was
$2,072, $962 and $551, respectively.
8. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities at September 30, 1998 and
1997 consisted of the following:
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
(IN THOUSANDS)
Accrued wages and related employee benefits..................................... $ 5,948 $ 5,198
Accrued sales commissions....................................................... 5,468 4,028
Accrued warranty and other product related costs................................ 2,826 2,666
Accrued severance and non-recurring charges..................................... 2,099 --
Other........................................................................... 4,732 7,731
--------- ---------
Total................................................................... $ 21,073 $ 19,623
--------- ---------
--------- ---------
</TABLE>
Non-recurring charges -- During fiscal 1998, the Company took multiple steps
to reduce its expenses and to lower the level of revenues necessary for
break-even results of operations. These steps include a 10% workforce reduction
in April 1998, a 15% workforce reduction in June 1998 and an additional 16%
workforce reduction in September 1998, as well as curtailing discretionary
spending and capital expenditures. In June 1998, the Company combined its Acuity
2-D machine vision operations with its CiMatrix 1-D and 2-D barcode reading and
data collection operations. Primarily as a result of these steps, the Company
took a total of $6.6 million in non-recurring charges in fiscal 1998, including
$3.8 million for severance payments to approximately 400 terminated employees
(all of whom were terminated prior to September 30, 1998), $1.5 million for
costs associated with changing distributors in Asia, a $1.1 million non-cash
write-down of previously capitalized software costs associated with currently
inactive products and $0.2 million in costs associated with the consolidation of
Acuity and CiMatrix operations.
F-15
<PAGE> 69
8. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES (CONTINUED)
The components of the non-recurring charges, related fiscal 1998
expenditures and remaining liability at September 30, 1998 are detailed
below:
<TABLE>
<CAPTION>
COSTS EXPENDITURES LIABILITY
--------- ------------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Severance payments to employees............................... $ 3,787 $ 2,403 $ 1,384
Write-off of software development costs....................... 1,113 1,113 --
Costs for changes in Asia distributors........................ 1,500 1,000 500
Costs to consolidate Acuity CiMatrix operations............... 215 -- 215
--------- ------ -----------
Total....................................................... $ 6,615 $ 4,516 $ 2,099
--------- ------ -----------
--------- ------ -----------
</TABLE>
The Company expects that the balance at September 30, 1998 will be paid
during fiscal 1999.
9. NOTES PAYABLE AND LONG-TERM DEBT
Notes payable and long-term debt at September 30, 1998 and 1997 consisted of
the following:
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
(IN THOUSANDS)
Lines of credit with domestic banks (a)....................................... $ 37,500 $ 6,589
Term loan with domestic bank (a).............................................. -- 7,600
Subordinated note payable (b)................................................. 2,250 --
Note payable (c).............................................................. -- 2,000
Other borrowings.............................................................. 1,347 848
---------- ----------
Total notes payable and long-term debt................................ 41,097 17,037
Less notes payable and current portion of long-term debt...................... (38,038) (10,623)
---------- ----------
Long-term debt................................................................ $ 3,059 $ 6,414
---------- ----------
---------- ----------
</TABLE>
a. In March 1998, the Company entered into a new $37,500 revolving credit
agreement with three domestic banks, which replaced $19,500 in existing
lines of credit and $6,900 outstanding under a term loan. The new
agreement has a two-year term and bears interest at either the prime rate
or LIBOR. At September 30, 1998, the interest rate was the prime rate of
8.25%. Borrowings are collateralized by substantially all of the domestic
tangible and intangible assets of the Company. The agreement, among other
things, contains certain financial covenants, including minimum levels of
profitability, liquidity and net worth, with which the Company has not
been in compliance. The banks have waived all instances of noncompliance
through January 29, 1999; however, absent continuation of the waivers,
the Company will be in noncompliance at the expiration of the waiver
period. Accordingly, borrowings under the agreement at September 30,
1998, have been classified as current. The Company is working with its
banks to modify the revolving credit agreement.
b. The subordinated note payable to General Scanning matures in June 2003,
bears interest at prime (8.25% at September 30, 1998) and is payable in
equal quarterly installments of $281 commencing September 12, 2001.
c. The note payable for $2,000 was with a related party supplier of
Vanguard, with interest at prime. This note was repaid in June 1998.
F-16
<PAGE> 70
10. EMPLOYEE BENEFIT PLANS
DEFINED BENEFIT PLAN--The Company has a noncontributory pension plan for
employees who meet certain minimum eligibility requirements. The level of
retirement benefit is based on a formula which considers both employee
compensation and length of credited service.
Plan assets are invested in pooled bank investment accounts, and the fair
value of such assets is based on the quoted market prices of underlying
securities in such accounts. The Company funds pension plan costs based on
minimum and maximum funding criteria as determined by independent actuarial
consultants.
The components of net pension cost for the fiscal years ended September 30,
1998, 1997 and 1996 are summarized as follows:
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
(IN THOUSANDS)
Service cost--benefits earned during the period........................................... $ 286 $ 272 $ 219
Interest on projected benefit obligations................................................. 164 135 97
Estimated return on plan assets........................................................... (167) (117) (81)
Other--amortizaiton of actuarial gains and net transition asset........................... (12) (15) (23)
--------- --------- ---------
Net pension cost.................................................................. $ 271 $ 275 $ 212
--------- --------- ---------
--------- --------- ---------
</TABLE>
The funded status of the plan compared with the accrued expense included in
the Company's consolidated balance sheet at September 30, 1998 and 1997 is as
follows:
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
(IN THOUSANDS)
Fair value of plan assets...................................................................... $ 2,254 $ 1,664
--------- ---------
Actuarial present value of benefit obligation:
Accumulated benefit obligation including vested benefits of $1,753 and $1,329 in 1998 and
1997 respectively........................................................................ 2,049 1,647
Effect of projected compensation increases................................................. 570 554
--------- ---------
Projected benefit obligation for services rendered to date................................. 2,619 2,201
--------- ---------
Projected benefit obligation in excess of plan assets...................................... (365) (537)
Unrecognized net loss...................................................................... 162 358
Remaining unrecognized net transition asset being amortized over 11 years.................. -- (14)
Unrecognized prior service costs........................................................... 14 23
--------- ---------
Accrued pension costs included in accrued expenses..................................... $ (189) $ (170)
--------- ---------
--------- ---------
</TABLE>
Significant assumptions used in determining net periodic pension cost and
related pension obligations are as follows:
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Discount rate.................................................................................. 7.25% 7.50%
Rate of compenstation increase................................................................. 4.00% 4.00%
Expected long-term rate of return on assets.................................................... 8.25% 8.25%
</TABLE>
DEFINED CONTRIBUTION PLANS (in thousands)--The Company has four defined
contribution plans (the "Plans") for all eligible employees, as defined by the
Plans. The Company made matching employer contributions at various percentages
in accordance with the respective plan documents. The
F-17
<PAGE> 71
10. EMPLOYEE BENEFIT PLANS (CONTINUED)
Company incurred $747, $604 and $338 for matching employer contributions to the
Plans in 1998, 1997 and 1996, respectively.
11. COMMITMENTS AND CONTINGENCIES
OPERATING LEASES--The Company has entered into operating lease agreements
for equipment, and manufacturing and office facilities. The minimum
noncancelable scheduled rentals under these agreements are as follows (in
thousands):
<TABLE>
<CAPTION>
FISCAL YEAR ENDING SEPTEMBER 30: FACILITIES EQUIPMENT TOTAL
- -------------------------------------------------------------------------------- --------- ------------- ---------
<S> <C> <C> <C>
1999............................................................................ $ 2,813 $ 187 $ 3,000
2000............................................................................ 2,696 111 2,807
2001............................................................................ 1,767 32 1,799
2002............................................................................ 1,375 -- 1,375
2003............................................................................ 1,210 -- 1,210
Thereafter...................................................................... 7,140 -- 7,140
--------- ----- ---------
Total........................................................................... $ 17,001 $ 330 $ 17,331
--------- ----- ---------
--------- ----- ---------
</TABLE>
Rent expense for the fiscal years ended September 30, 1998, 1997 and 1996
was $3,305, $3,015 and $2,283, respectively.
On January 6, 1997, the lessor of SEP's manufacturing facility assigned the
lease to the former majority shareholder of SEP, in conjunction with the sale of
this facility to the former majority shareholder. In addition, the lease was
amended to include certain capital equipment owned by the former majority
shareholder. SEP began leasing this facility during fiscal 1996. The base annual
rental payable under the lease is $605. The lease expires in October 2011.
LITIGATION--The Company, as plaintiff, was a party to an action initiated by
the Company in the United States District Court for the Eastern District of New
York against defendant Cybo Systems, Inc. ("Cybo"), entitled Robotic Vision
Systems, Inc. v. Cybo Systems, Inc. a/k/a Cybot Systems, Inc., alleging certain
contractual breaches by Cybo arising from the Company's sale to Cybo of the
Company's welding and cutting systems business. In October 1998, this action,
including all of Cybo's remaining counterclaims against the Company, was
dismissed with prejudice by mutual agreement of the Company and Cybo and without
any payment by either party to the other, following a partial summary judgment
ruling by the Court that had dismissed substantially all of Cybo's counterclaims
against the Company.
In June 1998, RVSI and General Scanning executed a settlement agreement of
RVSI's claims arising out of General Scanning's acquisition of View Engineering,
Inc. in August 1996, RVSI claimed that General Scanning used improperly obtained
information in connection with the acquisition. General Scanning denied all such
claims. Under the settlement agreement, General Scanning has agreed not to
compete for ten years in the inspection of interconnect leads of semiconductor
packages. Under the settlement, General Scanning licensed to RVSI its 2-D and
3-D vision technology solely and exclusively for RVSI's use in the
interconnection leads. In consideration for the technology license and
non-competition agreement, RVSI agreed to pay General Scanning $3.75 million, of
which $1.50 million represents 271,493 shares of the Company's common stock and
$2.25 million in a subordinated note payable with a maturity date of five years.
The Company, as plaintiff, was a party to two actions in the United States
District Court for the Central District of California against View Engineering,
Inc. ("View"), a wholly owned subsidiary of General Scanning, Inc. ("GSI"),
alleging infringement by View of a number of the Company's patents
F-18
<PAGE> 72
11. COMMITMENTS AND CONTINGENCIES (CONTINUED)
relating to View's assembly and distribution of View's own 3-D machine vision
products. In June 1998, the Court, in the first of these actions, involving the
coplanarity inspection of ball grid array semiconductor package substrates,
found infringement by View and granted the Company's request for injunctive
relief against View. This ruling has been appealed by View to the United States
Appeals Court for the Federal Circuit. The second of these actions, involving
the "in-tray" inspection of semiconductor packages is presently expected to come
to trial in the spring of 1999.
The Company is also presently involved in other litigation matters in the
normal course of business. Based upon discussion with Company's legal counsel,
management does not expect that these matters will have a material adverse
impact on the Company's consolidated financial statements.
12. STOCKHOLDERS' EQUITY
WARRANTS OUTSTANDING--As of September 30, 1998, there were warrants
outstanding to purchase approximately 376,000 shares of the Company's common
stock with exercise prices ranging between $2.57 and $25.00 per share.
STOCK OPTION PLANS--The Company has several stock option plans which provide
for the granting of options to employees or directors at prices and terms as
determined by the Board of Directors' Stock Option Committee. Such options vest
over a period of three to five years. All options issued by the Company to date
have exercise prices which were equal to market value of the Company's common
stock at the date of grant.
Shares granted and canceled during fiscal 1998 include a stock option
re-pricing offered by the Company to existing stock option holders of
unexercised options of each of the Company's stock option plans, excluding
members of the Board of Directors and certain corporate officers. Options
granted prior to June 26, 1998 were eligible for replacement under the terms of
the stock option re-pricing. At their election, stock option holders could
surrender their unexercised stock options for a proportionately lower amount of
stock options, based on a formula, at an exercise price of $4.13 per share, the
fair value of the Company's common stock on June 26, 1998. A total of
approximately 2,169,000 options, with exercise prices ranging from $5.19 per
share to $19.50 per share, were canceled, and approximately 1,446,000 options
were reissued at an exercise price of $4.13 per share. Reissued stock options
vest 40% on the six-month anniversary of the replacement date and 60% on the
date specified in the original option grant. The expiration date of these
reissued options are as specified in the original option grant.
Shares granted and canceled during 1997 include a stock option re-pricing
offered by the Company to existing stock option holders of unexercised options
of each of the Company's stock option plans. All options that were granted prior
to July 9, 1997 were eligible for replacement. In their election, stock option
holders could surrender their unexercised stock options for a proportionately
lower amount of stock options, based upon a formula, at an exercise of $14.13,
the fair value of the Company's common stock on July 22, 1997. A total of
approximately 1,196,000 options with exercise prices ranging from $14.52 to
$26.75 were canceled, and approximately 930,000 options were reissued at an
exercise price of $14.13 per share. Reissued options vest 20 percent on the
six-month anniversary of the replacement date; 20 percent on the one-year
anniversary of the replacement date; and 20 percent annually thereafter until
fully vested. The options expire on July 22, 2002. For directors and officers of
the Company, the options will not become exercisable until the earlier of seven
years from the replacement date or until the market value of the Company's
common stock reaches the exercise price of the originally replaced option.
F-19
<PAGE> 73
12. STOCKHOLDERS' EQUITY (CONTINUED)
The following table sets forth summarized information concerning the
Company's stock options:
<TABLE>
<CAPTION>
NUMBER OF EXERCISE
SHARES PRICE RANGE
----------- ---------------
<S> <C> <C>
(IN THOUSANDS)
Options outstanding for shares of common stock at October 1, 1995.................... 1,841 $ 0.53-$38.72
Granted.......................................................................... 1,843 7.71- 26.75
Canceled or expired.............................................................. (225) 1.00- 22.50
Exercised........................................................................ (498) 0.53- 17.43
-----------
Options outstanding for shares of common stock at September 30, 1996................. 2,961 0.53- 38.72
Granted.......................................................................... 2,660 7.71- 19.00
Canceled or expired.............................................................. (1,636) 0.81- 38.72
Exercised........................................................................ (293) 0.53- 15.34
-----------
Options outstanding for shares of common stock at September 30, 1997................. 3,692 0.75- 34.42
Granted.......................................................................... 2,943 3.19- 16.94
Canceled or expired.............................................................. (2,926) 2.20- 34.42
Exercised........................................................................ (138) 0.75- 10.00
-----------
Options outstanding for shares of common stock at September 30, 1998................. 3,571 1.00- 19.38
-----------
-----------
Shares reserved for issuance at September 30, 1998................................... 1,607
-----------
-----------
</TABLE>
Weighted average option exercise price information for the fiscal years
ended September 30, 1998, 1997 and 1996 was as follows:
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Outstanding at beginning of year..................................................... $ 11.08 $ 12.14 $ 4.27
Granted during the year.............................................................. 6.68 12.86 17.94
Exercised during the year............................................................ 2.36 4.14 2.09
Canceled, terminated and expired..................................................... 11.88 16.51 16.06
Exercisable at year end.............................................................. 7.12 5.86 4.52
</TABLE>
The Company applies Accounting Principles Board Opinion No. 25, "Accounting
For Stock Issued To Employees", and related interpretations in accounting for
its option plans. Accordingly, as all options have been granted at exercise
prices equal to fair market value on the date of grant, no compensation expense
has been recognized by the Company in connection with its stock-based
compensation plans. Had compensation cost for the Company's stock option plans
been determined based upon the fair value at the grant date for awards under
these plans consistent with the methodology prescribed under Statement of
Financial Accounting Standards No. 123, "Accounting For Stock-Based
Compensation", the Company's net income (loss) and earnings per share would have
been reduced (increased) by approximately $(5,961,000), $5,032,000 and
$2,420,000 or $(0.24), $0.21 and $0.11 per share in fiscal 1998, 1997 and 1996,
respectively. The weighted average fair value of the options granted during
fiscal 1998, 1997 and 1996 is estimated at $3.99, $7.44 and $9.76 on the date of
grant (using Black-Scholes option pricing model) with the following weighted
average assumptions for fiscal 1998, 1997 and 1996, respectively: volatility of
70%, 64% and 56%, risk-free interest rate of 4.30%, 5.83% and 5.81%, and an
expected life of five years in fiscal 1998, 1997 and 1996.
F-20
<PAGE> 74
13. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
For the fiscal years ended September 30, 1998 and 1997:
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
1998
------------------------------------------
<S> <C> <C> <C> <C>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
--------- --------- --------- ---------
Revenues.............................................................. $ 53,788 $ 47,727 $ 39,090 $ 28,402
Gross profit.......................................................... 26,043 21,041 10,919 (2,001)
Net income (loss)..................................................... 3,543 (5,672) (15,433) (22,943)
Net income (loss) per share:
Basic and diluted................................................. 0.14 (0.23) (0.63) (0.92)
</TABLE>
<TABLE>
<CAPTION>
1997
------------------------------------------
<S> <C> <C> <C> <C>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
--------- --------- --------- ---------
Revenues.............................................................. $ 38,734 $ 35,755 $ 41,789 $ 53,064
Gross profit.......................................................... 17,357 15,192 19,681 23,265
Net income (loss)..................................................... (294) (767) (762) 2,471
Net income (loss) per share:
Basic and diluted................................................. (0.01) (0.03) (0.03) 0.1
</TABLE>
During fiscal 1998, the Company took inventory provisions of $4,500 in the
third quarter and $12,062 in the fourth quarter, which reduced gross profit. The
Company also had non-recurring charges of $3,184 in the second quarter, $2,420
in the third quarter and $1,011 in the fourth quarter of fiscal 1998.
14. MAJOR CUSTOMERS AND CREDIT CONCENTRATIONS
During fiscal 1998, 1997 and 1996, revenues from a single customer
represented 20%, 23% and 13% of total revenues, respectively. No other customer
accounted for more than 10% of total revenues for fiscal 1998, 1997 and 1996.
15. GEOGRAPHIC OPERATIONS
For the purposes of segment reporting, management considers the Company to
operate in one industry, the machine vision industry. Operations in this
business segment by geographic area are summarized as follows (in thousands):
<TABLE>
<CAPTION>
UNITED
FISCAL YEAR ENDED SEPTEMBER 30, 1998 STATES EUROPE ELIMINATIONS CONSOLIDATED
- ------------------------------------------------------------ ------------ --------- ------------ ------------
<S> <C> <C> <C> <C>
Revenues from unaffiliated customers........................ $ 154,451 $ 14,556 -- $ 169,007
Transfers between geographic areas.......................... 4,852 -- $ (4,852) --
------------ --------- ------------ ------------
Total revenues.............................................. $ 159,303 $ 14,556 $ (4,852) $ 169,007
------------ --------- ------------ ------------
------------ --------- ------------ ------------
Income (loss) before income tax provision (benefit)......... $ (36,529) $ (3,747) $ (229) $ (40,505)
------------ --------- ------------ ------------
------------ --------- ------------ ------------
Identifiable assets......................................... $ 123,312 $ 7,979 $ (9,720) $ 121,571
------------ --------- ------------ ------------
------------ --------- ------------ ------------
</TABLE>
F-21
<PAGE> 75
15. GEOGRAPHIC OPERATIONS (CONTINUED)
<TABLE>
<CAPTION>
UNITED
FISCAL YEAR ENDED SEPTEMBER 30, 1997 STATES EUROPE ELIMINATIONS CONSOLIDATED
- ------------------------------------------------------------ ------------ --------- ------------ ------------
<S> <C> <C> <C> <C>
Revenues from unaffiliated customers........................ $ 152,530 $ 16,812 $ -- $ 169,342
Transfers between geographic areas.......................... 4,611 -- (4,611) --
------------ --------- ------------ ------------
Total revenues.............................................. $ 157,141 $ 16,812 $ (4,611) $ 169,342
------------ --------- ------------ ------------
------------ --------- ------------ ------------
Income (loss) before income tax provision................... $ 2,120 $ (721) $ (6) $ 1,393
------------ --------- ------------ ------------
------------ --------- ------------ ------------
Identifiable assets on September 30, 1997................... $ 136,448 $ 8,451 $ (4,976) $ 139,923
------------ --------- ------------ ------------
------------ --------- ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
UNITED
FISCAL YEAR ENDED SEPTEMBER 30, 1996 STATES EUROPE ELIMINATIONS CONSOLIDATED
- ------------------------------------------------------------ ------------ --------- ------------ ------------
<S> <C> <C> <C> <C>
Revenues from unaffiliated customers........................ $ 137,749 $ 16,226 $ -- $ 153,975
Transfers between geographic areas.......................... 4,128 240 (4,368) --
------------ --------- ------------ ------------
Total revenues.............................................. $ 141,877 $ 16,466 $ (4,368) $ 153,975
------------ --------- ------------ ------------
------------ --------- ------------ ------------
Income (loss) before income tax provision................... $ (187) $ (201) $ 69 $ (319)
------------ --------- ------------ ------------
------------ --------- ------------ ------------
Identifiable assets on September 30, 1996................... $ 108,529 $ 7,085 $ (8,143) $ 107,471
------------ --------- ------------ ------------
------------ --------- ------------ ------------
</TABLE>
Total revenues to customers outside the U.S. were $108,711, $115,854 and
$97,483 for the fiscal years ended September 30, 1998, 1997 and 1996,
respectively.
Export sales from the Company's United States operations to unaffiliated
customers for the fiscal years ended September 30, 1998, 1997 and 1996 were as
follows:
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Europe........................................................................... $ 7,501 $ 16,413 $ 9,160
Asia/Pacific Rim................................................................. 84,606 80,714 70,924
Other............................................................................ 2,048 1,915 1,173
--------- --------- ---------
Total............................................................................ $ 94,155 $ 99,042 $ 81,257
--------- --------- ---------
--------- --------- ---------
</TABLE>
16. EARNINGS PER SHARE
The calculations for earnings per share for the fiscal years ended September
30, 1998, 1997 and 1996 are as follows (in thousands, except per share amounts):
<TABLE>
<CAPTION>
1998 1997 1996
---------- --------- ---------
<S> <C> <C> <C>
Net income (loss)............................................................... $ (40,505) $ 648 $ 835
---------- --------- ---------
---------- --------- ---------
Weighted average number of common shares--basic................................. 24,613 23,718 22,092
Assumed number of shares issued from common share equivalents................... -- 249 1,293
---------- --------- ---------
Weighted average number of common and common equivalent
shares--diluted................................................................ 24,613 23,967 23,385
---------- --------- ---------
---------- --------- ---------
Net income (loss) per share--basic.............................................. $ (1.65) $ 0.03 $ 0.04
---------- --------- ---------
---------- --------- ---------
Net income (loss) per share--diluted............................................ $ (1.65) $ 0.03 $ 0.04
---------- --------- ---------
---------- --------- ---------
</TABLE>
17. EQUITY FINANCING -- SUBSEQUENT EVENT (UNAUDITED)
In February 1999, the Company completed an equity-based financing with a
group of institutional investors. Net proceeds from the financing were $10.0
million. The financing was in the form of prepaid and incentive common stock
purchase warrants. Proceeds from the financing are to be used for working
capital requirements.
F-22
<PAGE> 76
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(IN THOUSANDS)
<TABLE>
<CAPTION>
COLUMN C
-----------
COLUMN A COLUMN B ADDITION COLUMN E
----------- ----------- CHARGED TO COLUMN D -----------
BALANCE AT CHARGED TO OTHER ----------- BALANCE
BEGINNING COST AND ACCOUNTS DEDUCTIONS AT END OF
DESCRIPTIONS OF PERIOD EXPENSES -DESCRIBE -DESCRIBE PERIOD
- ---------------------------------------------------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Year Ended September 30, 1998:
Allowance for doubtful accounts................. $ 2,716 $ 329 $ -- $ 2,045(2) $ 1,000
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Reserve for excess and obsolete inventory....... $ 3,836 $ 16,562 $ -- $ 5,657(2) $ 14,741
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Year Ended September 30, 1997:
Allowance for doubtful accounts................. $ 1,400 $ 1,924 $ -- $ 608(2) $ 2,716
----------- ----------- ----------- ----------- -----------
Reserve for excess and obsolete inventory....... $ 3,960 $ 1,435 $ -- $ 1,559(2) $ 3,836
----------- ----------- ----------- ----------- -----------
Year Ended September 30, 1996:
Allowance for doubtful accounts................. $ 544 $ 957 $ 6(1) $ 107(2) $ 1,400
----------- ----------- ----------- ----------- -----------
Reserve for excess and obsolete inventory....... $ 1,057 $ 3,052 $ -- $ 149(2) $ 3,960
----------- ----------- ----------- ----------- -----------
</TABLE>
- ----------
(1) Recoveries of accounts written off.
(2) Amounts written off.
F-23
<PAGE> 77
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
December 31,
1998
(As restated, September 30,
See Note 8) 1998
------------ -------------
(In thousands, except per share data)
<S> <C> <C>
Assets:
Current assets:
Cash and cash equivalents $ 2,653 $ 2,421
Accounts receivable, net 30,537 32,367
Inventories 31,333 36,213
Other current assets 1,467 1,226
--------- ---------
Total current assets 65,990 72,227
Plant and equipment, net 15,265 17,591
Deferred income taxes 8,820 8,820
Goodwill 5,745 5,847
Other assets 18,090 17,086
--------- ---------
Total assets $ 113,910 $ 121,571
--------- ---------
--------- ---------
Liabilities and stockholders' equity
Current liabilities:
Notes payable and current portion of
long-term debt $ 36,000 $ 38,038
Accounts payable 19,436 21,388
Accrued expenses 19,636 21,073
Advance payments received 1,284 1,216
--------- ---------
Total current liabilities 76,356 81,715
Long-term debt 3,029 3,059
Stockholders' equity:
Common stock, authorized 50,000 shares,
$0.01 par value; issued and outstanding
24,876 at December 31, 1998 and 24,870 at
September 30, 1998 249 249
Additional paid-in capital 168,493 168,493
Accumulated deficit (134,234) (131,962)
Cumulative translation adjustment 17 17
--------- ---------
Total stockholders' equity 34,525 36,797
--------- ---------
Total liabilities and stockholders' equity $ 113,910 $ 121,571
--------- ---------
--------- ---------
</TABLE>
See Notes to Condensed Consolidated Financial Statements
F-24
<PAGE> 78
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended
December 31,
1998
(As restated, December 31,
See Note 8) 1997
------------ ------------
(Unaudited)
(in thousands, except per share amounts)
<S> <C> <C>
Revenues $ 29,405 $53,788
Cost of revenues 16,834 27,745
-------- -------
Gross profit 12,571 26,043
Research and development expenses 5,590 6,629
Selling, general and administrative expenses 11,216 14,894
Merger expenses - 623
-------- -------
Income (loss) from operations (4,235) 3,897
Gain on sale of product line (2,798) -
Interest expense, net 835 246
-------- -------
Income (loss) before provision for income taxes (2,272) 3,651
Provision for income taxes - 108
-------- -------
Net income (loss) $ (2,272) $ 3,543
-------- -------
-------- -------
Net income (loss) per share:
Basic $ (0.09) $ 0.14
Diluted $ (0.09) $ 0.14
Weighted average shares:
Basic 24,876 24,476
Diluted 24,876 25,444
</TABLE>
See Notes to Condensed Consolidated Financial Statements
F-25
<PAGE> 79
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
December 31,
1998
(As restated, December 31,
See Note 8) 1997
------------ ------------
(Unaudited)
OPERATING ACTIVITIES: (in thousands, except per share amounts)
<S> <C> <C>
Net income (loss) $(2,272) $ 3,543
Adjustments to reconcile net income (loss) to
net cash from operating activities:
Gain on sale of product line (2,798) -
Depreciation and amortization 2,632 1,660
Other - (20)
Changes in assets and liabilities:
Accounts receivable 1,830 (3,120)
Inventories 4,432 (9,460)
Other current assets (241) (245)
Other assets (1,748) (3,177)
Accounts payable (1,952) 1,100
Accrued expenses (1,594) 2,323
Advance contract payments 68 (314)
Other long-term liabilities - (503)
------------ ------------
Net cash used in operating activities (1,643) (8,213)
------------ ------------
INVESTING ACTIVITIES:
Additions to plant and equipment (46) (1,734)
Proceeds from sale of product line 4,050 -
------------ ------------
Net cash provided by (used in) investing activities 4,004 (1,734)
------------ ------------
FINANCING ACTIVITIES:
Proceeds from the exercise of stock options and
warrants - 84
Borrowings (repayments) of bank debt (2,025) 5,317
Repayments of long-term debt (104) (650)
------------ ------------
Net cash provided by (used in) financing activities (2,129) 4,751
------------ ------------
Effect of exchange rate changes on cash and cash
equivalents - 4
Net increase (decrease) in cash and cash equivalents 232 (5,192)
Cash and cash equivalents - beginning of period 2,421 8,811
------------ ------------
Cash and cash equivalents - end of period $ 2,653 $ 3,619
------------ ------------
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 835 $ 283
Income taxes paid $ - $ -
</TABLE>
See Notes to Condensed Consolidated Financial Statements
F-26
<PAGE> 80
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
4. Sale of Product Line
In December 1998, the Company sold its Aircraft Safety product line
("Aircraft Safety") to a subsidiary of B.F. Goodrich ("Goodrich") for
$4,500,000, consisting of $4,050,000 in cash paid on closing and $450,000
payable upon the resolution of two items as noted in the next paragraph. The
Company no longer considered this technology a key component of its product
portfolio or future strategic direction. The Company sold certain inventory,
equipment and intellectual property in the transaction. The transaction resulted
in an initial gain of $2,798,000.
During the second quarter of fiscal 1999, the contingency relating to a
portion of the employee retention ($250,000) was resolved and in the third
quarter of fiscal 1999, the remaining contingency relating to employee
retention was resolved ($125,000). These amounts will be recorded as additional
gain in those quarters. At April 20, 1999, the contract novation had not been
completed.
5. Net Income (Loss) Per Share
Basic net income (loss) per share is computed using weighted average
number of shares Outstanding during each period. Diluted net income per share
reflects the effect of the Company's outstanding stock options and warrants
(using the treasury stock method), except where such options would be
anti-dilutive. For the three months ended December 31, 1997, the assumed number
of shares issued from potential common shares was 968,000. For the three months
ended December 31, 1998, any such potential common shares were anti-dilutive due
to the loss for the period.
6. Comprehensive Income (Loss)
Effective October 1, 1998, the Company adopted the provisions of Statement
of Financial Accounting Standards No. 130, "Reporting Comprehensive Income".
Currently, in addition to Net income or loss, the only item that the Company
currently records as other comprehensive income or loss is the change in the
cumulative translation adjustment resulting from the changes in exchange rates
and the effect of those changes upon translation of the financial statements of
the Company's foreign operations. For the periods ended December 31, 1998 and
1997, the components of comprehensive income (loss) included net income (loss)
of $(2,272,000), and $3,543,000, respectively, foreign currency translation
adjustment of $0 and $(20,000), respectively, for total comprehensive income
(loss) of $(2,272,000) and $3,790,000, respectively.
7. Equity Financing
In February 1999, the Company completed an equity-based financing with a
group of institutional investors. Net proceeds from the financing were $10.0
million. The financing was in the form of prepaid and incentive common stock
purchase warrants. Proceeds from the financing are to be used for working
capital requirements.
8. Restatement
Subsequent to the issuance of the Company's unaudited condensed
consolidated financial statements for the three months ended December 31, 1998,
the Company's Management determined that $450,000 of the gain recorded in
connection with the sale of Aircraft Safety should have been deferred pending
receipt of the proceeds upon resolution of contingencies relating to the
retention of certain employees by Goodrich ($375,000) and the novation of a
certain government contract held by Aircraft Safety to Goodrich ($75,000). As a
result, the unaudited condensed consolidated financial statements for the three
months ended December 31, 1998 have been restated for amounts previously
reported. This change had no effect on the loss from operations of $4,235,000
for the three months ended December 31, 1998.
A summary of the significant effects of the restatement is as follows:
<TABLE>
<CAPTION>
1998
------------
As
Previously As
Reported Restated
---------- ----------
<S> <S> <S>
AT DECEMBER 31,
Accrued expenses $ 19,186 $ 19,636
Accumulated deficit (133,784) (134,234)
FOR THE THREE MONTHS ENDED DECEMBER 31,
Gain on sale of product line (3,248) (2,798)
Net income (loss) (1,822) (2,272)
Net loss per share -- Basic ($0.07) ($0.09)
Net loss per share -- Diluted ($0.07) ($0.09)
</TABLE>
F-27
<PAGE> 81
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The Condensed Consolidated Balance Sheet of Robotic Vision Systems, Inc. and
Subsidiaries (The "Company") as of December 31, 1998, the Condensed Consolidated
Statements of Operations for the three month periods ended December 31, 1998 and
1997 and the Condensed Consolidated Statements of Cash Flows for the three month
periods ended December 31, 1998 and 1997 have been prepared by the Company,
without audit. In the opinion of management, all adjustments (which include only
normal recurring adjustments) necessary to present fairly the financial
condition, results of operations and cash flows at December 31, 1998 and for all
periods presented have been made.
It is suggested that these condensed consolidated financial statements be read
in conjunction with the consolidated financial statements and notes thereto
included in the Company's Form 10-K for the year ended September 30, 1998. The
results of operations for the period ended December 31, 1998 are not necessarily
indicative of the operating results for the full year.
2. INVENTORIES
Inventories at December 31, 1998 and September 30, 1998 consisted of the
following;
<TABLE>
<CAPTION>
DECEMBER 31, 1998 SEPTEMBER 30, 1998
----------------- ------------------
(In thousands)
<S> <C> <C>
Raw Materials $15,498 $17,124
Work-in-Process 7,532 10,429
Finished Goods 8,303 8,660
------- -------
Total $31,333 $36,213
------- -------
------- -------
</TABLE>
3. NOTES PAYABLE:
The Company has a revolving credit agreement with three domestic banks which is
collateralized by substantially all of the domestic tangible and intangible
assets of the Company. The agreement has a term which expires in March 2000 and
borrowings under the agreement currently bear interest at the prime rate plus
one percent. At December 31, 1998, the Company had borrowings of $35,475,000
outstanding which reflect the maximum commitment under the agreement. The
agreement contains certain financial covenants, including minimum levels of
profitability, liquidity and net worth, with which the Company had not been in
compliance. Under an amendment executed in March 1999, the Company's banks
agreed to forebear their right to exercise any remedies under this agreement
through April 23, 1999. Accordingly, the borrowings under the agreement at
December 31, 1998 and September 30, 1998 have been classified as current. On
April 22, 1999, the Company renegotiated the terms of its credit agreement with
its three banks. The new agreement sets the facility at $35.4 million and
establishes new covenants for the balance of the term of the agreement, March
18, 2000.
F-28
<PAGE> 82
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
4. Sale of Product Line
In December 1998, the Company sold its Aircraft Safety product line
("Aircraft Safety") to a subsidiary of B.F. Goodrich ("Goodrich") for
$4,500,000, consisting of $4,050,000 in cash paid on closing and $450,000
payable upon the resolution of two items. As noted in the next paragraph. The
Company no longer considered this technology a key component of its product
portfolio or future strategic direction. The Company sold certain inventory,
equipment and intellectual property in the transaction. The transaction resulted
in an initial gain of $2,798,000.
During the second quarter of fiscal 1999, the contingency relating to a
portion of the employee retention ($250,000) was resolved and in the third
quarter of fiscal 1999, the remaining contingency relating to employee
retention was resolved ($125,000). These amounts will be recorded as additional
gain in those quarters. At April 20, 1999, the contract novation had not been
completed.
5. Net Income (Loss) Per Share
Basic net income (loss) per share is computed using weighted average
number of shares Outstanding during each period. Diluted net income per share
reflects the effect of the Company's outstanding stock options and warrants
(using the treasury stock method), except where such options would be
anti-dilutive. For the three months ended December 31, 1997, the assumed number
of shares issued from potential common shares was 968,000. For the three months
ended December 31, 1998, any such potential common shares were anti-dilutive
due to the loss for the period.
6. Comprehensive Income (Loss)
Effective October 1, 1998, the Company adopted the provisions of Statement
of Financial Accounting Standards No. 130, "Reporting Comprehensive Income".
Currently, in addition to Net income or loss, the only item that the Company
currently records as other comprehensive income or loss is the change in the
cumulative translation adjustment resulting from the changes in exchange rates
and the effect of those changes upon translation of the financial statements of
the Company's foreign operations. For the periods ended December 31, 1998 and
1997, the components of comprehensive income (loss) included net income (loss)
of $(2,272,000) and $3,543,000, respectively, foreign currency translation
adjustment of $0 and $20,000, respectively, for total comprehensive income
(loss) of $(2,272,000) and $3,790,000, respectively.
7. Equity Financing
In February 1999, the Company completed an equity-based financing with a
group of institutional investors. Net proceeds from the financing were $10.0
million. The financing was in the form of prepaid and incentive common stock
purchase warrants. Proceeds from the financing are to be used for working
capital requirements.
8. Restatement
Subsequent to the issuance of the Company's unaudited condensed consolidated
financial statements for the three months ended December 31, 1998, the Company's
Management determined that $450,000 of the gain recorded in connection with the
sale of Aircraft Safety should have been deferred pending receipt of the
proceeds upon resolution of contingencies relating to the retention of certain
employees by Goodrich ($375,000) and the novation of a certain government
contract held by Aircraft Safety to Goodrich ($75,000). As a result, the
unaudited condensed consolidated financial statements for the three months ended
December 31, 1998 have been restated for amounts previously reported. This
change had no effect on the loss from operations of $4,235,000 for the three
months ended December 31, 1998.
A summary of the significant effects of the restatement is as follows:
<TABLE>
<CAPTION>
1998
------------
As
Previously As
Reported Restated
---------- ----------
<S> <S> <S>
AT DECEMBER 31,
Accrued expenses $ 19,186 $ 19,636
Accumulated deficit (133,784) (134,234)
FOR THE THREE MONTHS ENDED DECEMBER 31,
Gain on sale of product line (3,248) (2,798)
Net income (loss) (1,822) (2,272)
Net loss per share -- Basic ($0.07) ($0.09)
Net loss per share -- Diluted ($0.07) ($0.09)
</TABLE>
F-29
<PAGE> 83
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The expenses in connection with the issuance and distribution of the
securities being registered, all of which, will be paid by the Registrant, are
as follows:
SEC Registration Fee.......................................... $ 6,887.90
Accounting Fees and Expenses.................................. *
Legal Fees and Expenses....................................... *
Blue Sky Fees and Expenses.................................... *
Miscellaneous Expenses........................................ *
---------
Total............................................. $
=========
- ----------
* To be furnished by amendment.
Item 14. Indemnification of Directors and Officers
Except as hereinafter set forth, there is no statute, charter provision,
by-law, contract or other arrangement under which any controlling person,
director or officer of Registrant is insured or indemnified in any manner
against liability which he may incur in his capacity as such.
Article SIXTH of the Restated Certificate of Incorporation of the
Registrant provides that registrant shall, to the full extent permitted by
Section 145 of the Delaware General Corporation Law, as amended, from time to
time ("DGCL"), indemnify all persons whom it may indemnify pursuant thereto.
Section 145 of the DGCL grants the registrant the power to indemnify
existing and former directors, officers, employees and agents of the Registrant
who are sued or threatened to be sued because they are or were directors,
officers, employees and agents of the Registrant.
II-1
<PAGE> 84
Item 15. Recent Sales of Unregistered Securities
On February 23, 1999, the Registrant completed a private sale of units of
its securities consisting of $11,000,000 in stated amount of prepaid common
stock purchase warrants exercisable at varying prices, and incentive common
stock purchase warrants to purchase an additional 592,307 shares of common stock
exercisable at $4.02 per share, to four accredited investors in a transaction
exempt from registration under the Securities Act of 1933 by virtue of Section
506 of Regulation D and Section 4(2) of the Securities Act of 1933. Incentive
common stock purchase warrants to purchase an additional 629,915 shares of
common stock were issued to The Zanett Securities Corporation, the placement
agent in the offering. The placement agent also received cash compensation
aggregating $979,000.
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits
2.1 Agreement and Plan of Merger and Reorganization dated as
of October 20, 1997 by and among Registrant, Vanguard
Automation, Inc. and RVSI Southwest Acquisition Corp.(1)
3.1 Amended and Restated Certificate of Incorporation of
Registrant(2)
3.2 Bylaws, as amended to date, of Registrant(3)
4.1 Rights Agreement dated as of May 14, 1998 between
Registrant and American Stock Transfer & Trust
Company(3)
4.2 Form of Prepaid Warrant(4)
5 Opinion of Cooperman Levitt Winikoff Lester & Newman,
P.C.(2)
10.1 Credit Agreement, dated as of March 18, 1998, by and
among Registrant, the Lenders Party thereto and Bank of
New York, as Administrative Agent(5)
10.2 Amendment No. 1 to Credit Agreement and Forbearance,
dated June 15, 1998, by and among Registrant, the
Lenders Party
II-2
<PAGE> 85
Thereto and Bank of New York, as Administrative Agent(2)
10.3 Amendment No. 2 to Credit Agreement and Forbearance,
dated June 26, 1998, by and among Registrant, the
Lenders Party Thereto and Bank of New York, as
Administrative Agent(2)
10.4 Amendment No. 3 to Credit Agreement and Forbearance,
dated December 4, 1998, by and among Registrant, the
Lenders Party Thereto and Bank of New York, as
Administrative Agent(6)
10.5 Amendment No. 4 to Credit Agreement and Forbearance,
dated January 29, 1999, by and among Registrant, the
Lenders Party Thereto and Bank of New York, as
Administrative Agent(2)
10.6 Amendment No. 5 to Credit Agreement and Forbearance,
dated March 16, 1999, by and among Registrant, the
Lenders Party Thereto and Bank of New York, as
Administrative Agent(2)
10.7 Amendment No. 6 to Credit Agreement and Forebearance
dated April 22, 1999, by and among Registrant, the
Lenders Party Thereto and Bank of New York, as
Administrative Agent(2)
10.8 Asset Purchase Agreement, dated November 16, 1998,
between Registrant and Rosemount Aerospace, Inc.(5)
10.9 License Agreement dated December 4, 1998 between
Registrant and Rosemount Aerospace, Inc.(5)
10.10 License Agreement dated December 4, 1998 between the
Company and Rosemount Aerospace, Inc.(5)
10.11 Securities Purchase Agreement dated as of February 18,
1999 among Registrant and the purchasers parties
thereto(4)
10.11 Registration Rights Agreement(4)
21 Subsidiaries of Registrant(5)
23(a) Consent of Deloitte & Touche LLP
23(b) Consent of Cooperman Levitt Winikoff Lester & Newman,
P.C. (to be contained in their opinion included under
Exhibit 5)*
24 Power of Attorney (comprises a portion of the signature
page to this registration statement)
II-3
<PAGE> 86
27 Financial Data Schedule
- ----------
(1) Filed as an exhibit to Registrant's Current Report on Form 8-K dated
December 18, 1997.
(2) To be filed by amendment.
(3) Filed as an exhibit to Registrant's Current Report on Form 8-K dated May
20, 1998.
(4) Filed as an exhibit to Registrant's Current Report on Form 8-K dated
February 24, 1999.
(5) Filed as an exhibit to Registrant's Annual Report on Form 10-K for its
fiscal year ended September 30, 1998.
(6) Filed as an exhibit to Registrant's Annual Report on Form 10-K/A for its
fiscal year ended September 30, 1998, filed on January 28, 1999.
(b) Financial Statement Schedules
See Index to Consolidated Financial Statements and Financial
Statement Schedule.
Item 17. Undertakings
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as
II-4
<PAGE> 87
expressed in the Securities Act of 1933 and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement;
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually
or in the aggregate, represent a fundamental change in the
information set forth in the registration statement;
(iii) to include any material information with respect to the plan
of distribution not previously disclosed in the registration
statement or any material change to such information set forth
in the registration statement;
provided, however, that paragraphs (1)(i) and (1)(ii) shall not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registrant pursuant to
Section 13 or Section 15(d) of the Exchange Act that are incorporated by
reference in the Registration Statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
II-5
<PAGE> 88
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of
this offering.
II-6
<PAGE> 89
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the Town of Canton, Commonwealth of
Massachusetts, on the 22nd day of April, 1999.
ROBOTIC VISION SYSTEMS, INC.
By: /s/ Pat V. Costa
-------------------------------
Pat V. Costa
Chairman, President and
Chief Executive Officer
POWER OF ATTORNEY
Each of the undersigned officers and directors of ROBOTIC VISION SYSTEMS,
INC. hereby constitutes and appoints each of PAT V. COSTA and FRANK D. EDWARDS
as true and lawful, attorney-in-fact and agent with full power of substitution
and resubstitution, for him in his name in any and all capacities, to sign any
and all amendments (including post-effective amendments) to this registration
statement and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission and to
prepare any and all exhibits thereto, and other documents in connection
therewith, granting unto said attorneys-in-fact and agents, full power and
authority to do and perform each and every act and thing requisite or necessary
to be done to enable ROBOTIC VISION SYSTEMS, INC. to comply with the provisions
of the Securities Act of 1933, as amended, and all requirements of the
Securities and Exchange Commission, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
-------------
Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<PAGE> 90
Signature Title Date
--------- ----- ----
Chairman, President
And Chief Executive
Officer (Principal
/s/ Pat V. Costa Executive Officer April 22, 1999
- ----------------------
Pat V. Costa
Chief Financial
Officer and Treasurer
(Principal Financial
and Accounting
/s/ Frank D. Edwards Officer) April 22, 1999
- ----------------------
Frank D. Edwards
/s/ Howard Stern Director April 22, 1999
- ----------------------
Howard Stern
/s/ Frank DiPietro
- ---------------------- Director April 22, 1999
Frank DiPietro
/s/ Jay M. Haft Director April 22, 1999
- ----------------------
Jay M. Haft
/s/ Tomas Kohn
- ---------------------- Director April 22, 1999
Tomas Kohn
/s/ Donald J. Kramer
- ---------------------- Director April 22, 1999
Donald J. Kramer
/s/ Mark J. Lerner
- ---------------------- Director April 22, 1999
Mark J. Lerner
/s/ Robert H. Walker Director April 22, 1999
- ----------------------
Robert H. Walker
<PAGE> 1
Exhibit 23(a)
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Robotic Vision Systems,
Inc. on Form S-1 of our report dated January 18, 1999 appearing in the
Prospectus, which is part of this Registration Statement.
We also consent to the reference to us under the heading "Experts" in such
Prospectus.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Boston, Massachusetts
April 20, 1999
