<PAGE>
REGISTRATION STATEMENT NO. __________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________________
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
__________________________
VITRONICS CORPORATION
------------------------------------------------
(Exact name of issuer as specified in its charter)
Commonwealth of Massachusetts 042726873
----------------------------- ------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification No.)
1 Forbes Road
Newmarket, New Hampshire 03857
(603) 659-6550
------------------------------
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
James J. Manfield, Jr., Chairman
Vitronics Corporation
1 Forbes Road
Newmarket, New Hampshire 03857
(603) 659-6550
-------------------------------
(Name, address, including zip code, and telephone number,
including area code, of agent for service of process)
Copy to:
Michael F. Sweeney, Esq.
Hinckley, Allen & Snyder
1500 Fleet Center
Providence, Rhode Island 02903
(401) 274-2000
____________________
Approximate date of commencement of proposed sale to the public: As soon
as practicable after the effective date of the Registration Statement.
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 the registrant elects to deliver its latest annual report to security
holders, or a complete and legible facsimile thereof, pursuant to Item 11(a)(1)
of this form, check the following box. [_]
Exhibit Index appears on page 16
<PAGE>
<TABLE>
<CAPTION>
================================================================================================================
CALCULATION OF REGISTRATION FEE
================================================================================================================
<CAPTION>
Title of
Each Class of Proposed Proposed
Securities Amount Maximum Maximum Amount of
to be to be Offering Aggregate Registration
Registered Registered Price Per Share* Offering Price* Fee
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares of Common
Stock, $.01 par
value, acquirable
by New England Growth
Fund, L.P. upon
conversion of a 10%
Convertible
Subordinated Debenture
dated 10/1/93 2,400,000 $1.47 $3,528,000 $1,216.55
Shares of Common
Stock, $.01 par
value, acquirable
by Barclay Investments,
Inc. upon exercise of
Common Stock Purchase
Warrants dated 12/15/92
(221,225 shares) and
10/1/93 (125,000 shares) 346,225 $1.47 $ 508,951 $ 175.50
Shares of Common
Stock, $.01 par
value, issued to
A.W. Airflo
Company 142,000 $1.47 $ 208,740 $ 71.98
TOTAL REGISTRATION FEE $1,464.03
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
(*) Estimated solely for the purpose of calculating the registration fee based
on prices quoted on the American Stock Exchange on April 19, 1995.
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 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY
DETERMINE.
ii
<PAGE>
PROSPECTUS
- ----------
VITRONICS CORPORATION
2,888,225 Shares of Common Stock
(par value $.01 per share)
The Selling Stockholders are offering for sale (the "Offering") a total of
2,888,225 shares (the "Shares") of Common Stock, $.01 par value per share (the
"Common Stock"), of Vitronics Corporation (the "Company").
The Shares are being registered pursuant to the Registration Statement of
which this Prospectus is a part and the Selling Stockholders are identified in
the table captioned "Selling Stockholders" herein.
The Shares are listed on the American Stock Exchange (the "AMEX") where they
trade under the symbol "VTC." The average of the high and low prices for the
Common Stock on April 19, 1995 was $1.47 per share. See "Risk Factors --
Volatility of Stock Price." The Selling Stockholders intend to sell the Shares
in market transactions on a continuous or delayed basis, subject to certain
limitations imposed by Federal and state securities laws, at then current market
prices at any time, and from time to time, over the next two years. In
connection with sales, it is expected that the Selling Stockholders will incur a
standard commission charge. See "Plan of Distribution". The selling price of the
Shares cannot be determined at this time.
SEE "RISK FACTORS" FOR A DISCUSSION OF CERTAIN FACTORS WHICH SHOULD BE
CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE SECURITIES OFFERED HEREBY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is ___________, 1995.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "Commission"). Reports, proxy statements and other information
filed with the Commission can be inspected and copied at the public reference
facilities maintained by the Commission at Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549; Seven World Trade Center, 13th Floor, New York,
New York 10048 and Room 1204, Everett McKinley Dirksen Building, 219 South
Dearborn Street, Chicago, Illinois 60604. Copies of such materials can be
obtained by mail from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549. Such reports and other information
concerning the Company can also be inspected at the offices of the AMEX at 86
Trinity Place, New York, New York 10006.
This Prospectus constitutes a part of a Registration Statement filed by the
Company with the Commission under the Securities Act of 1933, as amended (the
"Securities Act"). This Prospectus omits certain of the information contained in
the Registration Statement, and reference is hereby made to the Registration
Statement and to the exhibits relating thereto for further information with
respect to the Company and the Offering. Any statements contained herein
concerning the provisions of any document are not necessarily complete, and, in
each instance, reference is made to the copy of such document filed as an
exhibit to the Registration Statement or otherwise filed with the Commission.
Each such statement is qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed by the Company under the Exchange
Act with the Commission are incorporated herein by reference:
(1) The Company's Annual Report on Form 10-K for the year ended December
31, 1994 (the "10K").
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the Offering shall be deemed to be incorporated by reference
herein and to be a part hereof from the date of filing of such documents. Any
statement contained in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any other
subsequently filed documents which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus. The Company will provide, without
charge, to each person to whom a copy of this Prospectus has been delivered, on
the written or oral request of such person, a copy of any or all of the
documents referred to above which have been or may be incorporated by reference
herein other than exhibits to such documents (unless such exhibits are
specifically incorporated by reference herein). Requests for such copies should
be directed to: Lorraine Giordano, Clerk, Vitronics Corporation, 1 Forbes Road,
Newmarket, New Hampshire 03857; 6036596550.
-2-
<PAGE>
PROSPECTUS SUMMARY
The following information is qualified in its entirety by the more detailed
information included elsewhere or incorporated by reference in this Prospectus.
Each prospective investor is urged to read this Prospectus, and any document
incorporated by reference, in its entirety.
THE COMPANY
Vitronics Corporation (the "Company") designs, manufactures and markets
highvolume systems for the soldering of surface mounted devices to, and the
cleaning of, printed circuit boards ("PCBs"). The Company's solder reflow
systems generally sell for between $20,000 and $150,000, and its semi-aqueous
cleaning systems generally sell for between $110,000 and $160,000. Management
believes that the Company's systems have the largest market share of their
respective high end reflow markets (excluding Japan), with approximately 30% of
the domestic and one-quarter of the worldwide solder reflow market, and in
excess of 50% of the installed base of in-line, semi-aqueous cleaning systems.
Although none of the Company's customers named below have any ongoing
contractual obligation to purchase the Company's products, all have made
repeated purchases of the Company's products in the past and approximately 40%
of such customers currently have purchase orders pending in the Company's
backlog. United States customers during the past eighteen months have included
Allied Signal, AT&T, AVEX Electronics, Chrysler, GE, GM, GTE, Hughes Aircraft,
IBM, Intel, McDonnell Douglas, Motorola, Northern Telecom, Raytheon, SCI and
Xerox. International customers during such period have included Ericsson,
Fujitsu, Hitachi, Mitsubishi, NEC, Olympus, Phillips, Siemens and Toshiba.
During 1994, the Company successfully introduced two new solder reflow ovens
into the marketplace, and recorded total sales in excess of $17 million and net
income of $602,000, as compared with a net loss of $1,357,000 in 1993 on sales
of $12.7 million in 1993. During the last quarter of 1994, the Company had
record bookings of $5.5 million.
THE OFFERING
<TABLE>
<S> <C>
Shares Offered.................... 2,888,225 shares of Common Stock (the
"Shares").
Common Stock Outstanding/1/....... 7,553,638 shares
American Stock Exchange Symbol.... VTC
Use of Proceeds................... The Company will not receive any proceeds
from the sale of Shares.
Risk Factors...................... The Shares offered hereby are speculative in
nature, involve a high degree of risk and
should not be purchased by anyone who cannot
afford the loss of his entire investment.
See "Risk Factors."
</TABLE>
________________________________________
(1) As of March 31, 1995. Does not include the 976,200 shares reserved for
issuance pursuant to options presently outstanding under the Company's
stock option plans.
-3-
<PAGE>
RISK FACTORS
INVESTMENT IN THE SECURITIES OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK
AND IS SUITABLE ONLY FOR PERSONS OF SUBSTANTIAL RESOURCES WHO CAN AFFORD THE
LOSS OF ALL OR A PART OF THEIR INVESTMENT. PROSPECTIVE INVESTORS SHOULD
CAREFULLY CONSIDER, AMONG OTHER FACTORS, THE FOLLOWING MATTERS BEFORE INVESTING:
Recent History of Losses. As reflected in the Company's financial
------------------------
statements, the Company recorded net income of $602,000 in fiscal 1994, after
net losses of over $6 million in the aggregate for the preceding three fiscal
years. The Company attributes this turnaround to an aggressive cost control
program implemented in 1993, reduction in material and direct labor costs,
general improvement in the economy and the marketing of innovative new products
such as UNITHERM(R) II and ISOTHERM(TM). WHILE THE COMPANY WILL CONTINUE TO
BUILD ON THIS STRATEGY, THERE CAN BE NO ASSURANCE OF CONTINUED PROFITABILITY.
Bank Financing. The Company has obtained a $500,000 line of credit with the
--------------
First National Bank of Portsmouth. This line of credit is secured by
substantially all of the assets of the Company. Management believes this line of
credit, in addition to internally generated funds and capital equipment lease
financing expected to be available, will be sufficient to meet the Company's
working capital requirements in 1995. There can be no assurance, however, that
additional debt or equity financing will not be needed or that such financing,
if available, will be adequate to meet the Company's requirements on terms
satisfactory to the Company.
Business Cycles; Dependence of Company on Electronics-Related Industries.
------------------------------------------------------------------------
Most of the Company's customers operate in electronicsrelated industries that
are subject to a decline in activity during recessions in the general economy.
During the recent recession, the Company experienced a steady decline in net
sales from $20.5 million in fiscal 1989 to a low of $12.3 million in fiscal
1992. Although the Company in 1994 experienced a significant increase in sales
and orders for its products, there can be no assurance that the negative impact
of the recent recession in the general economy, and in the electronicsrelated
industries in particular, is over. Moreover, the currently forecasted slowdown
in the economy, should it occur, could have a material adverse impact on the
Company's operations. In the future, it should be expected that the Company's
business will continue to be affected by general business cycles and that such
cycles will have a material impact upon the Company's business from year to
year.
Competition. The printed circuit board ("PCB") reflow soldering and
-----------
cleaning markets are highly competitive. Although the Company believes that its
UNITHERM and ENVIROCLEAN(R) product lines are among the most advanced systems
available, management expects both lines to experience strong competition.
Competition, and particularly price competition, could adversely affect the
Company's ability to maintain and/or increase its sales and profitability.
Although the Company has been a leader in its markets, many of the Company's
current and potential competitors have substantial financial, marketing and
technical resources, manufacturing capability, customer support organizations
and name recognition. There can be no assurance that the Company will be able to
compete successfully in the future.
Component Supply. The microprocessor used in the Company's UNITHERM solder
----------------
reflow systems is presently being purchased from only one source. There can be
no assurance that this source will continue in business or continue to
manufacture the component upon which the Company's products currently depend.
The Company has not entered into a supply agreement with this vendor and is
dependent on the availability of its components on an as-needed basis. Although
management believes it can obtain the microprocessor component from other
sources on competitive terms, the inability to obtain the number of these
components required could result in delays or reductions in product shipments
which would adversely affect the Company's operating results.
Potential Increased Costs. Although management believes that it has defined
-------------------------
the production costs of its new product lines within fairly narrow ranges, these
costs may vary depending on the Company's ability to take advantage (or not) of
quantity discounts, etc. If the Company experiences working capital shortages in
1995, its costs may increase and gross margins decrease, which could have a
material adverse impact on the Company and its prospects for growth.
-4-
<PAGE>
Technological Change and Dependence on New Products. The Company's product
---------------------------------------------------
markets are characterized by changing technology, evolving industry standards
and frequent new product introductions. The Company's success will depend upon
its ability to market its existing products (including its UNITHERM, UNITHERM(R)
II, ISOTHERM(TM) and ENVIROCLEAN(R) product lines) and to introduce future
products on a timely basis. There can be no assurance that the Company will be
successful in selecting, developing, manufacturing, and marketing new products
or in continuing to market its existing products.
In 1994, the Company commenced the manufacture and marketing of its
UNITHERM II(R) and ISOTHERM(TM) reflow soldering systems. Management expects the
sale of the Company's older products to diminish over time. Management believes
that the success of the UNITHERM(R) II and ISOTHERM(TM) product lines is,
therefore, crucial to the future of the Company. Although sales of these
products to date have been encouraging, there can be no assurance that these
product lines will maintain profitable sales levels in 1995. The lack of sales
or profitability of these products could have a substantial and adverse impact
on the Company.
Narrow Product Line and Customer Base. The bulk of the Company's revenues
-------------------------------------
(92% in 1994) are derived from sales of its solder reflow systems. As a result,
the Company's revenues are subject to greater variability than would be true if
the Company had a broader product line. In addition, although the Company may
have as many as 160 customers in any given year, approximately 15% of its net
sales in fiscal 1994, 8% in fiscal 1993 and 11% in fiscal 1992 were derived from
the same customer. This concentration of business could subject the Company's
revenues to greater variability than would be true if the Company's sales were
distributed over a broader customer base, even though no other single customer
accounted for more than 10% of sales in any of the three fiscal years preceding
the date of this prospectus.
Current Patent Litigation. On November 26, 1991, the Company filed suit
-------------------------
against a competitor ("Conceptronic") in the United States District Court for
the District of New Hampshire seeking an injunction and damages against
Conceptronic for infringement of two patents owned by the Company covering the
apparatus and operating methodology of its solder reflow systems. Conceptronic
filed a counterclaim against the Company alleging that the patent suit was
brought in bad faith to maliciously interfere with Conceptronic's business
relations. Conceptronic's counterclaims were dismissed in December, 1993.
There has been a series of rulings on technical motions by each side since
the initiation of the suit which are described in detail under the heading
"Legal Proceedings" in the Company's 10-K for fiscal 1994. In short, the Court
at present has determined as a matter of law that the Company has produced
sufficient facts which, if proved at trial, will establish Conceptronic's
infringement of certain Company patents. A trial date has been set for June 20,
1995.
Trial by jury of any patent litigation can be both expensive and time
consuming, and there can be no assurance that the Company will ultimately
prevail. Although the Company intends to vigorously pursue this litigation,
continued litigation costs may be substantial and will reduce the Company's
resources available to fund working capital requirements.
A detailed procedural history of the patent litigation is set forth in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1994, which is incorporated herein by reference.
Dependence on Key Employees. The Company's success will depend in part on
---------------------------
key management and technical employees and on the Company's ability to continue
to attract, retain and motivate highly talented personnel. With the exceptions
of Messrs. Manfield, Lawler, Chanasyk and Spilling, the Company does not have
written employment agreements with its personnel, although the Company's
technical employees are required to enter into noncompetition agreements. The
loss of one or more of the Company's key employees could have an adverse impact
on the Company. There can be no assurance that the Company can retain its key
employees or that it can attract, assimilate, or retrain other skilled
personnel.
Limits of Current Plant and Equipment; Possible Need for Additional Capital.
---------------------------------------------------------------------------
The current plant and equipment of the Company is not fully utilized. The
Company estimates that its sales could increase to approximately $30,000,000 per
year before full utilization of its capacity would occur, although there can be
no assurance that such growth in sales will occur. Should sales reach the
Company's maximum capacity level,
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<PAGE>
however, further growth may be limited without the acquisition of additional
plant space and equipment.
Uncertainty of Forward-Looking Statements. Although no projections are
-----------------------------------------
included in this Prospectus, in certain instances management has made forward-
looking statements regarding the Company's future prospects where it felt such
information was important to an investor's understanding of the Company. These
forward-looking statements are based on management's best estimates and present
intentions and on assumptions that may or may not prove true. No assurance can
be provided that the actual results achieved will conform with management's
present beliefs, and variances, if they occur, may be material and adverse.
Volatility of Stock Price. The trading price of the Company's Common Stock
-------------------------
has been subject to substantial fluctuations in response to quarter to quarter
variations in operating results, announcements of technological innovations or
new products by the Company or its competitors, and other events or factors. In
addition, the stock market has, from time to time, experienced significant price
and volume fluctuations which have particularly affected the market price for
many high technology companies and which often have been unrelated to the
operating performance of these companies. These broad market fluctuations may
adversely affect the market price of the Company's Common Stock.
Shares Eligible for Future Sale. There are 976,200 shares reserved for
-------------------------------
issuance upon exercise of outstanding options granted under the Company's stock
option plan, which shares will become available for future sale in the public
market at prescribed times. Sales of substantial amounts of such shares in the
public market could exert downward pressure on the trading price of the Common
Stock.
Lack of Dividends. The Company has not paid any dividends on its Common
-----------------
Stock since its inception and currently intends to retain any future earnings
for use in its business.
-6-
<PAGE>
SELLING STOCKHOLDERS
--------------------
The following table sets forth the name, amount of Common Stock owned by the
Selling Stockholders prior to the Offering, the amount to be offered for the
holder's account and the amount and percentage, if required, of Common Stock to
be owned by the holder after the Offering. Unless indicated in a footnote, none
of the Selling Stockholders has held any position, office or material
relationship with the Company within three years of the date of this Prospectus.
<TABLE>
<CAPTION>
Shares acquirable
(and offered hereby) Shares acquirable Shares Remaining
upon conversion (and offered hereby) if all shares
10% Convertible upon exercise of offered hereby
Shares Currently Subordinated Common Stock are sold
Name Owned Debenture Purchase Warrants (% if > 1%
---- ---------------- ----------------- -------------------- -----------------
<S> <C> <C> <C> <C>
New England Growth
Fund I, L.P./1/ 0 2,400,000 0 0
Barclay Investments,
Inc./2/ 0 0 346,225/3/ 0
A.W. Airflo Company/4/ 142,000 0 0 0
</TABLE>
___________________________________
(1) John F. Rousseau, Jr. and Robert J. Hanks are general partners of the
general partner of New England Growth Fund I, L.P. ("NEGF") and have served
as directors of the Company since October 1993.
(2) Barclay Investments, Inc. served as standby underwriter for the Company's
1992 Rights Offering and as Advisor for the placement of the Company's 10%
Convertible Debenture to NEGF in October, 1993.
(3) Includes 125,000 shares acquirable upon exercise of a Common Stock Warrant
dated October 1, 1993, and 221,225 shares acquirable upon exercise of a
Common Stock Warrant dated December 15, 1992.
(4) A.W. Airflo Company supplies materials to the Company from time to time
which are used in the Company's manufacturing processes.
-7-
<PAGE>
PLAN OF DISTRIBUTION
The Shares are listed on the American Stock Exchange. The distribution of
the Shares by the Selling Stockholders may be effected from time to time in one
or more transactions (which may involve block transactions) on the American
Stock Exchange, in negotiated transactions, through the writing of options or
shares (whether such options are listed on an options exchange or otherwise), or
a combination of such methods of sale, at market prices prevailing at the time
of sale, at prices related to such prevailing market prices, or at negotiated
prices. The Selling Stockholders may effect such transactions by selling Shares
to or through broker-dealers, and such broker-dealers may receive compensation
in the form of discounts, concessions or commissions from the Selling
Stockholders and/or purchasers of shares for whom they may act as agent (which
compensation may be in excess of customary commissions).
DESCRIPTION OF THE COMMON STOCK
Common Stock. The Company's Articles of Organization authorizes the
------------
issuance of 20,000,000 shares of Common Stock, par value $.01 per share. Each
record holder of Common Stock is entitled to one vote for each share held on all
matters properly submitted to the stockholders for their vote.
In accordance with Massachusetts Business Corporation Law, the Company has a
classified Board of Directors currently consisting of one director whose term
expires in 1995, three directors whose terms expire in 1996 and two directors
whose terms expire in 1997. Cumulative voting for the election of directors is
not permitted by the Articles of Organization.
Holders of the outstanding shares of the Common Stock are entitled to such
dividends as may be declared from time to time by the Board of Directors out of
legally available funds therefor, although the Company has not declared
dividends and does not have a present intention to do so in the foreseeable
future. In the event of liquidation, dissolution or winding up of the affairs of
the Company, holders of the Common Stock are entitled to receive, ratably, the
assets of the Company net of liabilities. Holders of outstanding shares of
Common Stock have no preemptive, conversion or redemptive rights. All the issued
and outstanding shares of the Common Stock are, and all unissued shares when
issued against payment therefor will be, duly authorized, validly issued, fully
paid and non-assessable.
Transfer Agent. Registrar & Transfer Company, 10 Commerce Drive, Cranford,
--------------
New Jersey, acts as the Company's Transfer Agent.
INDEMNIFICATION
Section 67 of the Massachusetts Business Corporation Law (the "BCL")
authorizes and empowers the Company to indemnify the directors, officers,
employees and agents of the Company against liabilities incurred in connection
with, and related expenses resulting from, any claim, action or suit brought
against any such person as a result of his relationship with the Company,
provided that such persons acted in accordance with a stated standard of conduct
in connection with the acts or events on which such claim, action or suit is
based.
In addition, Section 13(b)(1 1/2) of the BCL permits the elimination or
limiting of the personal liability of a director to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
notwithstanding any provision of law imposing such liability; provided, however,
that such provision shall not eliminate or limit the liability of a director (i)
for any breach of the director's duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Sections 61
and 62 of the BCL (relating to the payment of unauthorized
-8-
<PAGE>
distributions or the extension of unapproved loans to officers or directors), or
(iv) for any transaction from which the director derived an improper personal
benefit.
Under Article 6A of the Company's Articles of Organization (the "Articles")
the Company may indemnify its directors, officers, employees or other agents,
present or former, if provided in the Company's by-laws. Under Article 6I of the
Articles, as amended, the Company's directors do not have personal liability to
the Company or its stockholders for monetary damages for any breach of their
fiduciary duty as directors to the extent Section 13(b)(1 1/2) of the BCL
permits the limitation of such liability.
Article V(9) of the Company's by-laws further provides for the
indemnification of officers and directors to the fullest extent authorized by
the BCL, and for the prompt advancement of expenses, for costs, expenses
(including legal fees) and obligations paid or incurred in connection with or
arising out of the defense or disposition of any action, suit or other
proceeding whether civil or criminal, in which the director or officer may be a
defendant or with which the director or officer may be threatened or otherwise
involved, directly or indirectly, by reason of his being or having been a
director or officer; provided, however, that the Company shall provide no
indemnification with respect to any matter as to which any such indemnitee shall
be finally adjudicated in such action, suit or proceeding not to have acted in
good faith in the reasonable belief that his action was (i) in the best interest
of the Company or (ii) to the extent such matter relates to federal or state
securities laws, consonant with such laws.
LEGAL MATTERS
Certain legal matters in connection with the validity of the Shares offered
hereby will be passed upon for the Company by Hinckley, Allen & Snyder, 1500
Fleet Center, Providence, Rhode Island 02903.
EXPERTS
The consolidated financial statements of the Company appearing in the
Company's Annual Report (Form 10-K) for the fiscal year ended December 31, 1994
have been audited by Coopers & Lybrand L.L.P., Independent Auditors, as stated
in their report dated February 21, 1995 incorporated herein by reference, and
have been so incorporated by reference in reliance upon such report given upon
the authority of that firm as experts in accounting and auditing.
-9-
<PAGE>
<TABLE>
<CAPTION>
===================================================== ======================================
No person has been authorized to give any
information or make any representations other
than those contained or incorporated by reference
in this Prospectus and, if given or made, such
information or representations must not be relied
upon as having been authorized by the Company.
This Prospectus does not constitute an offer to
sell any securities: (i) other than those
specifically offered hereby, (ii) in any
jurisdiction in which such offer or
solicitation is not authorized, (iii) in any
jurisdiction in which the person making such [VITRONICS LOGO]
or solicitation is not qualified to do so,
(iv) to any person to whom it is unlawful to
make such offer or solicitation in such
jurisdiction, or (v) to any person who is not a
United States resident or who is outside the
jurisdiction of the United States. Neither the
delivery of this Prospectus nor any sale hereunder
shall under any circumstances create any implication
that there has been no change in the affairs of the
Company since the date hereof or that the information
herein is correct as of any time subsequent to the
date as of which such information is provided in 2,888,225 SHARES
this Prospectus.
_________________
TABLE OF CONTENTS
<S> <C>
Available Information............................ 2
Incorporation of Certain Documents
by Reference.................................. 2 --------------------------
Prospectus Summary............................... 3 PROSPECTUS
Risk Factors..................................... 4 --------------------------
Selling Stockholders............................. 7
Plan of Distribution............................. 8
Description of the Common Stock.................. 8
Indemnification.................................. 8
Legal Matters.................................... 9
Experts.......................................... 9
===================================================== ___________________, 1995
======================================
</TABLE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The registrant estimates that expenses in connection with the offering
described in this Registration Statement, all of which shall be borne by the
Company, will be as follows:
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee...... $ 1,464
Printing expenses*....................................... $ 4,500
Accountant's fees and expenses........................... $ 2,500
Legal fees and expenses.................................. $ 15,000
Blue Sky fees and expenses............................... $ 5,000
Miscellaneous............................................ $ 500
________
Total................................................ $ 28,964
* Includes Edgar Filing Service Charges.
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 67 of the Massachusetts Business Corporation Law (the "BCL")
authorizes and empowers the Company to indemnify the directors, officers,
employees and agents of the Company against liabilities incurred in connection
with, and related expenses resulting from, any claim, action or suit brought
against any such person as a result of his relationship with the Company,
provided that such persons acted in accordance with a stated standard of conduct
in connection with the acts or events on which such claim, action or suit is
based.
In addition, Section 13(b)(1 1/2) of the BCL permits the elimination or
limiting of the personal liability of a director to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
notwithstanding any provision of law imposing such liability; provided, however,
that such provision shall not eliminate or limit the liability of a director (i)
for any breach of the director's duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Sections 61
and 62 of the BCL (relating to the payment of unauthorized distributions or the
extension of unapproved loans to officers or directors), or (iv) for any
transaction from which the director derived an improper personal benefit.
Under Article 6A of the Company's Articles of Organization (the "Articles")
the Company may indemnify its directors, officers, employees or other agents,
present or former, if provided in the Company's by-laws. Under Article 6I of the
Articles, as amended, the Company's directors do not have personal liability to
the Company or its stockholders for monetary damages for any breach of their
fiduciary duty as directors to the extent Section 13(b)(1 1/2) of the BCL
permits the limitation of such liability.
Article V(9) of the Company's by-laws further provides for the
indemnification of officers and directors to the fullest extent authorized by
the BCL, and for the prompt advancement of expenses, for costs, expenses
(including legal fees) and obligations paid or incurred in connection with or
arising out of the defense or disposition of any action, suit or other
proceeding whether civil or criminal, in which the director or officer may be a
defendant or with which the director or officer may be threatened or otherwise
involved, directly or indirectly, by reason of his being or having been a
director or officer; provided, however, that the Company shall provide no
indemnification with respect to any matter as to which any such indemnitee shall
be finally adjudicated in such action, suit or proceeding not to have acted in
good faith in the reasonable belief that his action was (i) in the best interest
of the Company or (ii) to the extent such matter relates to federal or state
securities laws, consonant with such laws.
II-1
<PAGE>
ITEM 16. EXHIBITS.
A list of the exhibits included as part of this Registration Statement is
set forth in the Exhibit Index which immediately precedes such exhibits and is
hereby incorporated by reference herein.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes to file, during any period in
which offers or sales are being made, a post-effective Amendment to this
Registration Statement to include any material information with respect to the
plan of distribution not previously disclosed in this Registration Statement or
any material change to such information in this Registration Statement.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each such post-
effective Amendment and each filing of the registrant's annual report pursuant
to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 that is
incorporated by reference in this Registration Statement 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.
The undersigned registrant hereby undertakes to remove from registration by
means of a posteffective Amendment any of the securities being registered which
remain unsold at the termination of the Offering.
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 expressed in the Act and will
be governed by the final adjudication of such issue.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized on the 25th day of April, 1995.
VITRONICS CORPORATION
By: /s/James J. Manfield, Jr.
----------------------------------------
James J. Manfield, Jr., Chairman of
the Board, Chief Executive Officer,
Chief Financial Officer, Treasurer and
Director
By: /s/Daniel J. Sullivan
----------------------------------------
Daniel J. Sullivan, Corporate
Controller and Principal Accounting
Officer
By: /s/Ronald W. Lawler
----------------------------------------
Ronald W. Lawler, President, Chief
Operating Officer and Director
By: /s/David R. A. Steadman
----------------------------------------
David R. A. Steadman, Director
By: /s/Allen H. Keough
----------------------------------------
Allen H. Keough, Director
By: /s/John F. Rousseau, Jr.
----------------------------------------
John F. Rousseau, Jr., Director
By: /s/Robert J. Hanks
----------------------------------------
Robert J. Hanks, Director
II-3
<PAGE>
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
No. Item Page
- --- ---- ----
<C> <S> <C>
3.1 Articles of Organization, as amended to date (1)
3.2 By-Laws, as amended to date (16)
4.1 Specimen Common Stock Certificate (2)
4.2 Form of Warrant issued to the Underwriter in the
Company' 1992 Rights Offering (12)
4.3 Form of 10% Convertible Subordinated Debenture (16)
4.4 Form of Common Stock Purchase Warrant (16)
5.0 Opinion of Messrs. Hinckley, Allen & Snyder
regarding the legality of the securities offered (18)
*10.1 Incentive Stock Option Plan of 1983
*10.2 Incentive Stock Option Plan of 1983-II (3)
*10.3 Form of Incentive Stock Option Agreement for 1983
Plan and the 1983-II Plan (3)
10.4 Lease of Real Property from Susan J. Conway, Trustee
of Forbes Realty Trust (2)
*10.5 1987 Stock Option Plan (5)
10.6 Form of Non-qualified Stock Option Agreement (5)
10.7 Building Agreement and Lease of Premises at Bush Park,
Estover, Plymouth from The Counsel of the City of
Plymouth (5)
10.8 Lloyd's Bank Loan Agreement (5)
10.9 Department of Trade and Industry Grant (5)
10.10 Lease of Real Property from Susan J. Conway, Trustee
of Afton Realty Trust (6)
10.11 Consulting Agreement with George F. Soderberg (7)
10.12 Non-Compete Agreement with George F. Soderberg (7)
10.13 Stock Repurchase Agreement with George F. Soderberg
(7)
10.14 Subordinated Term Note with George F. Soderberg (7)
10.15 Lease Amendments of Real Property from Susan J. Conway,
Trustee of Forbes Realty Trust (8)
*10.16 Employment Agreement with James J. Manfield, Jr. (8)
(10)(14)
*10.17 Employment Agreement with Edward A. Richards (8)(10)(14)
10.18 Lease of Real Property from the Corporate Business
Service Limited (9)
10.19 Term Note due from Anafaze, Incorporated and Security
Agreement (9)
*10.20 Employment Agreement with Albert J. Chanasyk (14)
10.21 Employment Agreement with Dennis J. Monroe (14)
10.22 Employment Agreement by and between Peter D. Spilling
and Vitronics Europe Ltd. (11)
*10.23 Employment Agreement with Ronald W. Lawler (15)
*10.24 Severance Agreement with Edward A. Richards (16)
10.25 Convertible Subordinated Debenture Purchase Agreement
dated October 1, 1993 between the Company and New
England Growth Fund I, LP. (NEGF) (16)
10.26 $1,200,000 10% Convertible Subordinated Debenture
dated October 1, 1993 issued to NEGF (16)
</TABLE>
<PAGE>
Page No.
<TABLE>
<S> <C>
10.27 Amendment to Lease between Forbes Realty Trust and
Vitronics Corporation (16)
10.28 $350,000 Demand Promissory Note of the Company issued
to NEGF dated January 13, 1994 (16)
10.29 Loan Agreement between the Company and NEGF
dated January 13, 1994 (16)
10.30 Security Agreement between the Company and NEGF
dated January 13, 1994 (16)
10.31 Underwriters Common Stock Purchase Warrant issued to
Barclay investments Inc. dated December 15, 1992 (16)
10.32 Common Stock Purchase Warrant for 125,000 Shares issued
to Barclay Investments Inc. dated October 1, 1993 (16)
10.33 Business Loan Agreement between the Company and First
National Bank of Portsmouth dated March 22, 1995 (18)
10.34 Promissory Note of the Company to First National Bank of
Portsmouth dated March 22, 1995 (18)
10.35 Commercial Security Agreement between the Company and
First National Bank of Portsmouth dated March 22, 1995 (18)
11.1 Calculation of Net Income Per Common Share (17)
13.1 Annual report to securityholders on Form 10-K for the
fiscal year ended December 31, 1994 20
16 Letter from Deloitte & Touche regarding change of
Accountant (13)
21.1 Subsidiaries of the registrant (17)
23.1 Consent of Coopers & Lybrand L.L.P. 53
23.2 Consent of Hinckley, Allen & Snyder (to be
included in Exhibit 5.0
27 Financial Data Schedule 54
99.1 Directors and Officers Liability Policy and Company
reimbursement (4)
99.2 Complaint regarding Conceptronic Patent Litigation (14)
99.3 Conceptronic's response to the Complaint (14)
99.4 Conceptronic's Counterclaim (14)
99.5 Vitronics' response to Conceptronic's Counterclaim (14)
99.6 Order of the United States District Court concerning
Conceptronic Patent Litigation (11)
99.7 Correspondence concerning the Vitronics Europe Limited lease (11)
99.8 Conceptronic's Counterclaim Summary Judgment (16)
</TABLE>
(1) Articles of Amendment filed on August 17, 1987 are hereby incorporated by
reference from Exhibits to Annual Report on Form 10-K (File No. 0-13715)
filed by the Company with the Securities and Exchange Commission on March
31, 1988. The balance of Exhibit 3.1 is hereby incorporated by reference
from Exhibits to Amendment No. 1 to Form S-18 Registration Statement (File
No. 2-90042) filed by the Company with the Securities and Exchange
Commission on August 1, 1984.
(2) Exhibits 4.1 and 10.4 are hereby incorporated by reference from Exhibits to
Annual Report on Form 10-K (File No.2-90042) filed by the Company with the
Securities and Exchange Commission on April 1, 1985.
(3) Exhibits 10.1, 10.2 and 10.3 are hereby incorporated by reference from
Exhibits to Form S-18 Registration Statement (File No. 2-90042) filed by
the Company with the Securities and Exchange Commission on March 20, 1984.
(4) Exhibit 99.1 is hereby incorporated by reference from Exhibits to Post-
Effective Amendment No. 1 to Form S-18 Registration Statement (File No. 2-
90042) filed by the Company with the Securities and Exchange Commission on
May 10, 1985.
(5) Exhibits 10.5, 10.6, 10.7, 10.8 and 10.9 are hereby incorporated by
reference from Exhibits to Annual Report on Form 10-K (File No. 0-13715)
filed by the Company with Securities and Exchange Commission on March 31,
1988.
(6) Exhibit 10.10 is hereby incorporated by reference from exhibits to Annual
Report on Form 10-K (File No. 0-13715) filed by the Company with the
Securities and Exchange Commission on March 24, 1989.
<PAGE>
(7) Exhibits 10.11, 10.12, 10.13 and 10.14 are hereby incorporated by reference
to Form 8-K (File No. 0-13715) filed by the Company with the Securities and
Exchange Commission on February 22, 1990.
(8) Exhibits 10.15, 10.16 and 10.17 are hereby incorporated by reference from
exhibits to Annual Report on Form 10-K (File No. 0-13715) filed by the
Company with the Securities and Exchange Commission on April 2, 1990.
(9) Exhibits 10.18 and 10.19 are hereby incorporated by reference from exhibits
to Annual Report on Form 10-K (File No. 0-13715) filed by the Company with
the Securities and Exchange Commission on April 1, 1991.
(10) Exhibits 10.16 and 10.17 were amended. Copies of such agreements as amended
are hereby incorporated by reference from exhibits to Annual Report on Form
10-K (File No. 0-13715) filed by the Company with the Securities and
Exchange Commission on March 27, 1992.
(11) Exhibits 10.22, 99.6 and 99.7 are hereby incorporated by reference to
Exhibits to Form S-2 Registration Statement (File No. 33-50928) filed by
the Company with the Securities and Exchange Commission on August 17, 1992.
(12) Exhibit 4.2 was hereby incorporated by reference to Exhibits to Amendment
No. 2 to Form S-2 Registration Statement (File No. 33-50928) filed by the
Company with the Securities and Exchange Commission on November 12, 1992.
(13) Exhibit 16 is hereby incorporated by reference to the Company's Form 8-K
dated December 30, 1992, and to the Amendment thereto on Form 8 dated
January 11, 1993.
(14) Exhibits 10.16, 10.17, 10.20, 10.21, 99.2, 99.3, 99.4 and 99.5 are hereby
incorporated by reference from exhibits to Annual Report on Form 10-K (File
No. 0-13715) filed by the Company with the Securities and Exchange
Commission on March 27, 1992.
(15) Exhibit 10.23 is hereby incorporated by reference from exhibits to Annual
Report on Form 10-K (File No. 0-13715) filed by the Company with the
Securities and Exchange Commission on March 26, 1993.
(16) Exhibits 3.2, 4.3, 4.4, 10.24, 10.25, 10.26, 10.27, 10.28, 10.29, 10.30,
10.31, 10.32, 21.1, and 99.8, are hereby incorporated by reference from
Exhibits to Annual Report on Form 10-K (File No. 0-13715) filed by the
Company with the Securities & Exchange Commission on April 13, 1994.
(17) Exhibits 11.1 and 21.1 are hereby incorporated by reference to exhibits to
Annual Report on Form 10-K (File No. 0-13715) filed by the Company with the
Securities and Exchange Commission on March 22, 1995.
(18) To be Filed by Amendment.
* Management compensatory plan or arrangement.
<PAGE>
EXHIBIT 13.1
------------
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
- ---
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1994
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ---
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ______________to_______________
Commission File No. 0-13715
VITRONICS CORPORATION
--------------------------------------------------------
(Exact name of registrant as specified in its charter)
COMMONWEALTH OF MASSACHUSETTS 04-2726873
--------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1 FORBES ROAD, NEWMARKET, NH 03857
------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (603)659-6550
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- ---------------------
Common Stock, $.01 par value American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
--------------
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes x No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of
the registrant as of March 9, 1995, was $10,856,702.00
Number of shares outstanding of the registrant's Common Stock, $.01 par
value as of March 9, 1995: 7,552,488 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company's definitive proxy statement for the 1995 Annual
Meeting of Shareholders are incorporated by reference into Part III.
<PAGE>
VITRONICS CORPORATION
PART I
ITEM 1. BUSINESS
Vitronics Corporation (the "Company") was incorporated in Massachusetts on
April 21, 1981. The Company is engaged in the design, engineering, manufacture
and marketing of state-of-the-art thermal processing systems for soldering
surface mounted devices to printed circuit boards and cleaning of the finished
assembly. The Company's customers are captive and contract manufacturers of
medium to high reliability printed circuit boards.
CURRENT PRODUCTS:
The Company produces several lines of solder reflow ovens used primarily in
the final step of attachment of surface mounted devices to printed circuit
boards. Using similar technology, the Company has also produced systems for
attaching hybrid circuits to ceramic substrates and for curing epoxies and
adhesives used in bonding applications by the electronics industry.
The products fall into four broad categories, each available in a range of
sizes to accommodate the throughput and space requirements of the circuit board
manufacturer.
- The SMR UNITHERM reflow series - high production rate, fully featured,
forced convection reflow ovens.
- The SMR ISOTHERM reflow series - low to medium production rate, forced
convection reflow ovens with basic features.
- The SMD reflow series - high production rate, infrared/natural convection
reflow ovens.
- The GP/MP series - low volume, benchtop, infrared/natural convection reflow
ovens.
Soldering remains the preferred method of permanently attaching hybrid and
semiconductor packages, microprocessors, resistors, capacitors and other common
electronic components to the surface of printed circuit boards.
Substrate/component assemblies treated with a coating of solder paste are placed
onto the conveyor system, which transports them at a constant rate through a
heated tunnel consisting of one or more individually heated and controlled
zones. Heat is transferred at a precisely controlled rate to the assemblies by
means of convection and radiation until the solder melts and flows between the
component leads and the circuit board. Rapid cooling ensures the formation of
the desired solder joints. This thermal process is also applicable to the
production of a variety of electronic component packages, including ceramic
hybrids, semiconductors and glass/epoxy circuits.
The Company's SMR series reflow soldering systems incorporate a revolutionary
heater and cell design with the benefits of high efficiency, forced convection
heat transfer, in addition to a background of infrared radiation. A unique
feature of this cell is the individual zone exhaust which removes solder paste
fumes as they are generated. Patent applications are pending worldwide covering
the unique features of the SMR series reflow soldering systems. The UNITHERM
version incorporates multiple heating cells both above and below the conveyor.
The economical ISOTHERM version, introduced in 1994, employs heater cells only
above the conveyor. In both versions, product heating is accomplished with high
velocity heated gas that is distributed with optimal flow uniformity across the
entire heating area supported by a background of infrared emission from the
heated surfaces. A second generation UNITHERM series introduced in 1994, offers
advanced features including controlled exhaust heater, auto chain lubrication,
variable tunnel aperture, and fume capture, for full automation. The Company
continues to produce its original SMD reflow systems for selected customers and
applications.
In addition to reflow ovens, the Company markets a line of aqueous and semi-
aqueous circuit board cleaners. These cleaners offer the printed circuit board
industry environmentally safe, yet cost effective, cleaning methods. The semi-
aqueous cleaners are designed to remove both rosin-based and water soluble
organic fluxes using non-CFC, biodegradable solvents for environmental safety.
The systems will
2
<PAGE>
operate both on-line or off-line with a variable speed conveyor system
facilitating the interface with any in-line soldering system. The first model
introduced by the Company in 1990, is known as the ENVIROCLEAN 3000 semi-aqueous
cleaning system. In 1993, the Company introduced the advanced ENVIROCLEAN 3500
semi-aqueous cleaning system, which incorporates an integrated emulsion module
with a decanter/separator and enhanced cleaning and drying capabilities.
PRODUCT APPLICATIONS:
Printed Circuit Board Systems - The trend in the printed circuit board (PCB)
-----------------------------
segment of the electronics industry is the attachment of surface-mounted
electronic components and devices to PCBs. The Company's solder reflow systems
are well suited to this task because of unique forced convection/infrared
heating cells and process gas management systems. The wide range of oven sizes
and features ensures the satisfaction of virtually all market requirements. The
Company's cleaning systems used for the removal of flux residues from finished
assemblies are not harmful to the environment due to the use of non-CFC
solvents.
PRODUCT OPTIONS AND ENHANCEMENTS:
Nitrogen Atmosphere - This option gives an inert atmosphere with tight control
-------------------
of oxygen levels (below 20 parts per million), which gives the process engineer
the ability to accommodate new assembly materials and processes.
Controlled Convection/Infrared - This option allows the process engineer
------------------------------
increased thermal stability and uniformity throughout the reflow cycle, thus
increasing production yields.
32 Loop Controller - A 32 loop proportional controller with integral and
------------------
differential control has been developed and integrated into the SMD and UNITHERM
series ovens. The 32 loop reduces cost on the larger ovens and adds versatility
of control.
Rail/Chain Conveyor Transport System - This option allows routine double-sided
------------------------------------
surface mount soldering without the necessity of fixturing as is necessary with
standard belt conveyors. This is made possible by allowing two edges of a board
to rest on pins which protrude from two moving chains that ride through
adjustable rails. A key benefit of this edge rail system is the 10 to 30 percent
increase in processing speed relative to the belt system.
Enhanced Cooling - This option provides additional cooling capacity within the
----------------
process tunnel to reduce both solder liquidous times and finished product
temperatures for product handling requirements.
PRODUCTS AND PROCESSES UNDER DEVELOPMENT:
Thermal Process Management - The Company continues to research methods and
--------------------------
products that improve the process integrity, automation and efficiency of its
thermal methodology.
Product Range - The Company continues to broaden its product range to address
-------------
ever larger segments of the printed circuit board market.
RESEARCH AND DEVELOPMENT:
During the year ended December 31, 1994, the Company expended $1,010,000 or 6%
of its net sales on research and development. Such expenditures were $860,000 or
7% of net sales in 1993, and $1,130,000 or 9% of net sales in 1992. All of the
Company's existing products have been designed and developed by the Company or
its subsidiaries.
MARKETS:
The primary market for the Company's products is the electronics industry,
where the systems are used in the production of printed circuit boards, ceramic
hybrids, semiconductor packages, and glass/epoxy circuits. Additional
applications of the Company's products within the electronics industry include:
circuit board drying, epoxy curing, hybrid solder reflow, polymer curing, and
thick film drying.
Segments of the electronics industry served by the Company's products are:
computers and peripheral office equipment, military electronics, consumer
electronic products, automotive electronics, telecommunication equipment, test
and measurement equipment, mechanical electronics, and contract assembly.
3
<PAGE>
MATERIALS:
The Company continues to produce in-house all of its thermal source emitters
and cells. The Company currently has one source for its microprocessor which is
used to interface the onboard computer with the machine in the Command Control
system, and feels that this microprocessor could be produced in-house or
obtained from another source. The Company has developed a new microprocessor for
its ISOTHERM machines. Work is currently being done to upgrade the
microprocessor for use on the UNITHERM product line. This new microprocessor
will enable the Company to develop an alternative source for its microprocessor.
The other components being used in the assembly of systems produced by the
Company are purchased from original equipment manufacturers, electronic supply
firms and others. The Company has no reason to believe that it cannot continue
to obtain such components, or suitable substitutes as required.
PATENTS AND TRADEMARKS:
The Company was issued a United States patent in January 1986 covering the
multi-zone thermal processing systems produced by the Company. A second patent
was issued in July 1986, on the source emitter panel produced by the Company.
Other patents cover the process for mounting surface-mount devices to printed
circuit boards through the use of solder reflow, and an improved source emitter
panel. The Company has also filed foreign patent applications corresponding to
the foregoing United States patents where it has been deemed advisable. Several
of these foreign applications have been granted. Management believes that the
patents strengthen the Company's competitive position.
The Company has three issued U.S. Patents and several pending applications
worldwide covering various aspects of the semi-aqueous cleaning systems.
The Company has an issued U.S. Patent, as well as additional pending patent
applications in the U.S. and worldwide, covering its UNITHERM product line.
The Company has U.S. and foreign trademark registrations for the trademark
VITRONICS, as well as a U.S. trademark registration for the VITRONICS LOGO,
UNITHERM and ENVIROCLEAN. The Company also uses unregistered trademarks for
ISOTHERM, VITRO-SENSE, Natural Convection/Infrared, Controlled
Convection/Infrared, VITRO-FOIL and VITRO-CLEAN.
CUSTOMERS AND MARKETING:
The Company is involved in surface-mount solder reflow with its patented
convection/infrared thermal technology. The Company has systems operating
successfully in most of the major contract and captive electronics companies
throughout the world. Such customers include:
<TABLE>
<S> <C> <C>
Allied-Signal GTE
AT&T Hughes Aircraft SCI Systems
Avex Electronics IBM Scientific Atlanta
Bose Intergraph TRW
Chrysler Intel US Assemblies
Cray Research Lockheed Varian
DuPont Motorola Xerox
General Electric Northern Telecom Zenith
GM (Delco Div.) Raytheon
<CAPTION>
International customers of the Company include:
<S> <C> <C>
L.M. Ericsson Mitsubishi Rank Xerox
Fujitsu Motorola Samsung
General Motors NEC Siemens
Goldstar Olivetti Texas Instruments
Hitachi Olympus Toshiba
Lucas Phillips
</TABLE>
4
<PAGE>
The Company's marketing and sales program includes: paid advertising, new
product announcements in industrial and commercial publications, direct mail
campaigns, technical articles, trade show exhibits, personal contacts and
trained sales representatives in the U.S., Canada, Southeast Asia, Europe, South
America, India and Israel.
The Company has 10 persons employed in its sales and marketing department,
including one person in both the West Coast and Central Regions, and 1 person in
its U.K. direct sales organization. The Company also utilizes 20 independent
sales representative organizations located in the United States and Canada, and
22 independent distributor organizations overseas.
During 1994, one of the Company's customers accounted for 15% of net sales
($2,544,000). None of the Company's customers accounted for 10% or more of its
net sales in 1993 and one customer accounted for 11% of total net sales in 1992
($1,315,000). The Company has no contracts that are subject to renegotiation of
profits or termination of contracts or subcontracts at the election of the
government. The Company's business is not seasonal in any material respect.
OEM Supply Relationships The Company has formed supply relationships with
------------------------
a number of "pick and place" original equipment manufacturers. "Pick and place"
is the term used to describe the automated technology used to place components
on PCBs prior to attachment and soldering. In each of these relationships, the
Company's solder reflow systems are purchased by the OEM and resold as a package
with pick and place equipment as part of an in-line assembly system.
BACKLOG:
On December 31, 1994, the Company had purchase orders reflecting a backlog
of $2,589,000 as compared to a December 31, 1993 backlog of $2,133,000. The
backlog has increased as a result of the increased bookings activity seen during
the year. All of the backlog at December 31, 1994 is expected to be shipped
within the next six months. At present, most of its customers pay the Company
within 40 to 60 days of billing.
COMPETITION:
Solder Reflow Systems Both domestically and internationally, the Company
---------------------
confronts competition from three primary competitors in the solder reflow
systems market. In addition, there are three lesser competitors selling systems
primarily in the United States' domestic market. In Europe, the Company competes
with companies based in Germany, France and the United Kingdom. The Japanese
market is dominated by three Japanese manufacturers that have focused almost
exclusively on that market. Asia (excluding Japan) has a mix of competitors,
none of which have significant market share on a worldwide basis. Management of
the Company believes that product performance, reliability and cost of operation
are the chief competitive factors in the market for solder reflow products. The
Company believes that its UNITHERM product line permits the Company to retain a
substantial market share in the solder reflow market place.
The Company's solder reflow systems may also face competition from the
development of electrically conductive adhesives designed to eliminate the need
to solder components to PCBs. At this point in the development of conductive
adhesives we believe that even if the adhesives are technologically sucessful,
they will require heat treatment or curing, and therefore they will continue to
represent a market for the Company's solder reflow technology. The potential
impact on the Company's semi-aqueous system business is uncertain, and this
business could be jeopardized.
Semi-Aqueous Cleaning Systems The Company is in strong competition with
-----------------------------
three primary competitors that manufacture semi-aqueous cleaning systems.
Competition is based on both price and performance considerations. Due to the
relatively large base of potential customers who have previously purchased the
Company's solder reflow systems, and the fact that the Company's semi-aqueous
system was the first such system to gain market acceptance, the Company believes
it is favorably positioned to take advantage of the expected rise in demand for
environmentally friendly semi-aqueous cleaning systems.
The Company's semi-aqueous cleaning technology, unlike the technology
employed by its three main competitors, utilizes a spray technique as opposed to
an immersion process. The Company believes that its spray technique is more
advanced and also gives the Company a cost advantage over its competitors.
5
<PAGE>
The Company's semi-aqueous cleaning systems, which have been fully
developed, also face competition from the growing acceptance and utilization of
"no clean" solder pastes which produce minimal flux residue, thus reducing and
potentially eliminating the need for post-assembly PCB cleaning and the
emergence of electrically-conductive adhesives. There can be no assurance that
the technology necessary to make and effectively use "no clean" solder pastes
which meet high reliability standards will not be developed. In this event the
market for semi-aqueous cleaning systems could be substantially reduced.
ENVIRONMENTAL COMPLIANCE:
Due to the nature of the Company's products, it has not been materially
affected by environmental laws. Management does not expect its capital
expenditures, earnings or competitive position to be materially affected in the
future.
EMPLOYEES:
As of December 31, 1994, the Company employed 114 full-time persons.
FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES:
During the year ended December 31, 1994, approximately $7,912,000 or 46% of
the Company's sales were foreign sales, primarily to European and Southeast
Asian companies, and $7,436,000 or 58% for the year ended December 31, 1993,
were foreign sales. Other information concerning foreign sales for the last
three fiscal years is presented in Note K to the Consolidated Financial
Statements.
ITEM 2. PROPERTIES
The executive offices and principal place of business of the Company are
located at Forbes Road, Newmarket Industrial Park, Newmarket, New Hampshire. The
Company leases two buildings, one 23,990 square foot facility for administration
and manufacturing, and one 9,400 square foot facility used exclusively as a
stockroom. The 23,990 square foot facility has a lease which expires in February
1999, and the 9,400 square foot facility has a three year lease which expires in
January 1997. The Company has the option to purchase the 23,990 property at the
end of the lease period for $1,100,000.00. The interior layout and leasehold
improvements to the 23,990 square foot facility were constructed to the
Company's specifications for its use of the facilities.
The Company's wholly-owned subsidiary, Vitronics Europe Limited ("VEL"),
leases a 15,000 square foot manufacturing and distribution facility in Plymouth,
England. This lease, which expired in June 1992, is continuing on a month-to-
month basis.
The Company believes that its current facilities are adequate for 1995
operations.
ITEM 3. LEGAL PROCEEDINGS
On November 26, 1991, the Company commenced an action entitled Vitronics
Corporation v. Conceptronic, Inc., Civil Action No. C91-696L in the United
States District Court for the District of New Hampshire. The Company brought
suit for infringement of its patents covering its method and apparatus for
solder reflow of surface-mounted devices to printed circuit boards. The specific
patents involved were U.S. Patent 4,833,301 (the "301 Patent") and U.S. Patent
4,654,502 (the "502 Patent"). The Company is seeking an injunction and monetary
damages in the form of profits lost because of the defendant's sales of
infringing devices.
The '301 Patent covers the reflow soldering apparatus used by the Company
to attach electronic circuit components to pre-printed infrared heating. The
'502 Patent covers the operating procedure associated with this apparatus. Both
patents were issued to Edward Furtek, a former employee of the Company, and
assigned to the Company. Mr. Furtek subsequently founded Conceptronic, and began
selling reflow soldering apparatus which constitutes the subject matter of this
litigation.
On July 20, 1992, the Court granted the Company's motion for summary
judgment of infringement with respect to the '301 patent but denied the
Company's motion for summary judgment with respect to the '502 patent, because
it found that a factual dispute remained over whether the component temperatures
claimed in the '502 patent existed in the Conceptronic system. Further, the
Court denied
6
<PAGE>
Conceptronic's motion for summary judgment.
However, on October 8, 1992, in response to a motion for reconsideration
filed by Conceptronic, the Court reconsidered its earlier grant of summary
judgment. The Court determined that there was indeed a dispute between the
parties as to whether or not the thermocouple used by Conceptronic to measure
the temperature of the air passing through its heater panels was substantially
equivalent in structure to the means for controlling the heater panel
temperature described in the Vitronics patents. In its findings, the Court did,
however, determine that the Conceptronic system performs the same function as
the apparatus disclosed in the patent. Thus, the only issue relating to
infringement to be resolved at trial is whether or not the structure described
in the patent is substantially equivalent to the structure used to control the
temperature in the Conceptronic system.
On October 20, 1992, in response to a second motion by Conceptronic to
reconsider its ruling on assignor estoppel, the Court reaffirmed its finding in
the original grant of summary judgment that because Edward Furtek was the named
inventor on the patents assigned to Vitronics, both he and his company,
Conceptronic, were precluded from challenging the validity of these patents in
this litigation.
In a further order on March 29, 1993, in response to a motion filed by the
Company to limit discovery, the Court reaffirmed its view that the only issues
to be resolved at trial relate to the foregoing issue of whether or not the
structure of the temperature control system in the Conceptronic oven is
equivalent to the structure described in the Vitronics patents, and to the
defense of Conceptronic that the Conceptronic system is so different from that
described in the Vitronics patents, that it cannot be held to infringe, even
though the claims of the patent literally read on the Conceptronic system. The
Court then went on to rule that discovery which extended beyond these topics and
Conceptronic's counterclaims would be prohibited.
On December 6, 1993, the Court granted the Company's motion for summary
judgment with respect to Conceptronic's counterclaims alleging abuse of process
and tortious interference with business relations. These counterclaims were
based solely on the Company's filing of its claim for patent infringement.
Conceptronic's counterclaims were dismissed in their entirety, thereby relieving
Vitronics of any potential liability, and greatly simplifying the remaining
discovery.
Conceptronic filed a motion to amend the answer and counterclaim to include
a defense based on fraud or inequitable conduct in the procurement of the '301
and '502 patents. This motion to amend was denied on March 22, 1994, and on
September 29, 1994, the Court denied a subsequent motion filed by Conceptronic
for reconsideration of the denial of its motion to amend.
Conceptronic also filed a motion for partial summary judgment of non-
infringement relating to Conceptronic's HVC Series ovens. This motion for
partial summary judgment was denied on October 4, 1994.
The foregoing rulings mean that the Court has determined that
Conceptronic's inequitable conduct defense has no merit. The rulings also mean
that the Court has determined as a matter of law that Vitronics has come forward
with sufficient facts, if proved at trial, to establish Conceptronic's
infringement of the Vitronics' patents by its manufacture and sale of
Conceptronic's HVC Series ovens.
Conceptronic has requested re-examination of the '301 patent by the U.S.
Patent and Trademark Office. Conceptronic contends that the '301 patent is
invalid due to certain prior art which it has uncovered, including Vitronics'
own sales literature. Vitronics is confident that Conceptronic's challenge to
the validity of the '301 patent will fail. Moreover, Conceptronic's motion
requesting the Court to stay the foregoing litigation pending the outcome of
this re-examination proceeding was denied by the Court on December 8, 1994. As a
result, the trial has been set to begin on June 20, 1995.
Based upon the events to date and upon the findings by the Court, the
Company is very optimistic that it will ultimately prevail in this litigation.
ITEM 4. SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of the fiscal year covered by this report, no
matter was submitted to a vote of security holders, through the solicitation of
proxies or otherwise.
7
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is traded on the American Stock Exchange under the
trading symbol VTC. As of December 31, 1994, there were 7,550,538 shares of
common stock issued and outstanding held by 682 stockholders of record.
The following table presents high and low sales prices for the Common Stock
for each fiscal quarter within the fiscal years ended December 31, 1994 and
1993.
<TABLE>
<CAPTION>
Common Stock
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
------------- ------------- ------------- ------------
High Low High Low High Low High Low
<S> <C> <C> <C> <C> <C> <C> <C>
1994 1 3/16 5/8 15/16 5/8 1 5/8 1 13/16 11/16
1993 7/8 9/16 11/16 7/16 13/16 3/8 1 1/8 9/16
</TABLE>
As of March 9, 1995, $1 /7//16 was the closing price for the Company's
Common Stock. Dividends are payable only when, and if, declared by the Board of
Directors from funds legally available and are dependent upon earnings, the
general financial status of the Company, and various other factors. The Company
has paid no dividends on its Common Stock and has no intention of doing so in
the near future.
ITEM 6. SELECTED FINANCIAL DATA
(Dollars in thousands except share amounts)
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
OPERATING DATA - YEAR ENDED DECEMBER 31
Net sales $17,346 $12,778 $12,373 $14,312 $18,168
Income (loss) after extraordinary item 602 (1,357) (2,965) (2,252) 702
Income (loss) per common share:
Primary .08 (.18) (.70) (.57) .18
Fully Diluted .07 (.18) (.70) (.57) .18
Backlog 2,589 2,133 3,018 1,282 2,874
Weighted average number of common
shares outstanding:
Primary 7,739 7,379 4,216 3,929 3,936
Fully Diluted 10,190 7,379 4,216 3,929 3,936
BALANCE SHEET DATA AT DECEMBER 31
Working capital $ 2,676 $ 2,096 $ 1,729 $ 2,635 $ 6,698
Total assets 6,052 4,796 6,755 9,620 12,392
Long-term liabilities 1,323 1,605 54 124 2,584
Stockholders' equity 1,728 999 2,382 4,265 6,527
</TABLE>
No dividends have been paid or declared by the Company.
8
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
The following table provides percentage comparisons of the components of net
income (loss) as presented in the Consolidated Statements of Operations included
elsewhere herein for the last three fiscal years.
<TABLE>
<CAPTION>
% Increase (Decrease)
--------------------------------
% of Net Sales 1994 1993
-------------------------
Years Ended December 31, Compared to Compared to
-------------------------
1994 1993 1992 1993 1992
---- ---- ---- ------------ --------------
<S> <C> <C> <C> <C> <C>
Net Sales 100% 100% 100% 36% 3%
Gross Profit 36 28 16 76 78
Selling, General
& Administrative 23 26 31 22 (12)
Research & Development 6 7 9 17 (24)
Non-Recurring Charges - 3 - - -
</TABLE>
Sales were $17,346,000 in 1994, $12,778,000 in 1993, and $12,373,000 in 1992.
Bookings for 1994 increased 50% to $17,802,000 from $11,893,000 in 1993.
Bookings for 1992 were $14,109,000. The Company's backlog was $2,589,000 at
December 31, 1994 versus $2,133,000 at December 31, 1993. The increase was a
result of a turnaround in the electronics industry, an increased demand for the
Company's new products, ISOTHERM and UNITHERM II, and a recapture of market
share lost in 1991 through 1993. During 1994, sales of semi-aqueous cleaners
were very slow, while sales of aqueous cleaners had slightly more activity.
Despite the total elimination of CFC production in 1995, the expected increased
revenue from these products has not yet materialized as expected. The decrease
in bookings for 1993 was due to a continued slow-down in capital spending in the
U.S. and Europe.
In 1994, gross profit percentage increased to 36% from 28% in 1993, primarily
due to decreased material costs and increased labor productivity, which was
partially offset by increased discounting and unabsorbed manufacturing overhead.
Steps were taken in the fourth quarter of 1993 to consolidate manufacturing
operations into one building in New Hampshire. This resulted in substantial
savings in 1994.
In 1992, margins were adversely affected by increased material costs with a
premium paid for materials associated with the start-up and enhancement of the
UNITHERM reflow system and higher learning costs of direct labor. The Company
also adjusted inventory values with the changeover to the new UNITHERM line.
Selling, general and administrative expenses increased in 1994 to $4,072,000
from $3,338,000 in 1993. However, as a percentage of sales, selling, general
and administrative expenses decreased to 23% in 1994 from 26% in 1993. The
increase in actual spending is partially a result of the increased sales volume
and the restoration of commission rates to previous levels. In 1992, selling,
general and administrative expenses were $3,778,000 or 31% of sales. The
Company incurred advertising costs of $176,000 in 1994, $147,000 in 1993, and
$143,000 in 1992.
Research and development expenses increased 17% to $1,010,000 in 1994 from
$860,000 in 1993. The increase was a result of increased headcount as the
Company accelerated the introduction of new products and enhanced features
during the year. Research and development expenses were $1,130,000 in 1992.
In 1993, the Company incurred $420,000 of non-recurring charges. The Company
wrote off restructuring charges of $290,000 relating to the consolidation of
manufacturing into one building and the payment of severance costs. The Company
wrote off $130,000 of goodwill relating to the Gram Corporation acquisition in
1988.
9
<PAGE>
The Company had net non-operating expenses of $501,000 in 1994 compared to
$232,000 for 1993 and $94,000 for 1992. Costs relating to the Company's patent
infringement lawsuit against Conceptronic were $330,000 for 1994, $127,000 for
1993, and $184,000 for 1992. The Company also incurred $72,000 of legal and
consulting costs relating to the Company's term loan agreement default in 1992.
The Company, as part of a planned program to generate cash, sold a number of its
demo machines, in either inventory or fixed assets, and realized a gain of
$85,000 in 1994, versus $42,000 in 1993, and $151,000 in 1992. The Company also
incurred $61,000 of cash discounts in 1994, versus $86,000 in 1993, and $45,000
in 1992.
LIQUIDITY AND CAPITAL RESOURCES
During the last three fiscal years, the Company has financed its operations
with internally generated funds and equity raised in a Rights Offering completed
in December 1992 and a subordinated convertible loan in 1993. In addition,
during January 1994, the Company pledged receivables and received a $350,000
loan from New England Growth Fund I, L.P.. This loan was repaid in full on
March 31, 1994. In 1994, cash increased by $499,000 as a result of the improved
operations of the Company. During 1994, the Company reduced its long-term debt
by approximately $447,000. During 1993, cash decreased by $1,084,000 as the
Company paid off its bank loan by approximately $684,000 and reduced its accrued
liabilities by $600,000. During 1992, the Company's cash decreased by
approximately $150,000 and the Company also reduced its bank indebtedness by
$1,200,000. During 1993 and 1992, there were no short term borrowings.
During 1992, the Company sold its investments in Research, Inc., Anafaze,
Inc., and the Surface Mount Center of Canada. The proceeds from Research, Inc.,
the SMT Center, and a portion of the Anafaze proceeds were applied to the bank
loan.
The Company has reviewed its capital spending budget for 1995 and expects to
finance its 1995 capital equipment acquisitions through lease financing. The
Company continues to monitor its operational spending levels very closely in
order to conserve cash. In early March 1995, the Company signed a commitment
letter for a $500,000 revolving line of credit with First National Bank of
Portsmouth which is expected to close in late March 1995. The Company believes
that its current cash balances and cash from operations will be adequate to meet
the Company's working capital requirements during the next year.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company's financial statements, together with the reports of the Company's
independent auditors, Coopers & Lybrand L.L.P., are contained on pages 16
through 30 of the 1994 Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The response to this item is incorporated herein by reference to the Company's
definitive proxy statement for the Annual Meeting of Shareholders to be held on
May 4, 1995.
ITEM 11. EXECUTIVE COMPENSATION
The response to this item is incorporated herein by reference to the Company's
definitive proxy statement for the Annual Meeting of Shareholders to be held on
May 4, 1995.
10
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The response to this item is incorporated herein by reference to the Company's
definitive proxy statement for the Annual Meeting of Shareholders to be held on
May 4, 1995.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The response to this item is incorporated herein by reference to the Company's
definitive proxy statement for the Annual Meeting of Shareholders to be held on
May 4, 1995.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
Page No.
<S> <C> <C> <C>
(a) 1. The following consolidated financial statements are filed as
part of this report:
Report of Coopers & Lybrand L.L.P., Independent Auditors,
dated February 21, 1995 16
Consolidated Balance Sheets at December 31, 1994 and 1993 17
Consolidated Statements of Operations for each of the
three years in the period ended December 31, 1994 18
Consolidated Statements of Stockholders' Equity for each
of the three years in the period ended December 31, 1994 19
Consolidated Statements of Cash Flow for each of the
three years in the period ended December 31, 1994 20
Notes to Consolidated Financial Statements for each of the
three years in the period ended December 31, 1994 21
2. THE FOLLOWING FINANCIAL STATEMENT SCHEDULE IS FILED WITH THIS
REPORT:
Schedule II - Valuation and qualifying accounts
All other schedules have been omitted because they are not
applicable, not required under the instructions, or the information
is contained in the financial statements or the notes thereto.
</TABLE>
11
<PAGE>
3. THE FOLLOWING EXHIBITS REQUIRED BY ITEM 601 OF REGULATION S-K ARE FILED
WITH THIS REPORT:
<TABLE>
<CAPTION>
EXHIBIT INDEX PAGE NO.
------------- --------
<S> <C> <C> <C>
3.1 Articles of Organization, as amended to date (1)
3.2 By-Laws, as amended to date (16)
4.1 Specimen Common Stock Certificate (2)
4.2 Form of Warrant issued to the Underwriter in the Company's
1992 Rights Offering (12)
4.3 Form of 10% Convertible Subordinated Debenture (16)
4.4 Form of Common Stock Purchase Warrant (16)
* 10.1 Incentive Stock Option Plan of 1983 (3)
* 10.2 Incentive Stock Option Plan of 1983-II (3)
* 10.3 Form of Incentive Stock Option Agreement for 1983 Plan
and the 1983-II Plan (3)
10.4 Lease of Real Property from Susan J. Conway, Trustee of
Forbes Realty Trust (2)
* 10.5 1987 Stock Option Plan (5)
10.6 Form of Non-qualified Stock Option Agreement (5)
10.7 Building Agreement and Lease of Premises at Bush Park, Estover,
Plymouth from The Counsel of the City of Plymouth (5)
10.8 Lloyd's Bank Loan Agreement (5)
10.9 Department of Trade and Industry Grant (5)
10.10 Lease of Real Property from Susan J. Conway, Trustee of
Afton Realty Trust (6)
10.11 Consulting Agreement with George F. Soderberg (7)
10.12 Non-Compete Agreement with George F. Soderberg (7)
10.13 Stock Repurchase Agreement with George F. Soderberg (7)
10.14 Subordinated Term Note with George F. Soderberg (7)
10.15 Lease Amendments of Real Property from Susan J. Conway,
Trustee of Forbes Realty Trust (8)
* 10.16 Employment Agreement with James J. Manfield, Jr. (8)(10)(14)
* 10.17 Employment Agreement with Edward A. Richards (8)(10)(14)
10.18 Lease of Real Property from the Corporate Business
Service Limited (9)
10.19 Term Note due from Anafaze, Incorporated and
Security Agreement (9)
* 10.20 Employment Agreement with Albert J. Chanasyk (14)
10.21 Employment Agreement with Dennis J. Monroe (14)
10.22 Employment Agreement by and between Peter D. Spilling and
Vitronics Europe Ltd. (11)
* 10.23 Employment Agreement with Ronald W. Lawler (15)
* 10.24 Severance Agreement with Edward A. Richards (16)
10.25 Convertible Subordinated Debenture Purchase dated October 1, 1993
between the Company and New England Growth Fund I, L.P. (NEGF) (16)
10.26 $1,200,000 10% Convertible Subordinated Debenture dated
October 1, 1993 issued to NEGF (16)
10.27 Amendment to Lease between Forbes Realty Trust and
Vitronics Corporation (16)
10.28 $350,000 Demand Promissory Note of the Company issued to NEGF
dated January 13, 1994 (16)
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX PAGE NO.
------------- --------
<S> <C> <C>
10.29 Loan Agreement between the Company and NEGF
dated January 13, 1994 (16)
10.30 Security Agreement between the Company and NEGF
dated January 13, 1994 (16)
10.31 Underwriters Common Stock Purchase Warrant issued to
Barclay Investments Inc. dated December 15, 1992 (16)
10.32 Common Stock Purchase Warrant for 125,000 Shares issued
to Barclay Investments Inc. dated October 1, 1993 (16)
11.1 Calculation of Net Income Per Common Share 31
16 Letter from Deloitte & Touche regarding change of Accountant (13)
21.1 Subsidiaries of the registrant 32
99.1 Directors and Officers Liability Policy and Company
reimbursement (4)
99.2 Complaint regarding Conceptronic Patent Litigation (14)
99.3 Conceptronic's response to the Complaint (14)
99.4 Conceptronic's Counterclaim (14)
99.5 Vitronics' response to Conceptronic's Counterclaim (14)
99.6 Order of the United States District Court concerning
Conceptronic Patent Litigation (11)
99.7 Correspondence concerning the Vitronics Europe Limited lease (11)
99.8 Conceptronic's Counterclaim Summary Judgment (16)
</TABLE>
(1) Articles of Amendment filed on August 17, 1987 are hereby incorporated by
reference from Exhibits to Annual Report on Form 10-K (File No. 0-13715)
filed by the Company with the Securities and Exchange Commission on March
31, 1988. The balance of Exhibit 3.1 is hereby incorporated by reference
from Exhibits to Amendment No. 1 to Form S-18 Registration Statement (File
No. 2-90042) filed by the Company with the Securities and Exchange
Commission on August 1, 1984.
(2) Exhibits 4.1 and 10.4 are hereby incorporated by reference from Exhibits to
Annual Report on Form 10-K (File No.2-90042) filed by the Company with the
Securities and Exchange Commission on April 1, 1985.
(3) Exhibits 10.1, 10.2 and 10.3 are hereby incorporated by reference from
Exhibits to Form S-18 Registration Statement (File No. 2-90042) filed by
the Company with the Securities and Exchange Commission on March 20, 1984.
(4) Exhibit 99.1 is hereby incorporated by reference from Exhibits to Post-
Effective Amendment No. 1 to Form S-18 Registration Statement (File No. 2-
90042) filed by the Company with the Securities and Exchange Commission on
May 10, 1985.
(5) Exhibits 10.5, 10.6, 10.7, 10.8 and 10.9 are hereby incorporated by
reference from Exhibits to Annual Report on Form 10-K (File No. 0-13715)
filed by the Company with Securities and Exchange Commission on March 31,
1988.
(6) Exhibit 10.10 is hereby incorporated by reference from exhibits to Annual
Report on Form 10-K (File No. 0-13715) filed by the Company with the
Securities and Exchange Commission on March 24, 1989.
13
<PAGE>
(7) Exhibits 10.11, 10.12, 10.13 and 10.14 are hereby incorporated by
reference to Form 8-K (File No. 0-13715) filed by the Company with the
Securities and Exchange Commission on February 22, 1990.
(8) Exhibits 10.15, 10.16 and 10.17 are hereby incorporated by reference from
exhibits to Annual Report on Form 10-K (File No. 0-13715) filed by the
Company with the Securities and Exchange Commission on April 2, 1990.
(9) Exhibits 10.18 and 10.19 are hereby incorporated by reference from
exhibits to Annual Report on Form 10-K (File No. 0-13715) filed by the
Company with the Securities and Exchange Commission on April 1, 1991.
(10) Exhibits 10.16 and 10.17 were amended. Copies of such agreements as
amended are hereby incorporated by reference from exhibits to Annual
Report on Form 10-K (File No. 0-13715) filed by the Company with the
Securities and Exchange Commission on March 27, 1992.
(11) Exhibits 10.22, 99.6 and 99.7 are hereby incorporated by reference to
Exhibits to Form S-2 Registration Statement (File No. 33-50928) filed by
the Company with the Securities and Exchange Commission on August 17,
1992.
(12) Exhibit 4.2 was hereby incorporated by reference to Exhibits to Amendment
No. 2 to Form S-2 Registration Statement (File No. 33-50928) filed by the
Company with the Securities and Exchange Commission on November 12, 1992.
(13) Exhibit 16 is hereby incorporated by reference to the Company's Form 8-K
dated December 30, 1992, and to the Amendment thereto on Form 8 dated
January 11, 1993.
(14) Exhibits 10.16, 10.17, 10.20, 10.21, 99.2, 99.3, 99.4 and 99.5 are hereby
incorporated by reference from exhibits to Annual Report on Form 10-K
(File No. 0-13715) filed by the Company with the Securities and Exchange
Commission on March 27, 1992.
(15) Exhibit 10.23 is hereby incorporated by reference from exhibits to Annual
Report on Form 10-K (File No. 0-13715) filed by the Company with the
Securities and Exchange Commission on March 26, 1993.
(16) Exhibits 3.2, 4.3, 4.4, 10.24, 10.25, 10.26, 10.27, 10.28, 10.29, 10.30,
10.31, 10.32, 21.1, 99.8, are hereby incorporated by reference from
Exhibits to Annual Report on Form 10-K (File No. 0-13715) filed by the
Company with the Securities & Exchange Commission on April 13, 1994.
* Management compensatory plan or arrangement.
(b) REPORTS ON FORM 8-K
No Reports on Form 8-K have been filed during the last quarter of the
period covered by this report.
14
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
(Registrant) VITRONICS CORPORATIO
---------------------------------------
By: /s/ JAMES J. MANFIELD, JR. Date: March 17, 1995
------------------------------
James J. Manfield, Jr., Chairman of the Board
and Chief Executive Officer
By: /s/ RONALD W. LAWLER Date: March 17, 1995
-------------------------
Ronald W. Lawler, President and
Chief Operating Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
By: /s/JAMES J. MANFIELD, JR. Date: March 17, 1995
-----------------------------
James J. Manfield, Jr., Chairman of the Board,
Chief Executive Officer, Chief Financial Officer
and Treasurer
By: /s/DANIEL J. SULLIVAN Date: March 17, 1995
-----------------------------
Daniel J. Sullivan
Corporate Controller and
Principal Accounting Officer
BOARD OF DIRECTORS
------------------
/s/ JAMES J. MANFIELD,JR. Date: March 17, 1995
------------------------------
James J. Manfield, Jr.
/s/ RONALD W. LAWLER Date: March 17, 1995
------------------------------
Ronald W. Lawler
/s/ DR. ALLEN H. KEOUGH Date: March 17, 1995
------------------------------
Dr. Allen H. Keough
/s/ DAVID R.A. STEADMAN Date: March 17, 1995
-------------------------------
David R.A. Steadman
/s/ ROBERT J. HANKS Date: March 17, 1995
-------------------------------
Robert J. Hanks
/s/ JOHN F. ROUSSEAU, JR. Date: March 17, 1995
-------------------------------
John F. Rousseau, Jr.
15
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
Vitronics Corporation
Newmarket, New Hampshire
We have audited the accompanying consolidated financial statements and the
financial statement schedule of Vitronics Corporation and subsidiaries listed in
Items 14a (1) and (2) of this Form 10-K. These financial statements and the
financial statement schedule are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements and
the financial statement schedule based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above,
present fairly, in all material respects, the financial position of Vitronics
Corporation and subsidiaries as of December 31, 1994 and 1993, and the results
of its operations and its cash flows for the three years in the period ended
December 31, 1994 in conformity with generally accepted accounting principles.
Also, in our opinion, the consolidated 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.
COOPERS & LYBRAND LLP
Manchester, New Hampshire
February 21, 1995
16
<PAGE>
VITRONICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands except share amounts)
<TABLE>
<CAPTION>
ASSETS
December 31
-----------------
1994 1993
-------- -------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 671 $ 172
Accounts receivable - less allowance
for doubtful accounts of $100 and $120 2,723 1,696
Inventories 2,094 2,159
Refundable taxes - 20
Other current assets 189 241
------- -------
TOTAL CURRENT ASSETS 5,677 4,288
PROPERTY AND EQUIPMENT 223 318
OTHER ASSETS 152 190
------- -------
$ 6,052 $ 4,796
======= =======
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 1,751 $ 1,026
Other current liabilities 945 696
Current maturities of long-term liabilities 305 470
------- -------
TOTAL CURRENT LIABILITIES 3,001 2,192
------- -------
LONG-TERM LIABILITIES - net of current maturities 1,323 1,605
------- -------
COMMITMENTS
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value:
Authorized 20,000,000 shares; issued and
outstanding 7,550,538 and 7,378,538 76 74
Additional paid-in capital 5,401 5,311
Foreign currency translation adjustment (184) (219)
Accumulated deficit (3,565) (4,167)
------- -------
1,728 999
------- -------
$ 6,052 $ 4,796
======= =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
17
<PAGE>
VITRONICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands except share amounts)
<TABLE>
<CAPTION>
Year Ended December 31
--------------------------------
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Net sales $17,346 $ 12,778 $ 12,373
Costs of goods sold 11,136 9,248 10,385
------ ------- -------
Gross profit 6,210 3,530 1,988
------ ------- -------
Selling, general and administrative expenses 4,072 3,338 3,778
Research and development costs 1,010 860 1,130
Non-recurring charges - 420 -
------ ------- -------
5,082 4,618 4,908
------ ------- -------
Income (loss) from operations 1,128 (1,088) (2,920)
Non-operating expense - net 501 232 94
------ ------- -------
Income (loss) before taxes 627 (1,320) (3,014)
Income taxes (credit) 25 37 (49)
------ ------- -------
Net income (loss) $ 602 $ (1,357) $ (2,965)
====== ======= =======
Income (loss) per common share:
Primary $ .08 $ (.18) $ (.70)
====== ======= =======
Fully diluted $ .07 $ (.18) $ (.70)
====== ======= =======
Weighted average number of common and
common equivalent shares used in
calculation of earnings per
common share:
Primary 7,739,000 7,379,000 4,216,000
========== ========= =========
Fully diluted 10,190,000 7,379,000 4,216,000
========== ========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
18
<PAGE>
VITRONICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Dollars in thousands)
<TABLE>
<CAPTION>
Unrealized
loss on
Foreign non-current
Additional currency marketable
Common Stock paid-in translation equity Retained
----------------
Shares Amount capital adjustment securities earnings Total
------ ------ ------- ---------- ---------- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balances, December 31, 1991 3,928,538 $ 39 $ 4,043 $ 53 $ (25) $ 155 $ 4,265
Foreign currency translation
adjustment - - - (264) - - (264)
Exercise of stock rights
(Offering) 3,450,000 35 1,286 - - - 1,321
Change in unrealized loss on
non-current marketable
equity securities - - - - 25 - 25
Net loss - - - - - (2,965) (2,965)
------ --- ---- ---- ---- ------ ------
Balances, December 31, 1992 7,378,538 74 5,329 (211) - (2,810) 2,382
Foreign currency translation
adjustment - - - (8) - - (8)
Additional cost related
to rights offering - - (18) - - - (18)
Net loss - - - - - (1,357) (1,357)
------ --- ---- ---- ---- ------ ------
Balances, December 31, 1993 7,378,538 74 5,311 (219) - (4,167) 999
Exercise of stock options 30,000 1 20 - - - 21
Conversion of debt to equity 142,000 1 70 - - - 71
Foreign - currency translation
adjustment - - - 35 - - 35
Net income - - - - - 602 602
------ --- ---- ---- ---- ------ ------
Balances, December 31, 1994 7,550,538 $ 76 $ 5,401 $ (184) - $(3,565) $1,728
========= ==== ======= ====== ======= ======= ======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
19
<PAGE>
VITRONICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
Year Ended December 31
----------------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 602 $(1,357) $(2,965)
---- ----- ------
Adjustments to reconcile net loss to net cash
provided by (used for) operating activities:
Depreciation and amortization 192 279 404
Gain on sale of assets - (42) (179)
Provision for excess and obsolescence 297 48 191
Deferred income taxes - - 360
Writedown of non-current marketable equity securities - 130 -
Changes in current assets and liabilities:
Accounts receivable (1,027) 294 417
Inventories (232) 49 79
Other current assets 52 96 (24)
Accounts payable 725 (90) 53
Income taxes 20 189 649
Other current liabilities 249 (614) 77
------ ------ ------
Total adjustments 276 339 2,027
------ ------ ------
Net cash provided by (used for) operating activities 878 (1,018) (938)
------ ------ ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (32) (65) (92)
Disposals of property and equipment 2 74 332
Additions to other assets (29) (177) (21)
Loan to affiliated company - - -
Proceeds on sale of investment - - 100
------ ------ ------
Net cash provided by (used for) investing activities (59) (168) 319
------ ------ ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Long-term borrowing - 1,200 -
Issuance of common stock under stock option plans 21 - -
Payments of long-term debt (376) (1,072) (1,112)
Rights offering - (18) 1,321
------ ------ ------
Net cash provided by (used for) financing activities (355) 110 209
------ ------ ------
Foreign currency translation adjustment 35 (8) 264
------ ------ ------
CASH AND CASH EQUIVALENTS:
Net increase (decrease) 499 (1,084) (146)
Balance, beginning of year 172 1,256 1,402
------ ------ ------
Balance, end of year $ 671 $ 172 $ 1,256
====== ====== ======
SUPPLEMENTAL DISCLOSURE OF NON-CASH
FINANCING ACTIVITIES:
Conversion of debt to equity $ 71 - -
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
20
<PAGE>
VITRONICS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
________________________________________________________________________________
Three Years Ended December 31, 1994
________________________________________________________________________________
A. Summary of Significant Accounting Policies
The Company is engaged in the business of designing, engineering,
manufacture and marketing of state-of-the-art thermal processing systems
for soldering surface mounted devices to printed circuit boards and
cleaning of the finished assembly. The significant accounting policies
employed are as follows :
OPERATIONS
In March 1995, the Company signed a commitment letter for a $500,000
revolving line of credit with First National Bank of Portsmouth.
Management believes this possible financing source, combined with its
existing cash balances and anticipated cash flow from operations, will be
adequate to meet its working capital requirements during 1995. However,
there can be no assurances that the Company will be able to access funds
under this financing arrangement or that Company operations will generate
adequate cash flows.
PRINCIPLES OF CONSOLIDATION-
The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiary. All significant intercompany
balances, transactions and profits have been eliminated.
CASH EQUIVALENTS-
The Company considers all highly-liquid debt instruments with a
maturity of three months or less to be cash equivalents. At December 31,
1994 and December 31, 1993, the Company had approximately $623,000 and
$172,000, respectively, on deposit at one Bank.
INVENTORIES-
Inventories are stated at the lower of cost (first-in, first-out
method) or market.
PROPERTY AND EQUIPMENT-
Property and equipment are recorded at cost. Depreciation is provided
using the straight-line method over the estimated useful lives of the
applicable assets. Expenditures for maintenance and repairs are charged to
expense as incurred, whereas expenditures for renewals and betterments are
capitalized. Upon sale or other disposition of assets, the cost and related
accumulated depreciation are removed from the accounts and any resulting
gain or loss is reflected in income.
The estimated useful lives used to compute depreciation are as
follows:
<TABLE>
<CAPTION>
Description Years
----------- -----
<S> <C>
Machinery and equipment 3-8
Furniture and fixtures 5-8
</TABLE>
Leasehold improvements are amortized over the life of the lease,
including extensions, but not in excess of the maximum useful lives of the
improvements.
21
<PAGE>
OTHER ASSETS-
Included in other assets are patents and debenture costs associated
with the issuance of long-term debt. Patents and debenture costs are being
amortized on the straight-line method over their estimated useful lives
ranging from three to seven years.
FOREIGN CURRENCY TRANSLATION-
All assets and liabilities of the Company's United Kingdom subsidiary,
Vitronics Europe Limited (VEL), are translated at exchange rates in effect
at December 31, 1994. Income and expenses are translated at average rates
for the year. The resulting differences, due to changing exchange rates,
are charged or credited to "Foreign Currency Translation Adjustment"
included as part of Stockholders' Equity. Gains and losses from foreign
currency transactions are included in earnings.
REVENUE RECOGNITION-
Revenue is recorded upon shipment to the customer.
RESEARCH AND DEVELOPMENTS COSTS-
All research and development costs are charged to operations as
incurred.
WARRANTIES-
The Company's products are generally under warranty against defects in
material and workmanship for a one year period. Estimated warranty costs
are accrued in the same period as products are shipped.
INCOME TAXES-
The Company has adopted the liability method of accounting for income
taxes, as set forth in Statement of Financial Accounting Standards No. 109,
Accounting for Income Taxes (SFAS 109), effective January 1, 1993. The
---------------------------
cumulative effect of adopting this statement as of January 1, 1993 was
immaterial to the results of operations for the year ended December 31,
1993. Previous to January 1, 1993, the Company had appropriately accounted
for taxes under APB #11. SFAS 109 is an asset and liability approach that
requires the recognition of deferred tax assets and liabilities for the
expected future tax consequences of events that have been recognized in the
Company's financial statements or tax returns. In estimating future tax
consequences, SFAS 109 generally considers all expected future events other
than future enactments of changes in the tax law or rates. Deferred tax
assets are recognized, net of any valuation allowance, for deductible
temporary differences and operating loss and credit carryforwards. Deferred
tax expense represents the change in the deferred tax assets and
liabilities.
INCOME (LOSS) PER SHARE-
The income (loss) per share is based on the weighted average number of
common and common equivalent shares (where dilutive) outstanding during the
year.
RECLASSIFICATION-
Certain 1993 and 1992 balances have been reclassified in order to
conform to the 1994 presentation.
22
<PAGE>
________________________________________________________________________________
B. INVENTORIES
Inventories consisted of (in thousands):
<TABLE>
<CAPTION>
December 31
-----------------
1994 1993
----- -----
<S> <C> <C>
Finished goods $ 224 $ 308
Work in process 369 473
Raw materials 1,501 1,378
----- -----
$2,094 $2,159
===== =====
</TABLE>
________________________________________________________________________________
C. PROPERTY AND EQUIPMENT
Property and equipment consisted of (in thousands):
<TABLE>
<CAPTION>
December 31
-----------------
1994 1993
----- -----
<S> <C> <C>
Machinery and equipment $ 958 $1,063
Furniture and fixtures 393 389
Leasehold improvements 428 418
----- -----
$1,779 1,870
Less accumulated depreciation
and amortization 1,556 1,552
----- -----
$ 223 $ 318
===== =====
</TABLE>
______________________________________________________________________________
D. OTHER ASSETS
Other assets consisted of (in thousands):
<TABLE>
<CAPTION>
December 31
-----------------
1994 1993
----- -----
<S> <C> <C>
Patents $ 229 $ 201
Debenture costs 155 155
----- -----
384 356
Less accumulated amortization 232 166
----- -----
$ 152 $ 190
===== =====
</TABLE>
23
<PAGE>
________________________________________________________________________________
E. OTHER CURRENT LIABILITIES
Other current liabilities consisted of (in thousands):
<TABLE>
<CAPTION>
December 31
----------------
1994 1993
----- -----
<S> <C> <C>
Accrued sales commissions $ 283 $ 194
Accrued payroll and related taxes 133 80
Accrued warranty costs 155 130
Other 374 292
----- -----
$ 945 $ 696
===== =====
</TABLE>
________________________________________________________________________________
F. INDEBTEDNESS
Long-term liabilities consisted of (in thousands):
<TABLE>
<CAPTION>
December 31
--------------
1994 1993
----- -----
<S> <C> <C>
U.K. term loan, interest at Bank
base rate plus 3% $ 220 $ 261
Notes payable, primarily to vendors,
interest ranging from 0% - 12% 204 565
Subordinated Convertible Debenture
interest at 10% 1,200 1,200
Unamortized government grants 4 49
----- -----
1,628 2,075
Less current maturities 305 470
----- -----
Total long-term liabilities -
net of current maturities $1,323 $1,605
===== =====
</TABLE>
On October 1, 1993, the Company received $1,200,000 from an investment
fund. This was a convertible subordinated debenture with an interest rate
of 10% convertible into 2,400,000 shares of Vitronics' common stock.
Quarterly principal payments of $33,333 are to be made beginning on June
30, 1995 and continuing through December 31, 1997, at which time any unpaid
principal will be due. The agreement calls for mandatory prepayment on the
occurrence of certain events and contains certain financial covenants, the
most restrictive of which is that the Company must maintain a ratio of
consolidated net earnings to cover interest charges of not less than 1:1
and that the Company must maintain a debt to equity ratio not greater than
3:1. In addition, the agreement restricts the Company's payment of
dividends. The outstanding principal balance of this note is convertible at
any time, at the discretion of the holder. The balance is convertible, at
the option of the Company, at the conversion price of $.50 per share, if
the average of the high and low trading prices of the stock is $2.00 or
more for a period of 30 consecutive trading days.
In January 1994, the Company pledged receivables and received a
$350,000 loan at 12% interest from New England Growth Fund I, L.P.. This
loan was repaid in March 1994.
24
<PAGE>
Borrowings under the U.K. term loan are collateralized by substantially all
of the assets of VEL, the Company's United Kingdom subsidiary and
guaranteed by the Company. The interest rate was 9% at December 31, 1994.
At December 31, 1994, this has been classified as long-term debt.
VEL received government grants in order to subsidize the acquisition
of equipment and leasehold improvements and to stimulate employment. To the
extent that the grant is capital in nature, it is amortized over 5 years,
the equipment's useful life. Because the Company has not met its personnel
requirements under the grant, the Company may be obligated to repay the
unamortized portion of the grant ($4,000) to the government.
In 1993, approximately $365,000 of accounts payable were converted to
long-term Notes Payable.
As of December 31, 1994, aggregate maturities of long-term liabilities
were as follows (in thousands):
<TABLE>
<S> <C>
1995 $ 305
1996 246
1997 243
1998 834
-----
$1,628
=====
</TABLE>
________________________________________________________________________________
G. INCOME TAXES
The provision for income taxes consisted of (in thousands):
<TABLE>
<CAPTION>
Year Ended December 31
------------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Currently payable (refundable):
Federal $ - $ (53) $(360)
Foreign - - (49)
State 25 - -
---- ---- -----
25 (53) (409)
---- ---- -----
Deferred (prepaid):
Federal - - 360
Foreign - 90 -
State - - -
---- ---- -----
- 90 360
---- ---- -----
$ 25 $ 37 $ (49)
==== ==== =====
</TABLE>
Reconciliations of income taxes at the statutory rate to the effective
rate reflected in the financial statements were as follows:
<TABLE>
<CAPTION>
Year Ended December 31
---------------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Statutory income tax rate 34.0% (34.0%) (34.0%)
Net losses without tax benefit - 20.9 28.8
Net operating losses utilized (34.0) - -
Goodwill amortization - 3.6 3.6
Foreign taxes - 6.8 -
State taxes net of Federal benefit 2.8 - -
Other 1.4 5.5 -
----- ----- -----
4.2% 2.8% (1.6%)
===== ===== =====
</TABLE>
25
<PAGE>
The 1993 foreign deferred tax provision represents an adjustment of
prior year amounts. The components of the net deferred tax assets and
liabilities were as follows (in thousands):
<TABLE>
<CAPTION>
December 31,
------------------
1994 1993
-------- --------
<S> <C> <C>
Deferred tax assets:
Inventory reserves $ 127 $ 116
Accounts receivable reserves 40 40
Other liabilities and reserves 62 69
Depreciation and amortization 147 155
Capital loss carryforwards 160 160
Net operating loss carryforwards 1,168 1,407
Research and development credits 155 199
------ ------
Total deferred tax asset 1,859 2,146
Valuation allowance (1,859) (2,146)
------ ------
Net deferred tax assets $ - $ -
====== ======
</TABLE>
The Company has placed a full valuation allowance against the deferred
tax asset due to the uncertainty regarding the utilization of these
benefits in future returns.
The Company currently has net operating loss and capital loss
carryforwards for Federal and Foreign income tax purposes of approximately
$3,116,651 and $468,668, respectively, and R&D credits of approximately
$155,000, all expiring in the years 2007 and 2008.
The Company had income (loss) before tax in the United Kingdom for the
years ended December 31, 1994, 1993 and 1992, of $218,000, $(242,000) and
$(519,000), respectively, and in the United States, $409,000, $(1,078,000)
and $(2,495,000), respectively.
________________________________________________________________________________
H. COMMITMENTS
The Company leases its facilities and certain equipment under
operating leases ranging up to 5 years with renewal and purchase options.
The leases provide for monthly rental payments, plus, in certain
situations, payments for real estate taxes, insurance and maintenance.
Rental expense for property, machinery and equipment charged to operations
was $372,000, $463,000 and $434,000 for the years ended December 31, 1994,
1993 and 1992, respectively.
At December 31, 1994, future minimum payments applicable to non-
cancelable operating leases with initial terms of one year or more were as
follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
1995 $ 309
1996 313
1997 246
1998 216
1999 11
-----
$1,095
=====
</TABLE>
26
<PAGE>
The Company, in the normal course of business, is involved in various
legal proceedings, that in the opinion of management, will not have a
material effect on the Company's financial conditions or results of
operations.
The Company does not currently offer employment benefits subject to
the provisions of Statements of Financial Accounting Standards 106 and 112.
________________________________________________________________________________
I. STOCK OPTIONS
Stock Option Plans
------------------
The Company has Stock Option Plans which allow for the granting of
options to employees, officers, directors and consultants to purchase an
aggregate of 1,000,000 shares of the Company's common stock. The Stock
Option Committee may issue options which are exercisable over a period not
to exceed 10 years and vest from date of issuance up to five years. The
following schedule summarizes the stock option activity during the three
years ended December 31, 1994:
<TABLE>
<CAPTION>
Number
of Option price
shares per share
--------- ----------------
<S> <C> <C>
Balance, December 31, 1991 326,500 $1.125 to $1.875
Granted in 1992 449,900 $.5625 to $1.25
Expired/Canceled in 1992 (145,950) $1.125 to $1.87
-------
Balance, December 31, 1992 630,450 $.5625 to $1.875
Granted in 1993 200,500 $.84
Expired/Canceled in 1993 (46,350) $.5625 to $1.75
------
Balance, December 31, 1993 784,600 $.5625 to $1.875
-------
Granted in 1994 324,000 $.01 to $1.3125
Expired/Canceled in 1994 (155,800) $.5625 to $1.875
Exercised (30,000) $.01
------
Balance, December 31, 1994 922,800 $.5625 to $1.75
=======
</TABLE>
Options to purchase 56,500 and 181,500 shares were available to be
granted under these plans as of December 31, 1994 and 1993, respectively.
When options under these plans are canceled, they may be granted again at a
later date. Options to purchase 409,900 shares at prices ranging from
$.5625 to $1.75 per share were exercisable as of December 31, 1994, and
options to purchase 393,900 shares at prices ranging from $.5625 to $1.875
were exercisable as of December 31, 1993. The Company has reserved 979,300
shares of common stock for these Plans.
In addition, the Company has 346,225 outstanding stock warrants to
purchase the Common Stock of the Company at an exercise price of $.60
exercisable from November 1993 through September 1998.
27
<PAGE>
___________________________________________________________________
J. NON-OPERATING EXPENSE - NET
Non-operating expense - net consisted of (in thousands):
<TABLE>
<CAPTION>
Year Ended December 31
-------------------------
1994 1993 1992
-------- ------- ------
<S> <C> <C> <C>
Loss on investment $ - $ - $ 6
Interest income (10) (6) (17)
Interest expense 189 114 160
Gain on sale of assets (85) (42) (179)
Patent defense costs 330 127 184
Other, net 77 39 (60)
---- ---- ----
$ 501 $ 232 $ 94
==== ==== ====
</TABLE>
On a cash basis, the actual interest income received and interest
expense paid by the Company during 1994, 1993 and 1992 approximated the
above amounts.
________________________________________________________________________________
K. FOREIGN OPERATIONS
The Company operates in one industry segment. Data by geographic area
were as follows (in thousands):
<TABLE>
<CAPTION>
Year Ended December 31
--------------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Foreign revenues:
Asia $ 4,974 $ 5,895 $ 3,169
Europe 2,663 1,541 2,217
Other 275 - 126
------- ------- -------
$ 7,912 $ 7,436 $ 5,512
======= ======= =======
Revenues by manufacturing operations:
United States $13,741 $10,133 $ 9,550
United Kingdom 3,605 2,645 2,823
------- ------- -------
$17,346 $12,778 $12,373
======= ======= =======
Income (loss) from operations:
United States $ 864 $ (866) $(2,387)
United Kingdom 264 (222) (533)
------- ------- -------
$ 1,128 $(1,088) $(2,920)
======= ======= =======
Identifiable assets:
United States $ 4,614 $ 3,758 $ 5,293
United Kingdom 1,438 1,038 1,462
------- ------- -------
$ 6,052 $ 4,796 $ 6,755
======= ======= =======
</TABLE>
28
<PAGE>
______________________________________________________________________________
L. MAJOR CUSTOMER
During 1994, one customer accounted for 15% of net sales. Accounts
receivable from this customer at December 31, 1994 amounted to $254,934.
In 1993, there were no customer accounts over 10% of net sales. During
1992, one customer accounted for 11% of net sales. Accounts receivable from
this customer amounted to $245,498 at December 31, 1992.
______________________________________________________________________________
M. EMPLOYEE BENEFIT PLAN
The Company maintains a 401(k) Plan and a defined Contribution Plan.
The 401(k) Plan covers substantially all full-time U.S. employees who have
twelve months of service and have attained the age of 21. Employee
contributions may range from 2%-15% of compensation with a discretionary
matching Company contribution. The Company is currently matching 25% of the
employees contribution, up to 1.5% of total compensation. The Company may
also make an optional contribution for any plan year at its discretion. The
defined Contribution Plan covers all full-time employees in the United
Kingdom. Contributions to the Plan are made only by the Company, and at the
Company's discretion.
The Company has expensed approximately $41,438, $34,325 and $32,469,
relating to contributions to the Plans during 1994, 1993 and 1992,
respectively.
________________________________________________________________________________
N. SUPPLEMENTAL SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
(Dollars in thousands except per share amounts)
<TABLE>
<CAPTION>
QUARTER ENDED
------------------------------------
Dec 31 Oct 1 Jul 2 Apr 2
------ ----- ----- -----
<S> <C> <C> <C> <C>
1994:
Net sales $5,360 $4,698 $3,704 $3,584
Gross profit 1,964 1,660 1,360 1,226
Gross profit % 37% 35% 37% 34%
Net income 288 243 59 12
Net income per common share
- Primary .04 .03 .01 .00
- Fully diluted .03 .03 .01 .00
</TABLE>
<TABLE>
<CAPTION>
QUARTER ENDED
------------------------------------
Dec 31 Oct 2 Jul 3 Apr 3
------ ------ ------ ------
<S> <C> <C> <C> <C>
1993:
Net sales $2,724 $3,238 $2,436 $4,380
Gross profit 674 1,096 536 1,224
Gross profit % 25% 34% 22% 28%
Net income/(loss) (520) 50 (790) (97)
Net income/(loss) per common share (.07) .01 (.11) (.01)
</TABLE>
During the fourth quarter of 1993, the Company recorded writedowns of
$130,000 relating to unamortized goodwill, and wrote-off $90,000 relating to a
prior year foreign tax asset. During the second quarter of 1993, the Company
recorded writedowns of $290,000 relating to restructuring costs.
29
<PAGE>
VITRONICS CORPORATION AND SUBSIDIARIES
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
(000's omitted)
______________________________________________________________________________
<TABLE>
<CAPTION>
Additions
Balance Charged to Balance
Beginning Costs and Deductions/(A)// End of
of Period Expenses Write-Offs Period
--------- -------- ---------- ------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts
year ended December 31,
1994 $120 $ 1 $ 21 $100
1993 124 12 16 120
1992 110 77 63 124
Inventory reserves
year ended December 31
1994 $289 $297 $219 $367
1993 315 48 74 289
1992 455 191 331 315
</TABLE>
(A) Deductions represent amounts determined to be uncollectible and
charged against the reserve.
30
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration statement of
Vitronics Corporation on Form S-3 (File No._____) of our report dated February
21, 1995, on our audits of the consolidated financial statements and financial
statement schedule of Vitronics Corporation, which report is included in this
Annual Report on Form 10-K.
Coopers & Lybrand L.L.P.
/s/ Coopers & Lybrand L.L.P.
Manchester, New Hampshire
April 24, 1995
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM DECEMBER
31, 1994 FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1994 DEC-31-1993
<PERIOD-START> JAN-01-1994 JAN-01-1993
<PERIOD-END> DEC-31-1994 DEC-31-1993
<CASH> 671 172
<SECURITIES> 0 0
<RECEIVABLES> 2,823 1,816
<ALLOWANCES> 100 120
<INVENTORY> 2,094 2,159
<CURRENT-ASSETS> 5,677 4,288
<PP&E> 1,779 1,870
<DEPRECIATION> 1,556 1,552
<TOTAL-ASSETS> 6,052 4,796
<CURRENT-LIABILITIES> 3,001 2,192
<BONDS> 0 0
<COMMON> 76 74
0 0
0 0
<OTHER-SE> 1,652 925
<TOTAL-LIABILITY-AND-EQUITY> 6,052 4,796
<SALES> 17,346 12,778
<TOTAL-REVENUES> 17,346 12,778
<CGS> 11,136 9,248
<TOTAL-COSTS> 5,082 4,618
<OTHER-EXPENSES> 322 124
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 179 108
<INCOME-PRETAX> 627 (1,320)
<INCOME-TAX> 25 37
<INCOME-CONTINUING> 602 (1,357)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 602 (1,357)
<EPS-PRIMARY> .08 (.18)
<EPS-DILUTED> .07 (.18)
</TABLE>
