UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 1-10013
Larson Davis Incorporated
(Exact name of small business issuer as specified in charter)
Nevada 87-0429944
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1681 West 820 North Provo, Utah 84601
(Address of principal executive offices) (Zip Code)
(801) 375-0177
(Issuer's Telephone number, including area code)
N/A
(Former name, former address, and former fiscal year,
if changed since last report)
<PAGE>
Check whether the Issuer (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act
during the past 12 months (or for such shorter period that the
Issuer was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.
Yes [ X ] No [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the Issuer filed all documents and reports required
to be filed by Section 12, 13, or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by court.
Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
As of November 10, 1995, the Issuer had 8,204,448 shares of its
common stock, par value $0.001 per share, issued and outstanding.
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [ X ]
Page 1 of 26 consecutively numbered pages, including exhibits.
<PAGE>
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Larson Davis Incorporated (the "Registrant") files herewith
unaudited condensed consolidated balance sheets of the Registrant
and its subsidiaries as of September 30, 1995 and June 30, 1995
(the Registrant's most recent fiscal year), unaudited condensed
consolidated statements of operations for the three months ended
September 30, 1995 and 1994, and unaudited condensed consolidated
statements of cash flows for the three months ended September 30,
1995 and 1994, together with unaudited condensed notes thereto.
In the opinion of management of the Registrant, the financial
statements reflect all adjustments, all of which are normal
recurring adjustments, necessary to fairly present the financial
condition of the Registrant for the interim periods presented.
The financial statements included in this report on form 10-QSB
should be read in conjunction with the audited financial statements
of the Registrant and the notes thereto included in the annual
report of the Registrant on form 10-KSB for the year ended June 30,
1995.
<PAGE>
LARSON DAVIS INCORPORATED
<TABLE>
<CAPTION>
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
September 30, June 30,
1995 1995
CURRENT ASSETS
<S> <C> <C>
Cash $ 172,251 $ 83,334
Trade accounts receivable, net 2,137,614 2,130,835
Inventories 2,528,657 2,152,768
Other current assets 120,849 135,348
Unbilled contract receivables 98,750 200,318
Total Current Assets 5,058,121 4,702,603
PROPERTY, PLANT AND EQUIPMENT
Net of accumulated depreciation 1,339,887 1,337,574
ASSETS UNDER CAPITAL LEASE
Net of accumulated amortization 272,232 303,522
NET ASSETS OF DISCONTINUED OPERATIONS 3,170,831 3,135,776
OTHER ASSETS
Product technology and license
costs net of amortization 2,041,967 1,975,699
Goodwill 124,493 124,493
$12,007,531 $11,579,667
<FN>
The accompanying notes are an integral part of these
financial statements.
</TABLE>
<PAGE>
LARSON DAVIS INCORPORATED
<TABLE>
<CAPTION>
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
September 30, June 30,
1995 1995
CURRENT LIABILITIES
<S> <C> <C>
Bank overdraft $ - $ 40,039
Short-term notes payable 1,593,867 2,219,187
Accounts payable 543,061 886,489
Accrued liabilities 437,761 469,003
Current maturities of long-term debt 206,409 206,409
Current maturities of capital lease
obligation 133,719 133,719
Total Current Liabilities 2,914,817 3,954,846
LONG-TERM DEBT
less current maturities 1,145,271 958,251
CAPITAL LEASE OBLIGATIONS
less current maturities 217,753 255,080
Total Liabilities 4,277,841 5,168,177
STOCKHOLDERS' EQUITY
Preferred Stock 200 200
Common stock 7,097 6,559
Additional paid-in capital 8,597,241 7,406,114
Retained earnings (873,665) (997,362)
Foreign currency translation (1,183) (4,021)
Total Stockholders' Equity 7,729,690 6,411,490
$12,007,531 $11,579,667
<FN>
The accompanying notes are an integral part of these
financial statements.
</TABLE>
<PAGE>
LARSON DAVIS INCORPORATED
<TABLE>
<CAPTION>
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the 3 Months Ended
September 30,
1995 1994
<S> <C> <C>
SALES, net $1,892,248 $1,932,524
COSTS AND OPERATING EXPENSES:
Costs of sales and operating
expenses 685,342 706,496
Research and development 402,370 343,247
Selling, general and
administrative 565,161 604,020
Total costs and
operating expenses 1,652,873 1,653,763
OPERATING INCOME (LOSS) 239,375 278,761
OTHER INCOME (EXPENSE) (100,678) (93,606)
INCOME BEFORE PROVISION FOR TAXES 138,697 185,155
PROVISION (BENEFIT) FOR
INCOME TAXES - 27,653
NET INCOME (LOSS) $ 138,697 $ 157,502
NET INCOME (LOSS) PER COMMON
SHARE: $ 0.02 $ 0.03
<FN>
The accompanying notes are an integral part of these
financial statements.
</TABLE>
<PAGE>
LARSON DAVIS INCORPORATED
<TABLE>
<CAPTION>
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the 3 Months Ended
September 30,
1995 1994
<S> <C> <C>
CASH FLOWS FROM (TO) OPERATIONS:
Net Income (Loss) $ 138,697 $ 157,502
Adjustments to reconcile net income to
net cash provided by operations:
Depreciation 83,861 55,901
Amortization 94,808 91,304
Changes in assets and liabilities:
Accounts receivable (6,779) (370,226)
Inventories (375,889) (363,270)
Prepaid expenses and other 14,499 (62,125)
Due from related parties - 2,896
Other current receivable 101,568 (93,693)
Accounts payable (343,428) 137,408
Accrued liabilities (31,242) (56,405)
Current deferred taxes - 26,853
Total Adjustments (462,602) 631,357
Net Cash Provided (Used) by Operations (323,905) (473,855)
CASH FLOWS TO INVESTING:
Foreign currency transactions 2,838 (9,200)
Net change in assets of discontinued
operations (35,055) -
Preferred stock dividends paid (15,000) -
Payments for software development
cost and technology (129,786) (209,918)
Purchase of instruments and equipment (86,174) (5,212)
Purchase of capital equipment - (45,739)
Net Cash (Used) in Investing Activities (263,177) (270,069)
<FN>
The accompanying notes are an integral part of these
financial statements.
</TABLE>
<PAGE>
LARSON DAVIS INCORPORATED
<TABLE>
<CAPTION>
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(continued)
For the 3 Months Ended
September 30,
1995 1994
<S> <C> <C>
CASH FLOWS FROM (TO) FINANCING:
Net borrowings (repayments) under
short-term debt (625,320) 414,017
Increases (decreases) in capital lease
obligation (37,327) 37,031
Borrowings (repayments) on long-term
debt 187,020 1,789
Proceeds from capital stock 1,191,665 -
Increase (decrease) in deferred taxes - -
Net Cash Provided (Used) by Financing 716,038 452,837
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 128,956 (291,087)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 43,295 432,261
CASH EQUIVALENT AT END OF PERIOD $ 172,251 $ 141,174
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid during the current quarter for:
Interest $ 100,678 $ 93,628
Income taxes $ - $ -
<FN>
The accompanying notes are an integral part of these
financial statements
</TABLE>
<PAGE>
LARSON DAVIS INCORPORATED
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying financial statements have been prepared by the
Registrant without audit. In the opinion of management, all
adjustments (which include only normal recurring adjustments)
necessary to present fairly the financial position, results of
operations, and changes in financial position at September 30,
1995 and for all periods presented have been made.
Certain information and footnote disclosure normally included in
financial statements prepared in accordance with generally
accepted accounting principles has been condensed or omitted.
It is suggested that these condensed financial statements be read
in conjunction with the Registrant's June 30, 1995 audited
financial statements and the notes thereto. The results of the
operations for the periods ended September 30, 1995 may not
necessarily be indicative of the operating results for the full
year.
Business Presentation. The accompanying consolidated financial
statements of Larson Davis Incorporated include the accounts of
the Registrant and its wholly-owned subsidiaries Larson Davis
Laboratories, Advantage Software, Inc., LD Info, Inc. and Larson
Davis Limited (a UK Corporation). All significant intercompany
transactions and accounts have been eliminated in consolidation.
Inventories. Inventories are valued at the lower of cost (using
average cost method) or market.
Plant and Equipment. Equipment is carried at cost less related
accumulated depreciation. Depreciation, including amortization of
capitalized leases, is computed using the straight-line method
over useful lives ranging from 3 to 5 years. Real estate is being
depreciated over a useful life of 25 years using the straight-line
method.
Preferred Stock Dividend. During the period ended September 30,
1995, the Registrant recognized preferred stock dividends payable
on 200,000 shares of issued and outstanding shares in the amount
of $15,000. The amount of dividend in arrears was $3,750:
Retained earnings balance 7/1/95 $(997,362)
Add: Net income 138,697
Deduct: Preferred stock dividend (15,000)
$(873,665)
<PAGE>
LARSON DAVIS INCORPORATED
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Earnings Per Share. The computation of earnings per share of
common stock is based on the weighted average number of shares
and common stock equivalents outstanding during the period. The
weighted average number of shares outstanding for the periods
ended September 30, 1995 and 1994, is 6,722,120 and 6,148,469,
respectively.
Revenue Recognition. The Registrant recognizes revenues on the
bulk of its product sales and services at the time of product
delivery or the rendering of services. With respect to recognizing
long-term contract revenues and charging expenses to operations,
the Registrant has adopted a "percentage-of-completion" method of
accruing revenues related to long-term contracts. Revenues are
accrued and a current, non-trade receivable is created based on
"progress toward completion" of the particular contract. Progress
is determined by comparing actual time incurred and materials used
with expected estimates of total contract costs. In short,
revenues are accrued as services are performed by the Registrant.
Losses on long-term contracts are recognized when they become
apparent. Billings to the customer are made according to the
payment terms of the contract. When a billing is created, the
amount of the billing is transferred into the regular trade
receivable account to await receipt of payment.
Software Development Costs. Pursuant to FAS No. 86, "Accounting
for the Costs of Computer Software to be Sold, Leased, or
Otherwise Marketed", the Registrant capitalizes all costs incurred
to develop software after technological feasibility has been
established. Amortization of these development costs is computed
using the straight-line method over estimated useful lives ranging
from 10 to 17 years.
Product Technology and License Rights. The Registrant capitalizes
costs incurred to acquire product technology and license rights.
These costs are being amortized over estimated useful lives
ranging from 10 to 17 years by the straight-line method.
Cash and Cash Equivalents. For purpose of the statement of cash
flows, the Registrant considers all highly liquid debt instruments
purchased with a maturity of three months or less to be cash
equivalents.
<PAGE>
LARSON DAVIS INCORPORATED
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - INVENTORIES
The composition of inventories at September 30, 1995, and
June 30, 1995, consists of the following:
<TABLE>
<CAPTION>
September 30, 1995 June 30, 1995
<S> <C> <C>
Raw materials $ 719,761 $ 669,433
Work in process 790,710 765,617
Finished goods 1,018,186 717,718
$2,528,657 $2,152,768
</TABLE>
NOTE 3 - CONTRACTS IN PROGRESS
The unbilled contract receivable represents amounts of contract
revenues accrued and recognized that have not yet been billed to
the customer. Billings on the contracts are made according to
payment terms and do not necessarily coincide with the "earning"
process.
<TABLE>
<CAPTION>
September 30, 1995 June 30, 1995
<S> <C> <C>
Total costs incurred
to date $2,416,110 $2,416,110
Estimated contribution
to date (40,465) (40,465)
Revenues recognized
to date 2,375,645 2,375,645
Progress billings
to date (1,789,842) (1,688,274)
Reclass net assets;
discontinued (585,803) (585,803)
Massport balance 98,750 98,750
Unbilled contracts
receivable $ 98,750 $ 200,318
</TABLE>
<PAGE>
NOTE 4 - EXPORT SALES
During the quarters ended September 30, 1995 and 1994, the
Registrant had export sales totaling approximately $593,289 and
$1,435,700, respectively.
PART I
FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
SIGNIFICANT FINANCIAL CHANGES - STATEMENT OF INCOME
The statements of income for the comparative periods of September
30, 1995 and 1994, show little change.
Total Revenue
Total revenues for the three months ended September 30, 1995 and
1994, are $1,892,248 and $1,932,524, respectively. The
approximately $40,000 decrease represented only a 2% change.
The significant difference is within the mix of sales between
foreign and domestic sales. For the three months ended September
30, 1995 and 1994, foreign sales represented 31% and 74%,
respectively. The increase in domestic sales has been interpreted
by management as a sign of strengthening within the U.S. economy
within the acoustics and vibration industry. Core instrumentation
sales have grown more dramatically than the change in total
revenues indicates due to a reduction in airports business revenues
which were approximately $205,000 for the three months ended
September 30, 1995, and approximately $825,000 for the same period
in 1994. The decrease in foreign sales between the two quarters is
also related to the decrease in airport revenues since a large
portion of these revenues in the 1994 quarter were foreign sales.
Costs of Sales and Operating Expenses
The Registrant's costs of sales and operating expenses as a
percentage of total revenue for the quarters ended September 30,
1995 and 1994, are 36% and 37%, respectively.
<PAGE>
Fluctuations in costs of sales and operating expenses are caused by
variances in product sales mix from period to period and normal
production cycles. The Registrant anticipates that cost of sales
and operating expenses will be approximately 40% to 45% over time.
The Registrant does not expect a significant change in the cost of
sales and operating expenses as a percentage of revenue as a result
of the recent acquisition of Sensar Corporation. (See the
Registrant's report on form 8-K dated October 27, 1995, for
additional information concerning this acquisition.)
Research and Development
As a percentage of total revenues the Registrant's research and
development costs for the three month period ended September 30,
1995 and 1994, are 21% and 18%, respectively. The increase is a
result of new product development and research and development
costs related to the Registrant's CrossCheck technology. It is
anticipated that the level of research and development expenses
will stabilize at approximately 10% to 15% over time.
Selling, General and Administrative
For the quarters ended September 30, 1995 and 1994, the percentage
of selling, general, and administrative expenses to total revenues
is 30% and 31%, respectively.
Other Expenses
The significant on-going element in other expenses is interest.
As indicated by the supplemental disclosure included in the
statements of cash flow, interest expense for the three month
period ended September 30, 1995 and 1994, is $100,678 and $93,606,
respectively.
SIGNIFICANT FINANCIAL CHANGES - BALANCE SHEETS
As of September 30, 1995, and June 30, 1995, total assets are
$12,007,531 and $11,579,667, respectively.
Trade Accounts Receivable
Accounts receivable remained approximately the same between June 30,
1995, and September 30, 1995. The $6,779 increase is insignificant
as a percentage change and indicated that the Registrant is
maintaining adequate collections of its trade accounts receivable.
Management feels the level of accounts receivable is within reason
and represents an acceptable collection cycle of its trade invoices.
<PAGE>
Inventories
As a continuation of its business plan, the Registrant continues
to stock finished goods to reduce the delivery lead time for its
instrumentation products. The approximately $300,000 increase in
finished goods and the approximately $25,000 increase in work in
process between June 30, 1995, and September 30, 1995, reflects
this commitment.
Short-term Notes Payable
There was a decrease of appropriately $625,000 in the Registrant's
short-term notes payable from June 30, 1995, to September 30, 1995.
Proceeds from the sale of common stock have been applied in part
to reducing short-term debt.
CAPITAL AND LIQUIDITY
At September 30, 1995, the Registrant's working capital ratio was
1.7:1 ($5,058,121 in current assets as compared to $2,914,817 in
current liabilities). Approximately $1,594,000 of the current
liabilities is represented by the Registrant's revolving line of
credit. The limit on this line is $2,100,000 and is adjusted from
time to time based on ratios of inventories and accounts receivable
levels. This line is reviewed annually and the Registrant
anticipates it will continue to remain available to it.
The Registrant entered into an agreement with a third party to
license its proprietary Airport Noise and Operations Monitoring
Software ("ANOMS") and transfer management and implementation of
substantially all of its airport monitoring contract business.
(See the Registrant's report on form 8-K dated June 30, 1995, as
amended, for additional information concerning this transaction.)
The Registrant was paid a one-time fee, will receive guaranteed
annual royalties, and will be paid a varying royalty based on the
gross sales by the third party within the airports noise monitoring
industry. Cash payments received from this agreement will have
little or no corresponding expenditures. As a result, the royalty
payments will improve the Registrant's cash flow situation.
Because a portion of the payment is based on a royalty from
revenues, the Registrant has elected to use the "Cost Recovery"
method to recognize revenues and amortize costs. This means that
there will be a dollar for dollar matching of amounts received
against the $3,170,831 in net assets of discontinued operations
until all of this amount is expensed; only after this will the
Registrant realize any gain from this agreement.
<PAGE>
The Registrant received net proceeds of approximately $1,200,000
from the sale of common stock during the three months ended
September 30, 1995. The Registrant has relied in the past on
capital infusion to sustain its operations. It is anticipated
that there will be further sales of common stock during this
fiscal year to provide capital and liquidity. Proceeds from
these anticipated sales will be used to supplement operating cash,
fund research and development efforts, and to acquire companies
with technologies and/or product lines compatible with the
Registrant's growth plan.
The Registrant considers its current liquidity position to be
favorable and anticipates sufficient cash from operations,
available short-term borrowing capabilities, and projected
capital funding to sustain normal operations.
SUBSEQUENT EVENT
The Registrant entered in to an agreement to acquire Sensar
Corporation, a privately-held Utah corporation, in exchange for
issuance of restricted common stock, the payment of cash to
redeem certain shares of Sensar Corporation, and the assumption
or payment of the liabilities of Sensar Corporation. (See the
Registrant's report on form 8-K dated October 27, 1995, for
additional information concerning this acquisition).
<PAGE>
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits
The following exhibits are includes with this report on form 10-QSB
for the quarter ended September 30, 1995.
Exhibit SEC
No. Reference No. Description Location
1 (10) Semiconductor Industry TOF This Filing
Marketing Agreement between
Sensar Corporation
(subsidiary of Larson Davis
Incorporated) and SAES
Getters S.p.A.
Reports on Form 8-K
The Registrant did not file any reports on form 8-K during the
quarter ended September 30, 1995.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
as amended, the Registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
Larson Davis Incorporated
Dated: November 13, 1995 By /s/ Dan J. Johnson
Dan J. Johnson
(Duly Authorized Officer
and Principal Financial
and Accounting Officer)
SEMICONDUCTOR INDUSTRY
TOF MARKETING AGREEMENT
This Agreement is made and entered into this 31 day of October 1995,
by and between the following parties:
Sensar Corporation, (subsidiary of Larson Davis, Inc.) a company
organized and existing under the laws of Utah, having its principal
place of business at 435 West 9160 South, Sandy, Utah 84070
(hereinafter referred to as "Sensar").
as one party
and
SAES Getters S.p.A., a company organized and existing under the laws
of Italy, with its principal place of business in Via Gallarate, 215
Milan, Italy, (hereinafter referred to as "SAES").
as the other party
WITNESSETH
WHEREAS, Sensar has developed a time-of-flight mass spectrometer
known as the Sensar TOF 2000 suitable for monitoring impurities in
nitrogen, argon, helium, and hydrogen (the TOF 2000 or any future
improved version(s) hereinafter referred to as the Product), which
has application in the Semiconductor Industry; and
WHEREAS, SAES is a worldwide known company involved in the field of
vacuum technology, and has wide experience in developing,
manufacturing and marketing of getters, purifiers and vacuum and
gas measuring instrumentation, and owns, directly or indirectly,
subsidiaries and companies, among which is SAES Pure Gas, Inc.,
in several countries (hereinafter referred to as "SAES Group"); and
WHEREAS, the parties did at one time enter into a Product Development
and Marketing Agreement whereby SAES became the exclusive distributor
of the TOF 2000 units, which Agreement has been terminated and is of
no further force and effect; and
WHEREAS, SAES remains interested in marketing the Product in the
Semiconductor Industry, and
<PAGE>
NOW, THEREFORE, in consideration of the premises, and other good and
valuable consideration, the receipt and sufficiency of which the
parties hereto acknowledge, the parties agree to, and hereby do agree
as follows:
l. Appointment as Distributor.
a. The parties hereto acknowledge and agree that the Product
Development and Marketing Agreement dated the 12th day of January
1994 has been and is terminated and is of no further force or effect
and all rights of the parties with respect thereto have been
fulfilled, settled or satisfied and there are no claims, demands,
or rights of any kind presently outstanding as between the parties.
b. Sensar hereby appoints SAES exclusive worldwide distributor to
market and solicit orders for the sale of the Product in the
Semiconductor Industry, for all phases of production and processing
of semiconductors and other electronic devices, with the exclusion
of stack emission and atmospheric pollution control applications
(hereinafter referred to as the "Semiconductor Industry"). SAES
accepts this appointment upon the terms and conditions set forth
herein and agrees to use its best efforts to promote the sale of the
Product in the Semiconductor Industry.
SAES may appoint sub-distributors and may use SAES Group commercial
network for the promotion, the marketing and the sale of the
Product. Sensar shall not be entitled to sell, directly or
indirectly, nor to appoint other distributors, agents and/or
sellers for the Product in the Semiconductor Industry save as
provided for in this Agreement.
2. Marketing and Sales Responsibilities
a. SAES shall use its best efforts to solicit orders of sales of
the Product by solicitation, advertising, symposium presentations,
mailing, booths at trade shows, journal articles, journal
advertising, and such other methods as may be appropriate. SAES
shall from time to time, but not less than semi-annually, review
with Sensar its solicitation plan, including documentation related
thereto. In the course of solicitation of such orders, SAES shall
actively seek out new applications for these products in the
Semiconductor Industry and follow-up sales leads obtained from
any source. SAES shall be responsible for maintaining proper
records, forms, or other documentation consistent with good
accounting practices, and shall retain and deliver copies of all
advertising documentation to Sensar upon a request therefore.
<PAGE>
b. During the term of this Agreement, SAES shall not act as a
distributor for any product that competes with the Product without
the written consent of Sensar. For purposes of this Agreement,
products using mass spectrometer devices to analyze gases at
atmospheric pressure are to be considered competitors. Sensar will
not market any products to the Semiconductor Industry or provide
information to competitors without the written consent of SAES.
c. SAES shall be responsible for conducting and covering all
expenses for marketing and sales efforts for the Products within
the Semiconductor Industry. This includes, but is not limited to:
preparing Product brochures and application notes, advertising,
mailing of marketing materials, participating in trade shows,
conducting surveys, and conducting demonstrations of the Product.
d. Sensar shall provide, in a timely manner and in good faith,
any technical data and assistance reasonably requested by SAES
for performing the marketing functions. Sensar shall furnish SAES
with literature, sales data, engineering materials, and such other
information as may be needed to solicit sales of the Product.
Sensar shall use its best efforts to provide materials and
technical assistance to SAES wherever and whenever it is
reasonably required to assist in the sales of the Product.
e. Sensar shall promptly refer any inquiries, requests, and/or
orders related to the Product for the Semiconductor Industry to
SAES, and SAES will refer the same to Sensar for any other markets.
f. Sensar reserves the right to maintain technical contacts and
relationships with potential and future customers, provided
however SAES shall be promptly informed of said contacts. In the
event services are performed by Sensar to customers, billing shall
be through SAES and Sensar shall be reimbursed for its services.
3. Manufacturing of Product.
a. Sensar shall, and has full rights to, manufacture the Product
for sale by SAES under this agreement. Sensar shall use its best
efforts to manufacture the Product in a timely manner to meet the
sales efforts of SAES. SAES shall allow ninety (90) days delivery
time for Products from date of order, although Sensar shall
deliver Products fully tested and in compliance to mutually
agreed specifications as rapidly as possible.
<PAGE>
b. SAES may require Sensar to identify the Product with SAES' name
by adding a label of appropriate size, stating "Manufactured for
SAES Getters S.p.A. by Sensar Corporation, a subsidiary of
Larson Davis Inc.," or such other language as may be agreed to
from time to time.
c. Sensar agrees that it shall indemnify, defend and hold SAES
harmless from and against any claims, damages, costs and expenses
(including attorney's fees) caused by the negligence of Sensar and
attributable to the Product including, without limitation, claims
for product liability or claims based on patent, copyright or
trademark infringement and caused by reason of any defective design
or manufacture of the Product and without the fault or negligence
of SAES. SAES agrees that it shall indemnify, defend and hold
Sensar harmless from and against any claims, damages, costs and
expenses (including attorney's fees) attributable to or arising
out of the fault or negligence of SAES.
4. Coordination of Activities.
a. SAES and Sensar will appoint contact persons through whom all
communications and authorizations between SAES and Sensar will be
made.
b. SAES shall report on a semi-annually basis its sales
activities, including sales forecasts, competitor situation, and
any other information reasonably requested by Sensar and related
to the Product.
c. SAES shall report to Sensar on a semi-annually basis any
technical information gathered from marketing and sales efforts
that could lead to improvements in the operation and/or
marketability of the Products, and Sensar will use its best
efforts to improve the Products to ensure competitiveness. Any
material reasonably considered to be confidential by any party
shall be identified as such and protected as provided in this
agreement.
d. Sensar shall keep SAES informed of its manufacturing
capabilities and delivery times. Sensar shall promptly inform
SAES of any problem which could limit or reduce its manufacturing
capabilities. SAES shall inform Sensar of anticipated purchase
orders as early as possible, in order for Sensar to plan its
production schedule.
<PAGE>
e. The parties shall coordinate contacts with prospective
purchasers of the Product with representatives and technical
support personnel of both SAES and Sensar, as may be agreed to by
the parties. SAES shall bear the cost of travel, meals and
lodging of Sensar employees who may be requested to assist SAES
in such sales efforts.
5. Product Development Activities
a. SAES shall cooperate with Sensar and Sensar shall cooperate
with SAES to further enhance the application of the TOF 2000 to
the Semiconductor Industry. Sensar shall have the primary
development responsibility and SAES shall provide Sensar all
information that is available, or which may in the future become
available to SAES, regarding specifications, know-how, technical
assistance and engineering, which would assist Sensar in such
enhancement.
b. SAES shall loan Sensar at no cost to Sensar, such ultrahigh
purity gas purifier units suitable for oxygen and other gas
purification as used by the Semiconductor Industry in its
manufacturing process. These gas purifiers shall be used
initially at Sensar's Sandy, Utah, manufacturing facility in
its product improvement and technical development program and for
use of the parties in the joint development effort. The gas
purifier units shall remain the sole property of SAES and shall
be immediately returned to SAES in the event of the termination
of this Agreement, unless such equipment has been disposed of in
a different manner, as both parties shall have agreed.
c. There is a jointly-owned TOF 2000 unit located at Sensar's
facility which is to be used for continued research and development
to improve the performance, reduce costs, increase quality,
maintain reliability and enhance the Product's value to the
Semiconductor Industry.
d. Sensar and SAES shall cooperate in a joint effort to improve
Product performance, increase quality, reduce costs, extend the
capabilities, improve marketability and develop new
instrumentation that is applicable to the Semiconductor Industry.
Particular and immediate attention will be given by Sensar to
the following:
i. Completion of the "Microsoft Windows" version of the software.
ii. Development of high purity oxygen gas monitoring capability.
iii. Improvements in quality control.
<PAGE>
Sensar shall have the responsibility for these tasks. In addition,
SAES hereby agrees to cooperate independently with Sensar, testing
the Product and carrying on needed evaluations, supplying adequate
gas test sources without charge as well as having SAES'
technicians visiting Sensar's facilities, at its own costs and
expenses.
6. Product Purchase Agreement and Schedule.
a. SAES shall purchase Products from Sensar at a FCA (Incoterms
1990) price of $150,000.00 each, for the TOF 2000 unit and
$180,000.00 each, for the TOF 2000 unit, including the gas
calibration system for four gases (Nitrogen, Hydrogen, Helium and
Argon) (but without the gas purifier units). These prices shall
be renegotiated at October of each year of validity of this
agreement. SAES shall be free to set its own price for sale of
the Products to the Semiconductor Industry.
b. SAES shall purchase two (2) TOF 2000s from Sensar in 1995
according to the following schedule. Upon signing of this
agreement, two (2) TOF 2000 units shall be ordered by SAES, for
delivery in ninety (90) days from the order date. For the
Products purchased from Sensar, SAES shall pay thirty percent
(30%) of the price of the Product(s) to Sensar at the time the
order is placed with Sensar. Other fifty percent (50%) will be
paid within fifteen (15) days of delivery of the completely
assembled and tested Product(s) as per the agreed tests
procedures. The remaining twenty percent (20%) will be paid
within fifteen (15) days of acceptance by the customer of the
Product(s) but however not later than forty-five (45) days after
delivery to customer of the Product(s). Delivery shall be FCA
(Incoterms 1990) Sensar's dock. All testing and payment shall
be within forty-five (45) days of the ship date of the TOF 2000s.
c. SAES shall purchase a minimum number of TOF 2000s (or
improved product if identified differently) from Sensar for each
of the years of the agreement. The schedule for purchases is:
Calendar year Number of TOF 2000s
1995 2
1996 6
1997 9
1998 11
1999 15
<PAGE>
It is the parties intention to maintain a continuous flow of orders
to permit orderly production schedules and cash flow. Accordingly,
without prior agreement, order levels will not be less than one
unit of the Product per any calendar quarter. If no purchases
are made from Sensar by SAES for any period of three months, then
Sensar shall have the right to terminate the Agreement upon 30
days written notice to SAES and a good faith attempt to study and
resolve the reason for the lack of purchases. In any event, if
Sensar does not elect to terminate the Agreement, then SAES shall
not be bound by the minimum calendar years numbers set forth in
this Article 6.c. if the Product ceases to be competitive in the
Semiconductor Industry market.
7. Payments. All payments due according to this Agreement and
not otherwise provided for in this Agreement will have to be made
within forty-five (45) days after invoice.
8. Independent Contractor. The relationship of SAES to Sensar
is that of an independent contractor. SAES shall, at its expense,
maintain offices and conduct its business worldwide, and shall
have complete control of and be completely responsible for its
business, personnel, and policies.
9. Warranty, Service, Repair, Installation and User Instruction.
SAES assumes full responsibility for all warranty, service,
repairs and equipment returns. Sensar warrants to SAES that all
products shall be free from defects in materials and workmanship
for one (1) year following installation. During the warranty
period, all broken or defective parts under warranty, as set forth
in Sensar's User's Guide for the Products, not caused by misuse or
accident through fault or negligence by the customer are to be
replaced by Sensar at no charge upon written notification from
SAES. Labor costs associated with warranty repairs will be the
sole responsibility of SAES but shall be reimbursed by Sensar at
the then current SAES hourly rate for such services. All third
party warranties shall be passed on by Sensar to SAES. SAES is
further responsible for the installation and user instruction of
the Product. In this regard, SAES will distribute to clients only
literature reviewed and approved in writing by Sensar explaining
Sensar warranty.
<PAGE>
10. Service Training and Servicing.
a. Sensar agrees to provide SAES engineers with all initial and
continuous training and documentation, as may be required in order
to ensure installation, start-up, training, warranty and customer
service to the Semiconductor Industry. SAES agrees to arrange for
initial training of personnel in servicing procedures. Such
training shall take place at the Sensar offices at the address set
forth above for the initial training or at such other mutually
agreed upon place. SAES shall be responsible for all costs of
transportation, food and lodging incurred with respect to
attending such training. Such training shall be given at such
time as may be mutually agreed to by the parties. Sensar and
SAES may decide that follow up training is required. Follow up
training may take place at Sensar or SAES' facilities, at such
time(s) as the parties deem appropriate. Each party shall pay its
own costs and expenses for such follow up training, except that
SAES shall bear the cost of travel, meals and lodging of Sensar's
employees who may be requested to provide such training away from
Sensar's facility.
b. Customer charges for service to equipment manufactured by
Sensar and placed in service by SAES shall be established by SAES.
Charges for service shall be fair and equitable, and shall reflect
the Sensar image in a favorable manner.
c. Replacement of parts and components shall be with Sensar or
Sensar approved parts and components only. Use of replacement
parts other than provided by Sensar, unless substitution is
specifically approved in writing, shall constitute a breach of
this Agreement unless an emergency situation exists and a Sensar
component or part is not available. For damages caused by use of
a non Sensar or unapproved component or part, the warranty
provision of this Agreement does not apply.
11. Term of Agreement. The term of this Agreement shall be for
an initial five (5) year term, commencing on the date of signature
of this Agreement by authorized representatives of both SAES and
Sensar. The term hereof shall be automatically renewed for
additional five year periods thereafter, unless the Agreement is
terminated by either party upon not more than 180 nor less than
ninety (90) days written notice prior to the end of the then
current term.
<PAGE>
12. Patent License Agreement. This Agreement shall be subject to
the provisions of the Patent License Agreement between Sensar and
Brigham Young University covering U.S. Patent No 5,070,240 and
all other patents domestic or foreign issued out of or in
relation thereto.
13. Trademarks and Copyrights. SAES agrees with respect to the
Sensar name and proprietary marks as follows:
a. SAES shall not in any way do anything to infringe upon, harm,
or contest the right of Sensar in any trade mark or name which
incorporates the name "Sensar." SAES shall be entitled to use its
own name and mark in connection with the sales of Sensar products,
and may place its name or mark on the Product.
b. SAES intends that its use of any proprietary mark, or any
other mark or name that incorporates the name "Sensar" to inure to
the benefit of Sensar and agrees that any goodwill arising from
such use by SAES shall revert to Sensar in the event that this
Agreement is terminated for any reason.
14. Ownership of Product and Enhancements. SAES agrees and
acknowledges that the Product and any and all technology, rights,
patents, know-how or other intellectual property interests
relating thereto are the sole and separate property of Sensar,
subject only to such rights as Sensar shall or may transfer, sell
or assign to SAES by written agreement. SAES further agrees and
acknowledges that, all enhancements and improvements to the Product
are and shall be the sole and separate property of Sensar, and that
no ownership claim shall be made by SAES as to the Product,
enhancements thereof or improvements thereto, except such rights
as shall be specifically provided herein.
15. Termination.
a. Any provision herein to the contrary notwithstanding, this
Agreement may be terminated at any time by any part in the event
of any material breach by the other party of any of the terms of
conditions of this Agreement or in the event of other acts of a
party that the other party reasonably believes will adversely
affect the Product, without prejudice to any right or remedy the
terminating party might have. The terminating party will notify
the other party if it believes such a condition exists, and the
other party will have sixty (60) days to rectify the situation
before any further action is taken by the terminating party.
<PAGE>
b. This Agreement shall terminate immediately and without notice
at the election of the other party, without prejudice to any
right or remedy the terminating party might have, upon (i) the
insolvency of the other party or (ii) a change in more than Fifty
percent (50%) in control of a party to a non related party.
c. Upon termination of this Agreement, SAES shall promptly return
to Sensar, at its principal office in the United States set forth
above, or at such other place as Sensar may designate, all property
of Sensar in SAES' possession, including but not limited to, all
Sensar drawings, specifications, literature, equipment and spare
parts, if any.
d. Upon termination of this Agreement, Sensar shall promptly
return to SAES at its principal office in Italy, or at such other
place as SAES may designate, all property of SAES in Sensar
possession, including but not limited to the provided gas
purification units.
e. Sensar shall not be liable to SAES or any person making a
claim in place of SAES for any indemnity or claimed payment
claimed on account of the termination of this Agreement, provided
that Sensar has complied with the terms of this Agreement.
f. In the event this Agreement is not renewed as per Article 11
hereof, where SAES desires to extend the initial term hereof, or
is terminated by Sensar not for breach by SAES of its obligations,
and provided that Sensar is continuing to market the Product and
provided also that SAES has actually sold during the term of this
Agreement more than sixty (60) Products, then SAES shall be
entitled to a goodwill indemnity as consideration for the
introduction of Sensar name and products in the Semiconductor
Production Gas Market as well as for consideration for SAES
activity in the development of the Product. Said goodwill
indemnity shall be calculated as follows:
twenty percent (20%) of the last twelve (12) months actual
sales made by SAES if said sales are between US $1,000,000 and
US $3,000,000;
ten percent (10%) of the last twelve (12) months actual sales
made by SAES if said sales are between US $3,000,001 and
US $5,000,000;
five percent (5%) of the last twelve (12) months actual sales
made by SAES if said sales are above US $5,000,001.
<PAGE>
The calculation of the goodwill indemnity shall be based on
segments. Accordingly, for illustrations purposes only, if sales
are US $3,500,000, the goodwill indemnity due shall be the sum of
20% of US $3,000,000 and 10% of US $500,000.
Sensar expressly agrees to pay SAES said goodwill indemnity
within three (3) months from the termination of the Agreement.
16. Succession. This Agreement, shall inure to the benefit of
and be binding upon the parties hereto and upon their assignees
and successors in interest of any kind whatsoever.
17. Failure to Enforce. The failure of a party to enforce any of
the provisions, rights or options of this Agreement shall in no way
be considered a waiver of such provisions, rights or options, or in
any way affect the validity of this Agreement. The exercise by a
party of any of its rights or options hereunder shall not preclude
or prejudice such party from exercising the same or any other
rights or options it may have under this agreement, irrespective
of any previous action or proceeding taken by such party.
18. Notices. All notices, requests, demands, and other
communications under this Agreement shall be in writing and shall
be deemed to have been duly given on the date of service if
served personally on the party to whom notice is to be given, or
on the third day after mailing, if mailed to the party to whom
notice is to be given, by first-class, registered or certified
mail, postage prepaid, and unless either party should notify the
other party in writing of a change of address, properly addressed
to the party's address first set out above.
19. Entire Agreement. This Agreement, constitutes the entire
agreement between the parties pertaining to the subject matter
contained in it and supersedes all prior and contemporaneous
agreements, representations and understanding of the parties
relating thereto. It may not be changed orally only by an
agreement in writing signed by the party against whom enforcement
of any waiver, change, modification, extension or discharge is
sought. No representations or promises not expressed herein shall
be binding on either party hereto for any purposes.
20. Section Headings. The section headings herein have been
inserted for convenience only and shall not be deemed to limit or
otherwise affect the construction of any provision herein.
<PAGE>
21. Attorney's Fees. In the event of a breach of this Agreement,
the breaching party shall pay to the enforcing party all
reasonable costs of enforcement, with or without suit, including
a reasonable attorney's fee, together with such other legal cost
as may be authorized by law.
22. Severability. In the event any section, paragraph, or portion
of this Agreement shall be or be deemed to be by any court having
lawful jurisdiction of the subject matter of this Agreement void,
voidable, or invalid for any reason, this Agreement shall be
otherwise valid and enforceable as if said void, voidable, or
invalid article, section, paragraph, or portion of this Agreement
had not been a part hereof in the first instance.
23. Authority to Bind. Each party executing this Agreement
hereby warrants that it has full and legal authority to execute
this Agreement for and on behalf of the respective parties, and
no further approval or consent of any other person is necessary
in connection therewith. Further, each party executing this
Agreement covenants and represents that the execution of this
agreement is not in contravention of and will not result in a
breach of any other agreement, contract, instrument, order,
judgment or decree to which such person is a party.
24. Counterparts. This Agreement may be executed in duplicate
originals, each of which shall be considered an original, but all
of which taken together shall constitute one and the same
original instrument. For purposes of this Article 24, facsimile
copies of this Agreement executed and transmitted by a party
shall be binding against such party as an original thereof.
25. Force Majeure. A party shall be excused for the period of
any delay in the performance of any obligations hereunder when
prevented from so doing by cause or causes beyond such party's
control, including labor disputes, civil commotion, war,
governmental regulations or controls, fire or other casualty,
inability to obtain any material or service or acts of God.
26. Miscellaneous. Nothing in this Agreement shall be deemed to
constitute the parties as partners, joint venturers, an association
or any other type of joint entity, nor shall this Agreement
constitute any employee of either party hereto or an agent or
representative, legal or otherwise, of the other party for any
purpose whatsoever. Neither party is authorized to make any
statement or representation on behalf of the other without the
prior written consent of the other party. Neither party assumes,
nor shall it be liable for, any liabilities or obligations of the
other whether past, present or future.
<PAGE>
27. Governing Law - Mediation - Situs. The parties hereby agree
that this Agreement shall be governed by the laws of the State of
Utah.
The parties hereby agree to avoid litigation where possible and
to resolve all disputes arising out of the subject matter of this
Agreement by mediation and agree to be bound by the provisions of
the Delaware Voluntary Alternative Dispute Resolution Act - which
terms are incorporated herein by reference - and in particular by
the Alternative Dispute Resolution (ADR) provisions of Title 6,
Chapter 77, entitled the Voluntary Alternative Dispute Resolution
Act of the Delaware Code. Mediation shall take place at a
mutually convenient place agreed to by the parties.
In the event a dispute between the parties is not resolved by
mediation, then the parties shall have access to Court. In this
regard, the parties expressly stipulate that all litigation under
this agreement not related to Intellectual Property and/or of
which Brigham Young University may be a party may be brought in
the state courts of Delaware and/or the United States District
Court for Delaware and consent to the jurisdiction of such courts
in any such matters.
In addition the parties expressly stipulate that all litigation
under this agreement related to Intellectual Property issues and/or
of which Brigham Young University may be a party shall be brought
in the state courts of Utah and/or the United States District
Court for Utah and consent to the jurisdiction of such courts in
any such matters.
For purposes of serving possible filing for legal cases and
enforcing possible judgments, injunctions, seizures, etc., SAES
hereby declares it is doing business in the United States with a
wholly-owned subsidiary, SAES Getters USA, Inc., located in
Colorado Springs, Colorado, which hereby acknowledges to this
Agreement as well as with SAES Pure Gas Inc. located in San Luis
Obispo, California which also hereby acknowledges to this
Agreement.
This Agreement has been drafted in English and shall be interpreted
in the English language as generally accepted in the State of Utah,
regardless of any translation hereof.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have hereunto set their
hands and seals effective the day and year first above written.
SENSAR CORPORATION;
By /s/ Brian G. Larson
Its Chairman
SAES GETTERS S.p.A.;
By /s/
Its Managing Director
Acknowledged and agreed
SAES Getters USA, Inc.
By /s/
Its President
Acknowledged and agreed
SAES Pure Gas, Inc.
By /s/
Its President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE BALANCE SHEETS AS OF SEPTEMBER 30, 1995, AND STATEMENTS OF
OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1995, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JUL-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 172,251
<SECURITIES> 0
<RECEIVABLES> 2,152,614
<ALLOWANCES> (15,000)
<INVENTORY> 2,528,657
<CURRENT-ASSETS> 5,058,121
<PP&E> 3,067,467
<DEPRECIATION> (1,727,580)
<TOTAL-ASSETS> 12,007,531
<CURRENT-LIABILITIES> 2,914,817
<BONDS> 0
<COMMON> 7,097
0
200
<OTHER-SE> 7,722,393
<TOTAL-LIABILITY-AND-EQUITY> 12,007,531
<SALES> 1,892,248
<TOTAL-REVENUES> 1,892,248
<CGS> 685,342
<TOTAL-COSTS> 1,652,873
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 100,678
<INCOME-PRETAX> 138,697
<INCOME-TAX> 0
<INCOME-CONTINUING> 138,697
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 138,697
<EPS-PRIMARY> 0.02
<EPS-DILUTED> 0.02
</TABLE>
