SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
--------------------------------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997
Commission File No. 0-20097
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ADVANCED MACHINE VISION CORPORATION
A California Corporation
IRS Employer Identification No. 33-0256103
2067 Commerce Drive
Medford, OR 97504
Telephone: 541-776-7700
Former Name: ARC Capital
------------------------
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes |X| No |_|
On March 31, 1997, registrant had 13,296,524 shares of Class A Common Stock, and
101,835 shares of Class B Common Stock, all no par value, issued and
outstanding.
Exhibit Index at Page 16
<PAGE>
INDEX
Page Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets..........................................1
Consolidated Statements of Operations................................2
Consolidated Statements of Cash Flows................................3
Notes to Unaudited Consolidated Financial Statements.............4 - 9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations..........................9 - 15
PART II. OTHER INFORMATION
Item 1. Legal Proceedings..............................................15 - 16
Item 6. Exhibits and Reports on Form 8-K....................................16
Signature...........................................................16
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
================================================================================
Advanced Machine Vision Corporation
Consolidated Balance Sheets
================================================================================
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
--------- ------------
(unaudited) (audited)
ASSETS
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 2,710,000 $ 1,909,000
Accounts receivable, net 4,931,000 4,979,000
Inventories 8,479,000 8,132,000
Prepaid expenses 630,000 391,000
------------- -------------
Total current assets 16,750,000 15,411,000
Property, plant and equipment, net 6,297,000 6,488,000
Intangible assets, net 7,546,000 7,876,000
Other assets 1,467,000 1,163,000
------------- -------------
$ 32,060,000 $ 30,938,000
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,378,000 $ 1,897,000
Short-term borrowings 799,000 947,000
Accrued liabilities 1,621,000 1,299,000
Customer deposits 2,471,000 2,463,000
Accrued payroll 942,000 707,000
Warranty reserve 469,000 479,000
Current portion of notes payable 1,443,000 1,706,000
------------- -------------
Total current liabilities 10,123,000 9,498,000
------------- -------------
Notes payable, less current portion 14,551,000 14,940,000
------------- -------------
Commitments and contingencies
Shareholders' equity:
Common stock:
Class A - no par value, one vote per share: 60,000,000
shares authorized, 13,297,000 and 11,140,000
shares issued and outstanding at March 31, 1997
and December 31, 1996, respectively 25,920,000 25,648,000
Class B - no par value, one vote per share: 3,000,000
shares authorized, 102,000 and 110,000 shares
issued and outstanding at March 31, 1997 and
December 31, 1996, respectively 66,000 72,000
Common stock warrants 2,403,000 2,403,000
Additional paid in capital 2,797,000 2,797,000
Accumulated deficit (23,601,000) (24,370,000)
Cumulative translation adjustment (199,000) (50,000)
------------- -------------
Total shareholders' equity 7,386,000 6,500,000
------------- -------------
$ 32,060,000 $ 30,938,000
============= =============
See Accompanying Notes to Unaudited Consolidated Financial Statements.
</TABLE>
<PAGE>
================================================================================
Advanced Machine Vision Corporation
Consolidated Statements of Operations
================================================================================
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1997 1996
---- ----
(unaudited)
<S> <C> <C>
Net sales $ 9,337,000 $ 3,613,000
Cost of sales 4,730,000 2,134,000
------------ ------------
Gross profit 4,607,000 1,479,000
------------ ------------
Operating expenses:
Selling and marketing 1,253,000 814,000
Research and development 1,019,000 818,000
General and administrative 1,032,000 883,000
Amortization of intangible assets 199,000 95,000
Charge for acquired in-process technology -- 4,915,000
Charge for royalty expense -- 647,000
------------ ------------
3,503,000 8,172,000
------------ ------------
Income (loss) from operations before other income and expense 1,104,000 (6,693,000)
Other income and expense:
Investment and other income 57,000 68,000
Interest expense (360,000) (172,000)
------------ ------------
Income (loss) before income taxes 801,000 (6,797,000)
Provision for income taxes 32,000 --
------------ ------------
Net income (loss) $ 769,000 $ (6,797,000)
============ ============
Earnings (loss) per share $ 0.06 $ (0.69)
----------- ------------
Weighted average shares outstanding 13,086,000 9,899,000
============ ============
See Accompanying Notes to Unaudited Consolidated Financial Statements.
</TABLE>
<PAGE>
================================================================================
Advanced Machine Vision Corporation
Consolidated Statements of Cash Flows
================================================================================
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1997 1996
---- ----
(unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net (loss) income $ 769,000 $ (6,797,000)
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Charge for acquired in-process technology -- 4,915,000
Charge for royalty expense -- 647,000
Depreciation and amortization 370,000 232,000
Changes in assets and liabilities (net of amounts purchased
in acquisition):
Accounts receivable 4,000 527,000
Inventories (630,000) (671,000)
Prepaid expenses and other assets (499,000) (667,000)
Accounts payable, short-term borrowings, accrued liabilities,
customer deposits, accrued payroll, and warranty reserve 989,000 913,000
------------ ------------
Net cash (used in) provided by operating activities 1,003,000 (901,000)
------------ ------------
Cash (used in) provided by investing activities:
Acquisition of Pulsarr -- (3,897,000)
Purchases of property and equipment (142,000) (160,000)
------------ ------------
Net cash provided by (used in) investing activities (142,000) (4,057,000)
------------ -------------
Cash (used in) provided by financing activities:
Notes payable to bank and others, net (75,000) 176,000
Proceeds from common stock issuances -- 2,000,000
Proceeds from exercise of stock options 15,000 20,000
------------ ------------
Net cash provided by financing activities (60,000) 2,196,000
------------ ------------
Net (decrease) increase in cash 801,000 (2,762,000)
Cash and cash equivalents, beginning of the period 1,909,000 4,171,000
------------ ------------
Cash and cash equivalents, end of the period $ 2,710,000 $ 1,409,000
============ ============
See Accompanying Notes to Unaudited Consolidated Financial Statements.
</TABLE>
<PAGE>
ADVANCED MACHINE VISION CORPORATION AND SUBSIDIARIES
================================================================================
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
1. Principles Of Consolidation
- --------------------------------
In the opinion of the management of Advanced Machine Vision Corporation (the
"Company" or "AMV"), formerly ARC Capital, the accompanying consolidated
financial statements, which have not been audited by independent accountants
(except for the balance sheet as of December 31, 1996), reflect all adjustments
(consisting of normal recurring accruals) necessary to present fairly the
Company's financial position at March 31, 1997, and December 31, 1996, the
results of operations and cash flows for the three month periods ended March 31,
1997 and 1996. The financial statements include the accounts of the Company and
its four wholly-owned subsidiaries, Applied Laser Systems, Inc. ("ALSO"), SRC
VISION, Inc. ("SRC"), ARC Netherlands bv and its respective subsidiary, Pulsarr
Holding bv ("Pulsarr"), from its March 1, 1996, acquisition date, and Ventek,
Inc. ("Ventek") from its July 24, 1996, acquisition date (see Note 8 regarding
the sale of Pulsarr in May 1997).
Certain notes and other information are condensed or omitted in the interim
financial statements presented in this Quarterly Report on Form 10-Q. These
financial statements should be read in conjunction with the Company's 1996
annual report on Form 10-K.
2. Nature Of Operations
- -------------------------
In February 1994, the Company acquired all of the issued and outstanding capital
stock of SRC for $8.1 million in cash. In March 1996, the Company acquired all
of the issued and outstanding stock of Pulsarr for cash of $6.5 million and
notes payable of $1.3 million (see Note 8 regarding the sale of Pulsarr for $8.4
million in cash in May 1997). In July 1996, the Company acquired the business
and certain assets of Ventek, subject to certain liabilities, for $5.1 million
in notes and other securities. The operations of each of the three acquired
entities are included in the consolidated financial results since their
respective acquisition dates. Through these subsidiaries, the Company designs,
manufactures and markets computer-aided vision defect detection and sorting and
defect removal equipment for use in a variety of industries, including food
processing, wood products and recycling. The Company's systems combine optical
and mechanical systems technologies to perform diverse scanning, analytical
sensing, measuring and sorting applications on a variety of products such as
food, wood and plastic. The Company sells its products throughout the world.
3. Financing
- --------------
In April 1995, the Company borrowed $2,160,000 pursuant to a convertible
subordinated secured note. Interest on the note was 10.25% and was payable
semi-annually. The note was secured by the issued and outstanding capital stock
of SRC. The note was convertible into the Company's Class A Common Stock at
$1.875 per share. In connection with the borrowing, the Company paid a finders
fee of $160,000 and issued 300,000 warrants to purchase Class A Common Stock at
$1.875 per share. In October 1996 and March 1997, $645,000 and $250,000
principal amounts of the note were converted by the debtholders into 344,000 and
133,000 shares of Class A Common Stock. The remaining principal amount of
$1,265,000 was paid in April 1997.
In April 1996, the Company borrowed $3,400,000 pursuant to a convertible secured
note. Interest on the note is 6.75% and is payable quarterly. The interest rate
may be adjusted upward on each anniversary date of the note if the market price
of the Company's Class A Common Stock fails to reach certain levels. In April
1997, the interest rate was adjusted to 9.75%. The maximum possible coupon
interest rate is 11.25% if none of the market price thresholds are met. The
principal amount is due in April 2001. The note is secured by 54% of the stock
of ARC Netherlands bv, a wholly-owned subsidiary of the Company established to
purchase Pulsarr. The note is convertible into the Company's Class A Common
Stock at $2.125 per share. In connection with the borrowing, the Company paid a
finders fee of $400,000 and issued 340,000 warrants to purchase Class A Common
Stock at $2.125 per share.
In July 1996, AMV issued the following notes in connection with the acquisition
of Ventek: (i) the 6.75% $1,000,000 note due July 23, 1999; (ii) a 6.75%
$2,250,000 note due July 23, 1999 convertible into the Company's Class A Common
Stock at $2.25 per share; and (iii) a $1,125,000 note and stock appreciation
rights payable (a) by issuance of up to 1,800,000 shares of Class A Common Stock
or at the Company's option, in cash on July 23, 1999, or (b) solely in cash in
the event AMV Common Stock is delisted from the Nasdaq Stock Market. The
$1,125,000 note and stock appreciation rights payable were valued at $1,529,000
on the acquisition date based upon an independent appraisal received by the
Company. All three notes are secured by all of the issued and outstanding shares
of Ventek.
4. Stock Transactions; Shares Eligible For Future Sale; Effect Of Warrants,
Options And Convertible Securities; Possible Dilution
- ----------------------------------------------------------
In March 1996, the Company sold 1,400,000 shares of its Class A Common Stock in
a private Regulation S offering to foreign investors at $1.625 per share, the
market price on the date the related Subscription Agreement was entered into. In
connection with the private placement, the Company paid finders fees and other
costs of approximately $700,000 and issued 240,000 warrants to purchase Class A
Common Stock at $2.00 per share.
On February 15, 1996, the Company redeemed all 497,094 shares of its Class E
Common Stock for nominal consideration. Also on that date, the 3,002,906 Class E
Warrants to purchase Class A Common Stock ceased to exist because escrow
conditions related to the warrants were not met.
In January 1997, the 1997 Restricted Stock Plan ("1997 Plan") was established to
retain the services of selected employees, officers and directors of the Company
and provide them with strong incentives to enhance the Company's growth. The
total number of shares of Class A Common Stock issuable under the 1997 Plan
shall not exceed 2,000,000. In January 1997, the Company's Board of Directors
awarded 2,000,000 shares of restricted Class A Common Stock to three key
employees of the Company. As to 10% of the stock, such shares cannot be traded
or transferred unless (i) the employee remains in the employ of the Company
until January 10, 2000 and (ii) a payment of $1.80 per share is made by the
employee to AMV. As to 90% of the stock, such stock cannot be traded or
transferred unless, in addition to the conditions in the prior sentence, the
market price of the stock as quoted by Nasdaq or other applicable stock exchange
for any 30 consecutive days prior to the third anniversary date of the award is
at least $20 per share. If any of these conditions are not met, the related
shares of stock will be forfeited and returned to the Company.
On March 8, 1997 and April 1, 1997, 188,400 Unit Purchase Options originally
issued in connection with the Company's 1992 initial public offering and 135,000
Laidlaw warrants, respectively, expired unexercised, thereby reducing
potentially outstanding shares and proforma proceeds in the table below by
1,830,000 and $6,304,000, respectively.
Schedule of Outstanding Stock, Warrants, Units and Potential Dilution: The
following table summarizes, as of April 1, 1997, outstanding common stock,
potential dilution to the outstanding common stock upon exercise of warrants and
conversion of convertible debt, and proforma proceeds from the exercise of
warrants. The table also sets forth the exercise or conversion prices and
warrant expiration and debt due dates.
<TABLE>
<CAPTION>
Proforma
Number or Principal Class A Common Proceeds
Amount Outstanding Conversion Stock After Conversion or Debt
Security at April 1, 1997 Factor Conversion Price Reduction
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Common Stock:
Class A 13,296,524 13,296,524
Class B 101,835 101,835
-------------
Total currently outstanding 13,398,359
-------------
Warrants (expiration date):
A (3/9/98) 2,941,963 1.4 4,118,748 $ 2.84 $ 11,697,000
B (3/9/98) 4,354,863 (A) 1.4 6,096,808 4.17 25,424,000
C (3/9/98) 846,250 1.4 1,184,750 2.21 2,618,000
D (6/30/98-7/31/98) 275,000 1 275,000 2.75 756,000
F (4/12/98) 300,000 1 300,000 1.88 564,000
G (2/28/99) 240,000 1 240,000 2.00 480,000
H (4/16/01) 340,000 1 340,000 2.13 724,000
I (7/23/01) 1,000,000 (B) 1 1,000,000 2.25 2,250,000
J (9/30/99) 300,000 1 300,000 2.03 608,000
Gerinda (8/97) 300,000 1 300,000 5.00 1,500,000
------------- ---------------
14,155,306 46,621,000
------------- ---------------
Convertible Debt (due date):
10.25% Notes (4/13/97) $ 1,265,000 (C) 675,000 1.88 1,265,000
6.75% Notes (4/16/01) 3,400,000 1,600,000 2.13 3,400,000
6.75% Ventek Note (7/23/99) 2,250,000 1,000,000 2.25 2,250,000
6% Note (2/28/01) 980,000 (D) 441,486 2.22 980,000
Ventek Note (7/23/99) 1,529,000 (B) 1,800,000 1,529,000
------------- ---------------
5,516,486 9,424,000
------------- ---------------
Potentially outstanding shares and proforma
proceeds and reduction of debt 33,070,151 $ 56,045,000
============= ===============
<FN>
(A) Includes 1,412,900 outstanding plus 2,941,963 assuming exercise of the
Class A Warrants.
(B) The Company issued the $1,529,000 note and Class I Warrant in
connection with the Ventek acquisition (see Note 5). The note is
payable (a) at the Company's option, in cash or by delivery of up to
1,800,000 shares of Class A Common Stock on the third anniversary date
of the note; or (b) solely in cash in the event AMV Common Stock is
delisted from the Nasdaq Stock Market. The Warrant vests 25% in each of
the next four years if sales and earnings objectives are achieved.
(C) This note was paid in full in April 1997.
(D) This note was paid in full in May 1997 in conjunction with the sale of
Pulsarr (see Note 8).
</FN>
</TABLE>
The proforma amounts above are for illustrative purposes only. Unless the market
price of AMV's Class A Common Stock rises significantly above the exercise or
conversion prices, it is unlikely that any warrants will be exercised or that
the debt will be converted.
In addition, on March 31, 1997, AMV had outstanding options to purchase
3,370,000 shares of Class A Common Stock, 2,783,000 of which are under its stock
option plans.
The existence of these outstanding warrants, options, and convertible debt,
including those granted or to be granted under AMV's Stock Option Plans or
otherwise, and potentially issuable shares pursuant to antidilution provisions
of warrant agreements could adversely affect AMV's ability to obtain future
financing. The price which AMV may receive for the Class A Common Stock issued
upon exercise of options and warrants, or amount of debt forgiven in the case of
conversion of debt, may be less than the market price of Class A Common Stock at
the time such options and warrants are exercised or debt is converted. For the
life of the warrants, options and convertible debt, the holders are given, at
little or no cost, the opportunity to profit from a rise in the market price of
their Class A Common Stock without assuming the risk of ownership. Moreover, the
holders of the options and warrants might be expected to exercise them at a time
when AMV would, in all likelihood, be able to obtain needed capital by a new
offering of its securities on terms more favorable than those provided for by
the options and warrants.
5. Earnings (Loss) Per Share
- ------------------------------
Earnings (loss) per share is computed based on the weighted average number of
common shares and dilutive common equivalent shares outstanding during the
period. Dilutive common equivalent shares consist of the shares relating to a
note and stock appreciation right agreement, options and warrants.
As Advanced Machine Vision Corporation has outstanding options and warrants
which, in the aggregate, exceed 20% of the common stock currently outstanding
(see Note 4), AMV is required to follow the provisions of Accounting Principles
Board (APB) Opinion No. 15, paragraph 38, in calculating earnings per share, if
dilutive. APB 15, paragraph 38, assumes the aggregate exercise of all options
and warrants and certain other computations. If earnings (loss) per share so
computed resulted in a lower earnings or greater loss per share when compared to
earnings (loss) per share excluding such items, such amount would be reported in
the financial statements. The APB 15, paragraph 38 calculation was not dilutive
for the quarters ended March 31, 1997 and 1996.
Fully diluted and primary earnings (loss) per share are the same amounts for
each period presented.
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 128, "Earnings per Share" (FAS 128). The changes
required by FAS 128 adjust the calculation of earnings per share (EPS) under
generally accepted accounting principles in the U. S. to be more consistent with
international standards. Under the new standard, companies will replace the
reporting of "primary" EPS with "basic" EPS. Basic EPS is calculated by dividing
the income available to common stockholders by the weighted average number of
common shares outstanding for the period, without consideration for common stock
equivalents. "Fully diluted" EPS will be replaced by "Diluted" EPS. Diluted EPS
is computed similarly to fully diluted EPS under the provisions of APB Opinion
No. 15. FAS 128 will be effective for periods beginning after December 15, 1997
and early application is not permitted. However, proforma EPS amounts computed
pursuant to FAS 128 are permitted and are shown below.
<TABLE>
<CAPTION>
Proforma
---------------------------------------------------------------------------------
For the Quarter Ended March 31,
---------------------------------------------------------------------------------
1997 1996
--------------------------------------- ----------------------------------------
Per Per
Income Shares Share (Loss) Shares Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
----------- ------------- ------ ----------- ------------- ------
<S> <C> <C> <C> <C> <C>
Basic EPS:
Income (loss) available to
common shareholders $ 769,000 13,398,000 $ (6,797,000) 9,899,000
Reduction for contingently
returnable shares as all
conditions were not met
as of period end -- (2,000,000) -- --
----------- ------------ ------------ -----------
Income (loss) available to
common shareholders $ 769,000 11,398,000 $ 0.07 $ (6,797,000) 9,899,000 $ (0.69)
====== =======
Effect of Dilutive Securities
Note and stock appreciation
rights agreement 25,000 1,800,000 -- --
Stock options -- 686,000 -- --
Convertible debt 137,000 3,716,000 -- --
----------- ------------ ------------ -----------
Diluted EPS:
Income (loss) available to
common shareholders
and assumed conversions $ 931,000 17,600,000 $ 0.05 $ (6,797,000) 9,899,000 $ (0.69)
=========== ============ ====== ============ =========== =======
</TABLE>
Options to purchase 2,684,000 shares of common stock between $1.69 and $4.84 and
warrants to purchase 14,290,000 shares of common stock between $1.88 and $5.00
were not included in the computation of Diluted EPS because such options' and
warrants' exercise prices were greater than the average market price of the
common shares.
6. Acquisitions Of Pulsarr and Ventek
- ---------------------------------------
On March 1, 1996, the Company acquired all of the outstanding capital stock of
Pulsarr for cash of $6.5 million and notes payable of $1.3 million. On July 24,
1996, the Company acquired certain assets and the business of Ventek, subject to
certain liabilities, for approximately $5.1 million in notes and other
securities. These acquisitions are accounted for under the purchase method of
accounting. On May 6, 1997, Pulsarr was sold (see Note 8).
The consolidated results of operations include Pulsarr's and Ventek's results of
operations from their respective acquisition dates.
The proforma condensed combined statements of operations, shown below as
supplemental information, assume the acquisitions of Pulsarr and Ventek occurred
as of the beginning of the 1996 three-month period. However, the proforma
combined balances are not necessarily indicative of balances which would have
resulted had the acquisitions occurred as of the beginning of such three-month
period presented. Proforma condensed combined statements of operations for the
1996 three-month period are presented below:
Three months ended March 31,
1997 1996
------------- -------------
Actual Proforma
Sales $ 9,337,000 $ 6,324,000
============= =============
Gross profit $ 4,607,000 $ 3,381,000
============= =============
Net income (loss) $ 769,000 $ (1,063,000)
============= =============
Earnings (loss) per share $ 0.06 $ (0.08)
============ =============
See the Company's report of Form 8-K, filed with the Securities and Exchange
Commission on May 9, 1997, for proforma financial information excluding Pulsarr.
7. Inventories
- ----------------
Inventories are stated at the lower of cost or market and include material,
labor and related manufacturing overhead. The Company determines cost based on
the first-in, first-out (FIFO) method.
March 31, December 31,
1997 1996
------------- -------------
Raw materials $ 2,719,000 $ 2,662,000
Work-in-process 2,995,000 2,234,000
Finished goods 2,765,000 3,236,000
------------- -------------
$ 8,479,000 $ 8,132,000
============= =============
8. Subsequent Event
- ---------------------
On May 6, 1997, the Company sold its Pulsarr subsidiary to Barco NV of Belgium
for $8.4 million in cash, resulting in a gain of approximately $5.0 million. The
sale resulted in net cash proceeds to AMV of approximately $7 million and a
reduction of current and long-term debt of approximately $4.6 million. The
Company had purchased Pulsarr on March 1, 1996 for cash of $6.5 million and
notes payable of $1.3 million. The gain on the sale of Pulsarr is largely a
result of the previous reduction in the carrying value of AMV's investment in
Pulsarr due to the $4.9 million charge for acquired in-process technology the
Company recorded in the quarter ended March 31, 1996 in conjunction with this
acquisition (see the Company's report on Form 8-K, filed with the Securities and
Exchange Commission on May 9, 1997, for proforma financial information excluding
Pulsarr).
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
================================================================================
On March 1, 1996, the Company acquired Pulsarr. On July 24, 1996, the Company
acquired Ventek. The discussion below pertains to the operations of AMV with
Pulsarr and Ventek included from their respective acquisition dates. In May
1997, the Company sold Pulsarr for $8.4 million in cash (see Liquidity and
Capital Resources below).
The Company's backlog at March 31, 1997, was $6,616,000, a decrease of 5% when
compared to the $6,947,000 backlog as of March 31, 1996. Excluding Pulsarr from
both periods, backlog was $3,820,000 at March 31, 1997 as compared to $2,701,000
at March 31, 1996. The 1997 backlog is expected to be shipped within nine
months.
Results of Operations - Comparison between three months ended March 31, 1997 and
March 31, 1996
- --------------
Sales for the three months ended March 31, 1997 ("Q1 1997") were $9,337,000, up
158% when compared to sales for the three months ended March 31, 1996
("Q1 1996") of $3,613,000. The increase is due to the inclusion of Pulsarr's
($1,782,000) and Ventek's ($1,428,000) sales and an increase of $2,514,000 in
sales at SRC.
Cost of sales was 51% of sales in Q1 1997 and 59% in Q1 1996.
Gross profit increased by 212% to $4,607,000 in Q1 1997 when compared to
$1,479,000 of gross profit in Q1 1996. In Q1 1997, gross profit was 49% as
compared to 41% in Q1 1996. The increase in gross profit as a percentage of
sales is primarily related to the higher margin Ventek products included in Q1
1997, an increase in the overall sales volume at SRC which allowed for the
spreading of fixed costs over a larger sales based as well as a change in sales
mix.
Selling and marketing expense increased 54% in Q1 1997 from Q1 1996 to
$1,253,000 amounting to 13% of sales in Q1 1997. Similar expenses in Q1 1996
were $814,000, or 23% of sales. The decrease in selling and marketing expenses
as a percent of sales is the result of spreading of fixed costs over a larger
sales base.
Research and development expenses were $1,019,000 and $818,000 in Q1 1997 and Q1
1996, or 11% and 23% of sales, respectively. The larger research and development
level in Q1 1997 was due principally to $95,000 of Pulsarr and $87,000 of Ventek
expenses.
General and administrative expenses increased $149,000 to $1,032,000 in Q1 1997
from $883,000 in Q1 1996. The increase in general and administrative expenses is
due principally to the addition of Pulsarr and Ventek.
The increase in amortization of intangible assets is due to the acquisitions of
Pulsarr and Ventek.
The decrease in investment and other income is the result of lower cash balances
available for investment.
The increase in interest expense is the result of the increase in debt
outstanding relating to the acquisitions of Pulsarr and Ventek.
Net income for Q1 1997 was $769,000 as compared to a net loss of $6,797,000 in
Q1 1996. Q1 1996 included special charges of $4,915,000 and $647,000 for the
write-off of acquired in-process technology and royalty expense, respectively.
Liquidity and Capital Resources
- -------------------------------
On May 6, 1997, the Company received net proceeds of approximately $7,000,000
from the sale of Pulsarr, which increased AMV's cash balance on that date to
approximately $8,500,000.
In March 1996, the Company received $2,000,000 from the sale of 1,400,000 shares
of Class A Common Stock pursuant to a private placement. In April 1996, the
Company received $3,000,000 representing the net proceeds of a private placement
of convertible debt. In October 1995, the Company received approximately
$1,052,000 from the sale of its laser diode operations. In April 1995, the
Company received $2,000,000 representing the net proceeds from a private
placement of convertible debt. The cash generated from these transactions was
used to finance the acquisition of Pulsarr and to provide funds for working
capital purposes.
The Company's principal sources of operating capital have been funds from the
above transactions, its overseas Regulation S offerings in September and October
1993 and in February 1994 and its initial public offering in March 1992. As of
March 31, 1997, the Company had $6,627,000 in working capital, which has been
substantially enhanced by the sale of Pulsarr.
As a result of the settlement in July 1992 of a lawsuit alleging certain patent
infringements, SRC entered into a royalty agreement, pursuant to which SRC will
pay royalties of 7% of certain vision system sales through the earlier of June
30, 2003, or the date at which aggregate royalty payments equal $1,600,000.
Until aggregate royalty payments equal $1,600,000, maximum annual royalty
payments are $400,000 through 1996. The final $400,000 installment was paid in
July 1996. During the quarter ended March 31, 1996, the Company wrote off
against income $647,000 of deferred royalty expense related to the settlement as
all royalties had been earned and no significant future economic life was
estimated to exist.
The Company intends to continue to market its vision systems technology and
products, and will evaluate selected acquisition opportunities. Additional
investments will be required for capital equipment, marketing and R & D for the
Company to remain competitive. For example, funds must be expended to complete
development of the Company's next generation of processor to enhance the
Company's ability to effectively compete in certain markets with Key Technology,
Inc.'s (the Company's principal competitor) 1995 product introduction.
Furthermore, if the Company consummates additional technology intensive
acquisitions, additional equipment and R&D investments may be necessary, perhaps
to a greater extent than for the Company's existing operations.
The Company's ALSO operation, AMV's only business prior to the February 1994
acquisition of SRC, had suffered losses since inception. The operations of ALSO
were sold in October 1995. In 1995, SRC generated operating profits (before
allocation of corporate overhead expenses). Even though SRC reached operating
profitability in five of the last seven quarters and had a history of profitable
operations prior to its acquisition by AMV, there can be no assurance that
long-term profitability will be realized. Pulsarr has operated profitably since
1990. Ventek has operated profitably since 1992. The Company operates in a
highly competitive environment, which environment may be intensified by the fact
that Pulsarr is now owned by a company substantially larger and with far greater
financial resources than AMV. Delays and difficulties relating to technological
changes in turnaround situations often occur, any of which would materially and
adversely affect the Company's cash flow. Furthermore, operational and marketing
difficulties may occur relating to the integration of the recently completed
acquisition of Ventek.
The acquisition of Pulsarr occurred on March 1, 1996. In connection therewith,
the Company paid approximately $6.5 million to the sellers. Cash received from
the March and April 1996 placements of stock and notes detailed above generated
approximately $5,000,000 for the purchase. The balance of the cash payments of
approximately $1,500,000 was paid from the Company's current cash balances. The
Company received net proceeds of approximately $7,000,000 when Pulsarr was sold
in May 1997.
The acquisition of Ventek occurred in July 1996. Consideration for the
transaction was approximately $5.1 million in notes and other securities as
described in Note 3 in this Form 10-Q.
Prior to 1995, the Company had a history of negative operating cash flow. The
Company believes it will operate at a negative cash flow during certain periods
in the future due to payment of notes issued in connection with prior
financings, working capital requirements, the need to fund certain development
projects, cash required to enter new market areas, and possible cash needed to
fully integrate Ventek's operations. In April 1997, the Company paid off the
$1,265,000 of the 10.25% Convertible Subordinated Secured Note when due.
Management believes that the Company has sufficient cash to enable the Company
to sustain its operations and to adequately fund the cash flow expected to be
used in operating activities for the next twelve months. Until the Company is
able to consistently generate sustained positive cash flow from operations, the
Company must rely on debt or equity financing.
In January 1997, the Company sued Credit Suisse to fulfill its obligation to
fund $1.6 million pursuant to a Subscription Agreement dated May 14, 1996. There
can be no assurance that the Company will prevail in this suit, although the
Company believes it has a contractual right to the funding.
In connection with the acquisition of Pulsarr, the Company wrote off
approximately $4.9 million of acquired in-process technology in the first
quarter of 1996 (which loss was offset by a $5 million gain recorded when
Pulsarr was sold in the second quarter of 1997). This non-recurring charge
contributed to substantial reported losses in that quarter even though sales for
such period, including Pulsarr from its acquisition date, increased from the
same period in the prior year.
There can be no assurance the Company will be able to obtain future financing on
terms satisfactory to the Company, if at all. The recent increases in
outstanding shares of the Company's Class A Common Stock due to private
placements and the 1997 Restricted Stock Plan, the April 1995 and April 1996
private placements of convertible debt, notes issued in connection with the
acquisition of Ventek, a substantial loss in 1996, and the number of securities
issuable upon exercise of warrants and convertible debt may limit the Company's
ability to negotiate additional debt or equity financing.
Cautionary Statements and Risk Factors
- --------------------------------------
The Company may, from time to time, make forward looking statements that involve
risks and uncertainties. Factors associated with the forward looking statements
which could cause actual results to differ materially from those stated appear
below. Readers should carefully consider the following cautionary statements and
risk factors.
History of Losses; Negative Cash Flow: Other than in 1995, the second half of
1996 and the first quarter of 1997, the Company has had a history of losses and
negative operating cash flow. The Company believes it may operate at a negative
cash flow in the future due to (i) the need to fund certain development
projects, (ii) cash required to enter new market areas, (iii) interest costs
associated with recent financings, (iv) cash required for the repayment of debt
(e.g., the $1.3 million paid in April 1997), and (v) possible cash needed to
fully integrate Ventek's operations. Until the Company is able to consistently
generate sustained positive cash flow from operations, the Company must rely on
debt or equity financing.
Although the Company achieved profitability in 1995, the second half of 1996 and
the first quarter of 1997, there can be no assurance as to the Company's
profitability on a quarterly or annual basis in the future. Furthermore, the
non-recurring expenses in early 1996 resulted in a significant overall loss for
the 1996 year.
Need for Additional Financing: The Company may seek additional financing;
however, there can be no assurance the Company will be able to obtain any
additional financing on terms satisfactory to the Company, if at all. The recent
increases in (i) outstanding shares of the Company's Class A Common Stock due to
private placements and implementation of the 1997 Restricted Stock Plan, (ii)
the April 1995 and April 1996 private placements of convertible debt, (iii) a
substantial loss in 1996, (iv) debt incurred for the acquisition of Ventek, and
(v) the number of securities issuable upon exercise of warrants and convertible
debt may limit the Company's ability to negotiate additional debt or equity
financing.
Uncertain Ability to Manage Growth and Integrate Acquired Businesses: As part of
its business strategy, the Company intends to pursue growth. In March and July
1996, the Company acquired Pulsarr and Ventek, respectively, which had sales in
1995 of approximately $11.4 million and $4.4 million, respectively, and would
have added approximately 80% to the Company's 1995 sales on a proforma basis. In
May 1997, AMV sold Pulsarr. A growth strategy will require the integration of
new entities, such as Ventek, the establishment of distribution relationships in
foreign countries, expanded customer service and support, increased personnel
throughout the Company and the continued implementation and improvement of the
Company's operational, financial and management information systems. There is no
assurance that the Company will be able to attract qualified personnel or to
accomplish other measures necessary for its successful integration of Ventek or
other acquired entities or for internal growth, or that the Company can
successfully manage expanded operations. As the Company expands, it may from
time to time experience constraints that will adversely affect its ability to
satisfy customer demand in a timely fashion. Failure to manage growth
effectively could adversely affect the Company's financial condition and results
of operations.
Rapid Technological Change; Product Development: The markets for the Company's
machine vision products are characterized by rapidly changing technology,
evolving industry standards and frequent new product introductions and
enhancements. For example, the Company believes that the 1995 introduction by
Key Technology, Inc. of its new line of vision sorting equipment adversely
affected bookings in late 1995 and 1996. Sales of products such as those offered
by the Company depend in part on the continuing development and deployment of
emerging technology and new services and applications based on such technology.
The Company's success will depend to a significant extent upon its ability to
enhance its existing products and develop new products that gain market
acceptance. There can be no assurance that the Company will be successful in
selecting, developing and manufacturing new products or enhancing its existing
products on a timely or cost-effective basis or that products or technologies
developed by others will not render the Company's products non-competitive or
obsolete. Moreover, the Company may encounter technical problems in connection
with its product development that could result in the delayed introduction of
new products or product enhancements. Failure to develop or introduce on a
timely basis new products or product enhancements that achieve market acceptance
would materially and adversely affect the Company's business, operating results
and financial condition.
Market Acceptance of New Products: The Company's future operating results will
depend upon its ability to successfully introduce and market, on a timely and
cost-effective basis, new products and enhancements to existing products. There
can be no assurance that new products or enhancements, if developed and
manufactured, will achieve market acceptance. The Company is currently in the
initial prototype stage of development on a new high speed software and digital
signal processing technology designed to significantly improve system
performance. There can be no assurance that a market for this system will
develop (i.e., that a need for the system will exist, that the system will be
favored over other products on the market, etc.) or, if a market does develop,
that the Company will be able, financially or operationally, to market and
support the system successfully.
Dependence on Certain Markets and Expansion Into New Markets: The future success
and growth of the Company is dependent upon continuing sales in domestic and
international food processing market as well as successful penetration of other
existing and potential markets. A substantial portion of the Company's
historical sales has been in the potato and vegetable processing markets.
Reductions in capital equipment expenditures by such processors due to commodity
surpluses, product price fluctuations, changing consumer preferences or other
factors could have an adverse effect on the Company's results of operations. The
Company also intends to expand the marketing of its processing systems in
additional food markets such as meat and granular food products, as well as
nonfood markets such as plastics, wood products and tobacco, and to expand its
sales activities in foreign markets. In the case of Ventek, the wood products
market served is narrow, and saturation of that market and the potential
inability to identify and develop new markets could adversely affect Ventek's
growth rate. There can be no assurance that the Company can successfully
penetrate additional food and non-food markets or expand further in foreign
markets.
Lengthy Sales Cycle: The sales cycle in the marketing and sale of the Company's
machine vision systems, especially in new markets or in a new application, is
lengthy and can be as long as three years. Even in existing markets, due to the
$100,000 to $500,000 price range for each system, the purchase of a machine
vision system can constitute a substantial capital investment for a customer
(which may need more than one machine for its particular proposed application)
requiring lengthy consideration and evaluation. In particular, a potential
customer must develop a high degree of assurance that the product will meet its
needs, successfully interface with the customer's own manufacturing, production
or processing system, and have minimal warranty, safety and service problems.
Accordingly, the time lag from initiation of marketing efforts to final sales
can be lengthy.
Competition: The markets for the Company's products are highly competitive. A
major competitor of the Company has recently made a new product introduction
which has increased the competition that the Company faces. Some of the
Company's competitors, including Pulsarr which was sold in May 1997 to a company
significantly larger than AMV, may have substantially greater financial,
technical, marketing and other resources than the Company. Important competitive
factors in the Company's markets include price, performance, reliability,
customer support and service. Although the Company believes that it currently
competes effectively with respect to these factors, there can be no assurance
that the Company will be able to continue to compete effectively in the future.
Dependence Upon Certain Suppliers: Certain key components and subassemblies used
in the Company's products are currently obtained from sole sources or a limited
group of suppliers, and the Company does not have any long-term supply
agreements to ensure an uninterrupted supply of these components. Although the
Company seeks to reduce dependence on sole or limited source suppliers, the
inability to obtain sufficient sole or limited source components as required, or
to develop alternative sources if and as required, could result in delays or
reductions in product shipments which could materially and adversely affect the
Company's results of operations and damage customer relationships. The purchase
of certain of the components used in the Company's products require an 8 to 12
week lead time for delivery. An unanticipated shortage of such components could
delay the Company's ability to timely manufacture units, damage customer
relations, and have a material adverse effect on the Company. In addition, a
significant increase in the price of one or more of these components or
subassemblies could adversely affect the Company's results of operations.
Dependence Upon Significant Customers and Distribution Channel: The Company sold
equipment to two unaffiliated customers totaling 13% and 12% of sales in 1996
and to two customers totaling 19% and 16% of sales in 1995. Sales to another
unaffiliated customer totaled 15% of sales in 1994. Ventek's sales have been to
a relatively small number of multi-location plywood manufacturers. The Company
usually receives orders of from one to several machine vision systems, but
occasionally receives larger orders. While the Company strives to create
long-term relationships with its customers and distributors, there can be no
assurance that they will continue ordering additional systems from the Company,
or that orders will not be delayed due to customer capital appropriations
procedures or other circumstances beyond the control of the Company. In certain
instances, the Company's cash flow may become negatively affected where
investments have been made in inventory in anticipation of an order and such
order is delayed by the customer. The Company may continue to be dependent on a
small number of customers and distributors, the loss of which would adversely
affect the Company's business.
Risk of International Sales: Due to its export sales, the Company is subject to
the risks of conducting business internationally, including unexpected changes
in regulatory requirements; fluctuations in the value of the U. S. dollar, which
could increase the sales prices in local currencies of the Company's products in
international markets; delays in obtaining export licenses, tariffs and other
barriers and restrictions; and the burdens of complying with a variety of
international laws. In addition, the laws of certain foreign countries may not
protect the Company's intellectual property rights to the same extent as do the
laws of the United States.
Fluctuations in Quarterly Operating Results; Seasonality: The Company has
experienced and may in the future experience significant fluctuations in
revenues and operating results from quarter to quarter as a result of a number
of factors, many of which are outside the control of the Company. These factors
include the timing of significant orders and shipments, product mix, delays in
shipment, capital spending patterns of customers, competition and pricing, new
product introductions by the Company or its competitors, the timing of research
and development expenditures, expansion of marketing and support operations,
changes in material costs, production or quality problems, currency
fluctuations, disruptions in sources of supply, regulatory changes and general
economic conditions. These factors are difficult to forecast, and these or other
factors could have a material adverse effect on the Company's business and
operating results. Moreover, due to the relatively fixed nature of many of the
Company's costs, including personnel and facilities costs, the Company would not
be able to reduce costs in any quarter to compensate for any unexpected
shortfall in net sales, and such a shortfall would have a proportionately
greater impact on the Company's results of operations for that quarter. For
example, a significant portion of the Company's quarterly net sales depends upon
sales of a relatively small number of high-priced systems. Thus, changes in the
number of such high-priced systems shipped in any given quarter can produce
substantial fluctuations in net sales, gross profits, and net income from
quarter to quarter. In addition, in the event the Company's machine vision
systems' average selling price increases, of which there can be no assurance,
the addition or cancellation of sales may exacerbate quarterly fluctuations in
revenues and operating results.
The Company's operating results may also be affected by certain seasonal trends.
The Company typically experiences lower sales and order levels in the first
quarter when compared with the preceding fourth quarter due primarily to the
seasonality of certain harvested food items and the fact that shipments to
certain customers occur during such customers' December plant shutdowns. The
Company expects these seasonal patterns to continue, though their impact on
revenues will decline as the Company continues to expand its presence in
nonagricultural and other markets which are less seasonal.
Risks Associated With Possible Acquisitions: The Company may pursue strategic
acquisitions or joint ventures in addition to the acquisitions of Pulsarr
(subsequently divested in May 1997) and Ventek as part of its growth strategy.
While the Company has no understandings, commitments or agreements with respect
to any further acquisition, one or more potential opportunities may become
available in the future. Acquisitions and joint ventures would require
investment of operational and financial resources and could require integration
of dissimilar operations, assimilation of new employees, diversion of management
resources, increases in administrative costs and additional costs associated
with debt or equity financing. There can be no assurance that any acquisition or
joint venture by the Company will not have an adverse effect on the Company's
results of operations or will not result in dilution to existing shareholders.
If additional attractive opportunities become available, the Company may decide
to pursue them actively. There can be no assurance that the Company will
complete any future acquisitions or joint ventures or that such a future
transaction will not materially and adversely affect the Company.
Dependence Upon Key Personnel: The Company's success depends to a significant
extent upon the continuing contributions of its key management, technical, sales
and marketing and other key personnel. Except for William J. Young, the
Company's President and Chief Executive Officer, Alan R. Steel, the Company's
Chief Financial Officer, Dr. James Ewan, SRC's President and Chief Executive
Officer, and the four former stockholders of Ventek, the Company does not have
long-term employment agreements or other arrangements with such individuals
which would encourage them to remain with the Company. The Company's future
success also depends upon its ability to attract and retain additional skilled
personnel. Competition for such employees is intense. The loss of any current
key employees or the inability to attract and retain additional key personnel
could have a material adverse effect on the Company's business and operating
results. There can be no assurance that the Company will be able to retain its
existing personnel or attract such additional skilled employees in the future.
Intellectual Property: The Company's competitive position may be affected by its
ability to protect its proprietary technology. Although the Company has a number
of United States and foreign patents, there can be no assurance that any such
patents will provide meaningful protection for its product innovations. The
Company may experience additional intellectual property risks in international
markets where it may lack patent protection.
Product Liability and Other Legal Claims: From time to time, the Company may be
involved in litigation arising out of the normal course of its business,
including product liability and other legal claims. While the Company has a
general liability insurance policy which includes product liability coverage up
to an aggregate amount of $10 million, there can be no assurance that the
Company will be able to maintain product liability insurance on acceptable terms
or that its insurance will provide adequate coverage against potential claims in
the future. There can be no assurance that third parties will not assert
infringement claims against the Company, that any such assertion of infringement
will not result in litigation or that the Company would prevail in such
litigation. Furthermore, litigation, regardless of its outcome, could result in
substantial cost to and diversion of effort by the Company. Any infringement
claims or litigation against the Company could materially and adversely affect
the Company's business, operating results and financial condition. If a
substantial product liability or other legal claim against the Company were
sustained that was not covered by insurance, there could be an adverse effect on
the Company's financial condition and marketability of the affected products.
Warranty Exposure and Performance Specifications: The Company generally provides
a one-year limited warranty on its products. In addition, for certain
custom-designed systems, the Company contracts to meet certain performance
specifications for a specific application. In the past, the Company has incurred
higher warranty expenses related to new products than it typically incurs with
established products. There can be no assurance that the Company will not incur
substantial warranty expenses in the future with respect to new products, as
well as established products, or with respect to its obligations to meet
performance specifications, which may have an adverse effect on its results of
operations and customer relationships.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
==========================
Ford & Cohn
- -----------
In March 1993, Wilson Ford, Robert Paul and Maxwell Cohn (together "Claimants")
brought various claims against AMV and William Patridge, Asif Ahmad and Nagaraj
Murthy, past or current directors or employees of AMV, in lawsuits in the
Superior Courts for Los Angeles County and Orange County, California. The
lawsuits were consolidated in February, 1994, and were litigated in Superior
Court for Los Angeles County in September and October, 1995.
Ford, a consultant to AMV, claims that AMV breached an agreement dated September
17, 1987, and subsequently amended on August 16, 1988, by which he was to
receive 25,000 shares of stock of CNVS, Inc., predecessor to AMV, at no cost and
an option to purchase 25,000 additional shares in the future upon the occurrence
of specified events. Ford claims he was promised that this total of 50,000
shares in the Company would amount to 5% of the outstanding shares. Ford also
claims AMV owes him royalties under a royalty agreement for certain low light
video camera technology. AMV contends that Ford was never promised that his
interest would amount to 5% of the outstanding shares, that Ford failed to
fulfill his obligations under the royalty agreement, and that Ford's claims are
barred under various legal theories. Based on these allegations, Ford made
claims for breach of contract and breach of the covenant of good faith and fair
dealing.
The Claimants contend that statements allegedly made by William Patridge to
United States Alcohol Testing of America, Inc. ("USAT") caused USAT to rescind
an Asset Purchase Agreement with the Claimants. The Claimants allege that the
statements concerning outstanding lawsuits and disputes between AMV and the
Claimants were false and meant to disrupt the business relationship between
Prime Lasertech and USAT. The Claimants allegedly would have benefited from the
Asset Purchase Agreement as shareholders and/or licensees. Based on these
allegations, the Claimants made claims for intentional and negligent
interference with prospective advantage, intentional and negligent infliction of
emotional distress, and civil conspiracy.
On October 2, 1995, a jury awarded $375,000 to the Claimants, which included
$281,000 of punitive damages for the breach of contract claim. The Company has
filed motions with the court to eliminate the punitive portion of the award. AMV
believes such damages are improper because (i) the claimants did not ask for
punitive damages in the contract claim, and (ii) such damages cannot be awarded
for breach of contract under applicable state laws. AMV is also attempting to
overturn the balance of the breach of contract award based on the fact that the
claim was made after the statute of limitations had expired. AMV has made an
appeal to overturn the verdict based on these factors and certain other
irregularities that occurred during the trial, which AMV believes unfairly
affected the jury's decision. Due to the fact that a verdict was rendered, a
$93,000 loss on the breach of contract claim was recorded as a liability in the
fourth quarter of 1995.
Credit Suisse, Max Khan and Konrad Meyer
- ----------------------------------------
On January 9, 1997, the Company sued Credit Suisse in Jackson County, Oregon,
seeking $1,600,000 in fulfillment of Credit Suisse's contractual obligation to
fund a Private Placement Subscription Agreement dated May 14, 1996. The Company
claims that Credit Suisse's failure to fund has limited AMV's ability to finance
its business plan for Pulsarr and other operations and, as a result, will
adversely impact AMV's credibility with investors and financial analysts. Any
erosion of credibility or, alternatively, the dilution of shareholder value
caused by alternate financing may, in turn, adversely impact the Company's
ability to raise debt and equity financing.
The suit also claims that Messrs. Khan and Meyer, who had previously provided
investment banking services to AMV, persuaded Credit Suisse to breach the
Subscription Agreement.
Item 6. Exhibits And Reports On Form 8-K
=========================================
(a) Exhibits
- -------------
Exhibit
Number Description
- ------- -----------
3 Amended and Restated Articles of Incorporation.
10 Share Purchase Agreement dated April 29, 1997 between Barco NV
and ARC Netherlands BV (1)
27 Financial Data Schedule.
- -------------------------------
(1) Filed with the Securities and Exchange Commission on May 9,
1997 as an exhibit to the Company's Form 8-K regarding the
sale of Pulsarr.
(b) Reports on Form 8-K:
- -------------------------
On January 22 1997 a Form 8-K was filed regarding the
resignation of a director, the appointment of four new
directors, and adoption of the 1997 Restricted Stock Plan.
On May 9, 1997, a Form 8-K was filed regarding the sale of
Pulsarr and the resignation of two directors.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
May 13, 1997 /s/ Alan R. Steel
------------------------------- --------------------------------
Alan R. Steel
Vice President - Finance
(Principal Financial and duly
Authorized Officer)
RESTATED ARTICLES OF INCORPORATION
OF
APPLIED LASER SYSTEMS
Asif S. Ahmad and Nagaraj P. Murthy certify that:
1. They are chief executive officer and the secretary, respectively, of
APPLIED LASER SYSTEMS, a California corporation.
2. The articles of incorporation of the corporation, as amended to the date
of the filing of this certificate, including amendments set forth herein but not
separately filed (and with the omissions required by Section 910 of the
Corporations Code) are restated as follows:
ARTICLE I
The name of this Corporation is Applied Laser Systems.
ARTICLE II
The purpose of this Corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
California, other than the banking business, the trust company business or the
practice of a profession permitted to be incorporated by the California
Corporations Code.
ARTICLE III
a. Shares Authorized
The corporation is authorized to issue four classes of shares, designated
"Preferred Stock," "Class A Common Stock," "Class B Common Stock" and "Class E
Common Stock," respectively. The number of shares of Preferred Stock authorized
to be issued is 5,000,000, the number of shares of Class A Common Stock
authorized to be issued is 17,000,000, the number of shares of Class B Common
Stock authorized to be issued is 3,000,000, and the number of shares of Class E
Common Stock authorized to be issued is 3,000,000.
b. Preferred Stock
The Preferred Stock may be divided into such number of series as the board
of directors may determine. The board of directors is authorized to determine
and alter the rights, preferences, privileges and restrictions granted to or
imposed upon any wholly unissued series of Preferred Stock, and to fix the
number of shares of any series of Preferred Stock and the designation of any
such series of Preferred Stock. The board of directors, within the limits and
restrictions stated in any resolution or resolutions of the board of directors
originally fixing the number of shares constituting any series, may increase or
decrease (but not below the number of shares of such series then outstanding)
the number of shares of any series subsequent to the issue of shares of that
series.
c. Series A Preferred Stock
In general. The corporation is authorized to issue 1,500,000 shares of
preferred stock in a series designated "Series A Preferred Stock." The Series A
Preferred Stock has only such rights, preferences and privileges as are
specifically set forth in this Article III. Series A Preferred Stock has no
voting rights.
Dividends. The Series A Preferred Stock has no right to receive dividends.
Liquidation Preference. In the event of any liquidation, dissolution or
winding up of the corporation, whether voluntary or involuntary, the holder of
each share of Series A Preferred Stock then outstanding shall be entitled to be
paid, out of the assets of the corporation available for distribution to its
shareholders, whether such assets are capital, surplus or earnings, before any
payment or declaration and setting apart for payment of any amount shall be made
in respect of any class of the Common Stock, an amount equal to $1 per share of
Series A Preferred Stock. If upon any liquidation, dissolution or winding up of
the corporation, whether voluntary or involuntary, the assets to be distributed
to the holders of the Series A Preferred Stock of the corporation shall be
insufficient to permit the payment to such shareholders of the full preferential
amount aforesaid, then all of the assets of the corporation to be distributed
shall be distributed to the holders of the Series A Preferred Stock, subject to
the rights, preferences and privileges of such further and subsequent classes
and series of preferred stock as may be outstanding at that time.
After the payment or distribution to the holders of the Series A Preferred
Stock of the full preferential amounts aforesaid, the holders of the Series A
Preferred Stock shall receive no further distributions with respect to such
shares.
A consolidation or merger of the corporation with or into any other
corporation or corporations or a sale of all or substantially all of the assets
of the corporation in which the shareholders of the corporation receive solely
capital stock of the acquiring corporation (or of the direct or indirect parent
corporation of the acquiring corporation), except for cash in lieu of fractional
shares, shall not be deemed a liquidation, dissolution, or winding up of the
corporation as those terms are used in this section III.c.
Redemption. The corporation shall redeem the entire series of Series A
Preferred Stock promptly after the following condition is met: Gross proceeds
from the exercise of the Class B Warrants exceed $15,000,000.
The board of directors of the corporation shall meet and shall determine
which of its members are disinterested with respect to redemption of the Series
A Preferred Stock, and such disinterested members shall be constituted a
committee with authority to elect either of the alternate forms of redemption
consideration payable to the holders of the Series A Preferred Stock. Such
committee shall elect to set the aggregate redemption consideration for the
entire series of Series A Preferred Stock at either (a) an amount equal to the
gross proceeds from the exercise of the Class B Warrants in excess of the first
$15,000,000 up to a maximum of $1,500,000 (the "Excess Amount"); or (b) that
number of shares of Class A Common Stock equal to the Excess Amount divided by
$3.00 per share.
Alternate Redemption. In the event that the Class B Warrants expire without
the redemption conditions above having been satisfied, the corporation shall
redeem the entire series of Series A Preferred Stock for aggregate consideration
of $100.
d. Class A Common Stock
The Class A Common Stock shall have all rights of shares of the corporation
not reserved to any other class. Upon the amendment of this article, each
outstanding share is converted into one-sixth of one share of Class A Common
Stock. The corporation shall pay to the holders of record the fair value of any
fractional share interests that result, with such fair value to be determined by
resolution of the board of directors.
e. Class B Common Stock
In General. The Class B Common Stock shall have all of the same rights as
the Class A Common Stock, except as specifically provided in this Article III.
On any matter as to which the Class A Common Stock is entitled to vote, the
Class A Common Stock, the Class B Common Stock and the Class E Common Stock
shall vote as a single class, with each share of Class A Common Stock having one
vote, and with each share of Class B Common Stock or of Class E Common Stock
having five votes. Whenever any Class B Common Stock is outstanding, any
corporate action, including but not limited to any declaration of dividends
(whether in cash, securities or other property) distribution, repurchase, split
or reverse split, reorganization, recapitalization, merger or consolidation,
liquidation, or dissolution shall affect equally all shares of Class A Common
Stock, and Class B Common Stock, except that any transaction that results in the
holders of Class A Common Stock and Class B Common Stock holding new securities
with voting rights, fixed or contingent, shall be effected in such a fashion
that the securities issuable with respect to each share of Class B Common Stock
shall have five votes for each one vote held by such new voting securities that
are issuable with respect to each share of Class A Common Stock.
Conversion at Option of Holder. Each share of Class B Common Stock shall
be convertible, at the option of the holder thereof, into one share of Class A
Common Stock. A holder of Class B Common Stock desiring to convert shall deliver
the share certificate to the corporation's Transfer Agent if it has one,
otherwise to the corporation at its principal executive office, accompanied by a
written request to convert, specifying the number of shares to be converted. The
indorsement of the share certificate and the request to convert shall be in form
satisfactory to the Transfer Agent or the corporation, as the case may be. Upon
the date of such delivery the conversion is deemed to have occurred and the
person entitled to receive share certificates for Class A Common Stock shall be
regarded for all corporate purposes from and after such date as the holder of
the number of shares of Class A Common Stock to which he is entitled upon the
conversion.
No Transfers. No person holding shares of Class B Common Stock of record
may transfer, and the corporation shall not register the transfer of, such
shares of Class B Common Stock, whether by sale, assignment, gift, bequest,
appointment or otherwise. Shares of Class B Common Stock shall be registered in
the names of the beneficial owners thereof and not in "street" or "nominee"
name. For this purpose, a "beneficial owner" of any shares of Class B Common
Stock shall mean a person who, or an entity which, possesses the power, either
singly or jointly, to direct the voting or disposition of such shares. The
corporation shall note on the certificates for shares of Class B Common Stock
the restrictions on transfer and registration.
Mandatory Conversion. Any purported transfer of shares of Class B Common
Stock, including any transfer by operation of law, shall result in the
conversion of the transferee's shares of Class B Common Stock into shares of
Class A Common Stock, effective the date on which certificates representing such
shares are presented for transfer on the books of the corporation. The
corporation may, in connection with preparing a list of stockholders entitled to
vote at any meeting of stockholders, or as a condition to the transfer or the
registration of shares of Class B Common Stock on the corporation's books,
require the furnishing of such affidavits or other proof as it deems necessary
to establish that any person is the beneficial owner of shares of Class B Stock.
f. Class E Common Stock
In General. The Class E Common Stock shall have all of the same rights as
the Class A Common Stock, except as specifically provided in this Article III.
On any matter as to which the Class A Common Stock is entitled to vote, the
Class A Common Stock, the Class B Common Stock and the Class E Common Stock
shall vote as a single class, with each share of Common Stock having one vote,
and with each share of Class B Common Stock or of Class E Common Stock having
five votes. On liquidation of the corporation each outstanding share of Class E
Common Stock shall have the same rights as a share of Class A Common Stock.
Whenever any Class E Common Stock is outstanding, any other corporate action,
including but not limited to any declaration of dividends (whether in cash,
property or securities), distribution, repurchase, split or reverse split,
reorganization, recapitalization, merger or consolidation, shall also affect
equally all shares of Class A Common Stock and Class E Common Stock, except that
any transaction that results or would result in the holders of Class E Common
Stock holding cash, new securities or other property shall be effected in such a
fashion that the cash, new securities or other property issuable with respect to
each share of Class E Common Stock shall be held in trust by the corporation or
by such other person as it may appoint, and that any transaction that results in
the holders of Class A Common Stock and Class E Common Stock holding new
securities with voting rights, fixed or contingent, shall be effected in such a
fashion that the securities issuable with respect to each share of Class E
Common Stock shall have five votes for each one vote held by such new voting
securities that are issuable with respect to each share of Class A Common Stock.
Such trust shall terminate at the Determination Date (as defined below). Any
earnings on the cash, new securities or other property held in such trust shall
be added to the corpus thereof, which shall be distributed promptly after the
Determination Date to the holders of Class E Common Stock as of the
Determination Date, in proportion to their holdings of Class E Common Stock,
except that if none of the Escrow Conditions (as defined below) shall have been
satisfied on or before the Determination Date, then such corpus shall be
distributed or shall revert to the corporation.
Conversion or Redemption. The Determination Date shall be the earlier to
occur of (i) the date any of the Escrow Conditions are satisfied, or (ii)
February 15, 1996. The Escrow Conditions shall be
(i) that the corporation's "Income" (as defined below) shall have
equalled or exceeded $3,000,000 for the fiscal year ending September 30,
1994,
(ii) that the corporation's Income shall have equalled or exceeded
$6,000,000 for the fiscal year ending September 30, 1995,
(iii) that the "Market Price" (as defined below) of the Class A Common
Stock, when averaged over any 30 consecutive trading days all of which are
less than 18 months after the "Effective Date" (as defined below), shall
have equalled or exceeded $7.50 per share, or
(iv) that the Market Price of the Class A Common Stock, when averaged
over any 30 consecutive trading days all of which are less than 36 months
after the Effective Date, shall have equalled or exceeded $9.35 per share.
"Income" shall mean the corporation's net income before provision for
income taxes, exclusive of any earnings that are classified as an extraordinary
item, and inclusive of any charges to income that may result from conversion of
the Class E Common Stock into Class B Common Stock, as stated in the
corporation's financial statements for such fiscal year upon which independent
auditors have given a report, divided by the average weighted number of shares
of Common Stock (Class A, Class B and Class E) outstanding over such fiscal
year, and multiplied by the number that is the sum of (i) the number of shares
of Common Stock (Class A, Class B and Class E) outstanding at the Effective Date
plus (ii) the number of shares of Common Stock sold under the "Registration
Statement" (as defined below) or issued upon exercise, directly or indirectly,
of the corporation's securities designated in the Registration Statement as the
Class A Warrants, Class B Warrants or Unit Purchase Option.
The "Registration Statement" shall mean that certain registration statement
filed by the corporation under the Securities Act of 1933, as amended, and
identified by file number 33-45126 of the United States Securities and Exchange
Commission.
The "Effective Date" shall mean the date on which the Registration
Statement becomes effective within the meaning of Section 8 of the Securities
Act of 1933, as amended.
"Market Price" shall mean, in order of preference, (i) the last reported
sales price on a consolidated transaction reporting system, if the Class A
Common Stock is listed on a national securities exchange or is a National Market
System security quoted on NASDAQ, (ii) the high closing bid price if such stock
is otherwise quoted on NASDAQ, or (iii) otherwise, a bid price for such stock
determined by such means as the corporation's board of directors finds to be
reasonable.
If on the Determination Date any of the Escrow Conditions shall have been
satisfied, then each share of Class E Common Stock shall be converted into one
share of Class B Common Stock, and if on the Determination Date none of the
Escrow Conditions shall have been satisfied, then the corporation shall redeem
all outstanding shares of Class E Common Stock for consideration of $.00001 per
share. The corporation shall give notice of redemption, and upon surrender of
the share certificates shall pay such redemption price to the holders of Class E
Common Stock, but neither the failure to give such notice nor the failure to pay
such consideration shall affect the rights of the holders of Class E Common
Stock, which from and after the Determination Date shall be limited to the
following: (i) in the event that any of the Escrow Conditions were satisfied at
the Determination Date, the right to receive a certificate representing the
number of shares of Class B Common Stock into which such Class E Common Stock
was converted, and otherwise to the rights of a holder of such shares of Class B
Common Stock; or (ii) in the event that none of the Escrow Conditions were
satisfied at the Determination Date, the right to receive the redemption
consideration of $.00001 per share payable with respect to the Class E Common
Stock (which right may be limited or eliminated by the application of Chapter 5
of the California General Corporation Law).
No transfers. No person holding shares of Class E Common Stock of record
may transfer such shares, except by testamentary disposition or by operation of
law, and any purported transfer other than as permitted by the preceding clause
shall be ineffective, null and void.
Shares of Class E Common Stock shall be registered in the names of the
beneficial owners thereof and not in "street" or "nominee" name. For this
purpose, a "beneficial owner" of any shares of Class E Common Stock shall mean a
person who, or an entity which, possesses the power, either singly or jointly,
to direct the voting or disposition of such shares. The corporation shall note
on the certificates for shares of Class E Common Stock the restrictions on
transfer and registration.
ARTICLE V
(A) The liability of the directors of this corporation for monetary damages
shall be eliminated to the fullest extent permissible under California law.
(B) The corporation is authorized to provide indemnification of agents (as
defined in Section 317 of the California Corporations Code) through bylaw
provisions, agreements with agents, vote of shareholders of disinterested
directors, or otherwise in excess of the indemnification otherwise permitted by
Section 317 of the California Corporations Code, subject only to applicable
limits set forth in Section 204 of the California Corporations Code with respect
to actions for breach of duty to the corporation and its shareholders.
1. The restated articles of incorporation have been duly approved by the
board of directors.
2. The article amendments as included in the restated articles of
incorporation (other than omissions required by Section 910 of the Corporations
Code) have been duly approved by the required vote of the shareholders in
accordance with Section 902 of the Corporations Code. The corporation has only
one class of shares and the number of outstanding shares is 6,000,000. The
number of shares voting in favor of the amendments equaled or exceeded the vote
required. The percentage vote required for the approval of the amendments was
more than 50%.
We further declare under penalty of perjury under the laws of the State of
California that the matters set forth in this certificate are true and correct
of our own knowledge.
Dated: February 24, 1992 /s/ Asif S. Ahmad
------------------------------
Asif S. Ahmad
Chief Executive Officer
/s/ Nagaraj P. Murthy
------------------------------
Nagaraj P. Murthy
Secretary
<PAGE>
CERTIFICATE OF CORRECTION
OF
RESTATED ARTICLES OF INCORPORATION
OF
APPLIED LASER SYSTEMS
The undersigned, Asif S. Ahmad and Nagaraj P. Murthy, hereby certify that:
1. They are the chief executive officer and secretary, respectively, of
Applied Laser Systems, a California corporation (the "Corporation").
2. The instrument being corrected is entitled "Restated Articles of
Incorporation," and said instrument was filed with the Secretary of State of
California on February 25, 1992.
3. The paragraph under Article III.f. of said Restated Articles of
Incorporation entitled Conversion or Redemption, relating to "Income," is hereby
corrected to read as follows:
"Income" shall mean the corporation's net income before provision for
income taxes, exclusive of any earnings that are classified as an
extraordinary item, and inclusive of any charges to income that may result
from conversion of the Class E Common Stock into Class B Common Stock, as
stated in the corporation's financial statements for such fiscal year upon
which independent auditors have given a report, divided by the average
weighted number of shares of Common Stock (Class A, Class B and Class E)
outstanding over such fiscal year, and multiplied by the number that is the
sum of (i) the number of shares of Common Stock (Class A, Class B and Class
E) outstanding at the Effective Date plus (ii) the number of shares of
Common Stock sold under the "Registration Statement" (as defined below).
Shares of Common Stock shall not be deemed to have been sold under the
Registration Statement if they are shares issued upon exercise, directly or
indirectly, of the corporation's securities designated in the Registration
Statement as the Class A Warrants, Class B Warrants or Unit Purchase
Option.
4. Said paragraph under Article III.f. entitled Conversion or Redemption,
relating to "Income," as corrected, conforms the wording of the Restated
Articles of Incorporation to that adopted by the Board of Directors and
shareholders.
The undersigned further declare under penalty of perjury under the laws of
the State of California that the matters set forth in this certificate are true
and correct of their own knowledge.
Dated: February 27, 1992 /s/ Asif S. Ahmad
--------------------------
Asif S. Ahmad,
Chief Executive Officer
/s/ Nagaraj P. Murthy
--------------------------
Nagaraj P. Murthy,
Secretary
<PAGE>
CERTIFICATE OF AMENDMENT TO
RESTATED ARTICLES OF INCORPORATION OF
APPLIED LASER SYSTEMS
William C. Patridge and Nagaraj P. Murthy certify that:
1. They are the President and Secretary, respectively of Applied Laser
Systems, a California corporation.
2. Section a. of Article III of the corporation's Restated Articles of
Incorporation is amended to read as follows:
ARTICLE III
a. Shares Authorized
The corporation is authorized to issue four classes of shares, designated
"Preferred Stock," "Class A Common Stock," "Class B Common Stock" and "Class E
Common Stock," respectively. The number of shares of Preferred Stock authorized
to be issued is 5,000,000, the number of shares of Class A Common Stock
authorized to be issued is 37,000,000, the number of shares of Class B Common
Stock authorized to be issued is 3,000,000, and the number of shares of Class E
Common Stock authorized to be issued is 3,000,000."
3. The first paragraph of Section d. of Article III, entitled "Class B
Common Stock," is amended to read as follows:
d. Class B Common Stock
In General. The Class B Common Stock shall have all of the same rights as
the Class A Common Stock, except as specifically provided in this Article III.
On any matter as to which the Class A Common Stock is entitled to vote, the
Class A Common Stock, the Class B Common Stock and the Class E Common Stock
shall vote as a single class, with each share of Class A Common Stock, Class B
Common Stock and Class E Common Stock having one vote. Whenever any Class B
Common Stock is outstanding, any corporate action, including but not limited to
any declaration of dividends (whether in cash, securities or other property),
distribution, repurchase, split or reverse split, reorganization,
recapitalization, merger or consolidation, liquidation, or dissolution shall
affect equally all shares of Class A Common Stock and Class B Common Stock."
4. The first paragraph of Section f. of Article III is amended to read as
follows:
f. Class E Common Stock
In General. The Class E Common Stock shall have all of the same rights as
the Class A Common Stock, except as specifically provided in this Article III.
On any matter as to which the Class A Common Stock is entitled to vote, the
Class A Common Stock, the Class B Common Stock and the Class E Common Stock
shall vote as a single class, with each share of Class A Common Stock, Class B
Common Stock and Class E Common Stock having one vote. On liquidation of the
corporation each outstanding share of Class E Common Stock shall have the same
rights as a share of Class A Common Stock. Whenever any Class E Common Stock is
outstanding, any other corporate action, including but not limited to any
declaration of dividends (whether in cash, property or securities),
distribution, repurchase, split or reverse split, reorganization,
recapitalization, merger or consolidation, shall also affect equally all shares
of Class A Common Stock and Class E Common Stock, except that any transaction
that results or would result in the holders of Class E Common Stock holding
cash, new securities or other property shall be effected in such a fashion that
the cash, new securities or other property issuable with respect to each share
of Class E Common Stock shall be held in trust by the corporation or by such
other person as it may appoint. Such trust shall terminate at the Determination
Date (as defined below). Any earnings on the cash, new securities or other
property held in such trust shall be added to the corpus thereof, which shall be
distributed promptly after the Determination Date to the holders of Class E
Common Stock as of the Determination Date, in proportion to their holdings of
Class E Common Stock, except that if none of the Escrow Conditions (as defined
below) shall have been satisfied on or before the Determination Date, then such
corpus shall be distributed or shall revert to the corporation."
3. The foregoing amendment to the Restated Articles of Incorporation has
been duly approved by the board of directors.
4. The foregoing amendment to the Restated Articles of Incorporation has
been duly approved by the required vote of shareholders in accordance with
Section 902 of the Corporations Code. The total number of outstanding shares of
the corporation is 2,780,833 shares of Class A Common Stock, 979,167 shares of
Class B Common Stock, and 2,000,000 shares of Class E Common Stock. The number
of shares voting in favor of the amendment equaled or exceeded the vote
required. The percentage vote required was more than 50%.
We further declare under penalty of perjury under the laws of the State of
California that the matters set forth in this certificate are true and correct
of our own knowledge.
Dated: August 27, 1993
/s/ William C. Patridge
------------------------------
William C. Patridge, President
/s/ Nagaraj P. Murthy
------------------------------
Nagaraj P. Murthy, Secretary
<PAGE>
CERTIFICATE OF AMENDMENT TO
RESTATED ARTICLES OF INCORPORATION OF
APPLIED LASER SYSTEMS
William J. Young and Alan R. Steel certify that:
1. They are the President and Secretary, respectively of Applied Laser
Systems, a California corporation.
2. Section a. of Article III of the corporation's Restated Articles of
Incorporation is amended to read as follows:
ARTICLE III
a. Shares Authorized
The corporation is authorized to issue four classes of shares, designated
"Preferred Stock," "Class A Common Stock," "Class B Common Stock" and "Class E
Common Stock," respectively. The number of shares of Preferred Stock authorized
to be issued is 5,000,000, the number of shares of Class A Common Stock
authorized to be issued is 60,000,000, the number of shares of Class B Common
Stock authorized to be issued is 3,000,000, and the number of shares of Class E
Common Stock authorized to be issued is 3,000,000."
3. The foregoing amendment to the Restated Articles of Incorporation has
been duly approved by the board of directors.
4. The foregoing amendment to the Restated Articles of Incorporation has
been duly approved by the required vote of shareholders in accordance with
Section 902 of the Corporations Code. The total number of outstanding shares of
the corporation is 9,307,456 shares of Class A Common Stock, 717,872 shares of
Class B Common Stock, and 497,094 shares of Class E Common Stock. The number of
shares voting in favor of the amendment equaled or exceeded the vote required.
The percentage vote required was more than 50% of the outstanding shares.
We further declare under penalty of perjury under the laws of the State of
California that the matters set forth in this certificate are true and correct
of our own knowledge.
Dated: December 12, 1994
/s/ William J. Young
------------------------------
William J. Young, President
/s/ Alan R. Steel
------------------------------
Alan R. Steel, Secretary
<PAGE>
CERTIFICATE OF OWNERSHIP
William J. Young and Alan R. Steel certify that:
1. They are the President and the Secretary, respectively, of Applied Laser
Systems, a California corporation.
2. This corporation owns all the outstanding shares of ARC Capital, a
California corporation.
3. The board of directors of this corporation, in accordance with Section
1110(a) of the California Corporations Code, has duly adopted the Plan of Merger
attached hereto as Exhibit A.
4. The board of directors of ARC Capital has duly adopted the Plan of
Merger attached hereto as Exhibit A.
We further declare under penalty of perjury under the laws of the State of
California that the matters set forth in this certificate are true and correct
of our own knowledge.
Dated: October 6, 1995 /s/ William J. Young
------------------------------
William J. Young, President
/s/ Alan R. Steel
------------------------------
Alan R. Steel, Secretary
<PAGE>
EXHIBIT A
PLAN OF MERGER
Plan of Merger (this "Plan") of Applied Laser Systems, a California
corporation ("Parent"), and ARC Capital, Inc., a California corporation
("Subsidiary").
1. Parent has acquired and owns all of the outstanding shares of capital
stock of Subsidiary.
2. The Board of Directors of Parent, in accordance with Section 1110 of the
California Corporations Code, has approved the merger (the "Merger") of
Subsidiary with and into Parent upon the terms set forth in this Plan.
3. Subsidiary shall merge with and into Parent, with Parent to be the
corporation surviving the Merger (the "Surviving Corporation").
4. Upon the Merger, the separate existence of Subsidiary shall cease, the
Surviving Corporation shall succeed to and assume all liabilities and
obligations of Parent and Subsidiary, and the effect of the Merger shall in all
other respects be as provided herein. The Surviving Corporation may, at any time
after the Merger, take any action (including executing and delivering any
document) in the name and on behalf of either Parent or Subsidiary in order to
carry out and effectuate the transactions contemplated by this Plan.
5. Upon the Merger, each outstanding share of common stock of Subsidiary
shall be cancelled.
6. The Articles of Incorporation of Parent in effect immediately prior to
the Merger shall be the Articles of Incorporation of the Surviving Corporation
until amended in accordance with the provisions thereof, except that Article I
of the Articles of Incorporation of Surviving Corporation shall be amended to
read as follows:
"I
The name of the corporation is ARC Capital."
<PAGE>
CERTIFICATE OF OWNERSHIP
William J. Young and Alan R. Steel certify that:
1. They are the President and the Secretary, respectively, of ARC Capital,
Inc., a California corporation.
2. This corporation owns all the outstanding shares of Advanced Machine
Vision Corporation, a California corporation.
3. The board of directors of this corporation, in accordance with Section
1110(a) of the California Corporations Code, has duly adopted the Plan of Merger
attached hereto as Exhibit A.
4. The board of directors of Advanced Machine Vision Corporation has duly
adopted the Plan of Merger attached hereto as Exhibit A.
We further declare under penalty of perjury under the laws of the State of
California that the matters set forth in this certificate are true and correct
of our own knowledge.
Dated: October 6, 1995 /s/ William J. Young
------------------------------
William J. Young, President
/s/ Alan R. Steel
------------------------------
Alan R. Steel, Secretary
<PAGE>
EXHIBIT A
PLAN OF MERGER
Plan of Merger (this "Plan") of ARC Capital, Inc., a California corporation
("Parent"), and Advanced Machine Vision Corporation, a California corporation
("Subsidiary").
1. Parent has acquired and owns all of the outstanding shares of capital
stock of Subsidiary.
2. The Board of Directors of Parent, in accordance with Section 1110(a) of
the California Corporations Code, has approved the merger (the "Merger") of
Subsidiary with and into Parent upon the terms set forth in this Plan.
3. Subsidiary shall merge with and into Parent, with Parent to be the
corporation surviving the Merger (the "Surviving Corporation").
4. Upon the Merger, the separate existence of Subsidiary shall cease, the
Surviving Corporation shall succeed to and assume all liabilities and
obligations of Parent and Subsidiary, and the effect of the Merger shall in all
other respects be as provided herein. The Surviving Corporation may, at any time
after the Merger, take any action (including executing and delivering any
document) in the name and on behalf of either Parent or Subsidiary in order to
carry out and effectuate the transactions contemplated by this Plan.
5. Upon the Merger, each outstanding share of common stock of Subsidiary
shall be cancelled.
6. The Articles of Incorporation of Parent in effect immediately prior to
the Merger shall be the Articles of Incorporation of the Surviving Corporation
until amended in accordance with the provisions thereof, except that Article I
of the Articles of Incorporation of Surviving Corporation shall be amended to
read as follows:
"I
The name of the corporation is Advanced Machine Vision Corporation."
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
March 31, 1997 financial statements and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<CIK> 0000795445
<NAME> ADVANCED MACHINE VISION CORPORATION
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 2710
<SECURITIES> 0
<RECEIVABLES> 4931
<ALLOWANCES> 0
<INVENTORY> 8479
<CURRENT-ASSETS> 16750
<PP&E> 7877
<DEPRECIATION> 1580
<TOTAL-ASSETS> 32060
<CURRENT-LIABILITIES> 10123
<BONDS> 14551
0
0
<COMMON> 25986
<OTHER-SE> (18600)
<TOTAL-LIABILITY-AND-EQUITY> 32060
<SALES> 9337
<TOTAL-REVENUES> 9337
<CGS> 4730
<TOTAL-COSTS> 8176
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 360
<INCOME-PRETAX> 801
<INCOME-TAX> 32
<INCOME-CONTINUING> 769
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<CHANGES> 0
<NET-INCOME> 769
<EPS-PRIMARY> .06
<EPS-DILUTED> .06
</TABLE>
