INFORMATION STATEMENT
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
INFORMATION STATEMENT PURSUANT TO SECTION 14(c)
OF THE SECURITIES EXCHANGE ACT OF 1934
Check the appropriate box:
[ ] Preliminary Information Statement [ ]Confidential, For Use of the
Commission by Rule 14a-5(d)(2)
[X] Definitive Information Statement
ORBIS, INC.
-----------
(Exact Name of Registrant as Specified in its Charter)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14c-5(g).
[X] Fee computed on table below per Exchange Act Rule 14c-5(g) and 0-11
1) Title of each class of securities to which transaction applies: Common
--------
2) Aggregate number of securities to which transaction applies: 5,000,237
-----------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 $1.00 .
------------------
4) Proposed maximum aggregate value of transaction: $5,000,237(i)
-----------------------
CALCULATION OF FILING FEE
Transaction Valuation Amount of Filing Fee
--------------------- --------------------
$5,000,237 $1,000
(i) For purpose of calculating fee only. The amount assumes transfer of
Common Stock totalling $5,000,237
[X] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amounts previously paid: $1,000
--------------------
2) Form, Schedule or Registration Statement No.: 000-15520
--------------------
3) Filing Party: Orbis, Inc.
-------------------
AMENDED INFORMATION STATEMENT
ORBIS, INC.
2 CHARLES STREET
PROVIDENCE, RHODE ISLAND 02904
INFORMATION STATEMENT
SPECIAL MEETING OF STOCKHOLDERS TO BE HELD AT 10:00 A.M.
ON SEPTEMBER 25, 1996
THIS IS AN INFORMATION STATEMENT. WE ARE NOT ASKING YOU
FOR A PROXY AND YOU ARE NOT REQUESTED TO SEND US A PROXY.
To the Stockholders of
Orbis, Inc.
This Information Statement relates to a Special Meeting of Stockholders
of Orbis, Inc. ("Orbis") to be held on September 25, 1996 at 10:00 a.m. at
Orbis's principal office, 2 Charles Street, Providence, Rhode Island, called in
connection with the proposed reincorporation of Orbis, a Rhode Island
corporation, as a Delaware corporation under the name Industrial Imaging
Corporation, ("Industrial Imaging"), the consolidation of Industrial Imaging and
Triple I Corporation ("Triple I"), a Delaware corporation, and the replacement
of Orbis's officers and directors with Triple I's officers and directors
(collectively, these actions will be called the "Transaction"). The
consolidation of Triple I and Industrial Imaging shall be completed by an
exchange of shares, which is included as the second proposal. The Special
Meeting of Shareholders has been called for the purpose of considering and
voting upon the following proposals necessary to complete the Transaction:
1. To reincorporate Orbis from the State of Rhode Island to the
State of Delaware, under the name Industrial Imaging
Corporation, and exchange one (1) share of Industrial Imaging
Common Stock, $.01 par value per share (the "Industrial
Imaging Common Stock") for every eighteen (18) shares of Orbis
Common Stock, $.01 par value per share (the "Orbis Common
Stock") as per the Agreement of Merger ("Reincorporation
Agreement") (attached as Exhibit B);
2. A proposal to approve the exchange of shares between
Industrial Imaging (the successor to Orbis) and Triple I,
pursuant to which 100% of Triple I's shares shall be exchanged
for 90% ownership of Industrial Imaging, as per the
Shareholders' Exchange Agreement ("Exchange Agreement")
(attached as Exhibit A);
3. To elect all the following nominees as Directors of Orbis:
Juan J. Amodei, Ph.D., Joseph Bordogna, Ph.D., Charles G.
Broming, Robert Creeden, A. Uri Levy, Joseph A. Teves, and
Harry Hsuan Yeh, Ph.D. to serve until the next annual meeting
of the stockholders of Industrial Imaging and to hold office
until the election and qualification of their successors;
4. To approve the 1996 Stock Option Plan (the "Plan") for Orbis
under which 600,000 shares of Common Stock have been reserved
for issuance pursuant to the Plan;
5. To ratify the selection of Coopers & Lybrand L.L.P. as
independent auditors for Industrial Imaging for the fiscal
year ending March 31, 1997; and
6. To consider and act upon any matters incidental to the
foregoing and any other matters that may properly come before
the meeting or any adjournment or adjournments thereof.
THE BOARD OF DIRECTORS OF ORBIS AND TRIPLE I HAVE UNANIMOUSLY VOTED FOR
THE LISTED PROPOSALS. BOTH BOARDS BELIEVE THAT THE EXCHANGE OF SHARES WITH
TRIPLE I WILL RESULT IN A COMPANY WITH ENHANCED PROSPECTS FOR GREATER FINANCIAL
BENEFITS FOR THE STOCKHOLDERS OF BOTH COMPANIES. HOLDERS OF 5,436,034 SHARES
(APPROXIMATELY 57.5%) (8 PERSONS) OF THE OUTSTANDING COMMON STOCK OF ORBIS HAVE
EXECUTED PROXIES TO VOTE IN FAVOR OF THE TRANSACTION AND ALL THE OTHER ITEMS
PROPOSED. AS AT AUGUST 28, 1996 THERE WERE 9,450,000 SHARES OF ORBIS COMMON
STOCK OUTSTANDING.
If you attend the meeting you may vote in person.
Respectfully yours,
Pasquale Ruggieri
President
August 28, 1996
INFORMATION STATEMENT
ORBIS, INC.
2 Charles Street
Providence, RI 02904
Notice of Special Meeting
of Stockholders
to be held on September 25, 1996
To the Holders of Common Stock:
This Information Statement relates to a Special Meeting of Stockholders
of Orbis, Inc. ("Orbis") to be held on September 25, 1996 at 10:00 a.m. at
Orbis's principal office, 2 Charles Street, Providence, Rhode Island, called in
connection with the proposed reincorporation of Orbis, a Rhode Island
corporation, as a Delaware corporation under the name Industrial Imaging
Corporation, ("Industrial Imaging"), the consolidation of Industrial Imaging and
Triple I Corporation ("Triple I"), a Delaware corporation, and the replacement
of Orbis's officers and directors with Triple I's officers and directors
(collectively, these actions will be called the "Transaction"). The
consolidation of Triple I and Orbis shall be completed by an exchange of shares,
which is included as the second proposal. The Special Meeting of Shareholders
has been called for the purpose of considering and voting upon the following
proposals necessary to complete the Transaction:
1. To reincorporate Orbis from the State of Rhode Island to the
State of Delaware, under the name Industrial Imaging
Corporation, and to exchange one (1) share of Industrial
Imaging for every eighteen (18) shares of Orbis as per the
Agreement of Merger ("Reincorporation Agreement") (attached as
Exhibit B);
2. A proposal to approve the exchange of shares between
Industrial Imaging (the successor to Orbis) and Triple I,
pursuant to which 100% of Triple I's shares shall be exchanged
for 90% ownership of Industrial Imaging, as per the
Shareholders' Exchange Agreement ("Exchange Agreement")
(attached as Exhibit A);
3. To elect all the following nominees as Directors of Orbis:
Juan J. Amodei, Ph.D., Joseph Bordogna, Ph.D., Charles G.
Broming, Robert Creeden, A. Uri Levy, Joseph A. Teves, and
Harry Hsuan Yeh, Ph.D. to serve until the next annual meeting
of the stockholders of Orbis and to hold office until the
election and qualification of their successors;
4. To approve the 1996 Stock Option Plan (the "Plan") for Orbis
under which 600,000 shares of Common Stock have been reserved
for issuance pursuant to the Plan;
5. To ratify the selection of Coopers & Lybrand L.L.P. as
independent auditors for Industrial Imaging for the fiscal
year ending March 31, 1997; and
6. To consider and act upon any matters incidental to the
foregoing and any other matters that may properly come before
the meeting or any adjournment or adjournments thereof.
The close of business on August 23, 1996 has been fixed as the record
date for the determination of holders of the Orbis's Common Stock entitled to
notice of, and to vote at, the meeting or any adjournment thereof. Each share of
Common Stock has one vote. Treasury shares have no voting rights.
By order of the Board of Directors
Pasquale Ruggieri, President
Providence, Rhode Island
__________________________________________
THE AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY OF THE OUTSTANDING
COMMON STOCK OF ORBIS IS REQUIRED FOR APPROVAL OF THE ITEMS TO BE VOTED UPON.
HOLDERS OF 5,436,034 SHARES (APPROXIMATELY 57.5%) (8 PERSONS) OF THE OUTSTANDING
COMMON STOCK OF ORBIS HAVE EXECUTED PROXIES TO VOTE IN FAVOR OF THE TRANSACTION
AND ALL THE OTHER ITEMS PROPOSED. SUCH SHARES ARE SUFFICIENT TO APPROVE THE
PROPOSALS.
______________________________
Orbis has not filed a Registration Statement with the Securities and
Exchange Commission covering the additional shares of Orbis Common Stock to be
received by the stockholders of Triple I in connection with the Transaction.
However, securities counsel for Triple I has advised Triple I stockholders that
they may tack on their original acquisition date of Triple I securities and
apply the same toward the new Orbis securities in accordance with Rule 145
promulgated under the Securities Act of 1933, as amended ("Rule 145") for
purposes of compliance with the holding period requirements under Rule 145.
Except for persons who are affiliated persons of Triple I before and after the
Transaction, stockholders of Triple I will be able to freely resell their new
Orbis shares under the provisions of Rule 145, provided that all other resale
requirements of that rule are met. However, certain of Triple I's existing
stockholders who purchased shares during a 1996 Private Placement (the "Private
Placement") prior to the Transaction have agreed not to sell any shares owned by
them for 12 months after the initial closing of the Private Placement, which
closing occurred in February 1996, without the prior written consent of
Schneider Securities Inc., the Placement Agent (the "Placement Agent").
______________________________
THIS IS AN INFORMATION STATEMENT.
WE ARE NOT ASKING YOU FOR A PROXY AND
YOU ARE NOT REQUESTED TO SEND US A PROXY.
ii
ORBIS, INC.
INFORMATION STATEMENT
TABLE OF CONTENTS
Information Statement
Summary of Information Statement....................................... 1
Proposal No. 1 - Reincorporation
Principal Features of the Reincorporation..................... 1
Purposes of the Reincorporation............................... 2
Comparisons of Delaware and Rhode Island
Corporate Law........................................ 3
Federal Income Tax Consequences
of Reincorporation................................... 3
Rights of Dissenting Shareholders ............................ 4
Proposal No. 2 - The Exchange
The Companies................................................. 4
Material Features of the Proposed Transaction................. 5
Reasons for the Proposed Transaction.......................... 6
Effects on Orbis Stockholders................................. 7
Federal Income Tax Consequences .............................. 7
Description of Securities..................................... 8
Dividend Policy............................................... 11
Selected Financial Data of Triple I........................... 12
Triple I's Management Discussion and Analysis of..............
Financial Condition and Results of Operation ................. 13
Comparative Per Share Data.................................... 17
Independent Auditors.......................................... 18
Triple I Product Information.................................. 18
Risk Factors ............................................ 27
Proposal No. 3 - Election of Directors
Background ............................................ 33
Certain Transactions of Triple I and Orbis.................... 35
Compliance with Section 16(a)................................. 36
Compensation of Directors and Officers of
Triple I and Orbis............................................ 37
Employment Agreements of Triple I ............................ 37
iii
Beneficial Owners of Triple I and Orbis....................... 37
Summary Compensation Table - Triple I......................... 40
Options Granted in Fiscal 1995................................ 41
Price Range of Common Stock................................... 42
Proposal No. 4 - Approval of 1996 Stock Option Plan
The Plan...................................................... 43
Federal Income Tax Consequences .............................. 45
Grant of Options under 1996 Plan.............................. 46
Proposal No. 5 - Approval of Auditors
Accounting Matters and Ratification of Auditors............... 46
Exhibit A - Form of Shareholders' Exchange Agreement
Exhibit B - Form of Agreement of Merger
Exhibit C - Certificate of Incorporation and Bylaws for Industrial Imaging
Corporation
Exhibit D - Audited Financials for Triple I Corporation for years ended
September 30, 1993, September 30, 1994 and September 30, 1995
Exhibit E - Rights of Dissenting Stockholders of Orbis, under Rhode Island
Law
Exhibit F - Orbis's Annual Report filed under Form 10-K for fiscal
year 1996
Exhibit G - Selected Unaudited Financial Statements of Triple I
Corporation for the nine months ended June 30, 1996 and
June 30, 1995.
iv
SUMMARY
This information statement is being furnished to Orbis, Inc. ("Orbis")
shareholders, who will be asked to consider and vote upon a series of proposals
that, if fully effected, shall result in reincorporating Orbis, Inc. (the
"Reincorporation") in the State of Delaware under the name Industrial Imaging
Corporation ("Industrial Imaging"), and the consolidation of Triple I
Corporation ("Triple I") into Industrial Imaging through an exchange of shares
(the "Exchange"). The Reincorporation and the Exchange are collectively called
the "Transaction". Industrial Imaging shall thereafter carry on the business of
Triple I as a publicly traded company and will be headed by Triple I's
management. Industrial Imaging's Common Stock is intended to be exchanged for
all of the Common Stock of Triple I. The Transaction will result in the present
stockholders of Orbis owning approximately 10% of the issued and outstanding
shares of Industrial Imaging to be outstanding immediately following the
Transaction. The entity resulting from the completion of the Transaction is
referred to herein occasionally as Industrial Imaging. STOCKHOLDERS ARE URGED TO
CAREFULLY REVIEW THIS ENTIRE INFORMATION STATEMENT, EACH OF THE EXHIBITS
ATTACHED HERETO AND THE DOCUMENTS INCORPORATED HEREIN BY REFERENCE.
PROPOSAL NO. 1
PROPOSAL TO REINCORPORATE ORBIS FROM THE STATE OF
RHODE ISLAND TO THE STATE OF DELAWARE UNDER
THE NAME "INDUSTRIAL IMAGING CORPORATION" AND TO
EXCHANGE ONE (1) SHARE OF INDUSTRIAL IMAGING
FOR EIGHTEEN (18) SHARES OF ORBIS
As part of the Transaction, Orbis is to reincorporate under the laws of
Delaware by means of a merger with the recently established Delaware
corporation, Industrial Imaging. Upon the completion of the Reincorporation, the
separate existence of Orbis will cease. The Reincorporation will occur prior to
the exchange of shares with Triple I discussed in Proposal 2.
Industrial Imaging has authorized 20,000,000 shares of Common Stock,
$.01 par value, and 1,000,000 shares of undesignated Preferred Stock, $.01 par
value. The Preferred Stock may be issued in one or more series by the Board of
Directors. The Board of Directors has the authority to determine the
designation, preference and rights (including voting rights) of each series of
Preferred Stock with no further action required from the shareholders.
PRINCIPAL FEATURES OF THE REINCORPORATION
The Reincorporation is to be completed via the Agreement of Merger
("Reincorporation Agreement") attached hereto as Exhibit B. The Reincorporation
will not become effective until approval by the shareholders of Orbis is
obtained and the Reincorporation Agreement or appropriate certificate of merger
is filed with the Secretary of State of Delaware and the Secretary of State of
Rhode Island. At the effective time, Industrial Imaging will be governed by its
Delaware Certificate of Incorporation and the Bylaws, which are attached as
Exhibit C, and Delaware General Corporation Law ("Delaware Law").
Orbis Common Stock shall be converted to Industrial Imaging Common
Stock on an eighteen (18) to one (1) basis; that is, for every eighteen (18)
shares of Orbis Common Stock, each shareholder shall receive one (1) share of
Industrial Imaging Common Stock. After the Reincorporation is complete, Orbis's
9,450,000 shares of outstanding Common Stock shall be exchanged for 525,000
shares of Industrial Imaging Common Stock. The purpose of this exchange rate is
to establish capitalization sufficient to accomplish the exchange of shares with
Triple I, discussed in Proposal No. 2.
As part of the Reincorporation, Orbis will change its name to
Industrial Imaging Corporation. The name change is necessary to reflect the
future principal business of Orbis after the Transaction.
Moreover, the name is readily associated with Triple I's business.
PURPOSE OF THE REINCORPORATION
The purpose of the Reincorporation is to provide a familiar entity
whereby the management of Triple I can continue to conduct the business of
Triple I. Triple I is presently a Delaware corporation. Moreover, the principal
offices of Industrial Imaging will be moved to Lowell, Massachusetts, the
present headquarters of Triple I. As such, Industrial Imaging will no longer
have significant contact with the state of Rhode Island. Finally, the
Reincorporation will enable the management to make use of the benefits of
Delaware corporate law.
For many years the State of Delaware has followed a policy of
encouraging incorporation in that state and in furtherance of that policy, has
adopted comprehensive, modern and flexible corporate laws which are periodically
updated and revised to meet changing business needs. As a result, many
corporations have been initially incorporated in Delaware or have subsequently
reincorporated in Delaware in a manner similar to that proposed by Orbis.
Because of Delaware's prominence as a state of incorporation, the Delaware
courts have developed considerable expertise in dealing with corporate issues
and a substantial body of case law has developed construing the Delaware General
Corporation Law and establishing public policies with respect to corporations
incorporated in Delaware. Consequently, Delaware Law is comparatively well known
and understood. It is anticipated that, as in the past, Delaware Law will
continue to be interpreted and explained in a number of significant court
decisions. The Board of Directors believes that reincorporation in Delaware
should provide greater predictability with respect to Industrial Imaging's
corporate affairs. As one of the effects of the proposed Reincorporation,
Industrial Imaging may expand the scope of its indemnification of directors,
officers and key employees and to limit the liability of its directors in a
broader range of circumstances than permitted under Rhode Island Law. The Board
of Directors has not viewed the increased protections permitted under Delaware
Law as a reason for recommending the Reincorporation. The Board, however,
believes that Industrial Imaging will benefit from having the ability to provide
its directors, officers and employees protections equivalent to those provided
by Delaware corporations. Shareholders should note, however, that since members
of the Board of Directors will receive the benefit of expanded indemnification
provisions and limitations on liability, the Board members may be viewed as
having a personal interest in the approval of the Reincorporation at the
potential expense of shareholders.
2
Orbis has taken steps to ensure that certain rights currently available
to its shareholders will be preserved after the Reincorporation. Shareholders
should be aware, however, that Delaware Law has been publicly criticized on the
grounds that it does not afford minority shareholders all the same substantive
rights and protections that are available under the laws of a number of other
states and that, as a result of the proposed Reincorporation, the rights of
shareholders will change in a number of important respects. For example, if the
Reincorporation is consummated, Industrial Imaging will not be required in the
future under Delaware Law to obtain shareholder approval, or to grant class
voting and appraisal rights, in connection with certain kinds of mergers and
corporate reorganizations. The Board of Directors believes that the advantages
of the Reincorporation to Orbis and its shareholders outweigh its possible
disadvantages.
COMPARISONS OF DELAWARE AND RHODE ISLAND CORPORATE LAW
Although Rhode Island and Delaware corporate law are similar in many
respects, several differences do exist. The discussion below provides a brief
summary of the differences between the laws of the two states which may affect
the rights and interests of the Orbis shareholders as a result of the
Reincorporation.
Rhode Island and Delaware corporate law differ concerning certain
shareholder rights. Rhode Island requires class voting for significant charter
amendments and mergers that may result in significant charter amendments. In
Delaware, class votes are generally not required unless the charter and bylaws
require otherwise. When action is taken by consent, Rhode Island law requires
unanimous written consent unless otherwise stated in a corporation's bylaws and
articles of incorporation. Unanimous written consent is required for mergers or
sales of substantially all assets of a company. By contrast, Delaware law
requires only that written consent be received from the number of shareholders
needed for the particular corporate action.
With regard to appraisal rights, Rhode Island law grants appraisal
rights to shareholders for sales of substantially all corporate assets, mergers,
amendments to a corporation's articles of incorporation and certain
acquisitions. The appraisal rights under Delaware law are much more limited.
Shareholders are granted rights for certain, but not all, mergers and charter
amendments.
Delaware law is also somewhat more restrictive than Rhode Island law as
to when dividends may be granted. Under Delaware law, dividends must be paid out
of net profits or surplus from the current or preceding year. Rhode Island law
allows dividends to be paid as long as the corporation can pay debts when due
and as long as assets are equal to or greater than liabilities.
FEDERAL INCOME TAX CONSEQUENCES OF THE REINCORPORATION
For federal income tax purposes, the Reincorporation is intended to
constitute a reorganization under ss.368(a)(1)(e) of the Internal Revenue Code
of 1986, as amended, and that consequently the holders of Orbis's Common Stock
will not recognize any gain or loss as a result of the Reincorporation. For
federal income tax purposes, each stockholder of Orbis will retain the
3
same tax basis in Industrial Imaging Common Stock as the shareholder held
immediately prior to the effective date of the Reincorporation, adjusted to
reflect the 18:1 reverse stock split. The holding period for tax purposes of
Industrial Imaging Common Stock will include the period during which the
shareholder held the corresponding Orbis Common Stock, provided that such
corresponding Common Stock was held by the shareholder as a capital asset at the
date the Reincorporation was effective.
Although it is not anticipated that state or local income taxes will
vary from the Federal income tax consequences described above, stockholders
should consult their own tax advisors as to the effect of the Reorganization
under state, local or foreign income tax laws.
RIGHTS OF DISSENTING STOCKHOLDERS
ALL HOLDERS OF OUTSTANDING SHARES OF COMMON STOCK OF ORBIS HAVE THE
RIGHT UNDER RHODE ISLAND LAW TO DISSENT FROM THE TRANSACTION AND TO ELECT TO
HAVE THE FAIR VALUE OF THEIR SHARES OF COMMON STOCK DETERMINED AS PROVIDED IN
THE RHODE ISLAND GENERAL LAWS. SEE EXHIBIT E WHICH IS A REPRINT OF SECTION
7-1.1-74 OF THE RHODE ISLAND CORPORATION LAW AND WHICH SETS FORTH THE APPRAISAL
PROCEDURES REQUIRED TO BE FOLLOWED.
PROPOSAL NO. 2
TO APPROVE THE EXCHANGE OF SHARES BETWEEN
ORBIS AND TRIPLE I, PURSUANT TO WHICH 100% OF
TRIPLE I'S SHARES SHALL BE EXCHANGED FOR 90%
OWNERSHIP OF THE OUTSTANDING SHARES OF ORBIS,
AS PER THE SHAREHOLDERS' EXCHANGE AGREEMENT
THE COMPANIES
ORBIS, INC.
Orbis was engaged in the business of manufacturing and marketing
application software products designed for use by health maintenance
organizations ("HMOs"). While Orbis continues to own certain application
software products utilized by HMOs, Orbis has had no significant revenues since
1992. As noted in the 1996 Annual Report on Form 10-K ("Form 10-K") attached
hereto as Exhibit F, Orbis is at present in effect a shell company with
approximately 240 record holders of its Common Stock.
4
TRIPLE I CORPORATION
Triple I was incorporated as a Delaware corporation in October 1992 and
is a successor corporation to AOI Systems, whose asset and product base was
acquired by Triple I in October 1992. Triple I is located at One Lowell Research
Center, 847 Rogers Street, Lowell, Massachusetts 01852. Triple I designs,
manufactures, and markets automated optical, vision and industrial imaging
systems for inspection and identification of defects in printed circuit boards
("PCBs"), and laser plotters for creation of PCB artwork and phototools. The
field of automated optical inspection of PCBs was pioneered by AOI Systems'
original parent company, Itek Corporation, now a part of Litton Industries
("Itek"), by key members of the team that later formed AOI Systems, and who now
are part of the management of Triple I. The product line was developed through
close cooperation between Itek and Digital Equipment Corporation, a
knowledgeable user which funded part of the development and acted as advisor,
customer, and beta site for the prototype and initial production models, which
were later completed and marketed by AOI Systems.
Companies engaged in the PCB manufacturing industry have become
increasingly interested in automated optical inspection and remote sensing as
increased competition within the industry demanded better efficiency and quality
control of PCBs. Concurrently, the trend within manufacturing is towards the
placement of more complex miniaturized components, in greater surface density,
and having decreased conducting line widths. Those companies engaged in
manufacturing are driven towards automated optical inspection and remote sensing
to satisfy industry demands for the precise quality of finished PCBs and
assemblies.
Triple I has developed an installed base of customers in the United
States, Europe, and Asia, including Ericsson Telecom (Sweden), Fanuc (Japan),
and Thompson Electronics (France). Triple I in 1994 obtained an exclusive
license to use The Polaroid Corporation's ("Polaroid") laser recording and
Helios film technology in the PCB market. This license, together with Triple I's
own advanced optical inspection systems, provides Triple I with the opportunity
to enhance its competitive position within the expanding industry of industrial
imaging as well as the capability to enter the PCB artwork and phototool
generation market. Triple I estimates the current annual market for inspection
systems for the PCB manufacturing industry alone to be in the range of $100 to
$150 million. The market consists of approximately 2,500 PCB manufacturers
domestically and internationally.
MATERIAL FEATURES OF THE PROPOSED TRANSACTION
Pursuant to the terms of the Exchange Agreement between Triple I and
Orbis, Triple I shares will be exchanged for shares of Orbis, which will have
previously reincorporated in Delaware under the name Industrial Imaging.
Shareholders of Triple I will receive 90% ownership of Industrial Imaging in
exchange for 100% of the outstanding Triple I Common Stock. Industrial Imaging
will continue the operation of Triple I's industrial imaging systems business as
a publicly traded entity. The present management of Triple I will remain in
place as the management of Industrial Imaging. Orbis must complete all of the
following corporate actions for the Transaction to be effective:
5
1. Provide that only 525,000 shares of Industrial
Imaging Common Stock are outstanding prior to the
Exchange.
2. Issue 5,000,237 shares of Common Stock to Triple I
shareholders, in exchange for 5,000,237 shares of
Triple I stock.
3. Change the business purposes as reflected in this
Information Statement.
4. Establish a stock option plan sufficient to
transfer the options granted by Triple I's stock
option plans.
5. Convert Triple I's warrants and options
outstanding immediately prior to the Exchange to
warrants and options of Industrial Imaging.
6. To have no more than 5,525,237 shares outstanding
after the Exchange or such additional amount as is
necessary to accomplish the Transaction.
7. To obtain the resignation of all Orbis officers
and directors effective at the closing of the
Transaction, with such officers and directors to
be replaced by nominees of Triple I.
The Transaction is designed to constitute a tax free exchange under
ss.368(a)(I)(B) of the Internal Revenue Code of 1986, as amended.
REASONS FOR THE PROPOSED TRANSACTION
Although no independent valuation of the Transaction has been made, the
Board of Directors of Orbis believes that the Transaction is fair to, and in the
best interests of, the Orbis shareholders. The Board made the decision not to
seek an independent evaluation for the Transaction because of the limited
resources of Orbis, the experience of Orbis executives in valuing businesses and
the absence of any other feasible business opportunities for Orbis, as further
described below. This fairness and best interests determination is based upon
the Board of Directors' consideration of a number of factors including, but not
limited to:
(a) The absence of any revenue to Orbis from operations or
business since 1992, and the Board's and management's
evaluation of Orbis's business and future prospects in the
absence of the Transaction.
(b) The greater financial resources and business growth potential
of Triple I.
(c) Orbis's prior operating history has resulted in a substantial
decrease in its shareholder's equity and in the trading price
of Orbis's Common Stock, beginning primarily in April 1988.
Since that time, Orbis has been seeking a way to improve
6
its business prospects and increase shareholder value.
(d) Orbis's pro forma balance sheet and income statement, as well
as its business prospects, after giving effect to the
Transaction.
Before agreeing to the Transaction, the Orbis Board gave considerable
weight to the fact that Orbis had been attempting to obtain financing and had
been exploring potential merger opportunities for three years and that during
such time, there were no other realistically feasible opportunities either
presently available or likely to be available in the foreseeable future. As a
consequence, the Board concluded that, given Orbis's current financial status,
effecting a merger with an entity that has stronger financial capabilities,
greater business opportunities and superior business capabilities, is in the
best interests of Orbis's shareholders.
The Orbis Board also believes that, after effecting the Transaction,
Industrial Imaging will be in a position to raise sufficient capital to meet the
initial listing requirements maintained by NASDAQ for its small capitalization
market, and the Orbis Common Stock could thereafter be eligible for re-listing,
thereby improving liquidity for Orbis's shareholders.
For these reasons, the Orbis Board has determined that the Transaction
is in the best interest of its shareholders.
EFFECT ON ORBIS STOCKHOLDERS
As a result of the Transaction, current holders of Orbis Common Stock
will suffer substantial dilution of their current holdings in Orbis. Once the
Transaction is completed, a total of approximately 5,525,237 shares of Orbis
Common Stock will be issued and outstanding. The current Orbis stockholders will
hold 525,000 of the outstanding shares along with warrants to purchase 100,000
shares of Industrial Imaging Common Stock. Although the current Orbis
shareholders will suffer dilution, and although there can be no assurances,
Orbis believes that the increased value to Orbis after the Transaction will
enhance shareholder value, and thus ameliorate, to some extent, the resulting
dilution. As noted earlier, Orbis has been a shell corporation since 1992, and
has had no significant revenue from that date to the present. In contrast, the
Transaction with Triple I will provide Orbis shareholders with a potential for
future value.
As of the first quarter of 1996, the high and low sale price ranges of
Orbis Stock have been $.28 and $.09. The stock is traded in the NASDAQ
over-the-counter-market.
FEDERAL INCOME TAX CONSEQUENCES
The following is a brief summary of the federal tax consequences of the
Transaction based on the Internal Revenue Code. This discussion is not intended
to be exhaustive and does not describe state and local tax consequences. Neither
Orbis nor Triple I has sought a ruling from the Internal Revenue Service
relative to the exchange of the shares.
7
For federal income tax purposes, the Transaction is intended to
constitute a reorganization under ss.368 of the Internal Revenue Code of 1986,
as amended, and that consequently the holders of Orbis Common Stock will not
recognize any gain or loss as a result of the Transaction. Although it is not
anticipated that state or local income taxes will vary from the federal income
tax consequences described above, stockholders should consult their own tax
advisors as to the effect of the reorganization under state, local or foreign
income tax laws.
DESCRIPTION OF SECURITIES
ORBIS
Common Stock
The authorized Common Stock of Orbis consists of 10,000,000 shares,
$.01 par value. As of the date hereof, there are 9,450,000 shares of Common
Stock outstanding. All shares have equal voting rights, one vote per share, and
are not assessable. Voting rights are not cumulative. Assuming the consummation
of the Transaction, Industrial Imaging will have authorized 20,000,000 shares of
Common Stock, and 1,000,000 shares of undesignated preferred stock. Triple I
Shareholders will hold approximately 5,000,237 shares of the Common Stock then
outstanding along with options/warrants to purchase 3,221,425 shares of Common
Stock. After the Transaction, Orbis Shareholders will retain 525,000 shares of
Industrial Imaging Common Stock, or about 10% of the Industrial Imaging Common
Stock outstanding.
Orbis Common Stock Warrants
Orbis has issued warrants to purchase an aggregate of 100,000 shares of
Orbis Common Stock as part of the conversion of its outstanding debt.
Exercise Price and Terms. The Orbis Common Stock Warrants entitle the
holder thereof to purchase shares of Orbis Preferred Stock at any time until
expiration at a price of $.00777 per share.
Orbis Common Stock Warrants expire on November 15, 1999.
Holders of the Orbis Common Stock Warrants may exercise their warrants
by surrendering the certificate representing the warrant to Orbis, with the
subscription on the reverse side of such certificate properly completed and
executed, together with payment of the exercise price.
Adjustments. The exercise price and the number of shares of Orbis
Common Stock purchasable upon the exercise of the Orbis Common Stock Warrants
are subject to adjustment upon the occurrence of certain events, including stock
dividends, stock splits, combinations or reclassification. The exercise price
and number of shares shall be adjusted as part of the reverse stock split
described in Proposal 1.
8
Transfer, Exchange and Exercise. The warrants may be transferred,
exchanged or exercised upon delivery of a properly executed and fully completed
assignment or subscription to Orbis.
TRIPLE I
Common Stock
The authorized Common Stock of Triple I consists of 8,700,000 shares,
$.01 par value. As of the date of the Transaction, there were 5,000,237 shares
of Common Stock outstanding. All shares have equal voting rights, one vote per
share, and are not assessable. Voting rights are not cumulative. The shares have
no preemptive rights.
Triple I Common Stock Warrants
Exercise Price and Terms. Triple I has granted warrants to purchase up
to (I) 20,000 shares of Common Stock with an exercise price of $.20 per share;
(ii) 500,000 shares of Common Stock with an exercise price of $.50 per share;
(iii) 160,000 shares of Common Stock with an exercise price of $1.25 per share;
(iv) 528,120 shares of Common Stock with an exercise price of $1.39 per share,
which are presently exercisable during periods up through June 30, 2005; (v)
444,000 shares of Common Stock with an exercise price of $1.00 per share, which
are presently exercisable, during periods up to August 22, 2004; (vi) 958,925
shares of Common Stock with an exercise price of $1.00, which are exercisable
after the earlier of (a) February 28, 2001 (five years from the closing of
Triple I's 1996 private placement) (the "1996 Private Placement"), (b) upon the
attainment of $12,000,000 in annual revenues or $1,000,000 in pretax net income
in Fiscal 1997 or (c) upon the attainment of $15,000,000 in annual revenues or
$1,500,000 in pretax net income in Fiscal 1998; and (vii) 88,000 shares of
Common Stock with an exercise price of $1.20, which are exercisable commencing
on April 26, 1997, issued to Schneider Securities, Inc. the Placement Agent for
the 1996 Private Placement (the "Placement Agent").
General. The Triple I Common Stock Warrants may be exercised by
surrendering the certificate representing the warrants to Triple I, with the
subscription on the reverse side of such certificate properly completed and
executed, together with payment of the exercise price. Certain of the Triple I
Common Stock Warrants are subject to registration rights granted by Triple I to
the holders of such warrants.
Adjustments. The Triple I Common Stock Warrants contain provisions that
protect the holders thereof against dilution by adjustment of the exercise price
per share and the number of shares issuable upon exercise thereof upon the
occurrence of certain events, including stock dividends, stock splits,
combinations or reclassification of the Common Stock.
Redemption. The Triple I Common Stock Warrants are not subject to
redemption.
Transfer, Exchange and Exercise. The Triple I Stockholder Warrants may
be transferred, exchanged or exercised upon the delivery of a properly executed
and fully completed assignment
9
or subscription to Triple I.
Registration Rights.
Triple I has agreed to register the 252,540 shares underlying the
Triple I Common Stock Warrants held by Massachusetts Technology Development
Corporation ("MTDC") at any time after the later of August 22, 1995 and six
months after a public offering of the Triple I securities resulting in net
proceeds of at least $5,000,000, subject to certain limitations. Triple I has
also agreed, subject to certain limitations, to register the shares underlying
the Triple I Common Stock Warrants by MTDC if Triple I intends to register other
securities. Triple I has also agreed, subject to certain limitations, to
register the shares underlying the Placement Agent's warrants if Triple I
intends to register other securities.
In addition, Triple I has agreed, subject to certain limitations, to
register the 128,160 shares underlying warrants held by Massachusetts Community
Development Finance Corporation ("CDFC") in the event that Triple I should
contemplate a public offering (other than an offering registering securities on
a Form S-4 or S-8 Registration Statement, or similar form) together with the
securities to be registered pursuant to such offering.
Triple I Series A Preferred Stock Warrants
Triple I has issued warrants to purchase 10,000 shares of Series A
Preferred Stock, which shall be converted into an equivalent number of shares of
Common Stock warrants of Industrial Imaging upon the completion of the
Transaction at the same terms and conditions described below.
Exercise Price and Terms. The Triple I Series A Preferred Stock
Warrants entitle the holder thereof to purchase shares of Triple I Series A
Preferred Stock at any time until December 31, 1996 at $5.00 per share. Holders
of these warrants may exercise such warrants by surrendering the certificate
representing the warrant to Triple I, with the subscription on the reverse side
of such certificate properly completed and executed, together with payment of
the exercise price.
Adjustments. The exercise price and the number of shares of Series A
Preferred Stock purchasable upon the exercise of these warrants are subject to
adjustment upon the occurrence of certain events, including stock dividends,
stock splits, combinations or reclassification.
Triple I Series B Preferred Stock Warrants
Triple I has issued warrants to purchase an aggregate of 216,380 shares
of Triple I Series B Preferred Stock, which shall be converted into an
equivalent number of shares of Common Stock warrants of Industrial Imaging upon
the completion of the Transaction at the same terms and conditions described
below.
10
Exercise Price and Terms. The Triple I Series B Preferred Stock
Warrants entitle the holder thereof to purchase shares of Triple I Series B
Preferred Stock at any time until expiration at a price of $1.39 per share.
196,380 shares of the Triple I Series B Preferred Stock Warrants expire on
August 22, 2004 and 20,000 shares of the Series B Preferred Stock Warrants
expire on December 22, 2003.
Holders of the Series B Preferred Stock Warrants may exercise their
warrants by surrendering the certificate representing the warrant to Triple I,
with the subscription on the reverse side of such certificate properly completed
and executed, together with payment of the exercise price.
Adjustments. The exercise price and the number of shares of Triple I
Series B Preferred Stock purchasable upon the exercise of the Triple I Series B
Preferred Stock Warrants are subject to adjustment upon the occurrence of
certain events, including stock dividends, stock splits, combinations or
reclassification.
Transfer, Exchange and Exercise. The warrants may be transferred,
exchanged or exercised upon delivery of properly executed and fully completed
assignment or subscription to Triple I.
DIVIDEND POLICY
Orbis presently intends to retain future earnings, if any, for use in
Industrial Imaging's business after the Transaction and, therefore, does not
expect to pay dividends in the foreseeable future. Any future determination with
respect to the payment of dividends will be made by the Board of Directors and
will depend upon the earnings and financial position of Industrial Imaging at
that time, and will be subject to, and limited by, the terms of any loan
agreements or other financing arrangements to which Industrial Imaging may then
be a party.
11
SELECTED FINANCIAL DATA OF TRIPLE I
The following summary financial information of Triple I is qualified in
its entirety by, and should be read in conjunction with, Triple I's audited
Financial Statements and notes thereto appearing in Exhibit D attached hereto.
In connection with the Transaction, Triple I will adopt Orbis's fiscal year end
of March 31.
STATEMENT OF OPERATIONS DATA (1):
<TABLE>
<CAPTION>
Fiscal years ended September 30, Nine months
-------------------------------- ended
1993 1994 1995 June 30, 1996
---- ---- ---- -------------
(unaudited)
Revenues:
<S> <C> <C> <C> <C>
Total revenues $353,520 $1,310,148 $1,225,023 $1,120,377
Total cost of product sales 710,511 1,197,065 1,142,582 1,098,442
--------- --------- --------- ---------
Gross profit (356,991) 113,083 82,441 21,935
--------- ------- ----------- ---------
Operating expenses
Research and Development 448,875 468,075 505,147 543,176
Sales and marketing 275,323 370,859 218,704 156,330
General and administrative 668,625 680,824 814,094 671,808
------- ------- ------- -------
Total operating expenses 1,392,823 1,519,758 1,537,945 1,371,314
--------- --------- --------- ---------
Loss from operations (1,749,814) (1,406,675) (1,455,504) (1,349,379)
Total other expenses (80,291) (99,888) (119,622) 13,668
------------ ------------- ------------ ----------
Net loss $(1,830,105) $(1,506,563) $(1,575,126) $(1,335,711)
BALANCE SHEET DATA(1):
Fiscal years ended September 30, Nine months
-------------------------------- ended
1993 1994 1995 June 30, 1996
---- ---- ---- -------------
(unaudited)
Total current assets $678,705 $744,803 $860,682 $1,038,809
Working capital deficit (349,083) (777,346) (1,748,891) (1,028,478)
Total assets 1,231,906 1,167,675 1,143,002 1,233,888
Total liabilities 1,192,788 2,117,120 3,267,573 2,046,287
Accumulated deficit (1,830,105) (3,336,668) (4,911,794) (6,247,505)
Stockholders' equity (deficit) 39,118 (949,445) (2,124,571) (833,399)
</TABLE>
12
(1) Summary historical financial data for the fiscal years ended September 30,
1995, September 30, 1994 and September 30, 1993 are derived from Triple I's
audited financial statements. All other interim period financial data is derived
from Triple I's unaudited financial statements. In the opinion of Triple I's
management, the unaudited financial statements have been prepared on the same
basis as the audited financial statements and include all adjustments necessary
for a fair presentation of the results of these periods. The results of
operation for the nine months ended June 30, 1996 may not be indicative of the
results that may be expected for the entire fiscal year.
TRIPLE I'S MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
Triple I was organized as a successor to AOI Systems in October 1992
when Triple I purchased the assets, technologies, and product base of AOI
Systems for a note payable of $150,000 and certain other obligations to AOI
Systems, for the purpose of manufacturing and selling optical inspection systems
in the PCB industry. The field of automated optical inspection of printed
circuit boards was pioneered by AOI Systems' original parent company, Itek. The
product line was developed through close cooperation between Itek and Digital
Equipment Corporation, a knowledgeable user which funded part of the development
and acted as advisor, customer, and beta site for the prototype and initial
production models, which were later perfected and marketed by AOI Systems. The
PCB optical inspection technology was pioneered at Itek by key members of the
team that later formed AOI Systems, and now are part of the management of Triple
I.
Triple I sells automated optical inspection systems to PCB
manufacturers, provides services and spare parts to its customers, and seeks
government grants and development contracts. During the last 12 months, Triple I
completed the beta testing and commencement of production of Triple I's new
AOI-2500 series. As of July 31, 1996, Triple I had a backlog of firm purchase
orders of approximately $1 million. During the years ended September 30, 1995,
and 1994, sales to foreign customers accounted for 91% and 80%, respectively, of
Triple I's total revenues. Triple I, including AOI Systems, Inc., has sold
approximately 80 systems in the United States, Europe and Asia.
Because of limited cash availability and a lack of readily available
capital from outside sources, Triple I's working capital resources were
insufficient during the last 12 months to handle in an effective and timely
manner the manufacturing and production of equipment. In addition, shipment of
products this year has been delayed by the enhanced engineering, manufacturing,
and design efforts needed to comply with recently enacted European Community
regulations and requirements. These regulations have been implemented to provide
for a uniform set of guidelines governing issues related to safety, mechanical
and electrical codes, and the like. As a result, all equipment designed to use
electrical components, power supplies, and similar items must be stamped to
identify that such parts are in compliance with the European Community
regulations and requirements. As a result, Triple I's revenues and income have
been adversely affected.
13
RESULTS OF OPERATIONS
NINE MONTHS ENDED JUNE 30, 1996 ("INTERIM 1996") COMPARED TO NINE MONTHS ENDED
JUNE 30, 1995 ("INTERIM 1995")
Triple I's revenues for Interim 1996 were approximately $1.1 million,
an increase of $400,000 from Interim 1995, due to an increase in both product
sales and services. The increase was due in part to improved business conditions
in the PCB market and increased customer acceptance of Triple I's products. Cost
of sales for Interim 1996 was approximately $1.1 million compared to $642,000,
an increase of $450,000 resulting from increased sales volume. Gross margins
decreased from 9.7% to 2% from June 30, 1995 to June 30, 1996 due to an increase
in cost of sales associated with an increase in indirect manufacturing costs.
Operating expenses increased from $1,192,522 in Interim 1995 to
$1,371,314 in Interim 1996, an increase of approximately $179,000, primarily due
to increased research and development costs associated with the development of
Triple I's new AOI-2500 product.
Other income (expense) was $96,000 in Interim 1995 as contrasted with
$13,000 of income for the same period in Interim 1996. The change is due to
$100,000 of debt forgiven in conjunction with the debt conversion that occurred
in February 1996. This forgiveness was recorded as other income. In addition,
interest expense increased from $92,000 in Interim 1995 to $106,000 in Interim
1996.
Triple I's net loss increased by approximately $117,000 from $1,219,836
in Interim 1995 to $1,335,117 in Interim 1996. This is primarily due to the
aforementioned increase in cost of sales as well as an increase in research and
development partially offset by the increase in other income.
YEAR ENDED SEPTEMBER 30, 1995 ("FISCAL 1995") COMPARED TO YEAR ENDED SEPTEMBER
30, 1994 ("FISCAL 1994")
Revenue for the year ended September 30, 1995 decreased slightly from
$1.3 million to $1.2 million, or 6%. Product sales increased by $50,000 due to
more products shipped and installed, while services revenue decreased by
$135,000 as a result of less contract service provided to customers.
Total cost of sales remained relatively constant and was $1,142,582 or
93% of total revenues and $1,197,065 or 91% of total revenues in Fiscal 1995 and
Fiscal 1994, respectively.
Gross profit decreased from $113,083 or 8.6% in Fiscal 1994 to $82,441
or 6.7% in Fiscal 1995. Since fixed overhead costs accounted for a significant
portion of Triple I's cost of sales, if and when revenues increase, gross
margins are expected to improve as fixed costs become a decreasing percentage of
revenues.
14
Triple I's operating expenses for Fiscal 1995 of $1,537,945 remained
relatively constant as compared to Fiscal 1994's operating expenses of
$1,519,758. Research and development expenses increased slightly while sales and
marketing expense decreased by approximately $150,000 in Fiscal 1995 compared to
Fiscal 1994 primarily due to a reduction in expenditures for trade shows,
advertising, and travel expenses. General and administrative expenses increased
by $133,270 from $680,824 in Fiscal 1994 to $814,094 in Fiscal 1995 primarily
due to hiring a chief financial officer and increased use of technical
consultants.
Interest expense increased to $126,189 in Fiscal 1995 from $83,311 in
Fiscal 1994 as a result of increased borrowings and the use of factoring of
accounts receivable.
Due to the uncertainty of realizing the tax benefits of net loss carry
forwards, no provision for income tax benefit was made for both Fiscal 1995 and
Fiscal 1994.
Net loss of $1,575,126 for Fiscal 1995 was relatively consistent with
the net loss for Fiscal 1994, due to the consistency of revenue, cost of sales,
and operating expenses.
FISCAL 1994 COMPARED TO THE PERIOD OF OCTOBER 26, 1992 TO SEPTEMBER 30, 1993
("FISCAL 1993")
Triple I's revenues from product sales increased to approximately
$937,000 in Fiscal 1994, from approximately $125,000 in Fiscal 1993, an increase
of approximately $812,000. Service revenue increased to approximately $370,000
in Fiscal 1994, compared to approximately $228,000 in Fiscal 1993, an increase
of approximately $142,000. These increases were due to improvements in system
sales.
Cost of sales for Fiscal 1994 was approximately $1,197,000, resulting
in a gross profit of approximately $113,083, compared to cost of sales in Fiscal
1993 of approximately $711,000, resulting in gross loss of approximately
$357,000 in Fiscal 1993. This improvement in margins is due primarily to higher
sales volume in Fiscal 1994.
Engineering, research and development expenses increased to
approximately $468,000 in Fiscal 1994 from approximately $449,000 in Fiscal
1993, an increase of approximately $19,000, due primarily to the development of
Triple I's AOI-2500 unit and engineering upgrades made to Triple I's AOI-190
unit. Sales and marketing expenses increased to $371,000 in Fiscal 1994 as
compared to approximately $275,000 in Fiscal 1993, an increase of approximately
$96,000. This increase was primarily caused by the hiring of additional
marketing representatives for Fiscal 1994, commissions and trade shows. General
and administrative expenses were approximately $681,000 in Fiscal 1994, compared
to $669,000 in Fiscal 1993, an increase of approximately $12,000. This increase
can be attributed to hiring a full-time chief financial officer. Interest
expense for Fiscal 1994 was approximately $83,000, an increase from
approximately $62,000 in Fiscal 1993. This increase is primarily attributable to
increased debt service requirements.
15
Triple I incurred a net loss of approximately $1,507,000 in Fiscal
1994, compared to a net loss of approximately $1,830,000 in Fiscal 1993, due
primarily to increased research and development and sales expenses as Triple I
developed new products and increased sales efforts in connection with
anticipated increased demand of its new products.
LIQUIDITY AND CAPITAL RESOURCES OF TRIPLE I
Triple I's operations to date have been funded by equity investments,
borrowing from banks, investors, and stockholders, and to a limited extent, cash
flow from operations. As of June 30, 1996, Triple I had cash of approximately
$79,000, and a working capital deficit of approximately $1,028,000. During the
fiscal years ended September 30, 1994 and 1995, and nine months ended June 30,
1996, cash used in operating activities was $1,169,231, $775,226 and $1,357,258
respectively.
From February 1996 through April 1996, Triple I raised $880,000 through
Schneider Securities, Inc. (the "Placement Agent") from a private placement of
equity securities. In addition, $450,000 was raised in June 1996 from sales of
common stock to MTDC and an affiliate of a director of Triple I.
From August 1993 through April 1995, various stockholders of Triple I,
MTDC and CDFC loaned Triple I an aggregate of $1,200,000 to help fund
operations. These loans were made pursuant to various promissory notes which
have become or will become due at various dates through August 22, 1999. These
notes provide for interest at per annum rates ranging from 8.4% to 10%. As part
of the 1996 Private Placement, Triple I had certain creditors and noteholders
forgive or convert into equity of Triple I up to approximately $1,300,000 of the
indebtedness owed to them by Triple I. Pursuant to an agreement with Schneider
Securities, Inc., Triple I converted the debt on the basis of one share of
Common Stock for every one dollar of debt converted.
In October 1995, certain shareholders, officers and/or directors loaned
Triple I approximately $255,000 of which $150,000 has been repaid. According to
the terms of the promissory notes, the principal balance was due in May 1996,
and interest is due at a rate of 10% per annum. Although no assurances can be
given that it will be successful in doing so, Triple I intends to negotiate an
extension of the payment date on these notes.
In May 1995, Triple I obtained a bank loan (the "SBA Loan") that
allowed Triple I to borrow $200,000 against one of its contract orders. The
contract order was shipped in July 1995, and the SBA Loan was repaid. Management
believes that the establishment and repayment of the SBA Loan should enable
Triple I to qualify for a broader revolving credit program sponsored by the SBA,
and materially improve its ability to build equipment as orders are received.
However, no assurance can be given that Triple I will be successful in obtaining
loans in the future, or if it is successful, that such loans would be on terms
favorable to Triple I.
16
In June 1995, MTDC and CDFC each made a 90 day loan to Triple I of
$100,000 that provided Triple I with short-term interim working capital to fund
operations. These loans incur interest at 10% and were due as of September 17,
1995. MTDC and CDFC converted these loans to equity in February 1996.
As successor to AOI Systems, Inc., Triple I became responsible for
$130,000 of indebtedness to the predecessor company's creditors. This
indebtedness incurs interest at 8.0% per annum and became due and payable on
January 30,1995. Triple I renegotiated the note in July 1994 to require interest
only payments at a rate of 8.0%, due monthly and negotiated an extension of the
maturity date of this obligation.
In March 1996 Triple I entered into an agreement with Centennial
Technologies, Inc, ("Centennial"), whereby Centennial would purchase on its own
account components to build up to 20 inspection systems and E/R stations. See
"Triple I's Products". Triple I would then construct the systems and pay
Centennial for the components, upon receipt of the sale price from Triple I's
customers. Originally, Centennial agreed to allow Triple I to purchase
components up to a total of $750,000 due at any one time. Centennial and Triple
I later agreed to increase the limit to $1,500,000. Triple I paid Centennial a
one-time fee of $200,000. Centennial holds 750,000 shares of Triple I's Common
Stock. See "BENEFICIAL OWNERS OF TRIPLE I COMMON STOCK".
Triple I has incurred operating losses since inception that have
continued through June 30, 1996. No assurance can be given that Triple I will be
able to achieve profitability in 1996 or in future years. In addition, the
report of Triple I's independent certified public accountant for the years ended
September 30, 1995 and 1994, contains an explanatory paragraph as to Triple I's
ability to continue as a going concern. Among the factors cited by the auditors
as raising doubt as to Triple I's ability to continue as a going concern is that
Triple I has suffered recurring losses from operations and has an accumulated
deficit of approximately $6.3 million as of June 30, 1996. See the Financial
Statements attached hereto as Exhibits D and G. In addition, Triple I will
require additional funds from borrowings or equity financings in the future. No
assurance can be given that such funds, if needed, will be available in the
future on favorable terms, if at all. See "Risk Factors".
COMPARATIVE PER SHARE DATA
Below is the per share data for Orbis and Triple I as of the companies'
respective year ends. Further information about Orbis is located in Orbis's 10-K
attached hereto as Exhibit F.
Orbis Triple I
March 31, 1996 September 30, 1995
Book Value per Common Share (.01) $(1.97)
Cash Dividends per Common Share 0 0
Income (Loss) per Common Share (.01) (1.04)
17
INDEPENDENT AUDITORS
A representative of Coopers & Lybrand L.L.P. is expected to be present
at the meeting of stockholders, and will have the opportunity to make a
statement and answer questions from stockholders if he or she so desires.
TRIPLE I PRODUCT INFORMATION
GENERAL
Triple I designs, manufactures and markets automated vision and
industrial imaging systems for inspection and identification of defects in
printed circuit boards ("PCBs") and markets laser plotters for creation of
artwork and phototools. Virtually all electronic equipment uses PCBs, which
contain electrical pathways ("conductors") that interconnect electronic
components. PCBs are susceptible to conductor defects, such as electrical
shorts, open circuits, and insufficient or excessive conductor widths, which
interfere with the interconnections between electronic components attached to
the finished boards.
Companies engaged in the PCB manufacturing industry have become
increasingly interested in automated optical inspection and remote sensing as
increased competition within the industry has demanded better efficiency and
quality control of PCBs. Concurrently, the trend within PCB manufacturing is
towards the placement of more complex miniaturized components, in greater
surface density, and having decreased conducting line widths. Those companies
engaged in PCB manufacturing are driven towards automated optical inspection and
remote sensing to satisfy industry demands for the precise quality of finished
PCBs and assemblies.
Triple I is an established supplier of automated inspection systems of
PCBs. Triple I has developed an installed base of customers in the United
States, Europe, and Asia, including Ericsson Telecom (Sweden), Fanuc (Japan),
Hitachi (Japan), and Thompson Electronics (France). Triple I's recently obtained
exclusive license to use the Polaroid Corporation's ("Polaroid") laser recording
and Helios(TM) film technology, together with Triple I's own advanced optical
inspection systems, provide Triple I with the opportunity to enhance its
competitive position within the expanding industry of industrial imaging as well
as the capability to enter the PCB artwork and phototool generation market.
Polaroid currently holds approximately 15% of Triple I's outstanding Common
Stock. See "BENEFICIAL OWNERS OF TRIPLE I COMMON STOCK". Triple I estimates the
current annual market for inspection systems for the PCB manufacturing industry
alone to be in the range of $100 to $150 million. This market consists of
approximately 2,500 PCB manufacturers domestically and internationally.
During the past twenty-four months, Triple I has accomplished a number
of major strategic goals, including the following:
18
o Introduction of new generation of inspection systems.
----------------------------------------------------
In April 1995, Triple I commenced production of its new AOI-2500 Series of
modular advanced automated inspection systems. Management believes that this
new generation of products accurately detects defects in PCB production at
speeds greater than conventional optical inspection systems with a detection
capability that permits inspection of fine lines and difficult geometric
patterns. Management believes that the unique modular design of the AOI-2500
Series offers customers excellent flexibility and ease of upgrading their
systems. Because the mechanical portions of each model in the series are
identical, a customer can purchase the lowest priced model and upgrade at an
appropriate time based on its needs and inspection requirements.
o Polaroid license and equity investment.
--------------------------------------
In November 1994, Triple I entered into a License and Collaboration Agreement
(the "Polaroid Agreement") with Polaroid. The Polaroid Agreement gives both
companies royalty free access to each others' patents, technology, and
know-how for use in their respective fields of business. In addition, the
agreement seeks to promote the development, marketing, and sales in the field
of PCB inspection of an image processing system consisting of equipment
designed by Triple I and other Polaroid partners and using Polaroid's new
Helios(TM) film. As part of the Polaroid Agreement, Triple I has been granted
the exclusive right to market Polaroid's Helios(TM)film within the PCB
industry, subject to Triple I satisfying ongoing sales and performance
milestones. Triple I and Polaroid believe that the Helios(TM)film offers
significant advantages over other films currently used in the design of PCBs,
such as processing cost-savings, high contrast and optical density, enhanced
durability, and improved edge resolution. Polaroid's Helios(TM)film also does
not require any wet processing, thereby avoiding significant environmental
concerns. As a result, Triple I believes that significant market
opportunities exist to sell the Helios(TM)film in conjunction with Triple I's
products. In addition, Polaroid has granted Triple I access to laser plotter
recording technology that is important to Triple I's efforts to expand and
enhance its product base, and strengthen its competitive position.
o Award of ARPA Contract.
----------------------
In August 1994, Triple I received a $946,000 contract (the "ARPA Contract")
from the United States Advanced Research Projects Agency ("ARPA"), as part of
ARPA's technology reinvestment project. To date, approximately $320,000 of
the ARPA Contract has been funded. Under the terms of the ARPA Contract,
Triple I, in conjunction with Optical Research Associates of Framingham,
Massachusetts, is developing new automated optical inspection techniques to
enable inspection systems to "adapt" to the position and movement speed of
the product being inspected. The results of this project and the development
of the new automated optical inspection system, if successful, are expected
to significantly improve the performance of inspection systems for PCBs.
19
THE PCB INDUSTRY
In PCB manufacturing, the design of conductor patterns is developed
with the help of a Computer Aided Design ("CAD") package, and later optimized
for manufacturing at the PCB manufacturing plant by using a CAM system. The CAM
system drives a laser plotter that generates a pattern on silver halide film.
This film is often used to expose dry film which then becomes the photo tool, or
"mask," to expose the photoresist that defines the conductor pattern on the PCB
surface.
The trend towards more complex and compact electronic products that
utilize large-scale integrated circuits requires the production of high-density
PCBs with finer conductor lines, reduced spacing between those lines, and
multiple layers. For such complex multilayer boards, production yield drops
dramatically as the number of likely defects increases, unless in-process
inspection is used. As a result, inspection is required throughout PCB
production to identify such defects, which are then repaired, if possible. Early
detection of these defects increases the possibility of successful repair and
reduces the number and cost of unusable PCBs.
Triple I intends to further develop and enhance its own proprietary
technology to better serve the industrial imaging and inspection markets and
exploit the synergy between its own technology in the field of image
acquisition, processing and reconstruction and the technology of Polaroid.
Triple I intends to expand into other inspection and industrial imaging markets,
such as flat-panel displays and other products requiring precise high-resolution
optical measurements to monitor quality control within the manufacturing
process.
TRIPLE I'S PRODUCTS
Triple I's current products are automated vision systems sold to the
PCB manufacturing industry. Triple I's products were pioneered by the current
Triple I management team while employed by Itek Corporation (now a part of
Litton Industries) in the 1980's through close collaboration with Digital
Equipment Corporation. Triple I's systems are quality control and yield
enhancement tools used for automated optical inspection of PCBs to determine the
presence of flaws such as conductor breaks, short circuits, missing features and
conductor width violations at various stages of the PCB manufacturing process.
In addition, Triple I's systems can generate statistical reports of defects in
real-time to assist in the control of the PCB manufacturing process, which can
result in substantially improved yields. These improved yields, in conjunction
with the advantages in quality control offered by Triple I's systems, provide a
major economic incentive for companies in the $25 billion dollar PCB industry to
purchase and use Triple I's products.
Triple I presently offers "in-line" systems capable of inspecting
almost any product at speeds ranging from three square feet per minute to over
sixty square feet per minute, with current prices that range from $185,000 for
Triple I's AOI-190A model to approximately $700,000 for some of the models from
Triple I's new AOI-2500 series.
20
PCB AUTOMATED OPTICAL INSPECTION SYSTEMS
Each of Triple I's automated optical inspection ("AOI") systems
consists of an optomechanical unit and an electronic unit. The optomechanical
unit includes a moving platform that carries the PCB or artwork being inspected,
and a scanning unit which acquires an image of the board, digitizes it, and
transmits it to the electronic unit. The electronic unit processes and enhances
the image to allow efficient analysis and interpretation of the acquired images.
The proprietary structure of the electronic logic unit enables real time
parallel processing, a requirement for performing each defect detection at very
high speeds.
Triple I's AOI Systems incorporate both the "design rule check" and
"reference comparison" methods of inspection. The design rule check method
involves inspecting the circuitry of PCBs pursuant to a pre-programmed algorithm
and detecting defects by applying prescribed rules to find flaws in the pattern
of the circuitry. The reference comparison method involves an intelligent
comparison of the subject PCB to a perfect "golden" board or to circuit pattern
representations stored in a computer aided design ("CAD") or computer aided
manufacture ("CAM") database.
Triple I's systems can easily be integrated into the production
processes of most PCB manufacturing facilities and can be employed at several
stages during PCB manufacturing to inspect the artwork design master, the
production phototools, the photoresist before the etching, the etched inner
layers before lamination and the outer layers before attachment of electronic
components. The systems are designed for operational simplicity and require no
special skills or experience to operate. The design of each system permits easy
maintenance and service. As a result, Triple I believes that the use of its AOI
systems significantly reduces the overall production costs of PCBs.
AOI-190 SERIES
The AOI-190 Series is Triple I's basic optical inspection system. This
system provides manufacturers of PCBs with a means to inspect PCB products for
quality and analyze the information to achieve higher yields at an economical
price. The AOI-190 inspection system provides a number of special features that
clearly distinguish it from its competitors, including but not limited to the
following:
o The in-line conveyorized transport provides automated operation
when linked to commercially available handling equipment.
Communication is maintained between the host computer and the
multi-functional evaluation/repair station (described below).
Part identification is achieved through a bar code labeling
device so that critical information moves throughout the system
with reduced possibility of error, and tracking of parts and
information throughout the manufacturing facility can be
automated;
21
o The linking of the AOI-190 inspector to the evaluation/repair
station enables the customer to set-up or repair products while
inspection is being conducted on the inspector with no
interruptions or waiting periods. This feature significantly
enhances throughput. In addition, management believes the AOI-190
is the only system on the market in which throughput can be
increased and features added by software and hardware upgrades
that are not expensive, and do not require major design changes,
such as those offered by the competition. This is due to the open
architecture and modularity inherent in Triple I's AOI-190;
o AOI-190 can be interfaced to most-available CAM systems to permit
direct "downloading" of set-up data; and
Triple I presently manufactures and markets three models of the AOI-190
that currently range in price from $150,000 to $230,000.
AOI-2500 SERIES
Triple I commenced production of the AOI-2500 in April 1995. This model
has been developed to be an entirely modular product with high performance and
maximum flexibility. Each model of the AOI-2500 series can be field upgraded to
any of the higher performance, and/or larger format configurations, by adding
plug-in boards and software. The series includes three basic models: the 1900,
the 2500, and the 3200; depending on width of the inspection area. Each model
combines in a standard and a high speed version. These models range currently in
price from $320,000 to $700,000. Through June 30, 1996, Triple I had sold one
AOI-2500 and two beta test models.
Due to the modularity of the design and the fact that the mechanical
portions of the machines in this series are identical, the customer can choose
the lowest priced model that can meet its requirements without risking
obsolescence as either the width of their product changes, or the factory
throughput increases. This is a further extension of Triple I's philosophy of
obsolescence-proof machines through the ability to continuously upgrade.
AOI ER 35-36 EVALUATION AND REPAIR (E/R STATION)
The AOI E/R Station enables the user to view, classify, and repair
defects as well as create inspection set-up files without interrupting ongoing
inspection at the inspection station. Ergonomically designed, the user may
position the E/R station's display monitors for optimum viewing comfort and
easily access the defective PCB for repair. Convenient bar code labeling
facilitates defect evaluation and eliminates inspection data confusion.
Automated camera positioning precisely displays a magnified, crisp image of
artwork and PCBs and of each reported defect on a high-resolution color monitor,
significantly reducing operator fatigue.
A computer generated reticle offers very precise measurement of
defects. Defects requiring repair or additional evaluation may be marked or
optionally photographed with a Polaroid freeze-
22
frame camera for further review. Video recording of complete inspection data is
also available. The inspection station defect report for the PCB under
evaluation is simultaneously displayed on a separate screen. This report
includes defect number, location, and type of defect. To maximize throughput,
defects are automatically sorted by user defined levels of severity.
Additionally, defects may be further classified for yield analysis and process
control using the eight included SPC software packages. Triple I's
Evaluation/Repair Station and series of inspection stations combine to provide a
complete automated optical inspection system for real-time process control and
yield improvement.
FUTURE PRINTED CIRCUIT BOARD INSPECTION PRODUCTS
Management believes that the major technological innovations that
Triple I has access to, through its previous work and its strategic partnership
with Polaroid, will permit Triple I to make major improvements in the PCB
product line as well as create opportunities for expansion into other market
areas, such as optical velocity tracking, optical Z dimension gauging, and
advanced imaging devices. Management believes that the addition of depth and
color will permit broadening the applicability of this product to types of PCBs
that presently cannot be inspected and significantly increase the performance of
the equipment in regard to defect detection, and improve the ability to
discriminate between real defects and oxidation or discoloration flaws which are
often flagged as defects, but judged not to be of consequence. As a result,
Triple I believes it will be able to increase the features of its present models
and simplify its software.
ARTWORK/PHOTOTOOL IMAGING SYSTEMS
In PCB manufacturing, the design of the conductor patterns are
developed with the help of a CAD software package, and later optimized for
manufacturing at the PCB manufacturing plant by using a CAM system. The CAM
system then drives a laser plotter that first generates the pattern on silver
halide film. This silver halide film often becomes the photo tool (mask) to
expose the photoresist that defines the conductor pattern on the PCB surface.
The image manipulation that is done in the CAM system ensures that the
final design meets all of the design rule criteria and makes optimum use of the
base material. The digital image generated in the CAM system contains all of the
information which is required both for generating the artwork and also for
establishing the criteria for inspection of the artwork and completed PCB
product. Because of this, it is customary now to treat the optical inspector,
the CAM and the laser plotter as an integrated "front end" system. The
interfaces then are designed so as to ensure that the correct information is
transmitted among all elements of this "front end," saving labor and increasing
accuracy.
Since the components of the "front end" represent the most
sophisticated systems in PCB manufacturing, the customers prefer to purchase
them from one supplier to ensure compatibility of interfaces and efficient
overall system integration. Triple I's major competitor, Orbotech, Inc., has
taken advantage of this trend by supplying CAM and artwork recording systems
(laser photoplotters) as well as inspection systems.
23
In order to address this strong customer preference, and to increase
the volume of sales per customer, Triple I plans to establish new OEM Agreements
and strategic alliances with suppliers of CAM products. In addition, pursuant to
the Polaroid Agreement, Triple I has access to critical advanced technology for
its base business, also grants as well as an exclusive license to sell
Polaroid's proprietary film in the PCB artwork and phototool markets.
POLAROID AGREEMENT
The strategic partnership between Triple I and Polaroid takes advantage
of complementary technological, marketing and product strengths, including, but
not limited to, the following:
o The Polaroid film technology that has been market tested and is
presently in production.
o The recording technology and devices that have been developed
through research and cooperation by Polaroid and other partners
(and which will be enhanced through the state-of-the-art advanced
optical concepts being developed by Triple I under ARPA
sponsorship).
o The features of Triple I's inspection systems that provide the
only means for reliable, fast inspection for artwork and
phototools. This ensures the quality of the phototools prior to
manufacturing, an absolute must when introducing a new film
product into a manufacturing environment.
POLAROID'S HELIOS(TM) FILM
Polaroid has developed the Helios(TM) film, a dry process film with
many superior performance characteristics compared to the imaging films
currently being used in the manufacture of PCBs. The Polaroid product is
expected to be less prone to deterioration with use than silver halide and
diazo. This permits repeated use of the film as both master and phototool,
eliminating the current practice which often requires both tools. This should
also eliminate most defects introduced by the relatively poor quality of diazo.
The film also shows promise for imaging PCB designs with very small features,
performance difficult to achieve with present technology.
As the Helios(TM) film is a dry process product, potential customers
will benefit from elimination of chemicals and their effluent, a major concern
in an industry that is closely scrutinized by environmental agencies. The dry
process film also eliminates the need for "dark room" facilities for creating
the phototools. The film will be marketed under private label.
The performance and economic advantages of using Polaroid's Helios(TM)
film include: (I) contrast is binary - black or white with no grey scale, (ii)
very high optical density, (iii) extremely sharp edges, (iv) very durable, (v)
threshold improves resolution, (vi) no wet processing, (vii) no pollutants, and
(viii) no equipment changes necessary for use as phototool.
24
SALES AND MARKETING STRATEGY
Triple I 's strategy is to emphasize the broad range of competitive
performance and cost advantages of its products and the ability to upgrade
systems through Triple I's modular designs of its systems. The AOI-190 series is
expected to be marketed to the customers that to-date have not purchased any
vendor's system, and to those accounts replacing outdated medium performance
equipment. The AOI-2500 series product is expected to be promoted to larger PCB
manufacturers that require high productivity. Key elements of Triple I's
marketing strategy include:
o emphasizing product performance advantages such as in-line
conveyorized material handling, ease-of-use, high throughput,
high reliability, flexible and affordable service policies and
upgrade paths;
o expanding Triple I's direct sales force in the United States,
particularly on the west coast;
o increasing international sales through proper support of the
existing strong representative and distributor network, including
joint seminars, sales calls, and product showings; and
o establishing Triple I's image as the supplier of choice via press
releases and institutional advertising.
Triple I currently employs one full-time, in-house, employee dedicated
to sales and marketing and also employs one salesperson in England. In addition,
Triple I relies upon the efforts of eight independent agents and distributors
both domestically and internationally. Triple I promotes its products through
institutional advertising, distribution of product literature and promotional
videotapes throughout the industries its products service, and exhibits and
product presentations at industry and trade shows, such as CEMEX and
Productronica.
Triple I intends to introduce new products that are developed from its
strategic alliance with Polaroid both domestically and in Japan through beta
site testing (installed at a customer's site) and field trials. Subsequently, it
intends to launch an advertising campaign designed to inform potential customers
of the economic and performance benefits offered by these products, emphasizing
both Polaroid's corporate image for creative technology and Triple I's
reputation for a high level of service and quality assurance. These products are
expected to then be marketed throughout the United States, Europe and Asia
through Triple I's sales and marketing staff and its international network of
agents and distributors.
COMPETITION
The optical inspection systems industry is intensely competitive.
Triple I competes with many companies in the United States and Europe, several
of which have substantially greater
25
financial, technical, sales, and managerial resources than Triple I and may be
able to adapt more quickly to new or emerging technologies and changes in
customer requirements or to devote greater resources to the promotion and sale
of their products than can Triple I. Triple I believes that in the future the
principal competitive factors will be product functionality and performance
(e.g., speed, ease of use, accuracy and reliability), the development of
improved products through research and development, customer support services,
customer relations and price. No assurance can be given that Triple I will
compete successfully with existing or potential future competitors.
Triple I believes that the quality of its products, its ability to
quickly and adequately respond to the needs of its customers, its early
recognition of trends in the development of optical inspection related products,
and its increasing product and brand name recognition are important competitive
factors in achieving market penetration for its products. In addition, Triple I
believes that it will be able to distinguish itself from its competition as a
result of Triple I's broad selection of inspection products, proprietary
technology, and access to other advanced technology and products by virtue of
Triple I's relationship with Polaroid as well as funded development through ARPA
and similar programs. Management believes that the significant advantages that
Triple I's products enjoy over those of its competition are as follows:
Reliability and limited down-time. Triple I believes that its products
enjoy significantly higher reliability and less down-time than those of its
competition. This can be attributed to the more advanced in-line design of
Triple I's products, which employ few moving parts, and are therefore less prone
to equipment failures, and the availability of direct diagnostic links, via
modem, whereby Triple I's in-house service technicians can diagnose and
troubleshoot Triple I's products in the field directly from Triple I's
facilities.
Versatile products which can be easily upgraded. Triple I's products
are designed to be significantly less prone to obsolescence than those of its
competition. Unlike those of Triple I's competition, Triple I's products are
designed to be more highly dependant upon software with a very modular hardware
design that may be easily upgraded to add more features.
Increased accuracy and higher throughput. Triple I believes that its
products, as a result of its unique in-line system with multiple stationary
cameras, achieve a higher throughput at most levels of resolution, resulting in
enhanced productivity and overall performance.
Complete integration of design, inspection and repair systems. Triple
I's products together allow for the integrated implementation of a complete
automated inspection system for real-time process control and yield improvement
through inspection, evaluation and repair. When combined with the laser plotters
and advanced Helios(TM) film currently being tested by Triple I, Triple I's
product line will have the added advantage of offering a complete integrated
solution to the "front needs" of PCB manufacturers.
26
FACILITIES AND MANUFACTURING OPERATIONS
Triple I maintains its corporate headquarters, executive offices and
principal research, developing, engineering, and manufacturing facilities in
approximately 13,000 square feet in Lowell, Massachusetts pursuant to a renewal
lease as of December 1, 1995, which includes the original facility, plus
additional manufacturing space. The annual rental for these premises is
approximately $92,000. Triple I believes that these facilities are adequate to
meet its current needs. If additional space is required, Triple I believes that
adequate facilities are available at competitive prices.
Triple I's current manufacturing operations occupies 6,000 square feet
of space in Lowell, and structured as a Just-In-Time/Demand Pull operation with
work cells for AOI-190 series inspectors, AOI-2500 series inspectors, and E/R
stations. The current space is sufficient for shipment of up to three systems
per month. Triple I intends to increase its manufacturing space gradually, as
additional products are developed.
Triple I's manufacturing work force consists of a small group of highly
talented individuals, each trained to cover several areas of production.
Emphasis is on performing final assembly, test and integration while maintaining
critical skills in each aspect of production: machining, PCB assembly and
rework, cable fabrication, electric-mechanical subassembly, optical alignment,
and electrical test.
RISK FACTORS
SHAREHOLDERS SHOULD CAREFULLY CONSIDER THE FOLLOWING MATTERS IN
ADDITION TO THE OTHER INFORMATION CONTAINED OR INCORPORATED BY REFERENCE IN THIS
INFORMATION STATEMENT. INFORMATION CONTAINED OR INCORPORATED BY REFERENCE IN
THIS INFORMATION STATEMENT CONTAINS "FORWARD-LOOKING STATEMENTS" WITHIN THE
MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995, WHICH
STATEMENTS CAN BE IDENTIFIED BY THE USE OF FORWARD-LOOKING TERMINOLOGY SUCH AS
"MAY," "WILL," "WOULD," "CAN," "COULD," "INTEND," "PLAN," "EXPECT,"
"ANTICIPATE," "ESTIMATE" OR "CONTINUE" OR THE NEGATIVE THEREOF OR OTHER
VARIATIONS THEREON OR COMPARABLE TERMINOLOGY. THE FOLLOWING MATTERS CONSTITUTE
CAUTIONARY STATEMENTS IDENTIFYING IMPORTANT FACTORS WITH RESPECT TO SUCH
FORWARD-LOOKING STATEMENTS, INCLUDING CERTAIN RISKS AND UNCERTAINTIES, THAT
COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE IN SUCH FORWARD-
LOOKING STATEMENTS.
LOSSES SINCE INCEPTION; WORKING CAPITAL DEFICIENCY; INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANT'S UNQUALIFIED REPORT WITH AN EMPHASIS ON A
MATTER
Triple I has incurred operating losses since its inception that have
continued through September 30, 1995 and June 30, 1996. As a result, Triple I
had an accumulated deficit at September 30, 1995 and June 30, 1996 of
approximately $4,900,000 and $6,247,000, respectively, primarily as a result of
limited production of systems, expenditures for research and product
development, marketing, and administrative overhead. In addition, at September
30, 1995 and June
27
30, 1996, Triple I had a working capital deficit of approximately $1,700,000 and
$1,028,000, respectively. No assurance can be given that Triple I will be able
to achieve profitability in this or future years. The report of Triple I's
independent certified public accountants for Triple I's fiscal year ended
September 30, 1995 contains an explanatory paragraph as to Triple I's ability to
continue as a going concern. Among the factors cited by the auditors as raising
substantial doubt as to Triple I's ability to continue as a going concern is
that Triple I has suffered recurring losses from operations and has an
accumulated deficit.
RAPID TECHNOLOGICAL CHANGE/DEPENDENCE ON PRODUCT DEVELOPMENT
The AOI field is undergoing rapid and significant technological change.
Management expects AOI technology to continue to develop rapidly. Industrial
Imaging's success will depend upon its ability to maintain a competitive
position for its products in the marketplace. To do so, Industrial Imaging must
develop and enhance its technology and products to keep pace with rapid
technological changes in AOI equipment and applications. Many companies have
developed and are capable of developing competing products based on technologies
similar to Triple I's or on other technologies. Many of these competitors are
well-established, and several have substantially greater financial and other
resources than Triple I, and have established success in the development, sale
and service of competitive products. No assurance can be given that these or
other firms will not develop new or enhanced products that are more effective
than any that have been developed or may be developed by Industrial Imaging. No
assurance can be given that planned future products will realize market
acceptance or will meet technical demands of current and potential customers.
Industrial Imaging's success in developing and selling new and enhanced
products depends upon a variety of factors, including accurate prediction of
future customer requirements, introduction of new products on schedule,
cost-effective manufacturing and product performance in the field. Industrial
Imaging's new product decisions and development commitments must anticipate the
equipment needed to satisfy the requirements for inspection processes one or
more years in advance of sales. Any failure to predict accurately customer
requirements and to develop new generations of products to meet those
requirements would have a sustained material adverse effect on Triple I's
business, financial condition and results of operations. New product transitions
could adversely affect sales of existing systems. Product introductions could
contribute to quarterly fluctuations in operating results as orders for new
products commence and orders for existing products or enhancements of existing
products fluctuate.
IMPORTANCE OF RECENTLY INTRODUCED PRODUCTS
Industrial Imaging's future success depends upon the market's
acceptance of new generations of its systems. Triple I recently commenced
production of its AO1-2500 series which has the capability to detect defaults in
PCB production at greater speeds than conventional optical inspection systems.
The inability of these systems to achieve widespread customer acceptance or any
technical or manufacturing difficulties with these systems (or subsequent
generations of Industrial Imaging's systems) would have a material adverse
effect on Industrial Imaging's business, financial condition
28
and results of operations. In addition, there can be no assurance that the
market for the leading-edge applications targeted by the AOI-2500 systems will
develop as quickly or to the degree that the Triple I currently anticipates, or
that these systems will achieve widespread customer acceptance.
COMPETITION
The optical inspection systems industry is intensely competitive and
Triple I's systems for PCB inspection face competition from a number of United
States and foreign companies. Industrial Imaging will compete with many
competitors, several of which have substantially greater financial, technical,
sales and managerial resources than Industrial Imaging and may be able to adapt
more quickly to new or emerging technologies and changes in customer
requirements or to devote greater resources to the promotion and sale of their
products than will Industrial Imaging. Industrial Imaging believes that in the
future the principal competitive factors will be product functionality and
performance (e.g., speed, ease of use, accuracy and reliability), the
development of improved products through research and development, customer
support services, customer relations and price. No assurance can be given that
Industrial Imaging will compete successfully with existing or potential future
competitors.
NEED FOR ADDITIONAL FUNDS
Industrial Imaging will require additional funds from borrowings or
equity financings. No assurance can be given that such funds, if needed, will be
available, if at all, on terms which are satisfactory or advantageous to
Industrial Imaging or its stockholders.
RISKS RELATING TO GROWTH AND EXPANSION
Rapid growth of Industrial Imaging's business, of which no assurance
can be given, may significantly strain Industrial Imaging's management,
operational, and technical resources. If Industrial Imaging is successful in
obtaining rapid market penetration of its products, Industrial Imaging will be
required to deliver increasing volumes of highly complex products and components
to its customers on a timely basis at a reasonable cost to Industrial Imaging.
No assurance can be given that Industrial Imaging's efforts to expand its
manufacturing and quality assurance activities will be successful or that
Industrial Imaging will be able to satisfy increased commercial scale production
on a timely and cost-effective basis. In addition to the levels of support
currently provided, including the ability to modify its technology and products
to meet end-user requirements, Industrial Imaging will also be required to
continue to improve its operational, management and financial systems and
controls. Failure to effectively manage such growth could have a material
adverse effect on the business of Industrial Imaging.
DEPENDENCE UPON FOREIGN SALES
During Fiscal Years 1993, 1994 and 1995, sales to foreign customers
accounted for the majority of Triple I's total revenue. Management expects that
revenues from foreign customers will
29
continue to account for a significant portion of future revenues. Triple I has
been and Industrial Imaging will continue to be subject to risks associated with
foreign customers in general, including political instability, embargoes,
shipping delays, custom duties, import and export quotas and other trade
restrictions, all of which could have a material adverse effect on Industrial
Imaging's operations, or could have a significant adverse impact on Industrial
Imaging's ability to deliver products on a competitive and timely basis.
Although Triple I generally sells products to large, well- funded corporations
or requests letters of credit from less creditworthy customers, Industrial
Imaging could experience difficulties in obtaining or enforcing judgments with
respect to receivables outside the U.S. Triple I's foreign sales have been, and
Industrial Imaging's foreign sales are expected to be made in U.S. dollars. A
strengthening in the dollar relative to the currencies of those countries where
Triple I does business would increase the prices of its products as stated in
those currencies, and may adversely affect Industrial Imaging's sales in those
countries. To the extent Industrial Imaging lowers its prices to reflect a
change in exchange rates, the profitability of Industrial Imaging's business in
those markets may be adversely affected. In the past, there have been
significant fluctuations in the exchange rates between the dollar and the
currencies in those countries in which Triple I does business.
RELIANCE ON POLAROID; POSSIBLE LOSS OF EXCLUSIVE RIGHTS TO HELIOS(TM)
FILM
Industrial Imaging anticipates that a significant amount of its future
revenues will be derived from products developed pursuant to the Polaroid
Agreement and in collaboration with Polaroid. Under the Polaroid Agreement,
Industrial Imaging will be required to meet certain sales and performance
milestones to maintain Triple I's exclusive right to market and sell Polaroid's
Helios(TM) film to the PCB market. No assurance can be given that Industrial
Imaging will be successful in developing and marketing products pursuant to the
Polaroid Agreement, or that Industrial Imaging will meet the sales and
performance milestones necessary to maintain the exclusive rights to market and
sell the Helios(TM) film granted thereunder. Although no such performance
milestones apply to Triple I's agreement with Polaroid granting it access to
Polaroid's other technology, failure to meet the performance milestones with
regard to the Helios(TM) Film could have a material adverse effect on Industrial
Imaging.
ATTRACTION AND RETENTION OF QUALIFIED PERSONNEL; DEPENDENCE ON KEY
EMPLOYEES
Industrial Imaging's ability to further develop and market its products
and to attain a competitive position will depend, in large part, on its ability
to attract, retain and motivate qualified personnel. No assurance can be given
that Industrial Imaging will be able to attract and retain such personnel. The
success of Industrial Imaging's business is dependent in particular upon the
services of Juan J. Amodei, Ph.D., its Chairman of the Board and Chief Executive
Officer. The loss of Dr. Amodei's services would have a material adverse effect
on Industrial Imaging.
30
LIMITED MARKET ACCEPTANCE FOR TRIPLE I'S PRODUCTS
Although Triple I has developed an installed base of customers in the
United States and in foreign markets, no assurance can be given that Industrial
Imaging's products in the future will be accepted in the marketplace. Industrial
Imaging's marketing efforts require substantial expenditures and no assurance
can be given that Industrial Imaging will be successful in selling any products
it develops or any products developed jointly by Industrial Imaging and
Polaroid.
PATENTS AND PROPRIETARY INFORMATION
Triple I's products require technical know-how to engineer and
manufacture and are based, in part, upon proprietary technology. Triple I holds
four United States patents and seven patents issued by Canada, France, Germany,
Israel, Japan, England and Taiwan. No assurance can be given that any patents
issued to Triple I will provide any competitive advantages or will not be
challenged by third parties. In addition, no assurance can be given that
Industrial Imaging will develop in the future proprietary products that are
patentable, or that the patents of others will not have an adverse effect on the
ability of Industrial Imaging to do business. No assurance can be given as to
the issuance of additional patents or, if so issued, as to their scope and
validity. Furthermore, although Triple I believes that its products and
processes do not infringe upon the intellectual property rights of others, no
assurance can be given that Triple I's products or processes will not be found
to infringe any patents or other intellectual property rights of third parties,
in which case, no assurance can be given that Industrial Imaging could obtain a
license from the intellectual property owner on commercially reasonable terms or
at all.
To the extent proprietary technology is involved and where patent
protection is not believed to be appropriate or obtainable, Industrial Imaging
will rely on trade secrets that it seeks to protect through the use of
confidentiality agreements with certain employees, consultants and other
parties. No assurance can be given that others will not independently develop
substantially equivalent or superior proprietary technology or otherwise gain
access to Industrial Imaging's trade secrets, that any obligations of
confidentiality will be honored or that Industrial Imaging will be able to
effectively protect its rights to proprietary information. As Triple I intends
to enforce its patents, trademarks and copyrights and protect its trade secrets,
it may be involved from time to time in litigation to determine the
enforceability, scope and validity of these rights. Any such litigation could
result in substantial cost to Industrial Imaging and diversion of effort by
Industrial Imaging's management and technical personnel.
POSSIBLE VOLATILITY OF COMMON STOCK PRICES
The markets for equity securities in general and for those of
manufacturers and sellers of high technology products, in particular, have been
volatile and the price of the Common Stock in the future could be subject to
wide fluctuations in response to quarterly variations in operating results, news
and product announcements, trading volume, general market trends and other
factors.
31
POSSIBLE DEPRESSIVE EFFECT IN PRICE OF SECURITIES OF FUTURE SALES OF
COMMON STOCK AND EXERCISE OF REGISTRATION RIGHTS.
The sale, or availability for sale, of substantial amounts of Common
Stock in the public market could adversely affect the prevailing market prices
of Industrial Imaging's securities and could impair Industrial Imaging's ability
to raise additional capital through the sale of its equity securities. In
addition, the existence of the outstanding options and warrants, and other
options that may be issued under the 1996 Plan, and exercise of these securities
may further dilute the interest of the persons purchasing Common Stock. Further,
the holders of such warrants and options may exercise them at a time when Triple
I would otherwise be able to obtain additional equity capital on terms more
favorable to Industrial Imaging.
POSSIBLE ISSUANCE OF ADDITIONAL SHARES
Industrial Imaging's Board of Directors has authority, without action
or vote of the stockholders, to issue all or part of the authorized but unissued
shares. Any such issuance will dilute the percentage ownership interest of
stockholders and may further dilute the book value of the Common Stock. In
addition, the authorized and unissued shares of Preferred Stock may be issued in
one or more series, the terms of which may be determined at the time of issuance
by the Board of Directors, without further action by stockholders, and may
include voting rights (including the right to vote as a series on particular
matters), preferences as to dividends and liquidation, conversion and redemption
rights and sinking fund provisions. The issuance of any additional shares of
Preferred Stock could adversely effect the rights of the holders of Common
Stock, and therefore reduce the value of the Common Stock. In particular,
specific rights granted to future holders of Preferred Stock could be used to
restrict Industrial Imaging's ability to merge with or sell its assets to a
third party, thereby preserving control of Industrial Imaging by present owners.
NO ASSURANCE OF LISTING
Following the completion of the Transaction, Industrial Imaging will
not meet the initial listing application requirements maintained by NASDAQ for
its small capitalization market ("Initial Listing Requirements"). Pursuant to
the Initial Listing Requirements, Triple I must have a total stockholders'
equity of at least $2,000,000 and a minimum bid price for its Common Stock of
$3.00. Management believes that, by completing the Transaction, Industrial
Imaging will be in a better position to seek to raise sufficient capital to meet
the Initial Listing Requirements. However, no assurances can be given that
Industrial Imaging will be able to meet the Initial Listing Requirements. If
Industrial Imaging's Common Stock remains ineligible for trading on NASDAQ for
this or any other reason, such Common Stock may be subject to a rule under the
Securities Exchange Act of 1934 that imposes additional stringent sales practice
requirements on broker-dealers who sell the Common Stock, which could result in
significantly less liquidity for and/or decreased trading price of the Common
Stock.
32
NO DIVIDENDS
Triple I and Orbis have paid no dividends to its stockholders since
their respective stockholders since inception. Industrial Imaging intends to
reinvest earnings, if any, in the development and expansion of its business, and
therefore does not plan to pay dividends in the foreseeable future. In addition,
if Industrial Imaging obtains bank financing in the future, of which no
assurance can be given, the terms of such financing may restrict Industrial
Imaging from declaring and issuing dividends to its stockholders.
PROPOSAL NO. 3
ELECTION OF DIRECTORS
The following table sets forth the date each nominee director was
elected a director and the age, positions and offices currently held by each
director. Each of Triple I's directors is elected for a period of one year and
serves until his successor is duly elected by the stockholders.
<TABLE>
<CAPTION>
NAME AGE POSITION(S)
<S> <C> <C>
Juan J. Amodei, Ph.D........................ 61 Chief Executive Officer and Chairman
of the Board of Directors
Joseph Bordogna, Ph.D....................... 62 Director
Charles G. Broming.......................... 47 Director
Robert Creeden.............................. 36 Director
A. Uri Levy................................. 36 Director
Joseph A. Teves............................. 48 Director
Harry Hsuan Yeh, Ph.D....................... 70 Director
</TABLE>
BACKGROUND
The following is a brief summary of the background of each nominee
director and future executive officer of Industrial Imaging:
JUAN J. AMODEI, PH.D., 61, has served as Chairman of the Board and
Chief Executive Officer of Triple I since October 1992. From September 1986 to
October 1992, Dr. Amodei served as Chairman of the Board of AOI Systems, Inc.,
Triple I's predecessor and a spin-off of Itek Optical Systems, where Dr. Amodei
served as President from March 1976 to August 1986. Dr. Amodei holds a Bachelor
of Science degree from Case Institute of Technology and both a Masters in
Electrical Engineering and a Ph.D. in Electrical Engineering from the University
of Pennsylvania. Dr. Amodei is a Trustee of the University of Pennsylvania and
Chairman of the Board of Overseers of the School of Engineering and Applied
Science.
33
BRYAN GLEASON, 46, has served as Chief Financial Officer ("CFO") for
Triple I since May 1996. Mr. Gleason was the CFO and Treasurer of Network Six, a
public company specializing in systems integration from 1993 - 1996. From 1982
to 1993 Mr. Gleason was Vice President and Corporate Controller of Winthrop
Financial Associates, a publicly held investment and management firm with a
portfolio in excess of $6 billion. Mr. Gleason received a Bachelor of Science
Degree with a concentration in Accounting at Northeastern University. Mr.
Gleason is a Certified Public Accountant.
MICHAEL CHASE, 51, has served as Triple I's Vice President of
Manufacturing and Field Service since October 1992. From September 1990 to
October 1992, Mr. Chase served as Vice President of Manufacturing for AOI
Systems, Inc. From August 1987 to July 1990, Mr. Chase served as the Vice
President of Operations for Datasec Corporation, a manufacturer of computer
equipment. Mr. Chase holds both a Bachelor of Engineering degree and a Masters
of Engineering degree from Rensselaer Polytechnic Institute.
DOUGLAS M. DOMRES, 52, has served as Triple I's Vice President of
Marketing since August 1993. From September 1990 to August 1993, Mr. Domres
served as a private consultant to several high-technology firms in the areas of
marketing and strategic planning and as a consultant to the healthcare industry
in the areas of image and document management systems. Mr. Domres holds a
Bachelor of Science degree in Chemistry from the State University of New York at
Buffalo.
RICHARD J. ROYSTON, 64, has served as Triple I's Vice President of
Research since October 1992. From September 1986 to October 1992, Mr. Royston
served as Vice President of AOI Systems, Inc. in several capacities. Mr. Royston
holds a Bachelor of Arts degree in Mathematics from Oxford University and a
Bachelor of Science degree in Mathematics from the University of London.
JOSEPH BORDOGNA, PH.D., 62, has served as a member of Triple I's Board
of Directors since April 1993. Dr. Bordogna is a Dean Emeritus of the University
of Pennsylvania, the head of the Engineering Directorate of the National Science
Foundation and the chair of the President's Initiative in Advanced Manufacturing
Technology. Dr. Bordogna also serves as a Director of University City Science
Center, a regional science and technology transfer park located in Philadelphia,
Pennsylvania. Dr. Bordogna has been awarded numerous honors, including the
Centennial Medal of the Institute of Electrical and Electronics Engineers.
CHARLES G. BROMING, 47, has served as a director of Triple I since
February 1996. Mr. Broming is presently an Investment Officer for the
Massachusetts Community Development Finance Corporation ("CDFC"), a state owned
corporation that provides financing for businesses in financially distressed
communities within Massachusetts. Prior to joining CDFC in 1994, Mr. Broming was
a business consultant for Recoll Management Corporation, a privately held
company that specializes in the recovery and collection of distressed loans.
From 1990 to 1991, Mr. Broming ran an independent management consulting business
called CGB Associates. Mr. Broming received a Bachelor of Arts degree from
University of California, Riverside and a Masters in Business Administration
degree from University of Michigan, Ann Arbor.
34
ROBERT CREEDEN, 36, has been a director of Triple I since February
1996. Since 1990, Mr. Creeden has been a Vice President at the Massachusetts
Technology Development Corporation ("MTDC"), a state owned corporation that
provides financing for technology-based emerging Massachusetts businesses. Prior
to joining MTDC, Mr. Creeden spent six years as a management consultant for Wolf
and Company of Massachusetts and Control Data Business Advisors, two privately
held business consulting companies. Mr. Creeden received a Bachelor of Arts
degree from the College of the Holy Cross and an Masters in Business
Administration from Suffolk University.
A. URI LEVY, 36, has been a director of Triple I since August 1996. Mr.
Levy is currently the President of Centennial Capital, Inc., a wholly owned
subsidiary that manages the investments and technology ventures of its parent
company, Centennial Technologies, Inc. From 1994 to August 1996, Mr. Levy was
President, Chief Operating Officer and Director of Centennial Technologies,
Inc., a publicly held company that specializes in the manufacture of PC cards
for computers. From 1989 to 1994, Mr. Levy served as President and Chief
Executive Officer of ACOM Computer, Inc., which specializes in hardware and
software products for laser printer development. Mr. Levy received a Bachelor of
Science degree from University of California, Irvine and a Master of Science
degree in Engineering from Northrop University.
JOSEPH A. TEVES, 48, has served as a member of Triple I's Board of
Directors since May 1994. Mr. Teves is the President of Distrigas Corporation, a
privately-held company located in Everett, Massachusetts engaged in the import,
export and distribution of liquid natural gas. Mr. Teves also serves as a
Director of the New England Gas Association and has served as a management
consultant to companies within the gas industry. Mr. Teves holds a degree in
Business Administration from the Massachusetts State College at Salem.
HARRY HSUAN YEH, PH.D., 70, has served as a member of Triple I's Board
of Directors since 1992. Dr. Yeh is Chairman of Sinonar Corporation, a Taiwanese
company founded by Dr. Yeh in 1982 engaged in the manufacture of amorphous
silicon devices and solar cells. Dr. Yeh is a graduate of Chai-Tung University
in China and holds a Ph.D. in Mechanical Engineering from the Massachusetts
Institute of Technology.
Under the terms of agreements by and among Triple I and MTDC and CDFC,
MTDC and CDFC have the right to nominate for election two additional members of
Triple I's Board of Directors. To date, MTDC and CDFC have nominated Messrs.
Broming and Creeden to the Board of Directors. In addition, Triple I has agreed
to support for election a designee of the Placement Agent (who is acceptable to
Triple I in its reasonable discretion) on the Board of Directors of Triple I.
The Placement Agent has not yet designated a candidate for election to the Board
of Directors. The Placement Agent's designee may be an officer, director,
partner, stockholder or affiliate of, or consultant to the Placement Agent or
Orbis.
35
CERTAIN TRANSACTIONS OF TRIPLE I AND ORBIS
From time to time during 1993, 1994 and 1995 Pasquale Ruggieri,
President, Arthur Jenkins, Secretary and Thomas L. DePetrillo, 5% stockholders
of Orbis, made loans to Orbis to meet accounting fees and other miscellaneous
expenses. Mr. Ruggieri's loans amounted to $32,495, Mr. Jenkins made loans of
$15,000 and Mr. DePetrillo made loans of $51,461. In addition, in November,
1995, the three above named individuals guaranteed payment of a loan to Shawmut
National Bank in the amount of $16,500. As agreed between the individuals and
the Board of Directors, these persons converted the amount due them (total of
$79,139) into pre-split common stock of Orbis (total 1,781,218 shares). Such
shares have been issued at a rate of $.055 per share, as follows: 584,910 shares
to Pasquale Ruggieri, 270,000 shares to Arthur Jenkins and 926,308 shares to
Thomas DePetrillo.
An aggregate of 1,357,886 shares of Orbis is owned by Messrs. Ruggieri
and Jenkins, who are presently associated with a securities firm that assisted
in the 1996 Private Placement of Triple I Corporation. These persons acquired
some of their holdings more than 5 years ago while associated with another
securities broker-dealer no longer in business. Messrs. Ruggieri and Jenkins,
along with others, have executed proxies for 5,436,034 shares totaling 57.5% of
the total outstanding shares of Orbis approving the Transaction.
In February 1996, in connection with the Private Placement, certain
stockholders of Triple I converted outstanding debt to Common Stock as follows:
<TABLE>
<CAPTION>
Name Outstanding Loan Balance($) Common Shares Issued(#)
- ---- --------------------------- -----------------------
<S> <C> <C>
Massachusetts Community 506,021 506,021
Development Finance
Corporation
Juan J. Amodei, Ph.D. 45,985 45,985
Joseph Bordogna, Ph.D. 17,271 17,271
Peter O. Kliem 67,408 67,408
Massachusetts Technology
Development Corporation 379,728 379,728
Joseph A. Teves 66,935 66,935
Harry Hsuan Yeh 187,289 187,289
</TABLE>
In June 1996, Centennial Technologies, Inc. ("Centennial") through a
wholly-owned subsidiary, Centennial Investments, Inc. purchased 250,000 shares
of Common Stock for $250,000. In March, 1996 Triple I entered into a purchase
agreement with Centennial whereby Centennial has agreed to purchase components
and materials up to $3 million for Triple I and resell them to Triple I. Triple
I has agreed to pay Centennial upon full payment from Triple I's customers as
systems are sold. The agreement is effective until June 30, 1997 and purchases
must be specifically authorized by Centennial. As of June 30, 1996, Centennial
had authorized purchases for the first $750,000. In accordance with the
agreement, Triple I paid a one time fee of $200,000. Uri Levy, President of
Centennial Investments, Inc., has been nominated as a member of the Board of
Directors of Industrial Imaging.
36
COMPLIANCE WITH SECTION 16(A)
Section 16(a) ("Section 16(a)") of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), requires executive officers and directors, and
persons who beneficially own more than ten percent (10%) of Orbis's Common
Stock, to file initial reports of ownership on Form 3 and reports of changes in
ownership on Form 4 with the Securities and Exchange Commission (the "SEC") and
any national securities exchange on which Orbis's securities are registered.
Executive officers, directors and greater than ten percent (10%) beneficial
owners are required by SEC regulations to furnish the Orbis with copies of all
Section 16(a) forms they file.
Based solely on a review of the copies of such forms furnished to Orbis
and written representations from the executive officers and directors, Orbis
believes that all Section 16(a) filing requirements applicable to its executive
officers, directors and greater than ten percent (10%) beneficial owners during
Fiscal 1995 were complied with.
COMPENSATION FOR DIRECTORS AND OFFICERS OF TRIPLE I AND ORBIS
The directors of Orbis have not received any compensation for the
meetings attended over the past fiscal year.
EMPLOYMENT AGREEMENT OF TRIPLE I
Triple I entered into a Key Employee Agreement with Dr. Amodei, which
expires on December 31, 1998, provides for a base salary of $110,500, and is
automatically renewable for one year periods, unless otherwise terminated. No
other executive officer of Orbis or Triple I receives a salary in excess of
$100,000. Triple I has also entered into confidentiality and non-competition
agreements with management and all of its non-administrative employees. The
agreement with Dr. Amodei and all of the agreements with management provide that
Triple I owns all inventions, whether or not reduced to practice and whether or
not patentable, made or conceived by the employee during the period of the
employee's employment with Triple I and which relate in any way to Triple I's
business. In addition, each employee has agreed in writing to keep confidential
all information of Triple I and its products not publicly available and not to
compete with Triple I for certain time periods. Pursuant to the terms of these
agreements, Dr. Amodei and other key technical and managerial employees may not
compete with Triple I for 18 months after termination of their employment with
Triple I. During the fiscal year ended September 30, 1995, Triple I paid or
accrued an aggregate of $414,250 to its five executive officers.
BENEFICIAL OWNERS OF TRIPLE I AND ORBIS
Presently, no Triple I shareholders are beneficial owners of Orbis.
After the Transaction is complete, Triple I shareholders will hold approximately
90% of the outstanding shares of Orbis. The
37
following table sets forth certain information regarding beneficial ownership of
Triple I's Common Stock by (I) each of Triple I's directors, (ii) each person
who is known by Triple I to beneficially own more than 5% of its voting
securities, and (iii) all directors and executive officers as a group. The
information below indicates the percentage ownership of Triple I before the
Transaction and of Industrial Imaging after the Transaction. None of the persons
listed are presently holders of Orbis stock. Immediately prior to the
Transaction, Triple I will have 5,000,237 shares of Common Stock issued and
outstanding held by approximately 25 stockholders of record.
<TABLE>
<CAPTION>
Number of Approximate
Triple I Shares Percentage of Ownership(1)
Beneficially Before After
Name of Beneficial Owner(2) Owned Transaction Transaction
<S> <C> <C> <C>
Harry Hsuan Yeh, Ph.D.(3) 1,429,869 26.8% 24.4%
Juan J. Amodei, Ph.D(4) 868,165 15.4% 14.1%
MTDC(5) 832,268 15.8% 14.4%
Robert Creeden(6) 832,268 15.8% 14.4%
Centennial Technologies(7) 795,000 15.6% 14.1%
A. Uri Levy(7)(8) 795,000 15.6% 14.1%
Polaroid Corporation(9) 771,520 14.8% 13.5%
CDFC(10) 634,181 12.4% 11.2%
Charles Broming(11) 634,181 12.4% 11.2%
Shirley Hsin-Hiu Wang(10) 352,400 7.0% 6.4%
James Lee(11) 200,000 4.0% 3.6%
Joseph A. Teves(12) 205,815 4.0% 3.6%
Joseph Bordogna, Ph.D(13) 80,971 1.6% 1.5%
All officers and directors as a
group (9 persons) (1)(3)(4)(5)(6)
(7)(8)(9)(11)(12)(13)(14)(15)(16) 5,096,749 62.6% 58.8%
</TABLE>
_____________________
(1) In computing the number of shares and the percentage of outstanding
Common Stock beneficially owned by a person who owns warrants or stock
options that are currently exercisable or that will become exercisable
within 60 days from the date of this Information Statement, shares of
Common Stock issuable upon the exercise of warrants or stock options
owned by such person, but no other persons, are deemed to be
outstanding.
(2) Of the present directors and beneficial owners of Orbis, none will be
considered beneficial owners after the Transaction. A list of
pre-Transaction beneficial owners of Orbis and their holdings, is
included within Part III of Orbis's Form 10-K previously filed by Orbis
and attached hereto as Exhibit F.
(3) Includes 335,580 shares issuable upon the exercise of outstanding
warrants to purchase 335,580 shares of Triple I Common Stock at
exercise prices ranging from $1.25 to $1.39 per share. Excludes 248,145
shares issuable upon the exercise of outstanding warrants to
38
purchase 248,145 shares of Triple I Common Stock at an exercise price
of $1.00 per share.
(4) Includes (I) 583,980 shares issuable upon exercise of outstanding
warrants to purchase 583,980 shares of Common Stock with exercise
prices between $.50 to $1.39; (ii) options to purchase 19,200 shares of
Common Stock at an exercise price of $.20 per share; and (iii) Options
to purchase 40,000 shares of Common Stock at an exercise price of
$1.00. Excludes options to purchase 12,800 shares of Common Stock at an
exercise price of $1.00 per share, which have not yet vested, and
206,245 shares issuable upon the exercise of outstanding warrants to
purchase 206,245 shares of Triple I Common Stock at an exercise price
of $1.00 per share.
(5) Includes (I) 72,160 shares issuable upon exercise of outstanding
warrants to purchase 72,160 shares of Triple I Common Stock at an
exercise price of $1.39; and (ii) 180,380 shares issuable upon
conversion of 180,380 shares of Triple I Series B Convertible Preferred
Stock underlying warrants outstanding to purchase 180,380 shares of
Triple I Series B Convertible Preferred Stock at an exercise price of
$1.39 per share. Excludes 63,135 shares issuable upon the exercise of
outstanding warrants to purchase 63,135 shares of Triple I Common Stock
at an exercise price of $1.00 per share.
(6) Mr. Creeden is a Vice President of MTDC.
(7) Includes 95,000 shares issuable upon the exercise of outstanding
warrants to purchase 95,000 shares of Triple I Common Stock at an
exercise price of $1.00 per share.
(8) Mr. Levy is the President of Centennial Capital, Inc., a wholly owned
subsidiary of Centennial Technologies, Inc.
(9) Includes 194,320 shares issuable upon exercise of outstanding warrants
to purchase 194,320 shares of Triple Common Stock at an exercise price
between $1.00 and $1.39 per share. Excludes 180,380 shares issuable
upon the exercise of outstanding Shareholder Warrants to purchase
180,380 shares of Triple I Common Stock at an exercise price of $1.00
per share.
(10) Includes 128,160 shares issuable upon the exercise of outstanding
warrants to purchase 128,160 shares of Triple I Common Stock with
exercise prices between $.20 and $1.39 per share. Excludes 32,040
shares issuable upon the exercise of outstanding warrants to purchase
32,040 shares of Triple I Common Stock at an exercise price of $1.00
per share.
(11) Mr. Broming is an Investment Officer of CDFC.
(12) Includes 10,000 shares issuable upon the exercise of outstanding
warrants to purchase 10,000 shares of Triple I Common Stock at an
exercise price of $5.00 per share. Excludes 88,100 shares issuable upon
the exercise of outstanding warrants to purchase 88,100 shares of
Triple I Common stock exercisable at $1.00 per share.
39
(13) Excludes 50,000 shares issuable upon the exercise of outstanding
warrants to purchase 50,000 shares of Triple I Common Stock at an
exercise price of $1.00 per share.
(14) Includes 138,886 shares issuable upon exercise of outstanding warrants
to purchase 138,886 shares of Triple I Common Stock at exercise prices
between $1.25 and $1.39. Excludes (I) 28,470 shares issuable upon the
exercise of outstanding warrants to purchase 28,470 shares of Triple I
Common Stock at an exercise price of $1.00 per share and (ii) 18,040
shares issuable upon exercise of outstanding warrants granted to
Gregory Teves, Mr. Teves' son, to purchase 18,040 shares of Triple I
Common Stock at an exercise price of $1.39 per share.
(15) Includes 19,700 shares issuable upon the exercise of outstanding
warrants to purchase 19,700 shares of Triple I Common Stock at exercise
prices from $1.25 to $1.90 per share. Excludes 14,675 shares issuable
upon the exercise of outstanding warrants to purchase 14,675 shares of
Triple I Common Stock at an exercise price of $1.00 per share.
(16) Includes (I) 8,000 shares issuable upon exercise of the vested portion
of an option to purchase 16,400 shares of Triple I Common Stock at an
exercise price of $.20 per share and 1,600 shares issuable upon
exercise of the vested portion of an option to purchase 4,000 shares of
Triple I Common Stock at an exercise price of $1.00 per share held by
Michael Chase, Triple I's Vice President of Manufacturing and Field
Service; (ii) 1,800 shares issuable upon exercise of the vested portion
of an option to purchase 5,000 shares of Triple I Common Stock at an
exercise price of $.20 per share and 800 shares issuable upon exercise
of the vested portion of an option to purchase 2,000 shares of Triple I
Common Stock at an exercise price of $1.00 per share held by Douglas M.
Domres, Triple I's Vice President of Marketing, (iii) 12,080 shares
issuable upon exercise of the vested portion of an option to purchase
17,600 shares of Triple I Common Stock at an exercise price of $.20 per
share and 3,000 shares issuable upon exercise of the vested portion of
an option to purchase 1,200 shares of Triple I Common Stock at an
exercise price of $1.00 per share held by Richard J. Royston, Triple
I's Vice President of Research; and (iv) 25,000 shares issuable upon
exercise of the vested portion of an option to purchase 100,000 shares
of Triple I Common Stock at an exercise price of $1.00 per share held
by Bryan Gleason, Triple I's Chief Financial Officer.
40
SUMMARY COMPENSATION TABLE -TRIPLE I
The following table sets forth the compensation paid to Dr. Juan J.
Amodei, Triple I's Chief Executive Officer and Chairman of its Board of
Directors, during the fiscal years ended September 30, 1995, September 30, 1994
and September 30, 1993. No other executive officers of Triple I received total
compensation in excess of $100,000 in any of those three years.
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
Awards Payouts
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other All other
Name and Annual Restricted Securities LTIP Compen-
Principal Compen- Stock Underlying payouts sation
Position Year Salary Bonus($) sation($) Awards($) Options(#) ($) ($)
- -------- ---- ------ -------- --------- --------- ---------- ---------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Dr. Juan J. Amodei 1995 $110,500 - - - 40,000 - $8,400 1
Chief 1994 $110,500 - - - 0 - $8,400
Executive 1993 $110,500 - - - 32,000 - $8,400
Officer
</TABLE>
1 This amount is comprised entirely of an automobile allowance
OPTIONS GRANTED IN FISCAL YEAR 1995
(INDIVIDUAL GRANTS BY TRIPLE I FROM MARCH 31, 1995 TO MARCH 31, 1996)(1)
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
Percent of
Number of Total
Securities Options
Underlying Granted to
Options Employees Exercise Or Expiration
Granted In Fiscal Base Price Date
Name (#) Year ($/Sh) ($)
(a) (b) (c) (d) (e)
<S> <C> <C> <C> <C>
Juan Amodei . . . . . . . . . . . . . . . 45,600 54.1% $1.00 2/5/2005
</TABLE>
- --------------------
(1) Orbis did not grant any options for fiscal 1995 from Orbis's stock option
plan.
41
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1995
AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options Options
Value at FY-End Exercisable/
Shares Acquired Realized Exercisable/ Unexercisable
Name on Exercise ($) Unexercisable(1) ($)(2)(3)
(a) (b) (C) (d) (e)
- -------------------------- --------------------------------------------------------------------
<S> <C> <C> <C> <C>
Juan Amodei ......................... 0 0 45,600/26,400 $0/$0
</TABLE>
(1) See "Summary Compensation Table."
(2) In-the-Money options are those options for which the fair market value
of the underlying Common Stock is greater than the exercise price of
the option.
(3) The value of unexercised options is determined by multiplying the
number of options held by the difference in the fair market value of
the Common Stock underlying the options at the end of Fiscal 1995 (as
determined by the closing bid price of Orbis as reported by NASDAQ,
which ranged from $.15625 to $.0625 per share) and the exercise price
of the options granted. Since the fair market value at the end of
Fiscal 1995 was lower than the exercise price of all of the options
held, none of the options listed in this table are In-The-Money at the
end of Fiscal 1995.
42
PRICE RANGE OF COMMON STOCK
Orbis's Common Stock was traded on the National Association of
Securities Dealers Automated Quotation System ("NASDAQ") under the symbol "ORB,"
until October 1992.
As of August 23, 1996, there were approximately 240 record holders of
Orbis's Common Stock. Management believes there are approximately 500 beneficial
holders of Orbis's Common Stock.
The following table sets forth the range of high and low bid prices for
Orbis's Common Stock, as reported by NASDAQ for the periods indicated. Such
quotations represent interdealer quotations without adjustment for retail
markups, markdowns or commissions and may not represent actual transactions.
Bid
High Low
1994
First Quarter $ 5/32 1/16
Second Quarter 5/32 1/16
Third Quarter 5/32 1/16
Fourth Quarter 5/32 1/16
1995
First Quarter $ 5/32 1/16
Second Quarter 9/32 3/32
Third Quarter 9/32 3/32
Fourth Quarter 9/32 3/32
1996
First Quarter $ 9/32 3/32
Second Quarter 9/32 3/32
Third Quarter (As of August 23, 1996) 9/32 3/32
43
PROPOSAL NO. 4
PROPOSAL TO APPROVAL ORBIS'S 1996 STOCK OPTION PLAN,
UNDER WHICH 600,000 SHARES OF COMMON STOCK HAVE
BEEN RESERVED PURSUANT TO THE PLAN
THE PLAN
On February 6, 1996, the Board of Directors approved a 1996 Stock
Option Plan (the "1996 Plan") that provides for the granting to employees,
officers, directors, consultants and non-employees (other than non-employee
directors) of Orbis of options to purchase up to 600,000 shares of Common Stock,
$.01 par value per share. The 1996 Plan is being established as part of the
Transaction so that options presently granted by Triple I can be transferred to
Industrial Imaging (the successor to Orbis after the Reincorporation) upon
effective date of the Exchange Agreement. The granted options shall be
transferred under the same terms and conditions as existed prior to the
Transaction. Following the Transaction, 296,400 options will be outstanding. A
list of options to be granted to Beneficial Owners is included herein. The Board
of Directors feels that the extra shares reserved under the 1996 Plan will be
needed in order to attract, keep and motivate key employees.
Options under the 1996 Plan may be either "incentive stock options"
within the meaning of Section 422A of the Internal Revenue Code of 1986, as
amended (the "Code"), or non-qualified options. Incentive stock options may be
granted only to employees of Orbis (including directors who are employees),
while non-qualified options may be issued to directors (whether or not
employees), consultants, and any other non-employee of Orbis.
The 1996 Plan is administered by disinterested members (as defined by
Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended) of
the Board of Directors. These duties involve determining those individuals who
shall receive options, the time period during which the options may be partially
or fully exercised, the number of shares of Common Stock that may be purchased
under each option, and the option price.
The per share exercise price of the Common Stock subject to incentive
stock options granted pursuant to the 1996 Plan may not be less than one hundred
percent (100%) of the fair market value of the Common Stock on the date the
option is granted. The 1996 Plan provides that the aggregate fair market value
(determined as of the date the option is granted) of the Common Stock that first
becomes exercisable by any employee in any one calendar year pursuant to the
exercise of incentive stock options may not exceed $100,000. No person who owns,
directly or indirectly, at the time of the granting of an incentive stock option
to him or her, more than 10% of the total combined voting power of all classes
of stock of Industrial Imaging (a "10% Stockholder") shall be eligible to
receive any incentive stock options under the 1996 Plan unless the option price
is at least 110% of the fair market value of the Common Stock subject to the
option, determined on the date of grant. Non- qualified stock options are not
subject to the limitations of the preceding sentence.
44
The term "fair market value" as used in this section, shall mean (1) if
Industrial Imaging stock is publicly traded at the time an option is granted
under the Plan, (a) the average of the high and low prices of the stock on the
principal national securities exchange on which the stock is traded, if the
stock is then traded on a national securities exchange, as determined as of the
last business day for which the prices are available prior to the date the
option is granted (the "determination date"); or (b) the last reported sale
price on the determination date of the stock on the NASDAQ National Market List,
if the stock is not then traded on a national securities exchange; or (C) the
closing bid price (or average of bid prices) last quoted on the determination
date by an established quotation service for over-the-counter securities, if the
stock is not reported on the NASDAQ National Market list; and (2) if the stock
is not publicly traded at the time an option is granted under the Plan, "fair
market value" shall mean the fair value of the stock as determined by the Board
after taking into consideration all factors which it deems appropriate,
including, without limitation, recent sale and offer prices of the stock in
private transactions negotiated at arm's length.
No stock option may be transferred by an optionee other than by will or
the laws of descent and distribution, and during the lifetime of an optionee,
the option will be exercisable only by him or her.
If the option holder shall cease to be an employee of Industrial
Imaging for any reason other than death, the options shall thereafter be
exercisable only to the extent of the purchase rights, if any, which have
accrued as of the date of such cessation; provided that (I) the Board of
Directors may provide in the instrument evidencing any option that the Board of
Directors may in its absolute discretion, upon any such cessation of employment
determine (but be under no obligation to determine) that such accrued purchase
rights shall be deemed to include additional shares covered by such option; and
(ii) unless the Board of Directors shall otherwise provide in the instrument
evidencing any option, upon any such cessation of employment, such remaining
rights to purchase shall in any event terminate upon the earlier of (A) the
expiration of the original term of the option; or (B) where such cessation of
employment is on account of permanent and total disability, the expiration of
one year from the date of such cessation of employment and, otherwise, the
expiration of three months from such date.
Should an option holder die while in possession of the legal right to
exercise an option or options under the 1996 Plan, such persons as shall have
acquired, by will or by the laws of descent and distribution, the right to
exercise any options theretofore granted, may, unless otherwise provided by the
Board of Directors in any instrument evidencing any option, exercise such
options at any time prior to one year from the date of death; provided, that
such option or options shall expire in all events no later than the last day of
the original term of such option; provided, further, that any such exercise
shall be limited to the purchase rights which have accrued as of the date when
the option holder ceased to be an employee, whether by death or otherwise,
unless the Board of Directors provides in the instrument evidencing such option,
that, in the discretion of the Board of Directors, additional shares covered by
such option may become subject to purchase immediately upon the death of the
option holder.
45
Options under the 1996 Plan must be granted within ten (10) years from
the effective date of the 1996 Plan. The incentive stock options granted under
the 1996 Plan cannot be exercised more than ten (10) years from the date of
grant.
All options granted under the 1996 Plan provide for the payment of the
exercise price in cash, promissory note, or by delivery to Industrial Imaging of
shares of Common Stock already owned by the optionee having a fair market value
equal to the exercise price of the options being exercised, or by a combination
of such methods of payment. Therefore, an optionee may be able to tender shares
of Common Stock to purchase additional shares of Common Stock and may
theoretically exercise all of his stock options with no additional investment
other than his or her original shares.
Any unexercised options that expire or that terminate upon an
employee's ceasing to be employed with Industrial Imaging become available once
again for issuance under the 1996 Plan.
FEDERAL INCOME TAX CONSEQUENCES
No tax obligation will arise for the optionee or Industrial Imaging
upon the granting of incentive stock options or non-qualified stock options
under the 1996 Plan. Upon exercise of non-qualified stock option, an optionee
will recognize ordinary income in an amount equal to the excess, if any, of the
fair market value, on the date of exercise, of the stock acquired over the
exercise price of the option. Thereupon, Industrial Imaging will be entitled to
a tax deduction (as a compensation expense) in an amount equal to the ordinary
income recognized by the optionee. Any additional gain or loss realized by an
optionee on disposition of the stock generally will be capital gain or loss to
the optionee and will not result in any additional tax deduction to Industrial
Imaging. The taxable event arising from exercise of non-qualified stock options
by officers of Industrial Imaging subject to Section 16(b) of the Securities
Exchange Act of 1934, as amended, occurs on the later of the date on which the
option is exercised or the date six months after the date the option was granted
unless the optionee elects, within thirty (30) days of the date of exercise, to
recognize ordinary income as of the date of exercise. The income recognized at
the end of any deferred period will include any appreciation in the value of the
stock during that period and the capital gain holding period will not begin to
run until the completion of such period.
Upon the exercise of an incentive stock option, an optionee recognizes
no immediate taxable income. The tax cost is deferred until the optionee
ultimately sells the shares of stock. If the optionee does not dispose of the
option shares within two (2) years from the date the option was granted and
within one (1) year after the exercise of the option, and the option is
exercised no later than three (3) months after the termination of the optionee's
employment (unless the Board of Directors has provided in the instrument
evidencing the option that a shorter time period applies), the gain on the sale
will be treated as long term capital gain. Subject to the limitations in the
1996 Plan, certain of these holding periods and employment requirements are
liberalized in the event of the optionee's death or disability while employed by
Industrial Imaging. Industrial Imaging is not entitled to any tax deduction,
except that if the stock is not held for the full term of the holding period
outlined above, the gain on the sale of such stock, being the lesser of (I) the
fair market value
46
of the stock on the date of exercise minus the option price, or (ii) the amount
realized on disposition minus the option price, will be taxed to the optionee as
ordinary income and Industrial Imaging will be entitled to a deduction in the
same amount. Any additional gain or loss realized by an optionee upon
disposition of the stock prior to the expiration of the full term of the holding
period outlined above, generally will be capital gain or loss to the optionee
and will not result in any additional tax deduction to Industrial Imaging. The
"spread" upon exercise of an incentive stock option constitutes a tax preference
item within the computation of the "alternative minimum tax" under the Code. The
tax benefits which might otherwise accrue to an option may be affected by the
imposition of the alternative minimum tax if applicable to the optionee's
individual circumstances.
GRANT OF OPTIONS TO BENEFICIAL OWNERS UNDER THE 1996 PLAN
To date, options to purchase up to 296,400 shares of Common Stock have
been granted by Triple I under two plans: the 1993 Stock Option Plan ("1993
Plan") and the 1995 Stock Option Plan ("1995 Plan"). To date no options have
been exercised. Triple I has granted the options set forth below to the named
executive officers and directors, with exercise prices set forth according to
the plan under which they were issued (1993 Plan/1995 Plan):
<TABLE>
<CAPTION>
Amount
vested/nonvested
Exercise as of
Individual Number of Options Price July 1, 1996
---------- ----------------- ------------- ----------------
<S> <C> <C> <C>
Juan J. Amodei, Ph.D. 32,000/40,000 $.20/$1.00 45,600/26,400
Michael Chase 12,400/4,000 $.20/$1.00 9,120/11,280
Douglas M. Domres 3,000/2,000 $.20/$1.00 2,200/2,800
Richard J. Royston 17,600/3,000 $.20/$1.00 12,680/7,920
Bryan Gleason 100,000 $1.00 25,000/75,000
</TABLE>
PROPOSAL NO. 5
ACCOUNTING MATTERS AND RATIFICATION OF AUDITORS
The shareholders will be asked to vote to ratify the selection of
Coopers & Lybrand L.L.P. as auditors for Industrial Imaging the fiscal year
ending March 31, 1997. Coopers & Lybrand L.L.P. are the present auditors of
Triple I. A representative of Coopers & Lybrand L.L.P. is expected to be present
at the meeting of stockholders, and will have the opportunity to make a
statement and answer questions from stockholders if he or she so desires.
THIS IS AN INFORMATION STATEMENT AND ORBIS IS
NOT SOLICITING PROXIES IN CONNECTION HERE WITH .
YOU ARE REQUESTED NOT TO SEND US A PROXY.
47
EXHIBIT A
SHAREHOLDER AGREEMENT
BY AND AMONG
ORBIS, INC.
TRIPLE I CORPORATION
AND
THE SHAREHOLDERS OF TRIPLE I CORPORATION
DATED AS OF AUGUST __, 1996
TABLE OF CONTENTS
Page
1. Exchange of Shares .................................................. 1
1.1 Transfer of Triple I Stock ................................. 1
1.2 Issuance of Industrial Imaging Common Stock ................ 2
1.3 Conversion of Warrants and Options ......................... 2
2. Representations and Warranties of Triple I .......................... 2
2.1 Capitalization of Triple I ................................. 2
2.2 Authorization .............................................. 3
2.3 Organization and Good Standing ............................. 3
2.4 Books and Records .......................................... 3
2.5 Financial Statements ....................................... 4
2.6 Tax Matters ................................................ 4
2.7 Title to Properties ........................................ 5
2.8 Agreements, Contracts and Commitments....................... 5
2.9 Required Consents, No Default .............................. 6
2.10 Litigation.................................................. 6
2.11 No Broker's or Finder's Fees................................ 6
2.12 Compliance with Agreements and Laws......................... 6
2.13 Employee Relations and Labor Matters........................ 7
2.14 Tort Claims................................................. 7
2.15 Disclosure.................................................. 7
3. Representations and Warranties of Orbis.............................. 7
3.1 Reincorporation and Capitalization of Orbis................. 8
3.2 Authorization............................................... 8
3.3 Organization and Good Standing.............................. 8
3.4 Books and Records........................................... 9
3.5 Financial Statements........................................ 9
3.6 Tax Matters................................................. 9
3.7 Title to Properties.........................................10
3.8 Agreements, Contracts and Commitments.......................10
3.9 Required Consents, No Default...............................11
3.10 Litigation..................................................11
3.11 No Broker's or Finder's Fees................................11
3.12 Tort Claims.................................................11
3.13 Disclosure..................................................11
i
4. Representations and Warranties of the Shareholders...................12
5. Conditions to Closing................................................12
5.1 Resignation of Officers.....................................12
5.2 Opinion of Counsel..........................................13
5.3 Accuracy of Representations and Warranties and Performance
of Obligation by Triple I and Orbis.........................13
5.4 Legal Proceedings...........................................13
5.5 Orbis Stockholder Approval..................................13
6. Provisions for Indemnification.......................................13
7. Termination..........................................................14
8. Tax Consequences.....................................................14
9. Entire Agreement.....................................................14
10. Waiver ............................................................15
11. Severability.........................................................15
12. Governing Law........................................................15
13. Binding Agreement....................................................15
14 Counterparts.........................................................15
15. Assignment...........................................................15
16. Arbitration..........................................................15
17. Counsel ............................................................15
Exhibit A List of Triple I Shareholders
Exhibit B Triple I's Master Schedule
Exhibit C Outstanding Options and Warrants of Triple I
Exhibit D Orbis Master Schedule
ii
SHAREHOLDERS' AGREEMENT
This Shareholders' Agreement (the "Agreement") is made and entered into
as of the ___th day of August, 1996 (the "Effective Date") by and among Orbis,
Inc. ("Orbis" or its successor corporation Industrial Imaging Corporation) a
Rhode Island corporation and the shareholders of Triple I Corporation, a
Delaware Corporation ("Triple I"), which are listed in Exhibit A (collectively,
the "Shareholders").
W I T N E S S E T H:
WHEREAS, the Shareholders own all of the issued and outstanding capital
stock of Triple I Corporation, a Delaware corporation with its principal place
of business at One Lowell Research Center, 847 Rogers Street, Lowell,
Massachusetts 01852; and
WHEREAS, Orbis shall reincorporate under Delaware corporate law and
change its name to Industrial Imaging Corporation ("Industrial Imaging");
WHEREAS, Industrial Imaging will have authority to issue 20,000,000
shares of Common Stock, $.01 par value, of Industrial Imaging (the "Industrial
Imaging Common Stock"), 525,000 shares of which will be issued and outstanding
immediately prior to the date of the Exchange (as defined below);
WHEREAS, the Shareholders believe that it is in each of their best
interests to exchange all of Triple I outstanding Common Stock, $.01 par value
(the "Triple I Stock") for Industrial Imaging Common Stock (the "Exchange"); and
WHEREAS, the Board of Directors of Industrial Imaging (as the successor
corporation of Orbis), by resolutions duly adopted, has approved this Agreement
and the issuance of a total of 5,000,237 shares of Industrial Imaging Common
Stock to the Shareholders in the amounts as hereinafter described;
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, Orbis, Triple I and the Shareholders agree as follows:
1. EXCHANGE OF SHARES
1.1. Transfer of Triple I Stock. The Exchange shall be effective upon
the ratification of this Agreement by Orbis shareholders, the reincorporation of
Orbis as a Delaware corporation under the name of Industrial Imaging and the
approval by each Shareholder of this Agreement as indicated by their signature
hereto. Each Shareholder shall deliver the certificate evidencing their Triple I
Stock to a representative of Triple I's legal counsel, O'Connor, Broude &
Aronson, as agent (the "Exchange Agent"). The Exchange Agent shall mail to any
Shareholder who has not duly surrendered his Triple I Stock certificates as of
the Effective Date, a letter of transmittal, together
1
with instructions on how to surrender such Triple I Stock certificates to the
Exchange Agent. Upon receiving these instructions, each holder of an outstanding
certificate who has not previously delivered his Triple I Stock certificates
shall surrender them to the Exchange Agent.
1.2. Issuance of Industrial Imaging Common Stock. On the Effective
Date, Industrial Imaging shall issue to each Shareholder who has surrendered his
Triple I Stock certificates, as described in the Section 1, one share of
Industrial Imaging Common Stock for each share of Triple I Stock. All shares of
Industrial Imaging Common Stock to be issued on the Effective Date will be
deemed issued as of the Effective Date. Triple I Stock shall be deemed to be
cancelled whether or not the certificates have been surrendered or otherwise
accounted for.
Holders of Triple I Stock will not receive any dividends or
distributions with respect to shares of Industrial Imaging Common Stock which
may be declared or payable following the Effective Date to holders of record of
Industrial Imaging Common Stock until and unless they surrender their Triple I
Stock certificates to the Exchange Agent. Former holders of Triple I Stock will
be entitled to exercise all rights of holders of shares of Industrial Imaging
Common Stock without having to surrender their stock certificates, except the
right to receive dividends or distributions.
1.3. Conversion of Warrants and Options. At the Effective Date, by
virtue of the Exchange and without any action on the part of the holder thereof
each option and/or warrant to purchase Triple I Common Stock outstanding
immediately prior to the Effective Date shall be changed and converted into an
option and/or warrant to purchase Industrial Imaging Common Stock on the basis
of the following ratio:
(a) An option to purchase one (1) share of Triple I Common Stock shall
be converted into an option to purchase one (1) share of Industrial Imaging
Common Stock.
(b) A warrant to purchase one (1) shares of Triple I Common Stock shall
be converted into a warrant to purchase one (1) share of Industrial Imaging
Common Stock.
2. REPRESENTATIONS AND WARRANTIES OF TRIPLE I.
Triple I represents and warrants to Industrial Imaging, upon which
representations and warranties Industrial Imaging shall be entitled to rely
regardless of any investigation by Industrial Imaging of the affairs of Triple
I, as follows (as supplemented by any referenced exhibit or on the Triple I's
Master Schedule dated as of August 1, 1996 listed in Exhibit B (the "Triple I's
Master Schedule"):
2.1 Capitalization of Triple I. Triple I's authorized capital stock
consists of 8,700,000 shares of Common Stock, $.01 par value per share, of which
5,000,787 shares are issued and outstanding on the date hereof, 1,000,000 shares
of Series A Preferred Stock, $.01 par value per share, of which no shares are
issued and outstanding on the date hereof, and 300,000 shares of Series
2
B Preferred Stock, $.01 par value per share, of which no shares are issued and
outstanding on the date hereof. All such issued and outstanding shares of Common
Stock have been duly and validly issued and are fully paid and non-assessable.
All outstanding options, warrants or other rights to purchase from Triple I any
capital stock of Triple I are listed on Exhibit C.
2.2 Authorization. This Agreement has been duly and validly executed
and delivered by Triple I. Subject to the approval of the Agreement by the
Shareholders, this Agreement constitutes, and, when executed and delivered at
the Closing, all other agreements entered into in connection with the
transactions contemplated hereby to which Triple I is a party will constitute,
the valid and legally binding obligations of Triple I, enforceable against it in
accordance with their respective terms except insofar as enforceability may be
limited by bankruptcy, insolvency, or similar laws affecting the rights of
creditors and general equitable principles. The execution, delivery and
performance by Triple I of this Agreement and the agreements provided for
herein, and the consummation by Triple I of the transactions contemplated hereby
and thereby, will not, with or without the giving of notice or the passage of
time or both, (a) violate the provisions of any law, rule or regulation
applicable to Triple I; (b) violate the provisions of the Certificate of
Incorporation or Bylaws of Triple I; (c) violate any judgment, decree, order or
award of any court, governmental body or arbitrator; or (d) conflict with or
result in the breach or termination of any term or provision of, or constitute a
default under, or cause any acceleration under or the creation of any
indebtedness, contract, lease, license, permit, lien, charge or encumbrance upon
the properties or assets of Triple I pursuant to, any indenture, mortgage, deed
of trust or other instrument or agreement to which Triple I is a party or by
which Triple I or any of its properties is or may be bound, subject to the
consent requirements described in Triple I's Master Schedule.
2.3 Organization and Good Standing. Triple I is a corporation duly
organized, validly existing and in good standing under the laws of the Delaware
and has all requisite power and authority (corporate and other) to own its
properties and to carry on its business as now being conducted. Except as
disclosed in Triple I's Master Schedule, Triple I is duly qualified to do
business and in good standing in all jurisdictions in which its ownership of
property or the character of its business requires such qualification and where
failure to be so qualified would have an adverse effect on Triple I. Neither
Triple I nor any of its officers or directors are subject to any agreement,
commitment or understanding which restricts or may restrict the conduct of
Triple I's business in any jurisdiction or location. The copies of the
Certificate of Incorporation and Bylaws of Triple I previously delivered to
Industrial Imaging are complete and correct.
2.4 Books and Records. The minute books of Triple I produced for
Industrial Imaging's review contain an accurate record of all meetings and other
corporate action of the Triple I Shareholders and the Board of Directors of
Triple I. The stock ledgers of Triple I produced for Industrial Imaging's review
contain an accurate record of the holdings of the stock issued by Triple I and
all transfers in connection therewith.
3
2.5 Financial Statements.
(a) Triple I's Financial Statements. Triple I has delivered to
Industrial Imaging true and complete copies of its Balance Sheets as of
September 31, 1995 and related Statements of Operations, Stockholders' Equity
and Cash Flows, all of which have been audited by Coopers & Lybrand L.L.P. as
set forth in their report thereon, and its unaudited Balance Sheet as of March
31, 1996 and related Statement of Operations for the six months then ended
(collectively, the "Financial Statements"). Except as described in Triple I's
Master Schedule, all Financial Statements are in accordance with the books and
records of Triple I, and (i) present fairly the financial position and results
of operations of Triple I as of the respective dates and for the respective
periods indicated, (ii) include all adjustments required to fairly reflect the
financial condition of Triple I and, (iii) have been prepared in accordance with
generally accepted accounting principles applied on a basis consistent with
prior periods and practices; provided, however, that the interim financial
statements as of and for the six months ended March 31, 1996 have been prepared
in accordance with Triple I's normal practices for internal management reporting
purposes and accordingly certain items may not be classified in a manner
consistent with the generally accepted accounting principles followed in the
preparation of Triple I's audited financial statements and such interim
financial statements do not include the notes required by generally accepted
accounting principles.
(b) No Adverse Changes or Undisclosed Liabilities. Except as
disclosed in Triple I's Master Schedule, since March 31, 1996, there has not
occurred or arisen, whether or not in the ordinary course of business any
material adverse change in the assets or financial condition of Triple I or any
adverse change in the operation or business of Triple I. Triple I has no
liabilities or obligations, fixed, accrued, contingent or otherwise, which are
required to be reflected on financial statements prepared in accordance with the
generally accepted accounting principles as set forth in the Financial
Statements and which are not fully reflected or provided for on, or disclosed in
the notes to, the Financial Statements, where applicable, except liabilities and
obligations incurred in the ordinary course of business since March 31, 1996,
none of which individually or in the aggregate has been or is adverse to the
operations, business, financial condition or prospects of Triple I.
2.6 Tax Matters.
(a) Except as disclosed on Triple I's Master Schedule, Triple
I has paid (and, as to any of the following which are payable after the
Effective Date, Triple I has properly reserved against in accordance with
generally accepted accounting principles) all income taxes, capital gains taxes,
payroll and withholding taxes, capital taxes, sales and use taxes, goods and
services taxes, business taxes, ad valorem taxes, property taxes, excise taxes,
customs and import duties, rates, levies, assessments and fees, and all other
taxes of every kind, character or description, including all interest, fines,
and penalties relating thereto, imposed by any governmental or
quasi-governmental authority, domestic or foreign, whether federal, state,
territorial or municipal (collectively, the "Taxes") required to be paid by
Triple I for all periods prior to the Effective Date. No outstanding
assessments, reassessments, Notices of Determination, or notices of any kind
whatsoever with respect to any such Taxes exist or could become a lien on the
properties or assets of Triple I. Except
4
as disclosed on Triple I's Master Schedule, Triple I has duly and timely filed
or caused to be filed all reports, returns and other documents relating to or
covering all such Taxes, which are due or required to be filed at or prior to
the date of Effective Date, and the Taxes or applicable amount shown thereon
have been timely accrued and paid. No such filings have contained any
misstatement or omitted any statement of any fact that should have been included
therein.
2.7 Title to Properties. Except as disclosed in Triple I's Master
Schedule, Triple I has good and marketable title to all of its properties and
assets reflected in the Financial Statements or acquired since March 31, 1996,
except properties and assets disposed of in the ordinary course of business
since the date thereof, and none of such properties or assets is subject to any
mortgage, pledge, lien, security interest, lease, charge, encumbrance,
objection, claim or joint ownership. To its knowledge, Triple I is not in
violation of any applicable zoning laws or in violation of any other local,
state or federal laws and regulations affecting the use and occupancy of such
property, which violation would have a material adverse effect on Triple I.
2.8 Agreements, Contracts and Commitments. Except as shown on Triple
I's Master Schedule, Triple I is not a party to or liable in connection with and
has not made or granted any oral or written:
(a) Note, loan, credit, security or guaranty agreement or
other obligation relating to the borrowing of money;
(b) license agreement, or sales representative, distributor,
franchise, advertising or property management agreement;
(c) agreement for the future purchase by Triple I of any
material, equipment, services or supplies in an amount in excess of $25,000 in
any instance or $100,000 in the aggregate, other than purchase orders issued by
Triple I in the ordinary course of business for components and supplies used in
the manufacture and service of its products;
(d) agreement for the future sale by Triple I of any
materials, equipment, services or supplies in an amount in excess of $25,000 in
any instance or $100,000 in the aggregate, other than purchase orders for Triple
I products and services received by Triple I from customers in the ordinary
course of business;
(e) agreement, not elsewhere specifically disclosed pursuant
to this Agreement, involving, or providing any benefit to, any officer,
director, employee or stockholder of Triple I;
(f) agreement or arrangement for the sale of any of its assets
or the grant of any preferential rights to purchase any of its assets, property
or rights or requiring the consent of any party to the transfer and assignment
of such assets, property or rights, other than purchase orders for ETO products
in the ordinary course of business;
5
(g) any contracts, agreements or other arrangements imposing a
non-competition or non-solicitation obligation on Triple I; and
(h) any other agreement, whether or not in the ordinary course
of business, which is not otherwise disclosed in this Agreement and which (i)
can reasonably be expected to require the payment to or by Triple I of more than
$25,000 in the aggregate for all such agreements in any period of 12 months or
(ii) has a remaining term of more than six months and cannot be terminated by
Triple I on 60 days' or less notice.
All agreements listed on Triple I's Master Schedule are valid and in
full force and effect, unless otherwise indicated therein.
2.9 Required Consents, No Default. Except as described in Triple I's
Master Schedule, neither the execution and delivery of this Agreement nor the
consummation of the Exchange, nor compliance by Triple I with its terms and
provisions will require the affirmative consent, approval, order or
authorization of or any registration, declaration or filing with any third party
or governmental authority, the failure to obtain which would have an adverse
effect on the Surviving Corporation after the Effective Date. Triple I is not in
default under or in violation of any provision of its Certificate of
Incorporation or Bylaws. Triple I is not in default under or in violation of any
provision of any indenture, mortgage, lease, loan or other agreement to which it
is a party or is bound or to which its properties are subject, which default or
violation would have an adverse effect on Triple I's business.
2.10 Litigation. There is no action, suit or proceeding to which
Triple I is a party (either as a plaintiff or defendant or otherwise) pending
or, to Triple I's knowledge, threatened before any court or governmental agency,
authority, body or arbitrator, and Triple I is not aware of any basis for any
such action, suit or proceeding. Neither Triple I nor any officer, director or
employee of Triple I has been permanently or temporarily enjoined by any order,
judgment or decree of any court or any governmental agency, authority or body
from engaging in or continuing any conduct or practice in connection with the
business, assets, or properties of Triple I. There is not in existence on the
date hereof any order, judgment or decree of any court, tribunal or agency
enjoining or requiring Triple I to take any action of any kind with respect to
its business, assets or properties.
2.11 No Broker's or Finder's Fees. No agent, broker, investment
banker, person or firm acting on behalf of Triple I or any of its affiliates or
under the authority of any of them is or will be entitled to any broker's or
finder's fee or any other commission or similar fee directly or indirectly in
connection with any of the transactions contemplated herein.
2.12 Compliance with Agreements and Laws. Triple I has all required
licenses, permits and certificates, including health and safety permits, from
federal, state and local authorities necessary to conduct its business as
currently conducted the failure to have which, individually or collectively,
would have an adverse effect on its business or assets (collectively, the
"Permits"). To the best of Triple I's knowledge, the business of Triple I as
conducted through the date hereof has
6
not violated any federal, state, local or foreign laws, regulations or orders
(including, but not limited to, any of the foregoing relating to employment
discrimination, occupational safety, conservation, or corrupt practices), the
enforcement of which would have an adverse effect on the business of Triple I.
Triple I has had no notice or communication from any federal, state or local
governmental or regulatory authority or otherwise of any such violation or
noncompliance.
2.13 Employee Relations and Labor Matter.
(a) Triple I is in compliance with all federal, state and
municipal laws regarding employment, employment practices, terms and conditions
of employment and wages and hours, the failure of which would, individually or
collectively, have an adverse effect on Triple I's business or assets, and it is
not engaged in any unfair labor practice, and there are no arrears in the
payment of wages or social security taxes.
(b) None of the employees of Triple I is represented by any
labor union, nor does Triple I have any agreements, whether directly or
indirectly, with any labor union, employee association or other similar entity.
Triple I has not made commitments to or conducted negotiations with any labor
union or employee association or similar entity with respect to any future
agreements. No trade union, employee association or other similar entity has any
bargaining rights acquired by either certification or voluntary recognition with
respect to the employees of Triple I. There is no unfair labor practice
complaint against Triple I pending before any federal, state or local agency.
There is no pending labor strike or other material labor trouble affecting
Triple I (including, without limitation, any organizational drive).
(c) Triple I is in compliance with all applicable and material
provisions of the Federal Fair Labor Standards Act or any similar state statute
and all rules and regulations under each, the failure of which would,
individually or collectively, have an adverse effect on Triple I's business or
assets.
2.14 Tort Claims. Except as disclosed in Triple I's Master Schedule,
there are no personal injury, property damage or other tort claims made against
ETO, not including service calls, and all accidents known to Triple I which
could reasonably be expected to give rise to such a claim.
2.15 Disclosure. The representations and warranties by Triple I in
this Agreement, including the certificates, Exhibits and Schedules furnished by
Triple I do not contain any untrue or misleading statement of a material fact or
omit to state a material fact reasonably related to the transactions covered by
this Agreement, and all such representations and warranties are and on the
Effective Date will be accurate and complete in all material respects.
3. REPRESENTATIONS AND WARRANTIES OF ORBIS.
Orbis represents and warrants to the Shareholders and Triple I, upon
which representations and warranties the Shareholders and Triple I shall be
entitled to rely regardless of any investigation
7
by Shareholders and Triple I of the affairs of Orbis (and its successor
corporation Industrial Imaging), as follows (as supplemented by any referenced
exhibit or on Orbis's master schedule dated as of August 1, 1996 listed in
Exhibit D (the "Orbis Master Schedule"):
3.1 Reincorporation and Capitalization of Orbis. As of the Effective
Date, Orbis will have (i) reincorporated as a Delaware corporation, (ii) changed
its name to Industrial Imaging, and (iii) authorized capital stock will consist
of 20,000,000 shares of Common Stock, $.01 par value per share, of which 525,000
shares are issued and outstanding, and 1,000,000 shares of Preferred Stock, $.01
par value per share, of which no shares are issued and outstanding. Orbis shall
also have authorized a 1996 Stock Option Plan with _____ shares reserved for
issuance under the plan. All such issued and outstanding shares of Common Stock
have been duly and validly issued and are fully paid and non-assessable. Except
as provided in Orbis's Master Schedule, there are no outstanding options,
warrants or other rights to purchase from Orbis any capital stock of Orbis.
3.2 Authorization. This Agreement has been duly and validly executed
and delivered by Orbis. This Agreement constitutes, and, when executed and
delivered on the Effective Date, all other agreements entered into in connection
with the transactions contemplated hereby to which Orbis is a party will
constitute, the valid and legally binding obligations of Orbis, enforceable
against it in accordance with their respective terms except insofar as
enforceability may be limited by bankruptcy, insolvency, or similar laws
affecting the rights of creditors and general equitable principles. The
execution, delivery and performance by Orbis of this Agreement and the
agreements provided for herein, and the consummation by Orbis of the
transactions contemplated hereby and thereby, will not, with or without the
giving of notice or the passage of time or both, (a) violate the provisions of
any law, rule or regulation applicable to Orbis; (b) violate the provisions of
the Certificate of Incorporation or Bylaws of Orbis; (c) violate any judgment,
decree, order or award of any court, governmental body or arbitrator; or (d)
conflict with or result in the breach or termination of any term or provision
of, or constitute a default under, or cause any acceleration under or the
creation of any indebtedness, contract, lease, license, permit, lien, charge or
encumbrance upon the properties or assets of Orbis pursuant to, any indenture,
mortgage, deed of trust or other instrument or agreement to which Orbis is a
party or by which Orbis or any of its properties is or may be bound.
3.3 Organization and Good Standing. Orbis is (and as of the Effective
Date, Industrial Imaging will be) a corporation duly organized, validly existing
and in good standing under the laws of its State of incorporation and has all
requisite power and authority (corporate and other) to own its properties and to
carry on its business as now being conducted. Except as disclosed in the Orbis's
Master Schedule, Orbis is duly qualified to do business and in good standing in
all jurisdictions in which its ownership of property or the character of its
business requires such qualification and where failure to be so qualified would
have an adverse effect on Orbis. Neither Orbis nor any of its officers or
directors are subject to any agreement, commitment or understanding which
restricts or may restrict the conduct of Orbis's business in any jurisdiction or
location. The copies of the Certificate of Incorporation and Bylaws of Orbis
previously delivered to Triple I are complete and correct.
8
3.4 Books and Records. The minute books of Orbis produced for Triple
I's review contain an accurate record of all meetings and other corporate action
of the Orbis stockholders and the Board of Directors of Orbis. The stock ledgers
of Orbis produced for Triple I's review contain an accurate record of the
holdings of the stock issued by Orbis and all transfers in connection therewith.
3.5 Financial Statements.
(a) Orbis's Financial Statements. Orbis has delivered to
Triple I true and complete copies of its Balance Sheets as of March 31, 1996 and
related Statements of Operations, Stockholders' Equity and Cash Flows, all of
which have been audited by Cager, Prescott, Clune & Chatellier as set forth in
their report thereon, (collectively, the "Financial Statements"). Except as
described in the Orbis Master Schedule, all Financial Statements are in
accordance with the books and records of Orbis, and (i) present fairly the
financial position and results of operations of Orbis as of the respective dates
and for the respective periods indicated, (ii) include all adjustments required
to fairly reflect the financial condition of Orbis and, (iii) have been prepared
in accordance with generally accepted accounting principles applied on a basis
consistent with prior periods and practices.
(b) No Adverse Changes or Undisclosed Liabilities. Except as
disclosed in Master Schedule, since March 31, 1996, there has not occurred or
arisen, whether or not in the ordinary course of business any material adverse
change in the assets or financial condition of Orbis or any adverse change in
the operation or business of Orbis. Orbis has no liabilities or obligations,
fixed, accrued, contingent or otherwise, which are required to be reflected on
financial statements prepared in accordance with the generally accepted
accounting principles as set forth in the Financial Statements and which are not
fully reflected or provided for on, or disclosed in the notes to, the Financial
Statements, where applicable, except liabilities and obligations incurred in the
ordinary course of business since March 31, 1996, none of which individually or
in the aggregate has been or is adverse to the operations, business, financial
condition or prospects of Orbis.
3.6 Tax Matters.
Except as disclosed on the Orbis Master Schedule, Orbis has
paid (and, as to any of the following which are payable after the Effective
Date, Orbis has properly reserved against in accordance with generally accepted
accounting principles) all income taxes, capital gains taxes, payroll and
withholding taxes, capital taxes, sales and use taxes, goods and services taxes,
business taxes, ad valorem taxes, property taxes, excise taxes, customs and
import duties, rates, levies, assessments and fees, and all other taxes of every
kind, character or description, including all interest, fines, and penalties
relating thereto, imposed by any governmental or quasi-governmental authority,
domestic or foreign, whether federal, state, territorial or municipal
(collectively, the "Taxes") required to be paid by Orbis for all periods prior
to the Effective Date. No outstanding assessments, reassessments, Notices of
Determination, or notices of any kind whatsoever with respect to any such Taxes
exist or could become a lien on the properties or assets of Orbis. Except
9
as disclosed on the Orbis Master Schedule, Orbis has duly and timely filed or
caused to be filed all reports, returns and other documents relating to or
covering all such Taxes, which are due or required to be filed at or prior to
the date of Effective Date, and the Taxes or applicable amount shown thereon
have been timely accrued and paid. No such filings have contained any
misstatement or omitted any statement of any fact that should have been included
therein.
3.7 Title to Properties. Except as disclosed in the Orbis Master
Schedule, Orbis has good and marketable title to all of its properties and
assets reflected in the Financial Statements or acquired since March 31, 1996,
except properties and assets disposed of in the ordinary course of business
since the date thereof, and none of such properties or assets is subject to any
mortgage, pledge, lien, security interest, lease, charge, encumbrance,
objection, claim or joint ownership.
3.8 Agreements, Contracts and Commitments. Except as shown on the
Orbis Master Schedule, Orbis is not a party to or liable in connection with and
has not made or granted any oral or written:
(a) Note, loan, credit, security or guaranty agreement or
other obligation relating to the borrowing of money;
(b) license agreement, or sales representative, distributor,
franchise, advertising or property management agreement;
(c) agreement for the future purchase by Orbis of any
material, equipment, services or supplies in an amount in excess of $25,000 in
any instance or $100,000 in the aggregate, other than purchase orders issued by
Orbis in the ordinary course of business for components and supplies used in the
manufacture and service of its products;
(d) agreement for the future sale by Orbis of any materials,
equipment, services or supplies in an amount in excess of $25,000 in any
instance or $100,000 in the aggregate, other than purchase orders for Orbis
products and services received by Orbis from customers in the ordinary course of
business;
(e) agreement, not elsewhere specifically disclosed pursuant
to this Agreement, involving, or providing any benefit to, any officer,
director, employee or stockholder of Orbis;
(f) agreement or arrangement for the sale of any of its assets
or the grant of any preferential rights to purchase any of its assets, property
or rights or requiring the consent of any party to the transfer and assignment
of such assets, property or rights, other than purchase orders for ETO products
in the ordinary course of business;
(g) any contracts, agreements or other arrangements imposing a
non-competition or non-solicitation obligation on Orbis; and
10
(h) any other agreement, whether or not in the ordinary course
of business, which is not otherwise disclosed in this Agreement and which (i)
can reasonably be expected to require the payment to or by Orbis of more than
$25,000 in the aggregate for all such agreements in any period of 12 months or
(ii) has a remaining term of more than six months and cannot be terminated by
Orbis on 60 days' or less notice.
All agreements listed on Master Schedule are valid and in full force and effect,
unless otherwise indicated therein.
3.9 Required Consents, No Default. Except as described in the Orbis
Master Schedule, neither the execution and delivery of this Agreement nor the
consummation of the Exchange, nor compliance by Orbis with its terms and
provisions will require the affirmative consent, approval, order or
authorization of or any registration, declaration or filing with any third party
or governmental authority, the failure to obtain which would have an adverse
effect on the Surviving Corporation after the Effective Date. Orbis is not in
default under or in violation of any provision of its Certificate of
Incorporation or Bylaws. Orbis is not in default under or in violation of any
provision of any indenture, mortgage, lease, loan or other agreement to which it
is a party or is bound or to which its properties are subject, which default or
violation would have an adverse effect on Orbis's business.
3.10 Litigation. There is no action, suit or proceeding to which Orbis
is a party (either as a plaintiff or defendant or otherwise) pending or, to
Orbis's knowledge, threatened before any court or governmental agency,
authority, body or arbitrator, and Orbis is not aware of any basis for any such
action, suit or proceeding. Neither Orbis nor any officer, director or employee
of Orbis has been permanently or temporarily enjoined by any order, judgment or
decree of any court or any governmental agency, authority or body from engaging
in or continuing any conduct or practice in connection with the business,
assets, or properties of Orbis. There is not in existence on the date hereof any
order, judgment or decree of any court, tribunal or agency enjoining or
requiring Orbis to take any action of any kind with respect to its business,
assets or properties.
3.11 No Broker's or Finder's Fees . No agent, broker, investment
banker, person or firm acting on behalf of Orbis or any of its affiliates or
under the authority of any of them is or will be entitled to any broker's or
finder's fee or any other commission or similar fee directly or indirectly in
connection with any of the transactions contemplated herein.
3.12 Tort Claims. Except as disclosed in the Orbis's Master Schedule,
there are no personal injury, property damage or other tort claims made against
Orbis, not including service calls, and all accidents known to Orbis which could
reasonably be expected to give rise to such a claim.
3.13 Disclosure. The representations and warranties by Orbis in this
Agreement, including the certificates, Exhibits and Schedules furnished by Orbis
do not contain any untrue or misleading statement of a material fact or omit to
state a material fact reasonably related to the transactions
11
covered by this Agreement, and all such representations and warranties are and
on the Effective Date will be accurate and complete in all material respects.
4. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS.
Each of the Shareholders represents and warrants to Industrial Imaging,
jointly and severally, upon which representations and warranties Orbis relies,
and which representations and warranties shall survive the Closing,
notwithstanding any investigation of the affairs by Orbis (and its successor
Industrial Imaging), as follows:
4.1 The Shareholders have full power and authority to execute and
deliver this Agreement and consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by each
of the Shareholders and no other actions or proceedings on the part of the
Shareholders are necessary to consummate the transactions so contemplated. This
Agreement has been duly and validly executed and delivered by each of the
Shareholders and constitutes the valid and legally binding obligation of each of
the Shareholders and enforceable against each of them in accordance with its
terms, subject only as to enforcement to general equitable principles and to
bankruptcy, insolvency, reorganization, moratorium, or similar laws of general
application affecting the rights and remedies of creditors.
4.2 In connection with the receipt by each of the Shareholders of any
and all of the Industrial Imaging Common Stock that such Stockholder may receive
pursuant to this Agreement, each Stockholder acknowledges by their signature
that the Common Stock is not being registered under the Securities Act of 1933,
as amended (the "Securities Act"), on the basis of a statutory exemption that is
based in part on the representations made by the Shareholders in connection with
this Agreement.
Each Stockholder shall warrant and represent in writing that (a) he or
it is acquiring such Common Stock for his or its own account and not with a view
to reselling or otherwise distributing such shares in violation of any relevant
federal or state securities laws; (b) he or it does not intend to resell or
otherwise dispose of such shares unless and until a registration statement under
the Securities Act is then in effect with respect to such shares or an exemption
from the registration requirements of the Securities Act is then in fact
applicable to such transfer; and (c) any and all stock certificates evidencing
ownership of any Common Stock shall bear any legends that counsel for Industrial
Imaging deem, in their sole opinion, to be required by state or federal law.
5. CONDITIONS TO CLOSING.
5.1 Resignation of Officers. The Officers of Orbis, on the Effective
Date, shall deliver their resignations, all of which resignations shall take
effect on the Effective Date. The new officers of Industrial Imaging shall
thereafter be appointed by the Board of Directors of Industrial Imaging.
12
5.2 Opinion of Counsel. Triple I shall have received from counsel to
Orbis, an opinion, dated the Effective Date, in form and substance satisfactory
to the Shareholders as to the matters described in Exhibit E.
5.3 Accuracy of Representations and Warranties and Performance of
Obligations by Triple I and Orbis. The representations and warranties of Triple
I and Orbis (applying to both Orbis and its successor corporation Industrial
Imaging) set forth in Section 3 shall be true and correct in all material
respects on the Effective Date, with the same effect as though made at such
time, except for changes expressly contemplated by this Agreement. Orbis shall
have performed all obligations and complied with all covenants and conditions
required by this Agreement to be performed or complied with by it prior to the
Effective Date. Triple I and Orbis shall have received certificates from
authorized officers of the other company as to the fulfillment of the conditions
set forth in this Section 5.3.
5.4 Legal Proceedings. No action or proceeding by or before any court
or any governmental body shall have been instituted or threatened to restrain,
prohibit or invalidate the transactions contemplated by this Agreement which
might affect the right of the Shareholders and Triple I to own, operate or
control Industrial Imaging after the Effective Date or which, either
individually or in the aggregate, might be materially adverse to the operations,
business, financial condition or prospects of Industrial Imaging.
5.5 Orbis Stockholder Approval. The Orbis stockholders shall have
approved the Exchange as described in Section 1.
6. PROVISIONS FOR INDEMNIFICATION
6.1 In the manner and to the extent provided in this Section 6, Triple
I and Industrial Imaging shall be defended, indemnified and held harmless from
and against any and all damages, losses and expenses (including reasonable legal
and other costs and expenses arising from or in connection with any action,
suit, proceeding, claim or investigation) suffered or incurred by either of them
or by any of their officers, directors, successor or assigns resulting from (i)
any breach of a representation or warranty of Orbis in this Agreement or any
Schedule or certificate thereto, (ii) any failure by Orbis to perform any
covenant made by it in this Agreement, and (iii) all awards, judgments or
settlements arising from or in connection with any action, suit, proceeding or
claim by any third party as a consequence of any such breach or failure.
6.2 Triple I, its directors, officers, employees or agents, if claiming
a right to indemnification under the provisions of this Section 6 (hereinafter,
the "Indemnitee"), shall give prompt written notice to the Orbis of each claim
for indemnification hereunder, specifying the amount and nature of the claim,
and of any matter which, in the opinion of the claiming party, is likely to give
rise to an indemnification claim. The party against whom such indemnity is
sought to be recovered (hereinafter, the "Indemnitor") shall have the right to
undertake and control the defense and settlement (so long as such settlement
imposes no financial or other obligation upon Triple I or its
13
directors, officers, employees or agents) of any such matter at Indemnitor's
sole expense and through legal counsel acceptable to Indemnitee, provided that
Indemnitor proceeds in good faith, expeditiously and diligently. Indemnitee
shall, at its option and expense, have the right to participate in any defense
undertaken by Indemnitor, with legal counsel of its own selection. No settlement
or compromise may be made by Indemnitor without the prior written consent of
Indemnitee unless (i) prior to such settlement or compromise Indemnitor
acknowledges in writing Indemnitor's obligation to pay in full the amount of the
settlement or compromise and all associated expenses and (ii) Indemnitee is
furnished with security reasonably satisfactory to Indemnitee that Indemnitor
will in fact pay such amount and expenses.
6.3 Orbis shall pay to Indemnities the amount of established claims for
indemnification within fifteen (15) days after the establishment thereof.
Indemnities may set off the amount of any established claim due to it from the
Orbis against Indemnities any Deficiency Payment due to the Shareholders.
6.4 No claim for indemnification provided in this Section 6 shall be
made more than 36 months (or, if longer, the applicable statute of limitations
period with respect to tax matters) following the Effective Date.
6.5 Any remedies of the indemnitees shall be cumulative and not
exclusive.
7. TERMINATION.
This Agreement may be terminated by Orbis or Triple I, in its sole
discretion, upon the occurrence of any of the following circumstances, by
written notice given to the non-terminating party on or before the Effective
Date:
(a) A breach by the non-terminating party of any representation,
warranty, covenant or other agreement contained herein; or
(b) If any condition to its obligations is not fulfilled on or before
the Effective Date.
Notwithstanding the foregoing, the parties may terminate this agreement
at any time upon their mutual written agreement.
8. TAX CONSEQUENCES. The Exchange is intended to qualify as a tax-free
reorganization under Section 368(a)(1)(B) of the Internal Revenue Code of 1986,
as amended (the "Code").
9. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between the
Shareholders and the Company with respect to the subject matter hereof and
supersedes any and all prior oral or written communications, understanding or
agreements concerning the subject matter hereof. This Agreement may be amended
or modified only by a written instrument signed by all of the Shareholders and
an officer of the Company.
14
10. WAIVER. No waiver of any right under this Agreement shall be deemed
effective unless contained in a writing signed by the Shareholder charged with
such waiver, and no waiver of any right arising from any breach or failure to
perform shall be deemed to be a waiver of any future such right or of any other
right arising under this Agreement.
11. SEVERABILITY. The invalidity or unenforceability of any provision hereof
shall in no way affect the validity or enforceability of any other provision. If
any provision of this Agreement is or becomes or is deemed invalid, illegal or
unenforceable to the maximum extent permissible in any jurisdiction, such
provision shall be deemed amended to conform to applicable laws so as to be
valid and enforceable or, if it cannot be so amended without materially altering
the intention of the parties, it shall be stricken and the remainder of this
Agreement shall remain in full force and effect.
12. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts.
13. BINDING AGREEMENT. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective legal representatives and
successors.
14. COUNTERPARTS. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original.
15. ASSIGNMENT. No Shareholder may assign this Agreement or his rights hereunder
without the other Shareholders' written consent, which consent may be withheld
at the non-assigning Shareholders' sole discretion.
16. ARBITRATION. Any dispute concerning this Agreement including but not limited
to, its existence, validity, interpretation, performance or non-performance,
arising before or after termination or expiration of this Agreement, shall be
settled by a single arbitrator in Boston, Massachusetts, in accordance with the
rules then in effect of the American Arbitration Association. Judgment upon any
award may be entered in any court of competent jurisdiction. The cost of such
arbitration shall borne equally between the parties thereto unless otherwise
determined by such arbitrator.
17. COUNSEL. Each of the parties acknowledges and confirms that each has had the
opportunity to secure advice, counsel and suggestions from professional persons
of such party's choosing in connection with this Agreement and related matters.
15
IN WITNESS WHEREOF, the parties hereto have set their hands and seals
on this ___ day of August, 1996.
ATTEST: ORBIS, INC.
By:
- ---------------------------- ----------------------------
Pasquale Ruggieri, President
ATTEST: TRIPLE I CORPORATION
By:
- ---------------------------- ----------------------------
Juan J. Amodei, Ph.D., President
TRIPLE I SHAREHOLDERS
WITNESS: JUAN J. AMODEI, Ph.D.
- ---------------------------- ------------------------------
WITNESS: JOSEPH BORDOGNA
- ---------------------------- ------------------------------
ATTEST: CENTENNIAL TECHNOLOGIES
By:
- ---------------------------- ----------------------------
Emanuel Pinez, President
16
WITNESS: CHARLES RIVER MORTGAGE
COMPANY, INC.
By:
- ---------------------------- ----------------------------
WITNESS: ROBERT COHEN
- ---------------------------- ----------------------------
WITNESS: CRESENT CAPITAL COMPANY, LLC
By:
- ---------------------------- ----------------------------
WITNESS: EZREIL DIAMOND
- ---------------------------- ----------------------------
WITNESS: WILLIAM G. EATON JR.
- ---------------------------- ----------------------------
WITNESS: S. MARCUS FINKLE
- ---------------------------- ----------------------------
WITNESS: LAWRENCE K. FLEISCHMANN
- ---------------------------- ----------------------------
17
WITNESS: ARTHUR G. JENKINS AND ROBERT R.
JENKINS, JTWROS
By:
- ---------------------------- ----------------------------
WITNESS: PETER O. KLIEM
- ---------------------------- ----------------------------
WITNESS: DAVID S. LAWI
- ---------------------------- ----------------------------
WITNESS: JAMES LEE
- ---------------------------- ----------------------------
WITNESS: DAVID & ESTER MANN, JTWROS
By:
- ---------------------------- ----------------------------
ATTEST: MASSACHUSETTS COMMUNITY
DEVELOPMENT FINANCE CORPORATION
By:
- ---------------------------- ----------------------------
ATTEST: MASSACHUSETTS TECHNOLOGY
DEVELOPMENT CORPORATION
By:
- ---------------------------- ----------------------------
18
WITNESS: POLAROID CORPORATION
- ---------------------------- ----------------------------
WITNESS: P. DANIEL QUINN
- ---------------------------- ----------------------------
ATTEST: RETIREMENT ACCOUNTS, INC. CUST
FBO JAMES F. TWADDLE
By:
- ---------------------------- ----------------------------
WITNESS: JEFFREY RUBIN
- ---------------------------- ----------------------------
WITNESS: HAROLD SCHEIN
- ---------------------------- ----------------------------
WITNESS: K. JOSEPH SHEKARCHI
- ---------------------------- ----------------------------
WITNESS: SHIRLEY HSIN-HUI WANG
- ---------------------------- ----------------------------
19
WITNESS: HARRY HSUAN YEH
- ---------------------------- ----------------------------
EXHIBIT B
AGREEMENT OF MERGER
THIS AGREEMENT OF MERGER ("Merger Agreement"), dated as of August ___,
1996 is between Orbis, Inc., a Rhode Island corporation ("Orbis") and Industrial
Imaging Corporation, Delaware corporation ("Industrial Imaging"). Orbis and
Industrial Imaging are hereafter sometimes collectively referred to as the
"Constituent Corporation."
WHEREAS, Orbis is a corporation duly organized and existing under the
laws of the State of Rhode Island;
WHEREAS, Industrial Imaging is a corporation duly organized and
existing under the laws of the State of Delaware;
WHEREAS, on the date of this Merger Agreement, Orbis, Inc. has
authority to issue _______ shares of Common Stock, $.01 par value per share
("Orbis Common Stock"), ________ shares of which are issued and outstanding;
WHEREAS, on the date of this Merger Agreement, Orbis has authority to
issue twenty million (20,000,000) shares of Common Stock, $.01 par value per
share ("Orbis Common Stock"), of which one (1) share is issued and outstanding,
one million (1,000,000) shares of Preferred Stock, $.01 par value per share, of
which no shares are issued and outstanding;
WHEREAS, the respective Boards of Directors of Orbis and Industrial
Imaging have determined that it is advisable and in the best interests of each
of such corporations to merge in a tax-free reorganization with and into
Industrial Imaging upon the terms and subject to the conditions of this Merger
Agreement; and
WHEREAS, the respective Boards of Directors of Orbis and Industrial
Imaging have, by resolutions duly adopted, approved this Merger Agreement, and
the shareholders of Orbis have duly approved this Merger Agreement, by majority
written consent dated _________, 1996 and the sole shareholder of Industrial
Imaging has, unanimous written consent dated _______, 1996, duly approved this
Merger Agreement;
NOW, THEREFORE, in consideration of the mutual agreements and covenants
set forth herein, Orbis and Industrial Imaging hereby agree as follows:
1. Merger. Orbis will be merged with and into Industrial Imaging (the
"Merger"), and Industrial Imaging shall be the surviving corporation
(hereinafter sometimes referred to as the "Surviving Corporation"). The merger
shall become effective upon the time and date of filing of such documents as may
be required under applicable law ("Effective Time").
2. Governing Documents. The Certificate of Incorporation and the Bylaws
of Industrial Imaging as in effect immediately prior to the Effective Time,
shall be the Certificate of Incorporation of the Surviving Corporation without
change or amendment until thereafter amended in accordance
with the provisions thereof and applicable laws.
3. Succession. At the Effective Time, the separate corporate existence
of Orbis shall cease, and Industrial Imaging shall possess all the rights,
privileges, powers and franchises of a public and private nature and be subject
to all the restrictions, disabilities and duties of Orbis; and all and singular,
the rights, privileges, powers and franchises of Orbis and all property, real,
personal and mixed, and all debts due to Orbis on whatever account, as well as
for share subscriptions and all other things in action or belonging to Orbis
shall be vested in the Surviving Corporation; and all property, rights,
privileges, powers and franchises, and all and every other interest shall be
thereafter as effectually the property of the Surviving Corporation as they were
of Orbis, and the title to any real estate vested by deed or otherwise, under
the laws of the State of Delaware, in Orbis shall not revert or be in any way
impaired by reason of the General Corporation Law of the State of Delaware; but
all rights of creditors and all liens upon any property of Orbis shall be
preserved unimpaired; and all debts, liabilities and duties of Orbis shall
thenceforth attach to the Surviving Corporation and may be enforced against it
to the same extent as if such debts, liabilities and duties had been incurred or
contracted by it. All corporate acts, plans, policies, agreements, arrangements,
approvals and authorizations of Orbis, its shareholders, Board of Directors and
committees thereof, officers and agents which were valid and effective
immediately prior to the Effective Time, shall be taken for all purposes as the
acts, plans, policies, agreements, arrangements, approvals and authorizations of
Industrial Imaging and shall be as effective and binding thereon as the same
were with respect to Orbis.
4. Further Assurances. From time to time, as and when required by
Industrial Imaging or by its successors and assigns, there shall be executed and
delivered on behalf of Orbis such deeds and other instruments, and there shall
be taken or caused to be taken by it all such further and other action, as shall
be appropriate or necessary in order to vest, perfect or confirm, of record or
otherwise, in Industrial Imaging the title to and possession of all property,
interest, assets, rights, privileges, immunities, powers, franchises and
authority of Orbis and otherwise to carry out the purposes of this Merger
Agreement, and the officers and directors of Industrial Imaging are fully
authorized in the name and on behalf of Orbis to take any and all such action
and to execute and deliver any and all deeds and other instruments.
5. Conversion of Shares. At the Effective Time, by virtue of the Merger
and without any action on the part of the holder thereof:
(a) Every eighteen (18) shares of Orbis Common Stock issued
and outstanding immediately prior to the Effective Time shall be
changed and converted into one (1) fully-paid and non-assessable share
of Common Stock of Industrial Imaging.
(b) The one (1) share of Industrial Imaging Common Stock
presently issued and outstanding shall be given to Industrial Imaging
as a capital contribution and shall be cancelled and resume the status
of authorized and unissued shares of Industrial Imaging Common Stock,
and no shares of Industrial Imaging Common Stock or other securities
shall be issued in respect thereof.
6. Conversion of Warrants and Options. At the Effective Time, by virtue
of the Merger
-2-
and without any action on the part of the holder thereof, unless the Board of
Directors determines otherwise, each option and/or warrant to purchase Orbis
Common Stock outstanding immediately prior to the Effective Time shall be
changed and converted into an option and/or warrant to purchase Industrial
Imaging Common Stock on the basis of the following ratio:
(a) Options to purchase eighteen (18) shares of Orbis Common
Stock shall be converted into an option to purchase one (1) share of
Industrial Imaging Common Stock.
(b) Warrants to purchase eighteen (18) shares of Orbis Common
Stock shall be converted into a warrant to purchase one (1) share of
Industrial Imaging Common Stock.
7. Stock Certificates. At and after the Effective Time, all of the
outstanding certificates which immediately prior to the Effective Time
represented shares of Orbis Common Stock shall be presented to Industrial
Imaging to be exchanged for certificates representing shares of Industrial
Imaging Common Stock as converted as herein provided. The registered owner of
any such outstanding certificate shall, until such certificate shall have been
surrendered for transfer or otherwise accounted for to Industrial Imaging or its
transfer agents, have and be entitled to exercise any voting and other rights
with respect to and to receive any dividends and other distributions upon the
shares of Industrial Imaging Common Stock evidenced by such outstanding
certificate as above provided. All certificates representing shares of
Industrial Imaging outstanding immediately prior to the Effective Time shall be
surrendered to Industrial Imaging for cancellation; at and after the Effective
Time, the shares represented by such certificates shall be deemed to be
cancelled whether or not the certificates have been surrendered or otherwise
accounted for.
8. Employee Benefit Plans. As of the Effective Time, Industrial Imaging
hereby assumes all obligations of Orbis under all employee benefit plans in
effect, if any, as of the Effective Time or with respect to which employee
rights or accrued benefits are outstanding, if any, as of the Effective Time.
9. Amendment. Subject to applicable law, this Merger Agreement may be
amended, modified or supplemented by written agreement of the parties hereto at
any time prior to the Effective Time with respect to any of the terms contained
herein.
10. Abandonment. At any time prior to the Effective Time, this Merger
Agreement may be terminated and the Merger may be abandoned by the Board of
Directors of either of Orbis or Industrial Imaging, or either of them,
notwithstanding approval of this Merger Agreement by the stockholders of any of
said corporations if circumstances arise which, in the opinion of the Board of
Directors of Orbis or Industrial Imaging make the Merger inadvisable.
11. Counterparts. In order to facilitate the filing and recording of
this Merger Agreement, the same may be executed in two or more counterparts,
each of which shall be deemed to be an original and the same agreement.
-3-
IN WITNESS WHEREOF, Orbis and Industrial Imaging have caused this
Merger Agreement to be signed by their respective duly authorized officers as of
the date first above written.
Orbis, Inc.
a Rhode Island corporation
By:
----------------------------
Pasquale Ruggieri, President
WITNESS:
- ----------------------------
Arthur G. Jenkins, Secretary
Industrial Imaging Corporation
a Delaware corporation
By:
----------------------------
Juan J. Amodei, Ph.D., President
WITNESS:
- ----------------------------
Juan J. Amodei, Ph.D., Secretary
-4-
EXHIBIT C
CERTIFICATE OF INCORPORATION
OF
INDUSTRIAL IMAGING CORPORATION
*****
1. The name of the corporation is Industrial Imaging Corporation
2. The address of its registered office in the State of Delaware is 1209 Orange
Street, in the City of Wilmington, County of New Castle. The name of its
registered agent at such address is The Corporation Trust Company.
3. The nature of the business or purposes to be conducted or promoted is:
To engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of Delaware.
4. The total number of shares of stock which the Corporation shall have
authority to issue is Twenty-one Million (21,000,000) shares; of which twenty
million (20,000,000) will be Common Stock, of the par value $.01 per share; and
one million (1,000,000) will be preferred stock, of the par value $.01 per
share, amounting in the aggregate to Two Hundred Ten Thousand and 00/100 Dollars
($210,000.00).
Additional designations and powers, preferences and rights and
qualifications, limitations or restrictions thereof of the shares of each class
shall be determined by the Board of Directors of the Corporation from time to
time.
5. The name and mailing address of the Corporation's incorporator is Juan J.
Amodei, Ph.D., Industrial Imaging Corporation, One Lowell Research Center, 847
Rogers Street, Lowell, Massachusetts 01852.
6. The name and address of the person who is to serve as the sole director of
the Corporation until the first annual meeting of the stockholders or until his
successors are elected and qualified is:
Juan J. Amodei, Ph.D.
Industrial Imaging Corporation
One Lowell Research Center
847 Rogers Street
Lowell, Massachusetts 01852
7. The Corporation is to have perpetual existence.
8. In furtherance and not in limitation of the powers conferred by statute, the
Board of Directors is expressly authorized:
To make, alter or repeal the bylaws of the Corporation.
To authorize and cause to be executed mortgages and liens upon the real and
personal property of the Corporation.
To set apart out of any of the funds of the Corporation available for
dividends a reserve or reserves for any proper purpose and to abolish any such
reserve in the manner in which it was created.
By a majority of the whole Board, to designate one or more committees, each
committee to consist of one or more of the Directors of the Corporation. The
Board may designate one or more directors as alternate members of any committee,
who may replace any absent or disqualified member at any meeting of the
committee. The bylaws may provide that in the absence or disqualification of a
member of a committee, the member or members thereof present at any meeting and
not disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such agent or disqualified member. Any such
committee, to the extent provided in the resolution of the Board of Directors,
or in the bylaws of the corporation, shall have and may exercise all the powers
and authority of the Board of Directors in the management of the business and
affairs of the Corporation, and may authorize the seal of the Corporation to be
affixed to all papers which may require it; but no such committee shall have the
power or authority in reference to amending the certificate of incorporation,
adopting an agreement of merger or consolidation, recommending to the
stockholders the sale, lease, or exchange of all or substantially all of the
corporation's property and assets, recommending to the stockholders a
dissolution of the corporation or a revocation of a dissolution, or amending the
bylaws of the corporation; and, unless the resolution or bylaws expressly so
provide, no such committee shall have the power or authority to declare a
dividend or to authorize the issuance of stock.
When and as authorized by the stockholders in accordance with statute, to
sell, lease or exchange all or substantially all of the property and assets of
the corporation, including its goodwill and its corporate franchises, upon such
terms and conditions and for such consideration, which may consist in whole or
in part of money or property, including shares of stock in, and/or other
securities of, any other corporation or corporation, as its board of directors
shall deem expedient and for the best interests of the corporation.
9. To the maximum extent permitted by Section 102(b)(7) of the General
Corporation Law of Delaware, a director of this Corporation shall not be
personally liable to the Corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director, except for liability (i) for any
breach of the director's duty of loyalty to the Corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the
Delaware General Corporation Law, or (iv) for any transaction from which the
director derived an improper personal benefit.
-2-
10. Whenever a compromise or arrangement is proposed between this corporation
and its creditors or any class of them and/or between this corporation and its
stockholders or any class of them, any court or equitable jurisdiction within
the State of Delaware may, on the application in a summary way of this
corporation or of any creditor or stockholder thereof, or on the application of
any receiver or receivers appointed for this corporation under the provisions of
Section 291 of Title 8 of the Delaware Code or on the application of trustees in
dissolution or of any receiver or receivers appointed for this corporation under
the provisions of Section 279 of Title 8 of the Delaware Code, order a meeting
of the creditors or class of creditors, and/or of the stockholders or class of
stockholders of this corporation, as the case may be, to be summoned in such
manner as the said court directors. If a majority in number representing
three-fourths in value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this corporation, as the case may be,
agree to any compromise or arrangement to any reorganization of this corporation
as consequences of such compromise or arrangement, the said compromise or
arrangement and the said reorganization shall, if sanctioned by the court to
which the said application has been made, be binding on all the creditors or
class of creditors, and/or on all the stockholders or class of stockholders of
this corporation, as the case may be, and also on this corporation.
11. Meetings of the stockholders may be held within or without the State of
Delaware, as the bylaws may provide. The books of the corporation may be kept
(subject to any provision contained in the statutes) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the bylaws of the corporation. Elections of directors
need not be by written ballot unless the bylaws of the corporation shall so
provide.
12. The corporation reserves the right to amend, alter, change, or repeal any
provision contained in this certificate of incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-3-
THE UNDERSIGNED, being the incorporator named hereinbefore, for the purposes
of forming a corporation pursuant to the General Corporation Law of the State of
Delaware, does make this certificate, hereby declaring and certifying that this
is his act and deed and the facts herein stated are true, and accordingly, has
hereunto set his hand this ____day of_________ , 1996.
______________________________
Juan J. Amodei, Ph.D.
COMMONWEALTH OF MASSACHUSETTS )
) ss.:
COUNTY OF MIDDLESEX )
BE IT REMEMBERED that on this day___ of______, 1996, personally came before
me, a Notary Public for the Commonwealth of Massachusetts, Juan J. Amodei,
Ph.D., the party to the foregoing Certificate of Incorporation, known to me
personally to be such, and acknowledged the said certificate to be his act and
deed and that the facts stated therein are true.
GIVEN under my hand and seal of office the day and year aforesaid.
-------------------------------
Notary Public
My commission expires:
-4-
BYLAWS
OF
INDUSTRIAL IMAGING CORPORATION
Article I. Offices.
Section 1. Registered Office. The registered office of the Corporation
shall be at The Corporation Trust Company, 1209 Orange Street, in the City of
Wilmington, County of New Castle, State of Delaware 19801.
Section 2. Additional Offices. The Corporation may also have offices at
such other places, both within and without the State of Delaware, as the Board
of Directors may from time to time determine or as the business of the
Corporation may require.
Article II. Meetings of Stockholders.
Section 1. Time and Place. A meeting of stockholders for any purpose
may be held at such time and place within or without the State of Delaware as
shall be stated in the notice of the meeting or in a duly executed waiver of
notice thereof.
Section 2. Annual Meeting. Annual meetings of stockholders, commencing
with the year 1997, shall be held on the first Monday in May at 10:00 a.m., or
at such other date and time as shall, from time to time, be designated by the
Board of Directors and stated in the notice of the meeting. At such annual
meetings, the stockholders shall elect a Board of Directors and transact such
other business as may properly be brought before the meetings.
Section 3. Notice of Annual Meeting. Written notice of the annual
meeting, stating the place, date, and time thereof, shall be given to each
stockholder entitled to vote at such meeting not less than ten (unless a longer
period is required by law) nor more than sixty days prior to the meeting.
Section 4. Special Meetings. Special meetings of the stockholders may
be called for any purpose or purposes, unless otherwise prescribed by statute or
by the Certificate of Incorporation, by the Chairman of the Board, if any, or
the President, and shall be called by the President or Secretary at the request,
in writing, of a majority of the Board of Directors or of the stockholders
owning a majority of the shares of capital stock of the Corporation issued and
outstanding and entitled to vote. Such request shall state the purpose of the
proposed meeting.
Section 5. Notice of Special Meeting. Written notice of a special
meeting, stating the place, date, and time thereof and the purpose or purposes
for which the meeting is called, shall be given to each stockholder entitled to
vote at such meeting not less than ten (unless a longer period is required by
law) nor more than sixty days prior to the meeting.
Section 6. List of Stockholders. The transfer agent or the officer in
charge of the stock ledger of the Corporation shall prepare and make, at least
ten days before every meeting of stockholders, a complete list of the
stockholders entitled to vote at the meeting, arranged in alphabetical order,
and showing the address of each stockholder and the number of shares registered
in the name of each stockholder. Such list shall be open to the examination of
any stockholder, for any purpose germane to the meeting, during ordinary
business hours, for a period of at least ten days prior to the meeting, at a
place within the city where the meeting is to be held, which place, if other
than the place of the meeting, shall be specified in the notice of the meeting.
The list shall also be produced and kept at the place of the meeting during the
whole time thereof and may be inspected by any stockholder who is present in
person thereat.
Section 7. Presiding Officer and Order of Business.
(a) Meetings of stockholders shall be presided over by the Chairman of
the Board. If he is not present or there is none, they shall be presided over by
the President, or, if he is not present or there is none, by a Vice President,
or, if he is not present or there is none, by a person chosen by the Board of
Directors, or, if no such person is present or has been chosen, by a chairman to
be chosen by the stockholders owning a majority of the shares of capital stock
of the Corporation issued and outstanding and entitled to vote at the meeting
and who are present in person or represented by proxy. The Secretary of the
Corporation, or, if he is not present, an Assistant Secretary, or, if he is not
present, a person chosen by the Board of Directors, shall act as Secretary at
meetings of stockholders; if no such person is present or has been chosen, the
stockholders owning a majority of the shares of capital stock of the Corporation
issued and outstanding and entitled to vote at the meeting who are present in
person or represented by proxy shall choose any person present to act as
secretary of the meeting.
(b) The following order of business, unless otherwise determined at the
meeting, shall be observed as far as practicable and consistent with the
purposes of the meeting:
(1) Call of the meeting to order.
(2) Presentation of proof of mailing of the notice of the
meeting and, if the meeting is a special meeting, the
call thereof.
(3) Presentation of proxies.
(4) Announcement that a quorum is present.
(5) Reading and approval of the minutes of the previous
meeting.
(6) Reports, if any, of officers.
(7) Election of directors, if the meeting is an annual
meeting or a meeting called for that purpose.
(8) Consideration of the specific purpose or purposes,
other than the election of directors, for which the
meeting has been called, if the meeting is a special
meeting.
(9) Transaction of such other business as may properly
come before the meeting.
(10) Adjournment.
-2-
Section 8. Quorum and Adjournments. The presence in person or
representation by proxy of the holders of a majority of the shares of the
capital stock of the Corporation issued and outstanding and entitled to vote
shall be necessary to, and shall constitute a quorum for, the transaction of
business at all meetings of the stockholders, except as otherwise provided by
statute or by the Certificate of Incorporation. If, however, a quorum shall not
be present or represented at any meeting of the stockholders, the stockholders
entitled to vote thereat who are present in person or represented by proxy shall
have the power to adjourn the meeting from time to time until a quorum shall be
present or represented. If the time and place of the adjourned meeting are
announced at the meeting at which the adjournment is taken, no further notice of
the adjourned meeting need be given. Even if a quorum shall be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat who are present in person or represented by proxy shall have the
power to adjourn the meeting from time to time for good cause to a date that is
not more than thirty days after the date of the original meeting. Further notice
of the adjourned meeting need not be given if the time and place thereof are
announced at the meeting at which the adjournment is taken. At any adjourned
meeting at which a quorum is present in person or represented by proxy, any
business may be transacted that might have been transacted at the meeting as
originally called. If the adjournment is for more than thirty days, or if, after
the adjournment, a new record date is fixed for the adjourned meeting, a notice
of the adjourned meeting shall be given to each stockholder of record entitled
to vote thereat.
Section 9. Voting.
(a) At any meeting of the stockholders, every stockholder having the
right to vote shall be entitled to vote in person or by proxy. Except as
otherwise provided by law or the Certificate of Incorporation, each stockholder
of record shall be entitled to one vote for each share of capital stock
registered in his name on the books of the Corporation.
(b) All elections shall be determined by a plurality vote, and, except
as otherwise provided by law or the Certificate of Incorporation, all other
matters shall be determined by a vote of a majority of the shares present in
person or represented by proxy and voting on such other matters.
Section 10. Action by Consent. Any action required or permitted by law
or the Certificate of Incorporation to be taken at any meeting of stockholders
may be taken without a meeting, without prior notice of a written consent,
setting forth the action so taken, shall be signed by the holders of outstanding
stock having not less than the minimum number of votes that would be necessary
to authorize or take such action at a meeting at which all shares entitled to
vote thereon were present or represented by proxy and voted. Such written
consent shall be filed with the minutes of the meetings of stockholders. Prompt
notice of the taking of the corporate action without a meeting by less than
unanimous written consent shall be given to those stockholders who have not
consented in writing thereto.
Article III. Directors.
Section 1. General Powers, Number, and Tenure. The business of the
Corporation shall be managed by its Board of Directors, which may exercise all
powers of the Corporation and
-3-
perform all lawful acts that are not by law, the Certificate of Incorporation,
or these Bylaws directed or required to be exercised or performed by the
stockholders. The number of directors shall be determined by the Board of
Directors; if no such determination is made, the number of directors shall be
one. The directors shall be elected at the annual meeting of the stockholders,
except as provided in Section 2 of this Article, and each director elected shall
hold office until the next annual meeting and until his successor is elected and
shall qualify. Directors need not be stockholders.
Section 2. Vacancies. If any vacancies occur in the Board of Directors,
or if any new directorships are created, they may be filled by a majority of the
directors then in office, although less than a quorum, or by a sole remaining
director. Each director so chosen shall hold office until the next annual
meeting of stockholders and until his successor is duly elected and shall
qualify. If there are no directors in office, any officer or stockholder may
call a special meeting of stockholders in accordance with the provisions of the
Certificate of Incorporation or these Bylaws, at which meeting such vacancies
shall be filled.
Section 3. Removal or Resignation.
(a) Except as otherwise provided by law or the Certificate of
Incorporation, any director or the entire Board of Directors may be removed,
with or without cause, by the holders of a majority of the shares then entitled
to vote at an election of directors.
(b) Any director may resign at any time by giving written notice to the
Board of Directors, the Chairman of the Board, if any, or the President or
Secretary of the Corporation. Unless otherwise specified in such written notice,
a resignation shall take effect on delivery thereof to the Board of Directors or
the designated officer. It shall not be necessary for a resignation to be
accepted before it becomes effective.
Section 4. Place of Meetings. The Board of Directors may hold meetings,
both regular and special, either within or without the State of Delaware.
Section 5. Annual Meeting. The annual meeting of each newly elected
Board of Directors shall be held immediately following the annual meeting of
stockholders, and no notice of such meeting shall be necessary to the newly
elected directors in order to constitute the meeting legally, provided a quorum
shall be present.
Section 6. Regular Meetings. Additional regular meetings of the Board
of Directors may be held without notice of such time and place as may be
determined from time to time by the Board of Directors.
Section 7. Special Meetings. Special meetings of the Board of Directors
may be called by the Chairman of the Board, the President, or by two or more
directors on at least two days' notice to each director, if such notice is
delivered personally or sent by telegram, or on at least three days' notice if
sent by mail. Special meetings shall be called by the Chairman of the Board,
President, Secretary, or two or more directors in like manner and on like notice
on the written request of one-half or more of the number of directors then in
office. Any such notice need not state the purpose or purposes of such meeting,
except as provided in Article XI.
-4-
Section 8. Quorum and Adjournments. At all meetings of the Board of
Directors, a majority of the directors then in office shall constitute a quorum
for the transaction of business, and the act of a majority of the directors
present at any meeting at which there is a quorum shall be the act of the Board
of Directors, except as may be otherwise specifically provided by law or the
Certificate of Incorporation. If a quorum is not present at any meeting of the
Board of Directors, the directors present may adjourn the meeting from time to
time, without notice other than announcement at the meeting at which the
adjournment is taken, until a quorum shall be present.
Section 9. Compensation. Directors shall be entitled to such
compensation for their services as directors and to such reimbursement for any
reasonable expenses incurred in attending directors' meetings as may from time
to time be fixed by the Board of Directors. The compensation of directors may be
on such basis as is determined by the Board of Directors. Any director may waive
compensation for any meeting. Any director receiving compensation under these
provisions shall not be barred from serving the Corporation in any other
capacity and receiving compensation and reimbursement for reasonable expenses
for such other services.
Section 10. Action by Consent. Any action required or permitted to be
taken at any meeting of the Board of Directors may be taken without a meeting,
and without prior notice, if a written consent to such action is signed by all
members of the Board of Directors and such written consent is filed with the
minutes of its proceedings.
Section 11. Meetings by Telephone or Similar Communications Equipment.
The Board of Directors may participate in a meeting by conference telephone or
similar communications equipment by means of which all directors participating
in the meeting can hear each other, and participation in such a meeting shall
constitute presence in person by any such director at such meeting.
Article IV. Committees.
Section 1. Executive Committee. The Board of Directors, by resolution
adopted by a majority of the whole Board, may appoint an Executive Committee
consisting of one or more directors, one of whom shall be designated as Chairman
of the Executive Committee. Each member of the Executive Committee shall
continue as a member thereof until the expiration of his term as a director or
his earlier resignation, unless sooner removed as a member or as a director.
Section 2. Powers. The Executive Committee shall have and may exercise
those rights, powers, and authority of the Board of Directors as may from time
to time be granted to it by the Board of Directors to the extent permitted by
law, and may authorize the seal of the Corporation to be affixed to all papers
that may require it.
Section 3. Procedure and Meetings. The Executive Committee shall fix
its own rules of procedure and shall meet at such times and at such place or
places as may be provided by such rules or as the members of the Executive
Committee shall fix. The Executive Committee shall keep regular minutes of its
meetings, which it shall deliver to the Board of Directors from time to time.
-5-
The Chairman of the Executive Committee or, in his absence, a member of the
Executive Committee chosen by a majority of the members present, shall preside
at meetings of the Executive Committee; and another member chosen by the
Executive Committee shall act as Secretary of the Executive Committee.
Section 4. Quorum. A majority of the Executive Committee shall
constitute a quorum for the transaction of business, and the affirmative vote of
a majority of the members present at any meeting at which there is a quorum
shall be required for any action of the Executive Committee; provided, however,
that when an Executive Committee of one member is authorized under the
provisions of Section 1 of this Article, that one member shall constitute a
quorum.
Section 5. Other Committees. The Board of Directors, by resolutions
adopted by a majority of the whole Board, may appoint such other committee or
committees as it shall deem advisable and with such rights, power, and authority
as it shall prescribe. Each such committee shall consist of one or more
directors.
Section 6. Committee Changes. The Board of Directors shall have the
power at any time to fill vacancies in, to change the membership of, and to
discharge any committee.
Section 7. Compensation. Members of any committee shall be entitled to
such compensation for their services as members of the committee and to such
reimbursement for any reasonable expenses incurred in attending committee
meetings as may from time to time be fixed by the Board of Directors. Any member
may waive compensation for any meeting. Any committee member receiving
compensation under these provisions shall not be barred from serving the
Corporation in any other capacity and from receiving compensation and
reimbursement of reasonable expenses for such other services.
Section 8. Action by Consent. Any action required or permitted to be
taken at any meeting of any committee of the Board of Directors may be taken
without a meeting if a written consent to such action is signed by all members
of the committee and such written consent is filed with the minutes of its
proceedings.
Section 9. Meetings by Telephone or Similar Communications Equipment.
The members of any committee designated by the Board of Directors may
participate in a meeting of such committee by conference telephone or similar
communications equipment by means of which all persons participating in such
meeting can hear each other, and participation in such a meeting shall
constitute presence in person by any such committee member at such meeting.
Article V. Notices.
Section 1. Form and Delivery. Whenever a provision of any law, the
Certificate of Incorporation, or these Bylaws requires that notice be given to
any director or stockholder, it shall not be construed to require personal
notice unless so specifically provided, but such notice may be
-6-
given in writing, by mail addressed to the address of the director or
stockholder as it appears on the records of the Corporation, with postage
prepaid. These notices shall be deemed to be given when they are deposited in
the United States mail. Notice to a director may also be given personally or by
telephone or by telegram sent to his address as it appears on the records of the
Corporation.
Section 2. Waiver. Whenever any notice is required to be given under
the provisions of any law, the Certificate of Incorporation, or these Bylaws, a
written waiver thereof signed by the person entitled to said notice, whether
before or after the time stated therein, shall be deemed to be equivalent to
such notice. In addition, any stockholder who attends a meeting of stockholders
in person or is represented at such meeting by proxy, without protesting at the
commencement of the meeting the lack of notice thereof to him, or any director
who attends a meeting of the Board of Directors without protesting at the
commencement of the meeting of the lack of notice, shall be conclusively deemed
to have waived notice of such meeting.
Article VI. Officers.
Section 1. Designations. The officers of the Corporation shall be
chosen by the Board of Directors. The Board of Directors may choose a Chairman
of the Board, a President, a Vice President or Vice Presidents, a Secretary, a
Treasurer, one or more Assistant Secretaries and/or Assistant Treasurers, and
other officers and agents that it shall deem necessary or appropriate. All
officers of the Corporation shall exercise the powers and perform the duties
that shall from time to time be determined by the Board of Directors. Any number
of offices may be held by the same person, unless the Certificate of
Incorporation or these Bylaws provide otherwise.
Section 2. Term of, and Removal From, Office. At its first regular
meeting after each annual meeting of stockholders, the Board of Directors shall
choose a President, a Secretary, and a Treasurer. It may also choose a Chairman
of the Board, a Vice President or Vice Presidents, one or more Assistant
Secretaries and/or Assistant Treasurers, and such other officers and agents as
it shall deem necessary or appropriate. Each officer of the Corporation shall
hold office until his successor is chosen and shall qualify. Any officer elected
or appointed by the Board of Directors may be removed, with or without cause, at
any time by the affirmative vote of a majority of the directors then in office.
Removal from office, however, shall not prejudice the contract rights, if any,
of the person removed. Any vacancy occurring in any office of the Corporation
may be filled for the unexpired portion of the term by the Board of Directors.
Section 3. Compensation. The salaries of all officers of the
Corporation shall be fixed from time to time by the Board of Directors, and no
officer shall be prevented from receiving a salary because he is also a director
of the Corporation.
Section 4. The Chairman of the Board. The Chairman of the Board, if
any, shall be an officer of the Corporation and, subject to the direction of the
Board of Directors, shall perform such executive, supervisory, and management
functions and duties as may be assigned to him from time to time by the Board of
Directors. He shall, if present, preside at all meetings of stockholders and of
the Board of Directors.
-7-
Section 5. The President.
(a) The President shall be the chief executive officer of the
Corporation and, subject to the direction of the Board of Directors, shall have
general charge of the business, affairs, and property of the Corporation and
general supervision over its other officers and agents. In general, he shall
perform all duties incident to the office of President and shall see that all
orders and resolutions of the Board of Directors are carried into effect.
(b) Unless otherwise prescribed by the Board of Directors, the
President shall have full power and authority to attend, act, and vote on behalf
of the Corporation at any meeting of the security holders of other corporations
in which the Corporation may hold securities. At any such meeting, the President
shall possess and may exercise any and all rights and powers incident to the
ownership of such securities that the Corporation might have possessed and
exercised if it had been present. The Board of Directors may from time to time
confer like powers upon any other person or persons.
Section 6. The Vice President. The Vice President, if any, or in the
event there be more than one, the Vice Presidents in the order designated, or in
the absence of any designation, in the order of their election, shall, in the
absence of the President or in the event of his disability, perform the duties
and exercise the powers of the President and shall generally assist the
President and perform such other duties and have such other powers as may from
time to time be prescribed by the Board of Directors.
Section 7. The Secretary. The Secretary shall attend all meetings of
the Board of Directors and the stockholders and record all votes and the
proceedings of the meetings in a book to be kept for that purpose. He shall
perform like duties for the Executive Committee or other committees, if
required. He shall give, or cause to be given, notice of all meetings of
stockholders and special meetings of the Board of Directors, and shall perform
such other duties as may from time to time be prescribed by the Board of
Directors, the Chairman of the Board, or the President, under whose supervision
he shall act. He shall have custody of the seal of the Corporation, and he, or
an Assistant Secretary, shall have authority to affix it to any instrument
requiring it, and, when so affixed, the seal may be attested by his signature or
by the signature of the Assistant Secretary. The Board of Directors may give
general authority to any other officer to affix the seal of the Corporation and
to attest the affixing thereof by his signature.
Section 8. The Assistant Secretary. The Assistant Secretary, if any, or
in the event there be more than one, the Assistant Secretaries in the order
designated, or in the absence of any designation, in the order of their
election, shall, in the absence of the Secretary or in the event of his
disability, perform the duties and exercise the powers of the Secretary and
shall perform such other duties and have such other powers as may from time to
time be prescribed by the Board of Directors.
Section 9. The Treasurer. The Treasurer shall have custody of the
corporate funds and other valuable effects, including securities, and shall keep
full and accurate accounts of receipts and disbursements in books belonging to
the Corporation and shall deposit all moneys and other valuable effects in the
name and to the credit of the Corporation in such depositories as may from time
to time
-8-
be designated by the Board of Directors. He shall disburse the funds of the
Corporation in accord with the orders of the Board of Directors, taking proper
vouchers for such disbursements, and shall render to the Chairman of the Board,
if any, the President, and the Board of Directors, whenever they may require it
or at regular meetings of the Board, an account of all his transactions as
Treasurer and of the financial condition of the Corporation.
Section 10. The Assistant Treasurer. The Assistant Treasurer, if any,
or in the event there shall be more than one, the Assistant Treasurers in the
order designated, or in the absence of any designation, in the order of their
election, shall, in the absence of the Treasurer or in the event of his
disability, perform such other duties and have such other powers as may from
time to time be prescribed by the Board of Directors.
Article VII. Indemnification.
Reference is made to Section 145 and any other relevant provisions of
the General Corporation Law of the State of Delaware. Particular reference is
made to the class of persons, hereinafter called "Indemnitees", who may be
indemnified by a Delaware corporation pursuant to the provisions of such Section
145, namely, any person, or the heirs, executors, or administrators of such
person, who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit, or proceeding, whether civil,
criminal, administrative, or investigative, by reason of the fact that such
person is or was a director, officer, employee, or agent of such corporation or
is or was serving at the request of such corporation as a director, officer,
employee, or agent of such corporation or is or was serving at the request of
such corporation as a director, officer, employee, or agent of another
corporation, partnership, joint venture, trust, or other enterprise. The
Corporation shall, and is hereby obligated to, indemnify the Indemnitees, and
each of them, in each and every situation where the Corporation is obligated to
make such indemnification pursuant to the aforesaid statutory provisions. The
Corporation shall indemnify the Indemnitees, and each of them, in each and every
situation where, under the aforesaid statutory provisions, the Corporation is
not obligated, but is nevertheless permitted or empowered, to make such
indemnification, it being understood that, before making such indemnification
with respect to any situation covered under this sentence, (i) the Corporation
shall promptly make or cause to be made, by any of the methods referred to in
Subsection (d) of such Section 145, a determination as to whether each
Indemnitee acted in good faith and in a manner he reasonably believed to be in,
or not opposed to, the best interests of the Corporation, and, in the case of
any criminal action or proceeding, had no reasonable cause to believe that his
conduct was unlawful, and (ii) that no such indemnification shall be made unless
it is determined that such Indemnitee acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interests of the
Corporation, and, in the case of any criminal action or proceeding, had no
reasonable cause to believe that his conduct was unlawful.
-9-
Article VIII. Affiliated Transactions and Interested Directors.
Section 1. Affiliated Transactions. No contract or transaction between
the Corporation and one or more of its directors or officers, or between the
Corporation and any other corporation, partnership, association, or other
organization in which one or more of its directors or officers are directors or
officers or have a financial interest, shall be void or voidable solely for this
reason, or solely because the director or officer is present at or participates
in the meeting of the Board of Directors or committee thereof that authorizes
the contract or transaction or solely because his or their votes are counted for
such purpose if:
(a) The material facts as to his relationship or interest and as to the
contract or transaction are disclosed or are known to the Board of Directors or
the committee, and the Board of Directors or committee in good faith authorizes
the contract or transaction by the affirmative vote of a majority of the
disinterested directors, even though the disinterested directors be less than a
quorum; or
(b) The material facts as to his relationship or interest and as to the
contract or transaction are disclosed or are known to the stockholders entitled
to vote thereon, and the contract or transaction is specifically approved in
good faith by the vote of the stockholders; or
(c) The contract or transaction is fair as to the Corporation as of the
time it is authorized, approved, or ratified by the Board of Directors, a
committee thereof, or the stockholders.
Section 2. Determining Quorum. Common or interested directors may be
counted in determining the presence of a quorum at a meeting of the Board of
Directors or of a committee thereof which authorizes the contract or
transaction.
Article IX. Stock Certificates.
Section 1. Form and Signatures.
(a) Every holder of stock of the Corporation shall be entitled to a
certificate stating the number and class, and series, if any, of shares owned by
him, signed by the Chairman of the Board, if any, or the President and the
Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary
of the Corporation, and bearing the seal of the Corporation. The signatures and
the seal may be facsimiles. A certificate may be signed, manually or by
facsimile, by a transfer agent or registrar other than the Corporation or its
employee. In case any officer who has signed, or whose facsimile signature was
placed on, a certificate shall have ceased to be such officer before the
certificate is issued, it may nevertheless be issued by the Corporation with the
same effect as if he were such officer at the date of its issue.
(b) All stock certificates representing shares of capital stock that
are subject to restrictions on transfer or to other restrictions may have
imprinted thereon any notation to that effect determined by the Board of
Directors.
-10-
Section 2. Registration of Transfer. Upon surrender to the Corporation
or any transfer agent of the Corporation of a certificate for shares duly
endorsed or accompanied by proper evidence of succession, assignment, or
authority to transfer, the Corporation or its transfer agent shall issue a new
certificate to the person entitled thereto, cancel the old certificate, and
record the transaction upon the books of the Corporation.
Section 3. Registered Stockholders.
(a) Except as otherwise provided by law, the Corporation shall be
entitled to recognize the exclusive right of a person who is registered on its
books as the owner of shares of its capital stock to receive dividends or other
distributions and to vote or consent as such owner, and to hold liable for calls
and assessments any person who is registered on its books as the owner of shares
of its capital stock. The Corporation shall not be bound to recognize any
equitable or legal claim to, or interest in, such shares on the part of any
other person.
(b) If a stockholder desires that notices and/or dividends shall be
sent to a name or address other than the name or address appearing on the stock
ledger maintained by the Corporation, or its transfer agent or registrar, if
any, the stockholder shall have the duty to notify the Corporation, or its
transfer agent or registrar, if any, in writing of his desire and specify the
alternate name or address to be used.
Section 4. Record Date. In order that the Corporation may determine the
stockholders of record who are entitled to receive notice of, or to vote at, any
meeting of stockholders or any adjournment thereof or to express consent to
corporate action in writing without a meeting, to receive payment of any
dividend or other distribution or allotment of any rights, or to exercise any
rights in respect of any change, conversion, or exchange of stock or for the
purpose of any lawful action, the Board of Directors may, in advance, fix a date
as the record date for any such determination. Such date shall not be more than
sixty nor less than ten days before the date of such meeting, nor more than
sixty days prior to the date of any other action. A determination of
stockholders of record entitled to notice of, or to vote at, a meeting of
stockholders shall apply to any adjournment of the meeting taken pursuant to
Section 8 of Article II; provided, however, that the Board of Directors may fix
a new record date for the adjourned meeting.
Section 5. Lost, Stolen, or Destroyed Certificates. The Board of
Directors may direct that a new certificate be issued to replace any certificate
theretofore issued by the Corporation that, it is claimed, has been lost,
stolen, or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate to be lost, stolen, or destroyed. When authorizing the
issue of a new certificate, the Board of Directors may, in its discretion and as
a condition precedent to the issuance thereof, require the owner of the lost,
stolen, or destroyed certificate, or his legal representative, to advertise the
same in such manner as it shall require, and/or to give the Corporation a bond
in such sum, or other security in such form, as it may direct as indemnity
against any claims that may be made against the Corporation with respect to the
certificate claimed to have been lost, stolen, or destroyed.
-11-
Article X. General Provisions.
Section 1. Dividends. Subject to the provisions of law and the
Certificate of Incorporation, dividends upon the outstanding capital stock of
the Corporation may be declared by the Board of Directors at any regular or
special meeting, and may be paid in cash, in property, or in shares of the
Corporation`s capital stock.
Section 2. Reserves. The Board of Directors shall have full power,
subject to the provisions of law and the Certificate of Incorporation, to
determine whether any, and, if so, what part, of the funds legally available for
the payment of dividends shall be declared as dividends and paid to the
stockholders of the Corporation. The Board of Directors, in its sole discretion,
may fix a sum that may be set aside or reserved over and above the paid-in
capital of the Corporation as a reserve for any proper purpose, and may, from
time to time, increase, diminish, or vary such amount.
Section 3. Fiscal Year. Except as from time to time otherwise provided
by the Board of Directors, the fiscal year of the Corporation shall end March 31
of each year.
Section 4. Seal. The corporate seal shall have inscribed thereon the
name of the Corporation, the year of its incorporation, and the words "Corporate
Seal" and "Delaware".
Article XI. Amendments.
The Board of Directors shall have the power to alter and repeal these
Bylaws and to adopt new Bylaws by an affirmative vote of a majority of the whole
Board, provided that notice of the proposal to alter or repeal these Bylaws or
to adopt new Bylaws must be included in the notice of the meeting of the Board
of Directors at which such action takes place.
-12-
EXHIBIT D
TRIPLE I CORPORATION
FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 1995 AND 1994
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Triple I Corporation:
We have audited the accompanying balance sheets of Triple I Corporation as
of September 30, 1995 and 1994, and the related statements of operations and
shareholders' equity and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Triple I Corporation at
September 30, 1995 and 1994, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note A to the
financial statements, the Company has suffered recurring losses from operations
and has a net capital deficiency that raise substantial doubt about its ability
to continue as a going concern. Management's plans in regard to these matters
include equity financing as described in Note A. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
Boston, Massachusetts
April 8, 1996
TRIPLE I CORPORATION
BALANCE SHEETS
as of September 30, 1995 and 1994
<TABLE>
<CAPTION>
ASSETS 1995 1994
---- ----
<S> <C> <C>
Cash $ 6,218 $ 0
Accounts receivable, net of allowance for doubtful accounts of
$7,000 in 1995 and $21,707 in 1994 (Notes B and C) 54,528 241,664
Inventory (Notes B and D) 794,821 492,338
Prepaid expenses 5,115 10,801
----------- -----------
Total current assets 860,682 744,803
Property and equipment, net (Notes B and E) 50,180 84,792
Patents, net (Notes B and F) 221,354 327,604
Other assets 10,786 10,476
----------- -----------
Total assets $ 1,143,002 $ 1,167,675
=========== ===========
LIABILITIES AND SHAREHOLDERS' (DEFICIT)
Current liabilities:
Notes payable (Notes I and J) 930,056 611,641
Accounts payable 299,373 185,867
Deferred revenue (Notes B and G) 679,725 315,653
Accrued expenses (Note H) 700,419 408,988
----------- -----------
Total current liabilities 2,609,573 1,522,149
Notes payable - long-term portion (Notes I and J) 658,000 594,971
----------- -----------
Total liabilities 3,267,573 2,117,120
Commitments and contingencies (Note G)
Shareholders' equity (Notes I, J, L, and N):
Common stock, par value $.01 per share, authorized 250,000 shares, 78,320 and
63,890 shares issued and outstanding at September 30, 1995 and 1994, respectively 783 639
Series A Preferred Stock, par value $.01 per share, authorized 50,000 shares,
31,660 shares issued and outstanding at September 30, 1995 and 1994, respectively 317 317
Series B Preferred Stock, par value $.01 per share, authorized 15,000 shares,
0 shares issued and outstanding at September 30, 1995 and 1994, respectively -- --
Additional paid-in capital 2,786,123 2,386,267
Accumulated deficit (4,911,794) (3,336,668)
----------- -----------
Total shareholders' deficit (2,124,571) (949,445)
----------- -----------
Total liabilities and shareholders' deficit $ 1,143,002 $ 1,167,675
=========== ===========
</TABLE>
The accompanying notes are an integral part of the
financial statements.
2
TRIPLE I CORPORATION
STATEMENTS OF OPERATIONS
for the years ended September 30, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Revenues (Note B):
Product $ 986,660 $ 936,783
Services 238,363 373,365
----------- -----------
1,225,023 1,310,148
----------- -----------
Cost of revenues:
Product 730,180 783,213
Services 412,402 413,852
----------- -----------
1,142,582 1,197,065
----------- -----------
Gross profit 82,441 113,083
----------- -----------
Operating expenses:
Research and development (Notes B and G) 505,147 468,075
Sales and marketing 218,704 370,859
General and administrative 814,094 680,824
----------- -----------
Total operating expenses 1,537,945 1,519,758
----------- -----------
Loss from operations (1,455,504) (1,406,675)
Other income (expense):
Interest expense (Notes C and I) (126,189) (83,311)
Other, net 6,567 (16,577)
----------- -----------
Other expense, net (119,622) (99,888)
Loss before income taxes (1,575,126) (1,506,563)
Provision for income taxes (Notes B and K) -- --
----------- -----------
Net loss $(1,575,126) $(1,506,563)
=========== ===========
</TABLE>
The accompanying notes are an integral part of the
financial statements.
3
TRIPLE I CORPORATION
STATEMENTS OF CASH FLOWS
for the years ended September 30, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net loss $(1,575,126) $(1,506,563)
Adjustments to reconcile net loss to net cash used in operating activities:
Loss on disposal of fixed assets -- 5,554
Depreciation 34,612 33,290
Amortization 106,250 106,250
Provision for doubtful accounts (14,707) 9,704
Changes in assets and liabilities:
Accounts receivable 201,843 (193,219)
Inventory (302,483) 70,493
Prepaid expenses 5,686 (1,384)
Other assets (310) (1,076)
Accounts payable 113,506 78,350
Deferred revenue 364,072 45,538
Accrued expenses 291,431 183,832
----------- -----------
Net cash used in operating activities (775,226) (1,169,231)
----------- -----------
Cash flows from investing activities:
Capital expenditures -- (14,996)
Proceeds from sale of fixed assets -- 1,307
----------- -----------
Net cash used in investing activities -- (13,689)
----------- -----------
Cash flows from financing activities:
Proceeds from issuance of nonconvertible debt 381,444 648,001
Principal payments on nonconvertible debt -- (31,389)
Proceeds from issuance of convertible debt -- --
Proceeds from issuance of stock 400,000 518,000
----------- -----------
Net cash provided from financing activities 781,444 1,134,612
----------- -----------
Net increase (decrease) in cash 6,218 (48,308)
Cash, beginning of period -- 48,308
----------- -----------
Cash, end of period $ 6,218 $ --
=========== ===========
Supplemental cash flows information:
Cash paid during the period for interest $ 49,500 $ 47,200
=========== ===========
</TABLE>
The accompanying notes are an integral part of the
financial statements.
4
TRIPLE I CORPORATION
STATEMENTS OF SHAREHOLDERS' EQUITY
for the years ended September 30, 1995 and 1994
<TABLE>
<CAPTION>
Series A Convertible
Preferred Stock Common Stock Additional Total
---------------------- ---------------- Paid-In Accumulated Shareholders'
Shares Amount Shares Amount Capital Deficit Equity
------- -------- ------ -------- ------------ ------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at September 30, 1993 19,860 $ 199 37,660 $ 377 $ 1,868,647 $ (1,830,105) $ 39,118
Issuance of Series A convertible
preferred stock and common stock
for cash, October 1993 10,000 100 10,000 100 99,800 100,000
Issuance of Series A convertible
preferred stock and common stock
for cash, October 1993 1,000 10 1,000 10 9,980 10,000
Issuance of Series A convertible
preferred stock and common stock
for cash, November 1993 800 8 800 8 7,984 8,000
Issuance of common stock for cash,
July 1994 14,430 144 399,856 400,000
Net loss (1,506,563) (1,506,563)
--------- --------- --------- ------- ------------- -------------- ---------------
Balance at September 30, 1994 31,660 $ 317 63,890 $ 639 $ 2,386,267 $ (3,336,668) $ (949,445)
Issuance of common stock for cash,
December 14, 1994 14,430 144 399,856 400,000
Net loss (1,575,126) (1,575,126)
-------- --------- -------- ------- ------------- -------------- ---------------
Balance at September 30, 1995 31,660 $ 317 78,320 $ 783 $ 2,786,123 $ (4,911,794) $ (2,124,571)
======== ========= ======== ======= ============= ============== ===============
</TABLE>
The accompanying notes are an integral part of the
financial statements.
5
TRIPLE I CORPORATION
NOTES TO FINANCIAL STATEMENTS
A. NATURE AND FORMATION OF BUSINESS:
NATURE OF BUSINESS
Triple I Corporation (the Company), a Delaware corporation, was
organized as a successor to AOI Systems, Inc., whose assets and
technologies it purchased in October 1992, for the purpose of
manufacturing and selling optical inspection systems in the printed
circuit board industry. The Company operates under the trade name of
AOI International and has manufacturing operations based in Lowell,
Massachusetts with customers located in the United States, Europe, and
Asia.
Since its inception, the Company has suffered recurring losses from
operations and has a net capital deficiency at September 30, 1995 and
has been unable to pay certain debt instruments. The remedies
available to the debt holders include immediate demand of payment and
foreclosure. These conditions raise substantial doubt about its
ability to continue as a going concern. The financial statements do
not include any adjustments that might result from the outcome of this
uncertainty. The ultimate success of the Company is dependent upon its
ability to raise financing through equity placement and significantly
increase contract revenue or product sales. However, the Company's
capital requirements may change depending upon numerous factors,
namely the demand for the Company's product.
While management believes that additional financing composed of equity
investments and funding through other means will be available to fund
future operations, there can be no assurances that additional funds
will be available when required. The Company is actively involved in
pursuing equity financing. In view of the Company's current financial
condition, the Company plans to aggressively manage its working
capital and expenses while pursuing product sales opportunities as
well as strategic or other business relationships.
BUSINESS COMBINATION
On October 22, 1992, AOI Systems, Inc. ("AOI") entered into an
Assignment for the Benefit of Creditors with another party due to its
inability to meet demands made on debt owed. As part of this
agreement, Triple I Corporation agreed to purchase the assets of AOI
and assume certain liabilities from the assignee. The total purchase
price was approximately $1,972,000 and includes an assumption of debt
and certain accrued liabilities. This transaction has been accounted
for under the purchase method of accounting.
6
TRIPLE I CORPORATION
NOTES TO FINANCIAL STATEMENTS, CONTINUED
B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is
determined on a first-in, first-out (FIFO) basis.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Depreciation and
amortization are computed using the straight-line method over the
lesser of the estimated useful lives of the assets or lease term.
Maintenance and repair costs are expensed as incurred; renewals and
betterments are capitalized. Upon the sale or retirement of fixed
assets, the accounts are relieved of the cost and the related
accumulated depreciation with any resulting gain or loss included in
income.
PATENTS
Purchased patents are valued at cost and amortized on a straight-line
basis over five years.
REVENUE RECOGNITION
Sales are generally recorded when products are shipped or services are
rendered. The sale of inspection systems and evaluation units are
recorded when customer acceptance requirements are met.
Revenue from service maintenance contracts is deferred and is
recognized over the term of the contract, generally one year. Revenue
from government grants is recognized when specific contract
requirements have been met and no significant contingencies remain
under the contract.
INCOME TAXES
The Company accounts for income taxes under the provisions of
Statement of Financial Accounting Standards (SFAS) No. 109,
"Accounting for Income Taxes," which requires the use of an asset and
liability approach for financial accounting and reporting for income
taxes. Under this method, deferred tax assets and liabilities are
recognized for the expected future tax consequences of temporary
differences between the carrying amounts and the tax bases of assets
and liabilities using the current statutory tax rates. If it is more
likely than not that some portion or all of a deferred tax asset will
not be realized, a valuation allowance is recognized.
RESEARCH AND DEVELOPMENT
Expenditures for research, development and engineering of products and
manufacturing processes are expensed as incurred. Cost reimbursement
under collaborative research agreements are recorded as offsets to
research and development expenses.
Continued
7
TRIPLE I CORPORATION
NOTES TO FINANCIAL STATEMENTS, CONTINUED
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
dates of the financial statements and the reported amounts of revenues
and expenses during the reporting periods. Actual results could differ
from those estimates.
C. ACCOUNTS RECEIVABLE:
In the normal course of business, the Company extends credit terms on
a customer-by-customer basis based on its evaluation of collectibility
exposure. Management's estimates of losses in this area are recorded
through an evaluation of the adequacy of the allowance for doubtful
accounts. The risk of loss from any concentrations of credit risk with
respect to trade receivable is mitigated by management's evaluation
and provision, the policy of securing larger dollar sales with
substantial deposits at order and ship dates, and the incentive for
customers to maintain their credit standing in order to receive
ongoing technical service.
During fiscal year 1995, $261,536 in accounts receivable were
factored, without recourse, to a related party. Specific invoices were
sold under individual purchase and sale agreements. The Company
receives a portion of the value of a receivable at the date of the
sale. Subsequent receipts of sold receivables are forwarded in full to
the factor. Interest is calculated at Prime +4% over the time the
money owed the factor is outstanding. The transaction is completed
when the Company receives the remaining balance of the receivable, net
of interest charges, from the factor. Interest on these contracts
totaled $7,642 during fiscal year ending September 30, 1995.
D. INVENTORIES:
Inventories consist of the following at September 30:
1995 1994
---- ----
Raw materials $ 390,858 $ 249,837
Work in process 727 83,501
Finished goods 403,236 159,000
-------------- --------------
$ 794,821 $ 492,338
============== ==============
Continued
8
TRIPLE I CORPORATION
NOTES TO FINANCIAL STATEMENTS, CONTINUED
E. PROPERTY AND EQUIPMENT:
Property and equipment consists of the following at September 30:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Machinery and equipment $ 55,613 $ 55,613
Computer equipment, including $10,001
in capital leases in 1995 and 1994, respectively 38,234 38,234
Computer software 14,949 14,949
Furniture and fixtures 24,837 24,837
------------ ----------
133,633 133,633
Less: accumulated depreciation and amortization 83,453 48,841
------------ ---------
$ 50,180 $ 84,792
============= ========
</TABLE>
Depreciation expense for the years ended September 30, 1995 and 1994
was $34,612 and $33,290, respectively.
F. INTANGIBLE ASSETS:
The Company holds several patents that were purchased. These patents
are stated at the acquisition cost of $531,250 and are amortized using
the straight-line method over 5 years. Amortization expense was
$106,250 for the years ended September 30, 1995 and 1994,
respectively.
G. COMMITMENTS AND CONTINGENCIES:
The Company is obligated under a 3-year lease agreement for an office
and manufacturing facility in Lowell, Massachusetts, which commenced
November 5, 1992. In October 1995, the Company extended the lease for
an additional 3-year term commencing on December 1, 1995 and expiring
on November 30, 1998.
Under the terms of the lease extension, the Company must pay basic
rent of $9,970 per month plus the Company's pro rata share of certain
costs paid by the landlord. Rent expense was $93,233 and $76,179 for
the years ended September 30, 1995 and 1994, respectively.
Continued
9
TRIPLE I CORPORATION
NOTES TO FINANCIAL STATEMENTS, CONTINUED
The amount of future minimum lease payments under the operating lease
is as follows:
1996 $114,988
1997 119,638
1998 119,638
Thereafter 19,940
----------
Total Minimum Lease Payments $374,204
==========
On August 1, 1994 the Company entered in to a cooperative agreement
with the U.S. Department of Energy ("DOE") to research optics through
March 1996. The Company is obligated under the agreement, as amended,
to provide approximately $593,000 of cost sharing under the project.
As of September 30, 1995, the Company had incurred $206,000 in project
expenses and received a $320,000 advance payment from the DOE which
was recorded as cost reimbursement against research and development
expense to the extent of costs incurred. The balance of $114,000 has
been classified with deferred revenues.
On November 28, 1994 the Company entered into an eight-year license
and collaboration agreement with Polaroid Corporation to promote the
development, marketing, and sales in the field of printed circuit
board production, and to collaborate in the fields of Automatic
Inspection and PCB PhotoTool generation. Performance milestones are
contained in the agreement. Under certain conditions either party may
terminate the agreement.
H. ACCRUED EXPENSES:
Accrued expenses consist of the following at September 30:
1995 1994
---- ----
Accrued vacation $ 89,000 $ 70,280
Accrued professional fees 125,000 152,617
Accrued payroll and related expenses 300,569 55,633
Accrued warranty 50,145 50,375
Accrued interest and other 135,705 80,083
--------- ----------
$700,419 $408,988
========= ==========
Continued
10
TRIPLE I CORPORATION
NOTES TO FINANCIAL STATEMENTS, CONTINUED
I. DEBT:
The following is a summary of the Company's debt obligations as of
September 30:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Collateralized demand note with assignee for the benefit of creditors for
the former AOI Systems, Inc., due January 30, 1995. The note was
renegotiated in July 1994 to require interest only payments
at a rate of 8.0%, due monthly $ 130,000 $130,000
Collateralized note with a related party, principal due December 31, 1994,
interest rate of 8.4%, interest only payments due monthly 200,000 200,000
Collateralized note with a related party, principal due February 20, 1994
Interest rate of 8.4%, interest only payments due monthly. This
note was renegotiated in September of 1995 to require interest only
payments at a rate of 10% and to extend maturity until
February 20, 1996. 200,000 200,000
Uncollateralized note with a related party, due February 28, 1996
interest rate of 8.4% 10,000 10,000
Collateralized subordinated note with a related party, principal due
December 31, 1996, interest rate of 8.4%, interest only payments
due quarterly 50,000 50,000
Collateralized subordinated note with the Massachusetts Technology
Development Corporation ("MTDC"), due August 22, 1999,
interest rate of 10%, interest only payments due quarterly 250,000 250,000
Collateralized note with the Massachusetts Community Development Finance
Corporation ("CDFC") due July 31, 1999, interest rate of 10%,
payable monthly 100,000 100,000
Collateralized note with CDFC, due December 22, 1998, interest
rate of 10%, payable monthly 258,000 258,000
Collateralized note with CDFC, due September 16, 1995 interest rate of
10%, payable monthly 100,000 -
Collateralized subordinated demand note with MTDC, due September 16,
1995, interest rate of 10% 100,000 -
Uncollateralized note with related parties, due July 6, 1995, interest
rate of 10% 82,000 -
</TABLE>
Continued
11
TRIPLE I CORPORATION
NOTES TO FINANCIAL STATEMENTS, CONTINUED
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Uncollateralized note with related parties, due April 15, 1995, interest
rate of 10% $ 100,000 $ -
Capital lease obligations 8,056 8,612
------------- -------------
1,588,056 1,206,612
Less amounts due within one year 930,056 611,641
---------- -----------
$ 658,000 $ 594,971
========== ==========
</TABLE>
Annual maturities for all long-term debt subsequent to September 30,
1996 are as follows:
1997 $ 50,000
1998 -
1999 608,000
Thereafter -
----------------
$ 658,000
================
The above debt instruments contain numerous covenants and remedies
upon default. As of September 30, 1995, the Company had not repaid
various borrowings that had become due. In February 1996, the Company
and various debt holders entered into an agreement to convert
$1,272,000 in unpaid debt and interest into 63,532 shares of the
Company's common stock and warrants to purchase 7,500 shares of Common
Stock at $20.00 per share through February 6, 1999. In addition, the
Company and certain debt holders agreed to extend the maturity on
$200,000 in notes until October 23, 1996.
Continued
12
TRIPLE I CORPORATION
NOTES TO FINANCIAL STATEMENTS, CONTINUED
J. SHAREHOLDERS' EQUITY:
The Company has 78,320 and 63,890 shares of voting common stock issued
and outstanding at September 30, 1995 and 1994 respectively. Holders
of common stock are entitled to receive dividends only when declared
by, and at the discretion of, the Board of Directors. An aggregate of
75,000 shares of voting common stock are reserved as follows: 50,000
for the conversion of the Series A Convertible Preferred Stock
("Series A Stock"); 15,000 shares for the conversion of Series B
Convertible Preferred Stock ("Series B Stock"); and 10,000 shares for
options under the 1992 Stock option plan.
The Company has authorized 75,000 shares of preferred stock, of which
65,000 shares have been designated convertible preferred stock with a
par value of $.01 per share. At September 30, 1995 and 1994, 50,000
shares are designated as Series A Stock and 15,000 shares are
designated as Series B Stock. The holders of the shares of preferred
stock vote in certain circumstances and receive dividends in parity
with holders of the common stock. Dividends are noncumulative for the
Series A stock, while annual dividends are cumulative for the Series B
Stock at 10% of the redemption value of $27.72.
The Series A and Series B Stock are convertible at the option of the
holder into shares of the Company's common stock at a conversion rate
using a conversion price that will be adjusted in certain instances
such as dilutive issuances of equity securities, both as defined. At
September 30, 1995 and 1994, the per share conversion rate for the
Series A Stock was $96.00 divided by the initial conversion price of
$96.00, or one for one. At September 30, 1995 and 1994, the per share
conversion rate for the Series B Stock was $27.72 divided by the
initial conversion price of $27.72, also one for one.
Upon liquidation, dissolution or winding up of the Company, holders of
the Series A and Series B Stock, in parity with one another, are
entitled to receive, prior and in preference to the holders of shares
of stock ranking junior to the Series A and Series B stock, an amount
equal to $96.00 and $27.72 per share, respectively. In addition,
Series B stockholders are entitled to any accrued dividends at the
date of liquidation.
As of September 30, 1995 and 1994, no Series B stock was outstanding
and no dividends were declared or accrued by the Company.
K. INCOME TAXES:
At September 30, 1995, the Company had net operating loss ("NOL")
carryforwards of approximately $4,400,000 for federal and Massachusetts
income tax purposes. These
Continued
13
TRIPLE I CORPORATION
NOTES TO FINANCIAL STATEMENTS, CONTINUED
carryforwards expire through 2010. In addition, the Company had
Research and Experimentation ("R&E") credit carryforwards of
approximately $60,000 and $25,000 for federal and Massachusetts income
tax purposes, respectively. Utilization of these NOL and R&E credit
carryforwards may be limited pursuant to the provisions of Section 382
of the Internal Revenue Code of 1986.
The components of the deferred tax assets and liabilities at September
30, 1995 are as follows (dollars in thousands):
1995
----
Deferred Tax Assets/(Liabilities):
Accrued expenses and other $ 253
Patents 89
R&E credits 85
NOL carryforwards 1,778
-----------
2,205
Total deferred tax asset 2,205
Valuation allowance (2,205)
-----------
Net deferred tax asset $ 0
===========
Due to the uncertainty surrounding the realization of these favorable
tax attributes in future income tax returns, the Company has placed a
valuation allowance against its otherwise recognizable deferred tax
assets.
L. STOCK WARRANTS:
During fiscal years ending September 30, 1995 and 1994, the Company
issued stock warrants as part of certain debt and equity transactions.
At date of issuance the value of these warrants was
Continued
14
TRIPLE I CORPORATION
NOTES TO FINANCIAL STATEMENTS, CONTINUED
not material. The following summarizes the issuances for the three
classes of stock authorized by the Company.
COMMON STOCK WARRANTS
In December 1993 the Company issued to an officer, who personally
guaranteed corporate indebtedness, warrants to purchase 25,000 shares
of Common Stock at $10.00 per share through December 22, 1998. Also in
December 1993 the Company issued in connection with debt, warrants to
purchase 1,000 shares of Common Stock at $4.00 per share through
December 22, 2003. In August 1994 the Company issued to several
directors and stockholders, warrants to purchase 8,000 and 9,017
shares of Common Stock at $25.00 and $27.72 per share, respectively
through August 22, 2004 and August 22, 2002, respectively. In October
1994, the Company issued in connection with debt, warrants to purchase
3,607 shares of Common Stock at $27.72 per share through October 5,
2002. In December 1994, in connection with certain equity financing,
the Company issued warrants to purchase 3,608 shares of Common Stock
at $27.72 per share through December 15, 2002. In June 1995, the
Company issued in connection with debt, warrants to purchase 10,174
shares of Common Stock at $27.72 per share through April 6, 2003.
SERIES A PREFERRED STOCK WARRANTS
During the fiscal year ending September 30, 1993, the Company issued
warrants to purchase 500 shares of Series A Preferred Stock at $100.00
per share through December 31, 1996 to a related party in connection
with debt.
SERIES B PREFERRED STOCK WARRANTS
In 1994 the Company issued warrants for the purchase of 9,019 and
1,000 shares of Series B Preferred Stock at $27.72 per share through
August 22, 2004 and December 22, 2003, respectively. In September 1994
the Company issued warrants for the purchase of 800 shares of Series B
Preferred Stock at $27.72 per share through September 15, 2004.
M. EMPLOYEE BENEFIT PLAN:
Effective October 26, 1992, the Company implemented a deferred
compensation plan under Section 401(k) of the Internal Revenue Code
(the "Plan"). Under the Plan, employees are permitted to contribute,
subject to certain limitations. The Company's contribution to the Plan
is discretionary and the Company has not contributed to the Plan since
its inception.
N. EMPLOYEE STOCK OPTION PLAN:
Continued
15
TRIPLE I CORPORATION
NOTES TO FINANCIAL STATEMENTS, CONTINUED
During 1993, the Company adopted, subject to shareholder approval, a
stock award and incentive plan which permits the issuance of options
or stock appreciation rights (SARs) to selected employees and
independent contractors of the Company. The plan reserves 10,000
shares of common stock for grant and provides that the term of each
award be determined by the Board of Directors charged with
administering the plan.
Under the terms of the plan, options granted may be either
nonqualified or incentive stock options and the exercise price,
determined by the Board of Directors, may not be less than the fair
market value of a share on the date of grant. SARs and limited SARs
granted in tandem with an option shall be exercisable only to the
extent the underlying option is exercisable and the grant price shall
be equal to the exercise price of the underlying option. All options
granted in 1993 and 1994 had an exercise price of $4.00 per share.
2,107 options were granted in October of 1992 to employees who
transferred to Triple I from AOI Systems; these options were
immediately exercisable. All other options granted during 1993 and
1994 vest over a five-year period. In September 1995, the Company
granted to certain employees, 1,703 options with an exercise price of
$16.00 per share, vesting over a five-year period. Also during
September 1995, the Company granted to an officer of the Company,
2,000 options with an exercise price of $16.00 per share, vesting over
a two-year period.
Details of stock options are as follows:
1993
Granted 3,147
Exercised 0
Canceled 0
-------
Outstanding at end of year 3,147
-------
Exercisable at end of year 2,107
=======
1994
Granted 3,150
Exercised 0
Canceled 50
-------
Outstanding at end of year 6,247
-------
Exercisable at end of year 2,315
=======
1995
Granted 3,703
Exercised 0
Continued
16
TRIPLE I CORPORATION
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Canceled 100
-------
Outstanding at end of year 9,850
-------
Exercisable at end of year 3,153
=======
There were no charges to operations in connection with these options
other than incidental expenses related to the issuance of shares.
In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123, Accounting for
Stock-Based Compensation, (Statement 123). Statement 123 encourages
but does not require the recognition of compensation expense for
grants of stock, stock options, and other equity instruments based
upon new fair value accounting rules (the "recognition method").
Companies that choose not to adopt the recognition method may continue
to apply the existing accounting principles however, Statement 123
requires companies that choose not to adopt the new fair value
accounting rules to disclose pro forma net income under the new fair
value method (the "disclosure method"). The Company plans to adopt the
disclosure method in 1997 and will report the pro forma effect (which
has not yet been determined) of applying fair value accounting rules
to grants of stock-based awards on net income in its 1997 financial
statements with comparable disclosures for 1996.
TRIPLE I CORPORATION
------------
FINANCIAL STATEMENTS
Coopers COOPERS & LYBRAND L.L.P.
& Lybrand a professional services firm
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Triple I Corporation:
We have audited the accompanying balance sheets of Triple I Corporation as of
September 30, 1994 and 1993, and the related statements of operations and
shareholders' equity and cash flows for the year ended 1994 and the period from
October 26, 1992 (date of inception) to September 30, 1993. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Triple I Corporation at
September 30, 1994 and 1993, and the results of its operations and its cash
flows for the year ended 1994 and the period from October 26, 1992 (date of
inception) to September 30, 1993 in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note A to the
financial statements, the Company has suffered recurring losses from operations
and has a net capital deficiency that raise substantial doubt about its ability
to continue as a going concern. Management's plans in regard to these matters
include equity financing as described in Note A. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
/s/ Coopers & Lybrand L.L.P.
Boston, Massachusetts
October 5, 1995
Coopers & Lybrand L.L.P. is a member of Coopers & Lybrand International, a
limited liability association incorporated in Switzerland
TRIPLE I CORPORATION
BALANCE SHEETS
as of September 30, 1994 and 1993
<TABLE>
<CAPTION>
ASSETS 1994 1993
---- ----
<S> <C> <C>
Current assets:
Cash $ 0 $ 48,308
Accounts receivable, net of allowance for doubtful accounts of
$21,707 in 1994 and $12,003 in 1993 (Notes B and C) 241,664 58,149
Inventory (Notes B and D) 492,338 562,831
Prepaid expenses 10,801 9,417
------ -----
Total current assets 744,803 678,705
Property and equipment, net (Notes B and E) 84,792 109,947
Patents, net (Notes B and F) 327,604 433,854
Other assets 10,476 9,400
------ -----
Total assets $ 1,167,675 $ 1,231,906
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Notes payable (Notes I and J) 611,641 425,000
Accounts payable 185,867 107,517
Deferred revenue (Notes B and G) 315,653 270,115
Accrued expenses (Note H) 408,988 225,156
Income taxes payable (Notes B and K) - -
----------- ----------
Total current liabilities 1,522,149 1,027,788
Notes payable - long-term portion (Notes I and J) 594,971 165,000
------- -------
Total liabilities 2,117,120 1,192,788
Commitments and contingencies (Note G)
Shareholders' equity (Notes I, J, L, and N):
Common stock, par value S.01 per share, authorized 250,000 shares,
63,890 and 37,660 shares issued and outstanding at
September 30, 1994 and 1993, respectively 639 377
Series A Preferred Stock, par value $.01 per share, authorized 50,000
shares, 31,660 and 19,860 shares issued and outstanding at
September 30, 1994 and 1993, respectively 317 199
Series B Preferred Stock, par value $.01 per share, authorized 15,000
shares, 0 shares issued and outstanding at
September 30, 1994 and 1993, respectively - -
Additional paid-in capital 2,386,267 1,868,647
Accumulated deficit (3,336,668) (1,830,105)
---------- ----------
Total shareholders' equity (deficit) (949,445) 39,118
-------- ------
Total liabilities and shareholders' equity (deficit) $ 1,167,675 $ 1,231,906
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
2
TRIPLE I CORPORATION
STATEMENTS OF OPERATIONS
for the year ended September 30, 1994 and the period
from October 26, 1992 (date of inception) to September 30, 1993
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Revenues (Note B):
Product $ 936,783 $ 124,726
Services 373,365 228,794
------- -------
1,310,148 353,520
--------- -------
Cost of revenues:
Product 783,213 333,738
Services 413,852 376,773
------- -------
1,197,065 710,511
--------- -------
Gross profit (loss) 113,083 (356,991)
------- --------
Operating expenses:
Research and development (Notes B and G) 468,075 448,875
Sales and marketing 370,859 275,323
General and administrative 680,824 668,625
------- -------
Total operating expenses 1,519,758 1,392,823
--------- ---------
Loss from operations (1,406,675) (1,749,814)
Other income (expense):
Interest expense (Note I) (83,311) (61,840)
Other (Note C) (16,577) (18,451)
------- -------
Other expense, net (99,888) (80,291)
Loss before income taxes (1,506,563) (1,830,105)
Provision for income taxes (Notes B and K) - -
------------ ------------
Net loss $ (1,506,563) $ (1,830,105)
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
TRIPLE I CORPORATION
STATEMENTS OF CASH FLOWS
for the year ended September 30, 1994 and
the period from October 26, 1992 (date of
inceptions to September 30, 1993
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net loss $(1,506,563) $(1,830,105)
Adjustments to reconcile net loss to net cash used in
operating activities:
Loss on disposal of fixed assets 5,554 -
Depreciation 33,290 18,177
Amortization 106,250 97,396
Provision for doubtful accounts 9,704 12,003
Changes in assets and liabilities:
Accounts receivable (193,219) (57,797)
Inventory 70,493 (481,611)
Prepaid expenses (1,384) (9,117)
Other assets (1,076) (7,600)
Accounts payable 78,350 59,615
Deferred revenue 45,538 270,115
Accrued expenses 183,832 113,470
------- -------
Net cash used in operating activities (1,169,231) (1,815,454)
---------- ----------
Cash flows from investing activities:
Capital expenditures (14,996) (45,161)
Proceeds from sale of fixed assets 1,307 -
------- -------
Net cash used in investing activities (13,689) (45,161)
------- -------
Cash flows from financing activities:
Proceeds from issuance of nonconvertible debt 648,001 450,000
Principal payments on nonconvertible debt (31,389) (410,000)
Proceeds from issuance of convertible debt - 700,000
Proceeds from issuance of stock 518,000 1,168,923
------- ---------
Net cash provided from financing activities 1,134,612 1,908,923
--------- ---------
Net increase (decrease) in cash (48,308) 48,308
Cash, beginning of period 48,308 -
------ ------
Cash, end of period - $ 48,308
======== ========
Supplemental cash flows information:
Cash paid during the period for interest $ 47,200 $ 30,037
======== ========
Non-cash items:
Debt and accrued interest converted to equity during the period - $ 1,203,923
Issuance of Series A convertible preferred stock to related party
for inventory - 25,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
TRIPLE I CORPORATION
STATEMENTS OF SHAREHOLDERS' EQUITY
for the year ended September 30, 1994 and
the period from October 26, 1992 (date of
inception) to September 30, 1993
<TABLE>
<CAPTION>
SERIES A CONVERTIBLE COMMON
PREFERRED STOCK STOCK ADDITIONAL TOTAL
------------------ ----------------- PAID-IN ACCUMULATED SHAREHOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT EQUITY
------ ------ ------ ------ ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Initial issuance of common stock
for cash at inception,
October 26, 1992 300 $ 3 $ 297 $ 300
Issuance of common stock for cash,
October 26,1992 20,000 200 79,800 80,000
Issuance of series A convertible
preferred stock and common
stock for cash, April 1993 100 $ 1 100 1 9,998 10,000
Issuance of Series A convertible
preferred stock and common
stock for cash, July 1993 2,500 25 2,500 25 249,950 250,000
Issuance of Series A convertible
preferred stock and common
stock as part of debt
conversion, August 1993 5,260 53 5,260 53 525,894 526,000
Issuance of Series A convertible
preferred stock and common
stock as part of debt
conversion, August 1993 7,000 70 7,000 70 727,783 727,923
Issuance of Series A convertible
preferred stock and common
stock for cash, August 1993 2,500 25 2,500 25 249,950 250,000
Issuance of Series A convertible
preferred stock for inventory,
August 1993 2,500 25 24,975 25,000
Net loss $ (1,830,105) (1,830,105)
------ ----- ------ ----- ----------- ------------ -----------
Balance at September 30, 1993 19,860 199 37,660 377 1,868,647 (1,830,105) 39,118
Issuance of Series A convertible
preferred stock and common
stock for cash, October 1993 10,000 100 10,000 100 99,800 100,000
Issuance of Series A convertible
preferred stock and common
stock for cash, October 1993 1,000 10 1,000 10 9,980 10,000
Issuance of Series A convertible
preferred stock and common
stock for cash, November 1993 800 8 800 8 7,984 8,000
Issuance of common stock for cash,
July 1994 14,430 144 399,856 400,000
Net loss (1,506,563) (1,506,563)
------ ----- ------ ----- ----------- ------------ -----------
Balance at September 30, 1994 31,660 $ 317 63,890 $ 639 $ 2,386,267 $ (3,336,668) $ (949,445)
====== ===== ====== ===== =========== ============ ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
TRIPLE I CORPORATION
NOTES TO FINANCIAL STATEMENTS
A. NATURE AND FORMATION OF BUSINESS:
NATURE OF BUSINESS
Triple I Corporation (the Company), a Delaware corporation, was organized as a
successor to AOI Systems, Inc., whose assets and technologies it purchased in
October 1992, for the purpose of manufacturing and selling optical inspection
systems in the printed circuit board industry. The Company operates under the
trade name of AOI International and has manufacturing operations based in
Lowell, Massachusetts with customers located in the United States, Europe, and
Asia.
Since its inception, the Company has suffered recurring losses from operations
and has a net capital deficiency at September 30, 1994 and has been unable to
pay certain debt instruments. The remedies available to the debt holders include
immediate demand of payment and foreclosure; however, no action has yet been
taken. These conditions raise substantial doubt about its ability to continue as
a going concern. The ultimate success of the Company is dependent upon its
ability to raise financing through equity placement and significantly increase
contract revenue or product sales. However, the Company's capital requirements
may change depending upon numerous factors, namely the demand for the Company's
product.
While management believes that additional financing composed of equity
investments and funding through other means will be available to fund future
operations, there can be no assurances that additional funds will be available
when required. The Company is actively involved in pursuing equity financing. In
view of the Company's current financial condition, the Company plans to
aggressively manage its working capital and expenses while pursuing product
sales opportunities as well as strategic or other business relationships.
BUSINESS COMBINATION
On October 22, 1992, AOI Systems, Inc. ("AOI") entered into an Assignment for
the Benefit of Creditors with another party due to its inability to meet demands
made on debt owed. As part of this agreement, Triple I Corporation agreed to
purchase the assets of AOI and assume certain liabilities from the assignee. The
total purchase price was approximately $1,972,000 and includes an assumption of
debt and certain accrued liabilities. This transaction has been accounted for
under the purchase method of accounting.
Continued
6
TRIPLE I CORPORATION
NOTES TO FINANCIAL STATEMENTS, CONTINUED
B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined on a
first-in, first-out (FIFO) basis.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Depreciation and amortization are
computed using the straight-line method over the lesser of the estimated useful
lives of the assets or lease term. Maintenance and repair costs are expensed as
incurred; renewals and betterments are capitalized. Upon the sale or retirement
of properties, the accounts are relieved of the cost and the related accumulated
depreciation with any resulting gain or loss included in income.
PATENTS
Purchased patents are valued at cost and amortized on a straight-line basis over
five years.
REVENUE RECOGNITION
Sales are generally recorded when products are shipped or services are rendered.
The sale of inspection systems and evaluation units are recorded when customer
acceptance requirements are met.
Revenue from service maintenance contracts is deferred and is recognized over
the term of the contract, generally one year. Revenue from government grants is
recognized when specific contract requirements have been met and no significant
contingencies remain under the contract.
INCOME TAXES
The Company accounts for income taxes under the provisions of Statement of
Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes."
RESEARCH AND DEVELOPMENT
Expenditures for research, development and engineering of products and
manufacturing processes are expensed as incurred. Cost reimbursement under
collaborative research agreements are recorded as offsets to research and
development expenses.
C. ACCOUNTS RECEIVABLE:
In the normal course of business, the Company extends credit terms on a
customer-by-customer basis based on its evaluation of collectibility exposure.
Management's estimates of losses in this area are recorded through an evaluation
of the adequacy of the allowance for doubtful accounts. The risk of loss from
any concentrations of credit risk with respect to trade receivable is mitigated
Continued
7
TRIPLE I CORPORATION
NOTES TO FINANCIAL STATEMENTS, CONTINUED
by management's evaluation and provision, the policy of securing larger dollar
sales with substantial deposits at order and ship dates, and the incentive for
customers to maintain their credit standing in order to receive ongoing
technical service.
During fiscal 1994, $142,389 in accounts receivable were factored, without
recourse, to a related party. Specific invoices were sold under individual
purchase and sale agreements. The Company receives a portion of the value of a
receivable at the date of the sale. Subsequent receipts of sold receivables are
forwarded in full to the factor. Interest is calculated at Prime +2% over the
time the money owed the factor is outstanding. The transaction is completed when
the Company receives the remaining balance of the receivable, net of interest
charges, from the factor. Interest on these contracts totaled $3,415 during
fiscal year ending September 30, 1994. No receivables were factored during the
fiscal period ending September 30, 1993.
D. Inventories:
Inventories consist of the following at September 30:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Raw materials $ 249,837 $ 240,962
Work in process 83,501 90,669
Finished goods 159,000 231,200
------- -------
$ 492,338 $ 562,831
========= ==========
</TABLE>
E. Property and Equipment:
Property and equipment consists of the following, at September 30:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Machinery and equipment $ 55,613 $ 51,267
Computer equipment, including $10,001 and
$0 in capital leases in 1994 and 1993, respectively 38,234 28,233
Computer software 14,949 14,949
Furniture and fixtures 24,837 33,675
------ ------
133,633 128,124
Less: accumulated depreciation and amortization 48,841 18,177
------ ------
$ 84,792 $ 109,947
======== =========
</TABLE>
Continued
8
TRIPLE I CORPORATION
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Depreciation expense for the year ended September 30, 1994 and the period from
October 26, 1992 to September 30, 1993 was $33,290 and $18,177, respectively.
F. INTANGIBLE ASSETS:
The Company holds several patents that were purchased. These patents are stated
at the acquisition cost of $531,250 and are amortized using the straight-line
method over 5 years. Amortization expense was $106,250 and $97,396 for the year
ended September 30, 1994 and the period from October 26, 1992 to September 30,
1993.
G. COMMITMENTS AND CONTINGENCIES:
The Company is obligated under a 3-year lease agreement for an office and
manufacturing facility in Lowell, Massachusetts, which commenced November 5,
1992.
Under this lease the monthly payments began at a base amount of $6,717 plus the
Company's pro rata share of certain costs paid by the landlord. The base monthly
rent increased to $7,180 and $7,644 on December 31, 1993 and 1994, respectively.
The Company intends to renew the lease as of December 1, 1995 to include the
original facility plus additional manufacturing space within the same facility.
Rent expense was $76,179 and $69,733 for the year ended September 30, 1994 and
the period from October 26, 1992 to September 30, 1993, respectively.
The amount of future minimum lease payments under the operating lease is as
follows:
1995 $ 90,800
1996 15,288
Thereafter O
--------
Total Minimum Lease Payments $106,088
========
On August 1, 1994 the Company entered in to a cooperative agreement with the
U.S. Department of Energy ("DOE") to research optics through March 1996. The
Company is obligated under the agreement, as amended, to provide approximately
$593,000 of cost sharing under the project. As of September 30, 1994, the
Company had incurred $138,000 in project expenses and received a $160,000
advance payment from the DOE which was recorded as cost reimbursement against
research and development expense.
Continued
9
TRIPLE I CORPORATION
NOTES TO FINANCIAL STATEMENTS, CONTINUED
H. Accrued Expenses:
Accrued expenses consist of the following at September 30:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Accrued vacation $ 70,280 $ 61,839
Accrued legal 152,617 73,525
Accrued payroll and related expenses 55,633 45,912
Accrued warranty 50,375 20,000
Other 80,083 23,880
------ ------
$408,988 $225,156
======== ========
</TABLE>
Debt:
The following is a summary of the Company's debt obligations as of September 30:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Collateralized demand note with assignee for the benefit of creditors for the
former AOI Systems, Inc., due January 30, 1995. The note was renegotiated in
July 1993 to require interest only payments at a rate of 8.0%, due monthly $ 130,000 $140,000
Collateralized note with a related party, principal due December 31, 1994,
interest rate of 8.4%, interest only payments due monthly 200,000 200,000
Collateralized note with a related party, principal due February 20, 1994,
interest rate of 8.4%, interest only payments due monthly 200,000 200,000
Uncollateralized note with a related party, due February 28, 1996 interest rate
of 8.4% 10,000 0
Collateralized subordinated note with a related party, principal due December
31, 1996, interest rate of 8.4%, interest only payments due quarterly 50,000 50,000
Collateralized subordinated note with the Massachusetts Technology Development
Corporation ("MTDC"), due August 22, 1999, interest rate of 10%, interest
only payments due quarterly 250,000 0
Collateralized note with a the Massachusetts Community Development Finance
Corporation ("CDFC") due July 31, 1999, interest rate of 10%, payable
monthly 100,000 0
</TABLE>
Continued
10
TRIPLE I CORPORATION
NOTES TO FINANCIAL STATEMENTS, CONTINUED
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Collateralized note with CDFC, due December 22, 1998, interest
rate of 10%, payable monthly $ 258,000
Capital lease obligations 8,612 $ 0
--------- -------
1,206,612 590,000
Less amounts due within one year 611,641 425,000
------- -------
$ 594,971 $165,000
========= ========
</TABLE>
The above debt instruments contain numerous covenants and remedies upon default.
The Company has not repaid various borrowings that have become due; however, the
lenders have not initiated claims against the Company.
Annual maturities for all long-term debt including the capitalized leases, for
each of the four fiscal years subsequent to September 30, 1995 are as follows:
1996 $ 90,672
1997 128,072
1998 86,247
Thereafter 289,980
-------
$594,971
========
J. SHAREHOLDERS' EQUITY:
The Company has 63,890 and 37,660 shares of voting common stock issued and
outstanding at September 30, 1994 and 1993 respectively. Holders of common stock
are entitled to receive dividends only when declared by, and at the discretion
of, the Board of Directors. An aggregate of 75,000 shares of voting common stock
are reserved as follows: 50,000 for the conversion of the Series A Stock; 15,000
shares for the conversion of Series B Stock; and 10,000 shares for options under
the 1992 Stock option plan.
The Company has authorized 75,000 shares of preferred stock, of which 65,000
shares have been designated convertible preferred stock with a par value of $.01
per share. At September 30, 1994 and 1993, 50,000 shares are designated as
Series A convertible preferred stock ("Series A Stock") and 15,000 shares are
designated as Series B convertible preferred stock ("Series B Stock"). The
holders of the shares of preferred stock vote in certain circumstances and
receive dividends in parity with holders of the common stock. Dividends are
noncumulative for the Series A stock,
Continued
11
TRIPLE I CORPORATION
NOTES TO FINANCIAL STATEMENTS, CONTINUED
while annual dividends are cumulative for the Series B Stock at 10% of the
redemption value of $27.72.
The Series A and Series B Stock are convertible at the option of the holder into
shares of the Company's common stock at a conversion rate using a conversion
price that will be adjusted in certain instances such as dilutive issuances of
equity securities, both as defined. At September 30, 1994 and 1993, the per
share conversion rate for the Series A Stock was $96.00 divided by the initial
conversion price of $96.00, or one for one. At September 30, 1994 and 1993, the
per share conversion rate for the Series B Stock was $27.72 divided by the
initial conversion price of $27.72, also one for one.
Upon liquidation, dissolution or winding up of the Company, holders of the
Series A and Series B Stock, in parity with one another, are entitled to
receive, prior and in preference to the holders of shares of stock ranking
junior to the Series A and Series B stock, an amount equal to $96.00 and $27.72
per share, respectively. In addition, Series B stockholders are entitled to any
accrued dividends at the date of liquidation.
As of September 30, 1994 and 1993, no Series B stock was outstanding and no
dividends were declared or accrued by the Company.
K. INCOME TAXES:
Due to operating losses incurred in the cumulative period from inception
(October 26, 1992) to September 30, 1994, no provision has been made for federal
or state income taxes at either September 30, 1994 or 1993. Deferred taxes
result from the Company's net operating loss carryforward. However, due to the
relative uncertainty of the Company's ability to generate sufficient taxable
income in the future, a full valuation allowance has been provided against the
deferred tax asset. The Company has a net operating loss tax carryforward of
approximately $2,973,000 and which is subject to review by the Internal Revenue
Service and, if not utilized, will expire beginning in 2008.
L. STOCK WARRANTS:
During fiscal years ending September 30, 1994 and 1993, the Company issued stock
warrants as part of certain debt and equity transactions. At date of issuance
the value of these warrants was not material. The following summarizes the
issuances for the three classes of stock authorized by the Company.
Continued
12
TRIPLE I CORPORATION
NOTES TO FINANCIAL STATEMENTS, CONTINUED
COMMON STOCK WARRANTS
In December 1993 the Company issued to an officer, who personally guaranteed
corporate indebtedness, warrants to purchase 25,000 shares of Common Stock
at $10.00 per share through December 22, 1998. Also in December 1993 the
Company issued in connection with debt, warrants to purchase 1,000 shares of
Common Stock at $4.00 per share through December 22, 2003. In August 1994
the Company issued to several directors and stockholders, warrants to
purchase 8,000 and 9,017 shares of Common Stock at $25.00 and $27.72 per
share, respectively through August 22, 2004 and August 22, 2002,
respectively.
SERIES A PREFERRED STOCK WARRANTS
During the fiscal year ending September 30, 1993, the Company issued
warrants to purchase 500 shares of Series A Preferred Stock at $100.00 per
share through December 31, 1996 to a related party in connection with debt.
SERIES B PREFERRED STOCK WARRANTS
In 1994 the Company issued warrants for the purchase of 9,019 and 1,000
shares of Series B Preferred Stock at $27.72 per share through August 22,
2004 and December 22, 2003, respectively. In September 1994 the Company
issued warrants for the purchase of 800 shares of Series B Preferred Stock
at $27.72 per share through September 15, 2004.
M. EMPLOYEE BENEFIT PLAN:
Effective October 26, 1992, the Company implemented a deferred compensation plan
under Section 401(k) of the Internal Revenue Code (the "Plan"). Under the Plan,
employees are permitted to contribute, subject to certain limitations. The
Company's contribution to the Plan is discretionary and the Company has not
contributed to the Plan since its inception.
N. EMPLOYEE STOCK OPTION PLAN:
During 1993, the Company adopted, subject to shareholder approval, a stock award
and incentive plan which permits the issuance of options or stock appreciation
rights (SARs) to selected employees and independent contractors of the Company.
The plan reserves 10,000 shares of common stock for grant and provides that the
term of each award be determined by the Board of Directors charged with
administering the plan.
Under the terms of the plan, options granted may be either nonqualified or
incentive stock options and the exercise price, determined by the Board of
Directors, may not be less than the fair market value of a share on the date of
grant. SARs and limited SARs granted in tandem with an option shall be
exercisable only to the extent the underlying option is exercisable and the
grant price shall
Continued
13
TRIPLE I CORPORATION
NOTES TO FINANCIAL STATEMENTS, CONTINUED
be equal to the exercise price of the underlying option. All options granted in
1993 and 1994 had an exercise price of $4.00 per share. 2,107 options were
granted in October of 1992 to employees who transferred to Triple I from AOI
Systems; these options were immediately exercisable. All other options granted
during 1993 and 1994 vest over a five-year period.
Details of stock options are as follows:
1993
Granted 3,147
Exercised 0
Canceled 0
Outstanding at end of year 3,147
Exercisable at end of year 2,107
1994
Granted 3,150
Exercised 0
Canceled 50
Outstanding at end of year 6,247
Exercisable at end of year 2,315
O. SUBSEQUENT EVENTS:
On November 28, 1994 the Company entered into an eight-year license and
collaboration agreement with Polaroid Corporation to promote the development,
marketing, and sales in the field of printed circuit board production, and to
collaborate in the fields of Automatic Inspection and PCB PhotoTool generation.
Performance milestones are contained in the agreement. Under certain conditions
either party may terminate the agreement.
14
EXHIBIT E
RIGHTS OF DISSENTING SHAREHOLDERS
RHODE ISLAND CORPORATION LAW
ss.7-1-74(a) Any shareholder electing to exercise the right of dissent shall
file with the corporation prior to or at the meeting of shareholders at which
the proposed corporate action is submitted to a vote, a written objection to the
proposed corporate action. If the proposed corporate action be approved by the
required vote and the shareholder shall not have voted in favor thereof, the
shareholder may, within ten (10) days after the date on which the vote was
taken, or if a corporation is to be merged without a vote of its shareholders
into another corporation, any of its shareholders may, within fifteen (15) days
after the plan of the merger shall have been mailed to the shareholders, make
written demand on the corporation, or, in the case of a merger or consolidation,
on the surviving or new corporation, domestic or foreign, for payment of the
fair value of the shareholder's shares, and, if the proposed corporate action is
effected, the corporation shall pay to the shareholder, upon surrender of the
certificate or certificates representing the shares, the fair value thereof as
of the day prior to the date on which the vote was taken approving the proposed
corporate action, excluding any appreciation or depreciation in anticipation of
the corporate action. Any shareholder failing to make demand within such ten
(10) day period or such fifteen (15) day period, as the case may be, shall be
bound by the terms of the proposed corporate action. Any shareholder making the
demand shall thereafter be entitled only to payment as in this section provided
and shall not be entitled to vote or to exercise any other rights of a
shareholder.
(b) No demand may be withdrawn unless the corporation shall consent
thereto. If, however, the demand shall be withdrawn upon consent, or if the
proposed corporate action shall be abandoned or rescinded or the shareholders
shall revoke the authority to effect the action, or if, in the case of a merger,
on the date of the filing of the articles of merger the surviving corporation is
the owner of all the outstanding shares of the other corporation, domestic and
foreign, that are parties to the merger, or if no demand or petition for the
determination of fair value by a court shall have been made or filed within the
time provided in this section, then the right of the shareholder to be paid the
fair value of his or her shares shall cease and his or her status as a
shareholder shall be restored, without prejudice to any corporate proceedings
which may have been taken during the interim.
(c) Within ten (10) days after the corporate action is effected, the
corporation, or, in the case of merger or consolidation, the surviving or new
corporation, domestic or foreign shall give written notice thereof to each
dissenting shareholder who has made demand as herein provided, and shall make a
written offer to each shareholder to pay for the shares at a specified price
deemed by the corporation to be the fair value thereof. The notice and offer
shall be accompanied by a balance sheet of the corporation the shares of which
the dissenting shareholder holds, as of the latest available date and not more
than twelve (12) months prior to the making of the offer, and a profit, and loss
statement of the corporation for the twelve (12) months' period ended on the
date of the balance sheet.
(d) If within thirty (30) days after the date on which the corporate
action was effected the fair value of the shares is agreed upon between any
dissenting shareholder and the corporation, payment therefor shall be made
within ninety (90) days after the date on which the corporate action was
effected, upon surrender of the certificate or certificates representing the
shares. Upon payment of the agreed value, the dissenting shareholder shall cease
to have any interest in the shares.
(e) If within the period of thirty (30) days a dissenting shareholder
and the corporation do not so agree, then the corporation, within thirty (30)
days after receipt of written request for the filing from any dissenting
shareholder given within sixty (60) days after the date on which the corporate
action was effected, shall, or at its election at any time within the period of
sixty (60) days may, file a petition in any court of competent jurisdiction in
the county in this state where the registered office of the corporation is
located praying that the fair value of the shares be found and determined. If,
in the case of a merger or consolidation, the surviving or new corporation is a
foreign corporation without a registered office in this state, the petition
shall be filed in the county where the registered office of the domestic
corporation was last located. If the corporation shall fail to institute the
proceeding as herein provided, any dissenting shareholder may do so in the name
of the corporation. All dissenting shareholders, wherever residing, shall be
made parties to the proceeding as an action against their shares quasi in rem. A
copy of the petition shall be served on each dissenting shareholder who is a
resident of this state and shall be served by registered or certified mail on
each dissenting shareholder who is a nonresident. Service on nonresidents shall
also be made by publication as provided by law. The jurisdiction of the court
shall be plenary and exclusive. All shareholders who are parties to the
proceeding shall be entitled to judgment against the corporation for the amount
of the fair value of their shares. The court may, if it so elects, appoint one
or more persons as appraisers to receive evidence and recommend a decision on
the question of fair value. The appraisers shall have such power and authority
as shall be specified in the order of their appointment or an amendment thereof.
The judgment shall be payable only upon and concurrently with the surrender to
the corporation of the certificate or certificates representing the shares. Upon
payment of the judgment, the dissenting shareholder shall cease to have any
interest in the shares.
(f) The judgement shall include an allowance for interest at such rate
as the court may find to be fair and equitable in all the circumstances, from
the date on which the vote was taken on the proposed corporate action to the
date of payment.
(g) The costs and expenses of any proceeding shall be determined by the
court and shall be assessed against the corporation, but all or any part of the
costs and expenses may be apportioned and assessed as the court may deem
equitable against any or all of the dissenting shareholders who are parties to
the proceeding to whom the corporation shall have made an offer to pay for the
shares if the court shall find that the action of the shareholders in failing to
accept the offer was arbitrary or vexatious or not in good faith. The expenses
shall include reasonable compensation for and reasonable expenses of the
appraisers, but shall exclude the fees and expenses of counsel for and experts
employed by any party; but if the fair value of the shares as determined
materially exceeds the amount which the corporation offered to pay therefor, or
if no offer was made, the court in its discretion may award to any shareholder
who is a party to the proceeding such sum as the court may determine to be
reasonable compensation to any expert or exerts employed by the shareholder in
the proceeding.
(h) Within twenty (20) days after demanding payment for his or her
shares, each shareholder demanding payment shall submit the certificate or
certificates representing his or her shares to the corporation for notation
thereon that the demand has been made. His or her failure to do so shall, at the
option of the corporation, terminate his or her rights under this section unless
a court of competent jurisdiction, for good and sufficient cause shown, shall
otherwise direct. If shares represented by a certificate on which notation has
been so made shall be transferred, each new certificate issued therefor shall
bear, similar notation, together with the name of the original dissenting holder
of the shares, and in transferee of the shares shall acquire by the transfer no
rights in the corporation other than those which the original dissenting
shareholder had after making demand for payment of the fair value thereof.
(i) Shares acquired by a corporation pursuant to payment of the agreed
value therefor or to payment of the judgment entered therefor, as in this
section provided may be held and disposed of by the corporation as in the case
of other treasury shares, except that, in the case of a merger or consolidation,
they may be held and disposed of as the plan of merger or consolidation may
otherwise provide.
EXHIBIT F
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
FORM 10-K
ANNUAL REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended Commission File
March 31, 1996 Number 0-15520
ORBIS, INC.
(Exact name of registrant as specified in charter)
RHODE ISLAND 05-0396504
(State or other jurisdiction (IRS - Employer Identification No.)
of incorporation or organization)
2 Charles Street
Providence, RI 02904
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code: (401) 861-4228
Securities registered pursuant to
Section 12(b) of the Act: None
Securities registered pursuant to
Section 12(g) of the Act: Common Stock, $.01 par value
Preferred Stock, $1.00 par value
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 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
------ -----
Aggregate market value, as of March 31,1996 of Common Stock held by non
affiliates of the registrant: $101,028.31
Number of shares of Common Stock outstanding at March 31, 1996:
9,450,000 (does not include 80,468 shares of treasury stock)
Number of shares of Preferred Stock outstanding at March 31, 1996:
0
- --------------------------------------------------------------------------------
DOCUMENTS INCORPORATED BY REFERENCE
Certain Exhibits, as indicated in the Exhibit Index located on page 10, are
incorporated by reference and were previously filed as Exhibits to the Company's
prior annual reports on Form 10-K and are hereby incorporated herein by
reference.
1
INDEX TO ITEMS
--------------
<TABLE>
<CAPTION>
PART I PAGE
<S> <C>
Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . 5
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters . . . . . . . 6
Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Item 7. Management's Discussion and Analysis of Financial condition and Results of Operations . . 7
Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . 8
Item 9. Disagreements on Accounting and Financial Disclosure . . . . . . . . . . . . . . . . . 8
PART III
Item 10. Directors and Executive Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Item 12. Security Ownership of Certain Beneficial Owners and Management . . . . . . . . . . . . 9
Item 13. Certain Relationships and Related Transactions . . . . . . . . . . . . . . . . . . . 10
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-k . . . . . . . . . . 10
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
</TABLE>
2
PART I
ITEM 1: BUSINESS
A. GENERAL
The Company is a continuation of two Rhode Island corporations, Information
Systems, Inc. incorporated in 1971, and Dataman, Inc., incorporated in 1973,
which consolidated management and operations in 1982. Information Systems
provide primarily payroll processing, data entry, batch processing and
microfiche processing services to a broad base of businesses. Dataman, Inc.
focused on professional services and facilities management, becoming involved
with the health care field in 1979 when it began performing software consulting
and design work for the Rhode Island Group Health Association ("RIGHA"). In
March, 1986 the Company completed the process which it began in 1983 of
terminating its involvement with the non-healthcare related businesses in which
it and its predecessors had previously engaged, recognizing that the industry's
need for many of the Company's prior services was declining due to the increased
use of in-house computer systems which resulted in a reduction of companies
using outside services such as data entry and computer processing.
The business of the Company consists of manufacturing and marketing application
software products designed for use on Hewlett Packard computers by health
maintenance organizations ("HMOs") as well as furnishing HMOs related
professional services involving customer funded enhancements of the Company's
software products. Although the Company's software products have in the past
typically required some enhancement prior to customer use, the Company is
attempting and has begun to design software needing few or not enhancements
prior to use by customers.
There are several categories of HMOs, including one in which the HMO directly
employs physicians (the "staff model") and one in which the HMO contracts with
independent physicians or independent practice associations (the "IPA model").
Based on its analysis of a number of independently conducted studies, the
Company believes that these two models represent a majority of the HMO's
currently in operation.
The Company provides software to both staff and IPA model HMO's which assists
the HMO in tracking members, billing clients, processing claims and maintaining
doctors' appointment schedules.
B. PRODUCTS AND SERVICES
The Company did not have any revenue in 1996.
The Company's HMO software is modular in design. The package which the Company
offers typically includes a license of its software products and professional
services relating to installation and enhancement of the modules and, in a
majority of cases, includes the sale of Hewlett Packard equipment on an VAR
commission basis or as a software supplier in a Hewlett Packard-originated sale.
One or more of the modules can be licensed with or without the purchase of
Hewlett Packard equipment.
The Company's HMO software operates on hardware manufactured by Hewlett Packard.
The Company believes that because there are many suppliers that sell Hewlett
Packard equipment and the equipment does not modifications to run the Company's
software, customers of the Company should continue to be able to procure Hewlett
Packard equipment to run the Company's software. Under its VAR Agreement with
Hewlett Packard, the Company has a value added re-seller relationship with
Hewlett Packard which provides for discounts to the Company on Hewlett Packard
hardware, depending on dollar volume of sales, if the Company sells Hewlett
Packard hardware with its software to any of its customers. Additionally, if
Hewlett Packard makes a hardware sale through its own sales force based in part
on a customer's desire to use the Company's software, the Company will receive a
commission, which will be smaller than the discount it would have received had
it initiated the sale.
The HMO software modules currently marketed by the Company are described below.
Although the Company's customers have in the past typically required some
enhancement of the modules to meet their individual needs more exactly, the
modules are fully operational without further enhancements.
3
1. Membership/Marketing
This module contains on-line features to enter and maintain
member, subscriber, group and physician data. Substantial
inquiry capability is available for marketing purposes, such
as locating dependents reaching the age of eligibility for
individual membership. This is a "core" module highly
integrated with other applications.
2. Billing and Accounts Receivable
The Company's system performs premium billing for both group
and individual subscribers.
3. Claims Processing
In addition to processing claims, this module contains
extensive features which re available for utilization review
to enable the HMO to analyze hospital usage, emergency room
use and various external services in determining which
specialists should be brought in-house.
4. Patient Appointment Scheduling
This module provides on-line updates and inquiries, and
automatically generates physicians' schedules. Usage reports,
also generated by this module, summarize patient usage,
fee-for-service versus prepaid usage, workload and
productivity by physician and reception staff.
5. Pharmacy
This module interacts with the membership data base to provide
on-line verification of patient eligibility and to maintain a
medication profile for each patient. It automatically
generates prescription labels and receipts containing alert
messages associated with the drug being dispensed.
6. Referral Management
This module tracks referrals by physicians. Type of referrals
tracked include emergency room, home health, inpatient
admission, ambulatory surgery, scheduled and continuing care.
7. Utilization Reporting
This module draws data from claims and encounter files for
monitoring health care services provided to members and forms
one of the actuarial foundations for the rate setting process.
8. Capitation Reimbursement
This module allows IPA model HMO's to reimburse physicians on
a predetermined rate-per-month rather than on a
fee-for-service basis. Additionally, the Company has recently
enhanced its existing modules to enable a new variety of HMO,
the preferred provider organization or PPO, to use the
Company's system.
C. MARKETING AND CUSTOMERS
There is no active marketing at this time.
The Company had no written agreements for provision of products to any customers
during its fiscal year ended March 31, 1996 relative to the sale of any product
to any customer.
D. PRODUCT DEVELOPMENT
The Company did not have any product development.
E. PRODUCT PROTECTION
The Company relies on a combination of trade secret laws and license agreements
to protect its rights in its software. Although the Company's license agreements
prohibit disclosure of the proprietary aspects of its products, it is
technically possible to copy aspects of its products in violation of the
Company's rights.
4
The Company believes that, because of rapid technological change in the software
industry, patent, trade secret and copyright protection is less significant than
factors such as the knowledge, ability and experience of employees. Further, the
Company believes that the great difficulty and dime involved in any attempt to
recode mainframe computer software such as the Company's, which contains
hundreds of thousands of lines of code, would deter a potential plagiarizer.
F. BACKLOG
The Company does not currently have any orders for installation of HMO software
and does not anticipate having any backlog in the future.
G. COMPETITION
The market for the Company's software products is characterized by rapid
advancements in technology and by intense competition among a number of
manufacturers and distributors. New competitors can be expected to enter the
market as the market expands. No assurance can be given that the Company will
have the financial resources, marketing, distribution, service or support
capabilities, depth of key personnel or technological expertise to compete
successfully in the future.
The Company's HMO software operates only on hardware manufactured by Hewlett
Packard. Although the Company does not have any current information regarding
the percentage of the HMO market serviced by the various hardware manufacturers,
the Company believes that many HMO's are currently using Hewlett Packard
equipment. If conditions in the market change it may be necessary for the
Company to undertake to adapt its software to other computer manufacturer(s).
The Company's software continues to suffer from a lack of acceptability in that
it is not easibly convertible into compatible software needed on non-Hewlett
Packard equipment.
The principal considerations for users of HMO software and include product
reliability, compatibility with current owned hardware, price/performance
characteristics, integration of functions, availability and quality of support
and training services and ease of understanding and operating the software.
H. EMPLOYEES
As of March 31, 1996, the Company did not have any full-time employees. The
officers and directors of the Company continue to work on a part-time basis
without compensation.
ITEM 2: PROPERTIES
The Company's principal executive and administrative offices are located in a
portion of a building at 2 Charles Street, Providence, Rhode Island and
occupancy is without cost to the Company.
ITEM 3: LEGAL PROCEEDINGS
Not applicable.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
5
PART II
ITEM 5: MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET PRICE OF COMMON STOCK
In March 1987, the Company made a public offering of 1,000,000 shares of common
stock at $2.50 per share. The Company's stock is traded in the over-the-counter
market with NASDAQ symbol ORBS. The table below sets forth the range of the high
and low bid quotations for the common stock for each quarterly period since the
offering.
HIGH BID LOW BID
-------- -------
03/12/87 - 03/31/87 2 5/8 2 1/4
04/01/87 - 06/30/87 2 7/8 2
07/01/87 - 09/30/87 3 2
10/01/87 - 12/31/87 2 1/8 3/4
01/01/88 - 03/31/88 1 3/4
04/01/88 - 06/30/88 1/4 1/4
07/01/88 - 09/30/88 11/16 3/8
10/01/88 - 12/31/88 3/8 3/16
01/01/89 - 03/31/89 1/4 1/4
04/01/89 - 06/30/89 1/4 1/4
07/01/89 - 09/30/89 7/16 1/4
10/01/89 - 12/31/89 7/16 3/8
01/01/90 - 03/31/90 3/8 5/16
04/01/90 - 06/30/90 5/16 5/32
07/01/90 - 09/30/90 5/32 1/8
10/01/90 - 12/31/90 1/8 1/32
01/01/91 - 03/31/91 1/16 1/16
04/01/91 - 06/30/91 1/16 1/16
07/01/91 - 09/30/91 1/16 1/32
10/01/91 - 12/31/91 1/16 1/32
01/01/92 - 03/31/92 5/32 1/16
04/01/92 - 06/30/92 5/32 1/16
07/01/92 - 09/30/92 5/32 1/16
10/01/92 - 12/31/92 5/32 1/16
01/01/93 - 03/31/93 5/32 1/16
04/01/93 - 06/30/93 5/32 1/16
07/01/93 - 09/30/93 5/32 1/16
10/01/93 - 12/31/93 5/32 1/16
01/01/94 - 03/31/94 5/32 1/16
04/01/94 - 06/30/94 5/32 1/16
07/01/94 - 09/30/94 5/32 1/16
10/01/94 - 12/31/94 5/32 1/16
01/01/95 - 03/31/95 5/32 1/16
04/01/95 - 06/30/95 9/32 3/32
07/01/95 - 09/30/95 9/32 3/32
10/01/95 - 12/31/95 9/32 3/32
01/01/96 - 03/31/96 9/32 3/32
The above quotations represent prices between dealers and do not include retail
markup, markdown or commission. They may not necessarily represent actual
transactions.
The closing bid price on March 31, 1996 was $.20. The Company has not paid any
dividends on its common stock. On March 31, 1996, there were approximately 175
record holders of common stock.
6
ITEM 6: SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Sales 0 0 $25,000 $0
Income(loss) ($38,934) ($33,333) ($101,320) (72,094) (573,881)
Income(loss) per common shares (.01) (.01) (.02) (.02) (.14)
Weighted average number of shares 9,450,000 6,318,782 6,318,782 5,913,782 5,913,782
Balance Sheet Data:
Current assets 403 196 1,259 26,259 1,206
Total assets 403 1,961 3,024 96,150 128,855
Current liabilities 0 235,629 197,359 205,844 166,455
Long-term obligations 0 95,000 101,000 87,500 87,500
Common shareholders' equity 403 (328,668) (295,335) (197,194) (125,100)
</TABLE>
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
The Company did not have any revenue for the year ended March 31, 1996.
<TABLE>
<CAPTION>
Year Ended - March 31
1996 1995 1994
<S> <C> <C> <C>
Professional Services $0 $0 $0
Licenses, facilities management, packages and VAR Sales $0 $0 $0
Total Gross Sales $0 $0 $0
Less: Cost of Goods Sold $0 $0 $0
Net Sales $0 $0 $0
</TABLE>
The net loss from operations before taxes for the twelve months ended March 31,
1996, was $38,934 which compares with a corresponding loss for the twelve month
period ended March 1995 of $33,333. The net loss is attributed mainly to the
lack of revenues in the Company's primary market (HMO's) for its software
products.
The Company did not have any new sales during the year.
LIQUIDITY AND CAPITAL RESOURCES
The Company signed a letter of intent on October 2, 1995 with Triple I
Corporation whereby Orbis, Inc. will exchange up to 90% of the Company's common
stock for 100% of Triple I Corporation's common stock; conduct a reverse stock
split, and change its name to Industrial Imaging Corporation all subject to
stockholder approval. A Form 8-K was filed with the Securities and Exchange
Commission on October 12, 1995.
On October 25, 1995, the Company converted a Promissory note to Celestial
management in the amount of $175,000 as well as interest due on this note in the
amount of $94,050 into common stock of Orbis, Inc.
Celestial received in exchange for this note and interest, 1,350,000 shares of
Orbis common stock as well as 100,000 three year warrants to purchase additional
shares of Orbis common stock at $.0777.
The Company had acquired the assets and rights to a yogurt chain named Perkits
Yogurt in August 1991 from Celestial Management. No revenues were derived from
this investment and all stores have been closed and the Company has ceased to
exist.
7
On November 15, 1995 various creditors of the Company converted debt in the
amount of $98,956 in exchange for 1,781,218 shares of Orbis common stock.
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See item 14(a) of this annual report of Form 10-K.
ITEM 9: DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10: DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES
The current directors, executive officers and persons nominated to become
directors of the company are as follows:
NAME AGE POSITION
- ---- --- --------
Pasquale Ruggieri 63 President, Chief Executive
Officer and Director
Arthur G. Jenkins 70 Secretary, Director
Henry E. Tow 48 Treasurer, Director
Pasquale Ruggieri, age 63, has served as President, Chief Executive Officer and
Director of the Company since August of 1990. He is currently with the
Investment Banking Division of Schneider Securities, Inc. He was Executive Vice
President and Director of Investment Banking for Jonathan Alan & Co., Inc. until
January of 1991. Mr. Ruggieri was in Corporate Finance and coordinator of
special situations of Providence Securities until January 1987. Mr. Ruggieri was
self-employed as a management consultant for the two years prior. He was an
investment broker at Tucker, Anthony, and R.L. Day from 1983 through 1985. Mr.
Ruggieri received his Bachelor of Science Degree in Business Administration from
Bryant College and has banking certificates from the American Institute of
Banking.
Arthur G. Jenkins, age 70, has been the Secretary and Director of the Company
since August of 1990. He is currently with the Investment Banking Division of
Schneider Securities, Inc. He was with Josephthal Lyon & Ross, Inc. until August
of 1994. He was with the Investment Banking Division of Schneider Securities,
Inc. until October, 1992. He was a Vice President, Investment Banking Division
of Jonathan Alan & Company, Inc. until January of 1991, and held a comparable
position with Providence Securities, Inc. during January 1988- November 1988;
during the period June 1986 - January 1988 he was a principal at A.G. Jenkins &
Associates, S. Orange, New Jersey, a consulting engineer firm and held the
position of Senior Vice President at Cornell Dublier Electronics Inc., Wayne,
New Jersey, where he associated from December 1960 - June 1986.
8
Henry E. Tow, age 48, has served as Treasurer and Director of the Company since
August 1990. He is currently with the investment firm of Coburn & Merideth. He
was with the Investment Banking Division of Schneider Securities, Inc. until
August of 1995. He was a vice president of Jonathan Alan & Company, Inc. with
whom he has been associated until January of 1991 and a registered
representative since September 1986 with other securities brokerage firms;
during the period September 1984 - September 1986 he attended RI College at
Providence, RI; he held the position of President at his restaurant business,
Jasmine Associates, Warwick, RI from June 1984 - July 1985, and the General
Manager of Tow Industries Inc., Pawtucket, RI during the period June 1976 -
December 1983.
Officers and directors are elected on an annual basis. The present term of
office for each director will expire at the next annual meeting of the Company's
stockholders or at such time as his successor is duly elected. Directors of the
Company are not presently receiving compensation for their services to the
Company but have been granted options under the 1987 stock option plan. Officers
serve at the discretion of the Board of Directors.
ITEM 11: EXECUTIVE COMPENSATION
The following table sets forth all cash compensation paid by the Company during
the fiscal year ended March 31, 1996 to each of its five most highly compensated
officers whose total cash compensation exceeds $60,000 and to all executive
officers as a group:
<TABLE>
<CAPTION>
NAME OF INDIVIDUAL OR NUMBER IN GROUP CAPACITIES IN WHICH SERVED CASH COMPENSATION
<S> <C> <C>
Pasquale Ruggieri President $0
Chief Executive Officer
All Executive Officers as a Group (3 people) $0
</TABLE>
1987 STOCK OPTION PLAN
An aggregate of 400,000 shares of Common Stock is reserved for issuance under
the Company's 1987 Stock Option Plan (the "1987 Plan"), which was approved by
the Board of Directors as of December 17, 1987, amended on July 26, 1988 and
ratified by the stockholders of the Company on September 7, 1988. The terms of
the 1987 Plan are identical to those of the 1986 Plan, except that (i) the
employees need not agree in writing to remain in the employ of the Company for
one year after being granted an option to be eligible to exercise it but will
not be granted options until they have served for one year; (ii) directors of
the Company who have served as directors for period of at least one full year
(except for directors who are full-time employees of the Company) are eligible
to be granted options; and (iii) the Company does not have a repurchase option
in the event that the employee competes directly or indirectly with the Company
during the period of employment or for two years thereafter, as the 1986 Plan
does.
On December 1, 1988, the Company authorized the issuance of stock options under
the 1987 Plan to all qualified Directors of the Company who have served for at
least one year in the amount of 10,000 shares to each Director at 80 percent of
the market value of the Company's Common Stock as of December 1.
EMPLOYMENT AGREEMENT
None.
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of March 31, 1996, regarding the
beneficial owners of 5% or more of the Company's outstanding Common Stock, the
only class of the Company's voting securities and the share ownership of all
directors and executive officers as a group. Unless otherwise indicated, each of
the following stockholders has sole voting and investment power with respect to
the shares beneficially owned:
9
<TABLE>
<CAPTION>
NAMES AND ADDRESS OF BENEFICIAL OWNER SHARES OF THE COMPANY'S COMMON STOCK
BENEFICIALLY OWNED
NUMBER PERCENT
------ -------
<S> <C> <C>
Thomas L. DePetrillo 2,329,286 24.6%
65 Peaked Rock Road
Narragansett, RI 02882
Celestial Management 1,350,000 14.3%
336 Atlantic Avenue
East Rockaway, NY 11518
Pasquale Ruggieri 1,087,886 11.5%
51 Country Lane
Cranston, RI 02920
All Current Directors and Officers 1,407,886 14.9%
as a Group (3 people)
</TABLE>
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None
PART IV
ITEM 14:
(A) 1. LIST OF FINANCIAL STATEMENTS
The following financial statements of Orbis, Inc. as required by Item 8
of Part II of this Annual Report of Form 10-K appear at pages F-1
through F-12 of this Annual Report on Form 10-K:
Independent Auditor's Report
Balance Sheets -- March 31, 1996 and March 31, 1995
Statements of Operations -- Years Ended March 31, 1996, 1995,
and 1994
Statements of Changes in Common Shareholders' Equity -- Years
Ended March 31, 1996, 1995, and 1994
Statements of Cash flows -- Years Ended March 31, 1996, 1995,
and 1994
Notes to Financial Statements-- March 31, 1996, 1995, and 1994
2. FINANCIAL STATEMENT SCHEDULE
The following auditors' opinion and financial statement schedules of
Orbis, Inc. appear at Pages S-1 through S-6 of this Annual Report on
Form 10-K:
Schedule II Accounts Receivable from Related
Parties and Underwriters, Promoters
and Employees Other Than Related
Parties
Schedule V Property, Plant and Equipment
10
Schedule VI Accumulated Depreciation, Depletion
and Amortization of Property, Plant
and Equipment
Schedule VIII Valuation and Qualifying Accounts
Schedule IX Short-Term Borrowings
Schedule X Supplementary Income Statement
Information
3. EXHIBITS
The exhibit numbers in the following list correspond to the numbers assigned to
such exhibits in the Exhibit Table of Item 601 of Regulation S-K.
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION OF DOCUMENT
- ------- -----------------------
<S> <C>
*3.1 Restated Articles of Incorporation of the Company.
*3.2 By-Laws of the Company, as amended.
*3.3 Underwriter's Warrant.
*3.4 Articles of Amendment to the Articles of Incorporation of the Company.
*4.1 Specimen certificate for shares of Common Stock of the Company.
**10.1 1987 Stock Option Plan.
**10.2 Investment Agreement between the company and Rhode Island Group Health Association, Inc.
("RIGHA") dated December 31, 1985.
*10.3 Agreement between Tufts Associated Health Plan and the Company dated July 1, 1986.
*10.4 Form of Software License Agreement.
*10.5 Asset Purchase Agreement between the Company and Automated Business Centers, Inc. dated as
of March 29, 1985.
*10.6 Amended HMO Software Agreement between RIGHA and the Company dated December 31, 1985.
**10.7 Amendment dated May 19, 1987 to Facilities Maintenance
Agreement between the Company and RIGHA dated October 10,
1986.
**10.8 Cancellation dated May 19, 1987 of Agreement for computer Processing Services dated September 4, 1985.
*10.9 Subscription Agreement between Tufts Associated Health Plan and the Company dated as of July 1, 1986.
*10.10 OEM Agreement between the Company and Hewlett Packard dated August 19, 1986.
*10.11 Lease Agreement for 20 Catamore Boulevard offices between the
Company and Novius IV Limited Partnership dated December 30,
1985.
*10.12 Promissory Note, Revolving Credit and Standby Letter of Credit Agreement between the
Company and Old Stone Bank dated August 29, 1985.
</TABLE>
11
<TABLE>
<S> <C>
*10.13 Nine percent debenture of the Company payable to DeBlois Oil Company dated January 27, 1986.
*10.14 Employment Agreement between the Company and Clinton L. Wright dated July 1, 1982.
*10.15 Orbis, Inc. Thrift 401(k) Plan and Trust.
***10.16 Agreement between All Care, Inc. and the Company dated August 19, 1986.
*****10.17 Joint Venture Agreement between Network Solutions, Inc. and the Company dated May 7, 1988.
****10.18 Agreement between Record Management Systems, Inc. and Orbis Medical, Inc. dated April 30, 1988.
****10.19 Agreement and Plan of Merger among Systems & Solutions, Inc., Orbis Medical, Inc. and the
Company dated April 30, 1988.
******10.20 Agreement between Rhode Island Group Health Association and the Company dated June 16, 1988.
******10.21 Settlement between Orbis Medical Inc. and Mark Towner, Douglas Barry and Alan Rowberry
(division known as Record Management Systems (RMS)) dated October 13, 1988.
******10.22 Stock Purchase and Call Option Agreement between the Company and Network Solutions Inc. dated March 13, 1989.
******10.23 1986 Stock Option Plan.
******11.2 Statement regarding Computation of Earnings Per Share.
*****13.1 1988 Annual Report to Shareholders.
****22.1 Subsidiaries of the Registrant.
</TABLE>
*Incorporated herein by reference from the exhibits to the Company's Form S-18
Registration Statement No. 33-8184B filed with the Securities and Exchange
Commission.
**Incorporated herein by reference from the exhibits to the Company's Form 10-K
Annual Report for fiscal year ending 3/31/87 No. 0-15520 filed with the
Securities and Exchange Commission.
***Incorporated herein by reference from the Company's Form 8 to the Form 10-K
Annual Report for fiscal year ending 3/31/87 No. 0-15520 filed with the
Securities Exchange Commission.
****Incorporated herein by reference from the exhibits to the Company's Form
10-K Annual Report for fiscal year ending 3/31/88 No. 0-15520 filed with the
Securities and Exchange Commission.
*****Incorporated herein by reference from the company's Form 8 to the Form 10-K
Annual Report for fiscal year ending 3/31/88 No. 0-15520 filed with the
Securities Exchange Commission.
******Incorporated ;herein by reference from the Company's form 8 to the Form
10-K Annual Report for fiscal year ending 3/31/89 No. 0-15520 filed with the
Securities and Exchange Commission.
(B) REPORTS 8-K
A Form 8-K was filed on October 4, 1991
12
A Form 8-K was filed on May 7, 1992
A Form 8-K was filed on October 21, 1993
An amended Form 8-K was filed on January 21, 1994
A Form 8-K was filed on October 12, 1995
13
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
ORBIS, INC.
Date: June 17, 1996 By: /s/ Pasquale Ruggieri
--------------------------
Pasquale Ruggieri, Chief Executive
Officer, President, Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Date: June 17, 1996 /s/ Pasquale Ruggieri
----------------------
Pasquale Ruggieri, Chief Executive
Officer, President, Director
Date: June 17, 1996 /s/ Arthur G. Jenkins
---------------------
Arthur G. Jenkins, Secretary,
Director
Date: June 17, 1996 /s/ Henry E. Tow
----------------
Henry E. Tow, Treasurer, Director
14
List of Financial Statements
F1--F12
ORBIS, INC. AND SUBSIDIARY
==========================
CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED
MARCH 31, 1996 AND 1995
WITH
INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS' REPORT
F1
CAYER PRESCOTT
CLUNE CHATELLIER
CERTIFIED PUBLIC ACCOUNTANTS
PROVIDENCE, RHODE ISLAND
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS' REPORT
To the Shareholders of
Orbis, Inc. and Subsidiary
We have audited the accompanying consolidated balance sheets of Orbis,
Inc. and Subsidiary as of March 31, 1996 and 1995, and the related consolidated
statements of operations and changes in shareholders' equity and cash flows for
the years ended March 31, 1996, 1995, and 1994. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Orbis, Inc.
and Subsidiary at March 31, 1996 and 1995, and the results of its operations and
its cash flows for the years ended March 31, 1996, 1995 and 1994 in conformity
with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in Note
10 to the consolidated financial statements, the Company has experienced
substantial operating losses in recent years. The Company's financial position
and operating results raise substantial doubt about its ability to continue as a
going concern. Management's plans in regard to these matters are also described
in Note 10. The consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
/s/ CAYER PRESCOTT CLUNE & CHATELLIER
May 31, 1996
F2
ORBIS, INC. AND SUBSIDIARY
==========================
BALANCE SHEETS
MARCH 31, 1996 AND 1995
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
ASSETS
======
1996 1995
---- ----
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents.............................................................$ 303 $ 96
Accounts receivable:
Trade (net of allowance for doubtful accounts: $126,466 in 1996 and 1995)..........
Prepaid expenses...................................................................... 100 100
-------------------------------------
TOTAL CURRENT ASSETS.............................................................. 403 196
-------------------------------------
EQUIPMENT, FIXTURES AND SOFTWARE, AT COST............................................... 585,031 585,031
Less: accumulated depreciation and amortization...................................... (585,031) (585,031)
-------------------------------------
NET EQUIPMENT, FIXTURES AND SOFTWARE.............................................. 0 0
-------------------------------------
OTHER ASSETS:
Deposits.............................................................................. 1,765
-------------------------------------
TOTAL OTHER ASSETS................................................................ 0 1,765
-------------------------------------
TOTAL ASSETS....................................................................$ 403 $ 1,961
=====================================
LIABILITIES AND SHAREHOLDERS' DEFICIENCY
========================================
CURRENT LIABILITIES:
Current portion of long-term debt..................................................... $ 96,500
Accounts payable...................................................................... 8,535
Accrued expenses:
Professional fees................................................................... 500
Due to related parties.............................................................. 36,044
Interest to related party........................................................... 94,050
-------------------------------------
TOTAL CURRENT LIABILITIES.........................................................$ 0 235,629
-------------------------------------
LONG-TERM DEBT, NET OF CURRENT PORTION.................................................. 0 95,000
-------------------------------------
STOCKHOLDERS' DEFICIENCY:
Common stock - $.01 par value; 10,000,000 shares authorized; 9,450,000 shares
issued (6,318,782 in 1995).......................................................... 94,500 63,188
Paid-in capital....................................................................... 3,245,134 2,908,441
Accumulated deficit................................................................... (3,284,939) (3,246,005)
--------------------------------------
Total............................................................................. 54,695 (274,376)
Less: 80,468 shares of treasury stock, at cost....................................... (54,292) (54,292)
--------------------------------------
TOTAL SHAREHOLDERS' DEFICIENCY.................................................... 403 (328,668)
--------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIENCY..................................$ 403 $ 1,961
=====================================
SEE NOTES TO FINANCIAL STATEMENTS.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
F3
ORBIS, INC. AND SUBSIDIARY
==========================
STATEMENTS OF OPERATIONS
YEARS ENDED MARCH 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
OPERATING EXPENSES................................................... $37,076 $ 6,633 $ 93,839
---------------------------------------------------
LOSS FROM OPERATIONS................................................. (37,076) (6,633) (93,839)
----------------------------------------------------
OTHER INCOME (EXPENSE):
Professional fees..................................................
Interest expense................................................... (26,700) (26,250)
Accounts payable settlements....................................... 18,319
Miscellaneous income (loss)........................................ (1,858) 450
-----------------------------------------------------
OTHER INCOME (EXPENSE), NET...................................... (1,858) (26,700) (7,481)
-----------------------------------------------------
NET LOSS............................................................. $(38,934) $(33,333) $(101,320)
====================================================
LOSS PER SHARE....................................................... $ (.01) $ (.01) $ (.01)
SEE NOTES TO FINANCIAL STATEMENTS.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
F4
ORBIS, INC. AND SUBSIDIARY
==========================
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIENCY)
YEARS ENDED MARCH 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Preferred Stock Common Stock Paid-in Retained
Shares Amount Shares Amount Capital Earnings
------ ------ ------ ------ ------- --------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, MARCH 31, 1993............. 400,000 $ 400,000 5,913,782 $59,138 $2,509,312 $(3,111,352)
Conversion of preferred stock....... (400,000) (400,000) 400,000 4,000 396,000
Issuance of common stock............ 5,000 50 3,129
Net loss for the year............... (101,320)
------------------------------------------------------------------------------------------------
BALANCE, MARCH 31, 1994............. 0 0 6,318,782 63,188 2,908,441 (3,212,672)
Net loss for the year............... (33,333)
------------------------------------------------------------------------------------------------
BALANCE, MARCH 31, 1995............. 0 0 6,318,782 63,188 2,908,441 (3,246,005)
Conversion of debt to equity........ 3,131,218 31,312 336,693
Net loss for the year............... (38,934)
------------------------------------------------------------------------------------------------
BALANCE, MARCH 31, 1996............. 0 $ 0 9,450,000 $94,500 $3,245,134 $(3,284,939)
================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Treasury Stock
Shares Amount Total
------ ------ -----
<S> <C> <C> <C>
BALANCE, MARCH 31, 1993............. 80,468 $54,292 $(197,194)
Conversion of preferred stock.......
Issuance of common stock............ 3,179
Net loss for the year............... (101,320)
------------------------------------------------
BALANCE, MARCH 31, 1994............. 80,468 54,292 (295,335)
Net loss for the year............... (33,333)
------------------------------------------------
BALANCE, MARCH 31, 1995............. 80,468 54,292 (328,668)
Conversion of debt to equity........ 368,005
Net loss for the year............... (38,934)
------------------------------------------------
BALANCE, MARCH 31, 1996.............
80,468 $54,292 $ 403
================================================
SEE NOTES TO FINANCIAL STATEMENTS.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
F5
ORBIS, INC. AND SUBSIDIARY
==========================
STATEMENTS OF CASH FLOWS
YEARS ENDED MARCH 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
CASH PROVIDED BY:
Operating activities:
Net loss......................................................... $(38,934) $(33,333) $(101,320)
Items in net loss not affecting cash:
Depreciation and amortization.................................. 68,126
Write off of deposits.......................................... 1,765
Increase (decrease) in cash from changes in assets and liabilities:
Accounts receivable.......................................... 25,000
Prepaid expenses and deposits................................ 990
Accounts payable............................................. 6,774
Accrued expenses............................................. 37,376 33,770 6,270
-------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES.................. 207 1,427 4,850
-------------------------------------------------------
CASH USED FOR FINANCING ACTIVITIES:
Repayment of long-term debt...................................... (1,500) (4,850)
--------------------------------------------------------
NET CASH USED FOR FINANCING ACTIVITIES..................... (1,500) (4,850)
--------------------------------------------------------
NET INCREASE (DECREASE) IN CASH...................................... 207 (73) 0
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR ........................ 96 169 169
------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF YEAR............................... $ 303 $ 96 $ 169
=====================================================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest......................................................... $ 0 $ 0 $ 0
=======================================================
SEE NOTES TO FINANCIAL STATEMENTS.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
F6
ORBIS INC. AND SUBSIDIARY
=========================
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MARCH 31, 1996, 1995 AND 1994
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
On April 1, 1989 Orbis Acquisition, Inc. (a wholly-owned
subsidiary) acquired all of the outstanding common stock of Systems and
Solutions, Inc. and changed its name to Orbis Medical, Inc. All
material intercompany transactions and balances have been eliminated in
consolidation and are recorded using the purchase method of accounting.
NATURE OF BUSINESS
The Company manufactures and markets application software
products designed for use on Hewlett Packard computers by health
maintenance organizations (HMOs) and furnishes related professional
services to HMOs on customer-funded enhancements of the Company's
software products.
The Company has suspended active business at the present time
until anticipated corporate restructuring occurs.
REVENUE RECOGNITION POLICY
Revenue is recognized as services are performed and
installations are completed.
COMPUTER SOFTWARE DEVELOPMENT COSTS
Pursuant to the Financial Accounting Standards Board Statement
No. 86, the Company capitalizes the cost of computer software to be
sold, leased or otherwise marketed.
Expenses incurred to establish the technological feasibility
of a product are expensed. Subsequent development costs are
capitalized. The amounts amortized for the years ended March 31, 1996,
1995, and 1994 were $0, $0 and $68,079, respectively.
PUBLIC STOCK OFFERING COSTS
Public stock offering costs have been netted against the
proceeds from the offering.
CASH EQUIVALENTS
The Company considers all highly liquid debt instruments, with
maturities of three months or less, to be cash equivalents.
EQUIPMENT, FIXTURES AND SOFTWARE
Equipment, fixtures and software are recorded at cost.
Depreciation and amortization are computed on the straight-line method
over the assets' useful lives for financial reporting purposes.
(CONTINUED)
- --------------------------------------------------------------------------------
F7
ORBIS INC. AND SUBSIDIARY
=========================
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MARCH 31, 1996, 1995 AND 1994
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ORGANIZATION COSTS
Organization costs are amortized on a straight-line basis over
a sixty month period. These costs are fully amortized as of March 31,
1994.
OTHER MATTERS
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosures of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting periods. Actual results
could differ from those estimates.
2. EQUIPMENT, FIXTURES AND SOFTWARE
At March 31, 1996 and 1995, equipment, fixtures and software
consist of the following:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Computer equipment.................................................... $ 61,579 $ 61,579
Purchased software programs........................................... 60,511 60,511
Developed software programs........................................... 446,874 446,874
Office furniture and equipment........................................ 16,067 16,067
---------------------------------
Total............................................................... 585,031 585,031
Less: accumulated depreciation and amortization...................... (585,031) (585,031)
---------------------------------
NET EQUIPMENT, FIXTURES AND SOFTWARE................................ $ 0 $ 0
=================================
</TABLE>
3. LONG-TERM DEBT
Long-term debt at March 31, 1996 and 1995, is as follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Settlement agreement with a financial institution totaling $18,000 in
accordance with the following payment schedule: (1) $500 on or before
June 30, 1994; and (2) thirty five monthly payments of $500, due and
payable on the first day of each month, beginning August 1, 1994, with
the final monthly payment due on or before June 1, 1997. In the event
that the Company defaults on a payment, the financial institution shall
be entitled to the full amount of the settlement including all costs
incurred and all post-judgement interest accrued. During fiscal year
ended March 31, 1996, this debt was assumed by certain shareholders in
exchange for stock................................................................... $0 $16,500
.
</TABLE>
(CONTINUED)
- --------------------------------------------------------------------------------
F8
ORBIS INC. AND SUBSIDIARY
=========================
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MARCH 31, 1996, 1995 AND 1994
- --------------------------------------------------------------------------------
3. LONG-TERM DEBT (CONTINUED)
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Note payable to Celestial Management, Ltd. The principal sum is due in
installments as follows: (1) $87,500 on September 30, 1991 or upon the
closing date of a private offering of any securities of the Company,
whichever is earlier; and (2) $87,500 or the entire principal balance
then due on July 31, 1998 or the closing date for the public offering
of any securities of the Company whichever is earlier. The Company
agrees to pay interest on the unpaid principal balance from the issue
date until payment in full, monthly, at a rate of 15 percent per annum:
currently in default. During fiscal year ended March 31, 1996, this
note was converted to common stock of the Company..................................... 0 175,000
----------------------------
Total long-term debt....................................................... 191,500
Less: current portion....................................................... 0 96,500
----------------------------
NET LONG-TERM DEBT......................................................... $0 $ 95,000
============================
</TABLE>
Cash paid for interest during the years ended March 31, 1996,
1995 and 1994 was $0, $0, and $0, respectively.
4. INCOME TAXES
The Company has adopted Statement of Financial Accounting
Standards No. 109, Accounting for Income Taxes. Under this method,
deferred income tax assets and liabilities are calculated based on
their estimated effect on future cash flows. The new method generally
differs from the former method because sources of taxable income other
than reversals of existing taxable temporary differences are considered
in the deferred tax calculations.
The net current and noncurrent deferred tax asset as presented
in the accompanying balance sheet consists of the following:
Deferred tax asset................................ $934,600
Valuation allowance............................... (934,600)
---------
$ 0
=========
The valuation allowance at March 31, 1995 was $921,400
representing a net increase of approximately $13,200.
The deferred tax asset balance is the result of net operating
loss carryforwards.
A valuation allowance has been recorded for the deferred tax
assets as it is more likely than not that the deferred tax asset will
not be realized.
The Company has available research activities credits,
investment tax credits and jobs tax credit carryforwards totaling
approximately $167,000 expiring at various dates through 2005, and a
net operating loss carryforward of approximately $2,700,000 expiring at
various dates through 2005.
(CONTINUED)
- --------------------------------------------------------------------------------
F9
ORBIS INC. AND SUBSIDIARY
=========================
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MARCH 31, 1996, 1995 AND 1994
- --------------------------------------------------------------------------------
5. RELATED PARTY TRANSACTIONS
In June of 1990, Jonathan Alan Group, Inc., a related party,
assumed $229,009 in debt owed to a former shareholder. Jonathan Alan
Group, Inc. agreed to convert $129,009 of this assumed obligation into
1,822,714 shares of common stock. The remaining $100,000 was recorded
as a note payable, however as of March 31, 1991, no formal note has
been executed. In September 1991, the note was converted into 100,000
shares of one dollar par value preferred stock convertible into common
stock of the Company as explained in Note 10. On June 16, 1993, the
Board of Directors authorized the Company to convert the preferred
stock into 100,000 shares of the Company's common stock.
On August 22, 1991, the Company acquired all assets and rights
to a yogurt chain from Celestial Management, Ltd. The yogurt chain was
acquired by the Company through the issuance of two secured promissory
notes for $300,000 and $175,000 to Celestial Management, Ltd. In
September of 1991, the $300,000 promissory note was paid by the
issuance of 300,000 shares of one dollar par value preferred stock
convertible into common stock of the Company as explained in Note 10.
On September 30, 1991, a principal payment of $87,500 was due on the
$175,000 promissory note. As of March 31, 1992, no payment has been
made and the note is considered to be in default. On June 16, 1993, the
Board of Directors authorized the Company to convert the preferred
stock into 300,000 shares of the Company's common stock. On November
15, 1995, this $175,000 note plus $94,050 of accrued interest was
converted into 1,350,000 shares of common stock and 100,000 warrants.
The Company has received advances from a partnership, in which
the partners are also Directors or shareholders of the Company. The
amounts due to the partnership are payable upon demand. Interest is
payable at the applicable federal rate. The amounts due to the
partnership for the years ended March 31, 1996 and 1995, is $0 and
$36,044, respectively. During fiscal year ended March 31, 1996, these
advances were converted to common stock of the Company.
6. COMMON STOCK TRANSACTIONS
On June 16, 1993, the Company converted 400,000 shares of
preferred stock into 400,000 shares of common stock. Also on this date,
the Company issued 5,000 shares of common stock as part of payment in
full of their outstanding balance with a creditor.
On November 16, 1995, the Company converted all of its debt
into equity and issued 3,131,218 shares of common stock. Of this debt,
$82,456 was due to related parties, $191,500 plus accrued interest of
$94,050 was due to third parties for a grand total of $368,006.
The Company also issued 100,000 three year warrants to
purchase additional shares of common stock at $.0777 to a third party
in the conversion. (Upon execution of the reverse stock split discussed
in Note 12, the purchase price will increase to $1.40.)
7. PREFERRED STOCK TRANSACTIONS
The Company converted the $300,000 note payable to Celestial
Management, Inc. as well as a prior $100,000 debenture payable to
Jonathan Alan into preferred stock of the Company. See Note 5.
On June 16, 1993, the Board of Directors authorized the
Company to convert the 400,000 shares of preferred stock into 400,000
shares of common stock.
(CONTINUED)
- --------------------------------------------------------------------------------
F10
ORBIS INC. AND SUBSIDIARY
=========================
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MARCH 31, 1996, 1995 AND 1994
- --------------------------------------------------------------------------------
8. STOCK OPTIONS
An aggregate of 400,000 shares of common stock is reserved for
issuance under the Company's 1987 Stock Option Plan (the "1987 Plan"),
which was approved by the Board of Directors as of December 17, 1987,
amended on July 26, 1988 and ratified by the stockholders of the
Company on September 7, 1988. The terms of the 1987 Plan are identical
to those of the 1986 Plan, except that (i) the employees need not agree
in writing to remain in the employ of the Company for one year after
being granted an option to be eligible to exercise it but will not be
granted options until they have served for one year; (ii) directors of
the Company who have served as directors for a period of at least one
full year (except for directors who are full-time employees of the
Company) are eligible to be granted options; and (iii) the Company does
not have a repurchase option in the event that the employee competes
directly or indirectly with the Company during the period of employment
or for two years thereafter, as the 1986 Plan does.
On December 1, 1988, the Company authorized the issuance of
stock options under the 1987 Plan to all qualified Directors of the
Company who have served for at least one year in the amount of 10,000
shares to each Director at 80 percent of the market value of the
Company's common stock as of December 1.
9. EARNINGS PER SHARE
Earnings per share amounts are computed based on the weighted
average number of shares outstanding plus the shares that would be
outstanding assuming the exercise of dilutive stock options, which are
considered to be common stock equivalents. The number of shares used in
the computations was 9,450,000 in 1996 and 6,318,782 in 1995.
10. CONTINUING OPERATIONS
The accompanying financial statements have been prepared in
conformity with generally accepted accounting principles, which
contemplates continuation of the Company as a going concern. However,
the Company has sustained substantial operating losses in recent years
due to the depressed conditions of health maintenance organizations.
The Company has used substantially all of its working capital to
maintain the corporate existence.
In view of these matters, realization of a major portion of
the assets in the accompanying balance sheet is dependent upon
continued operations of the Company, which in turn is dependent upon
the Company's ability to meet its financing requirements, and
resumption of operations.
In an effort to maintain the value of its HMO software
products, the Company is attempting to negotiate license agreements
which, if successful, could provide the Company with future royalties.
As discussed in Note 5, a related party, is currently
providing necessary operating cash flow through cash infusions.
The related party's current intent is to seek a sale or merger
of the Company, as discussed in Note 12.
(CONTINUED)
- --------------------------------------------------------------------------------
F11
ORBIS INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MARCH 31, 1996, 1995 AND 1994
- --------------------------------------------------------------------------------
11. ACCOUNTS PAYABLE SETTLEMENTS
In exchange for partial payments, certain vendors have
forgiven remaining amounts owed to them for services and products
acquired by the Company in previous years.
12. SUBSEQUENT EVENTS
The Company has entered into a letter of intent with Triple I
Corporation (a manufacturer of optical imaging machinery) whereby
Orbis, Inc. will exchange up to 90% of common stock for 100% of Triple
I Corporation's common stock; conduct a reverse stock split, and change
its name to Industrial Imaging Corporation.
(CONCLUDED)
- --------------------------------------------------------------------------------
F12
Financial Statement Schedule
S1 - S6
<TABLE>
<CAPTION>
SCHEDULE II
ORBIS, INC. AND SUBSIDIARY
==========================
AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS, PROMOTERS,
AND EMPLOYEES OTHER THAN RELATED PARTIES.
YEARS ENDED MARCH 31, 1996, 1995 AND 1994
- ------------------------------------------------------------------------------------------------------------------------------------
Column A Column B Column C Column D Column E
-------- -------- -------- -------- --------
Balance at Deductions Balance at end of Period
---------- ------------------------
Beginning (1) (2) (1) (2)
Name of Debtor of Period Additions Amounts Collected Amounts Written Off Current Net Current
-------------- --------- --------- ----------------- ------------------- ------- -----------
<S> <C> <C> <C> <C> <C> <C>
Year ended March 31, 1996 $- 0 - $- 0 -
Year ended March 31, 1995 $- 0 - $- 0 -
Year ended March 31, 1994 $- 0 - $- 0 -
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
S1
<TABLE>
<CAPTION>
SCHEDULE V
ORBIS, INC. AND SUBSIDIARY
==========================
PROPERTY, PLANT AND EQUIPMENT
YEARS ENDED MARCH 31, 1996, 1995 AND 1994
- ------------------------------------------------------------------------------------------------------------------------------------
Column A Column B Column C Column D Column E Column F
-------- -------- -------- -------- -------- --------
Balance at
Beginning Additions Other Changes Add Balance at
Classification of Period at cost Retirements (Deduct) Describe End of Period
-------------- --------- ------- ----------- ---------------- -------------
<S> <C> <C> <C> <C> <C>
Computer equipment............. $ 61,579 $ 61,579
Purchased software programs.... 60,511 60,511
Developed software programs.... 446,874 446,874
Leasehold improvements......... 16,067 16,067
YEAR ENDED MARCH 31, 1995:
Computer equipment............. $ 61,579 $ 61,579
Purchased software programs.... 60,511 60,511
Developed software programs.... 446,874 446,874
Office furniture and equipment. 16,067 16,067
YEAR ENDED MARCH 31, 1994:
Computer equipment............. $ 61,579 $ 61,579
Purchased software programs.... 60,511 60,511
Developed software programs.... 446,874 446,874
Office furniture and equipment. 16,067 16,067
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
S2
<TABLE>
<CAPTION>
SCHEDULE VI
ORBIS, INC. AND SUBSIDIARY
==========================
ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
YEARS ENDED MARCH 31, 1996, 1995 AND 1994
- ------------------------------------------------------------------------------------------------------------------------------------
Column A Column B Column C Column D Column E Column F
-------- -------- -------- -------- -------- --------
Balance at
Beginning Additions Other Changes Add Balance at
Classification of Period at cost Retirements (Deduct) Describe End of Period
-------------- --------- ------- ----------- ---------------- -------------
<S> <C> <C> <C> <C> <C>
YEAR ENDED MARCH 31, 1996:
Computer equipment................... $ 61,579 $ 61,579
Purchased software programs.......... 60,511 60,511
Developed software programs.......... 446,874 446,874
Leasehold improvements............... 16,067 16,067
YEAR ENDED MARCH 31, 1995:
Computer equipment................... $ 61,579 $ 61,579
Purchased software programs.......... 60,511 60,511
Developed software programs.......... 446,874 446,874
Office furniture and equipment....... 16,067 16,067
YEAR ENDED MARCH 31, 1994:
Computer equipment................... $ 61,579 $ 61,579
Purchased software programs.......... 60,511 60,511
Developed software programs.......... 378,795 $68,079 446,874
Office furniture and equipment....... 16,067 16,067
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
S3
<TABLE>
<CAPTION>
SCHEDULE VIII
ORBIS, INC. AND SUBSIDIARY
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED MARCH 31, 1996, 1995 AND 1994
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at
Beginning Charged to Costs Charged to Other Deductions - Balance at end
Decription of Period and Expenses Accounts - Describe Describe of the period
---------- --------- ------------ ------------------- -------- -------------
<S> <C> <C> <C> <C> <C>
YEAR ENDED MARCH 31, 1996
Deducted from asset accounts:
Allowance for doubtful accounts......... $126,466 $126,466
YEAR ENDED MARCH 31, 1995:
Deducted from asset accounts:
Allowance for doubtful accounts......... $126,466 $126,466
YEAR ENDED MARCH 31, 1994:
Deducted from asset accounts:
Allowance for doubtful accounts......... $126,466 $126,466
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
S4
<TABLE>
<CAPTION>
SCHEDULE IX
ORBIS, INC. AND SUBSIDIARY
==========================
SHORT TERM BORROWINGS
- ------------------------------------------------------------------------------------------------------------------------------------
Column A Column B Column C Column D Column E Column F
- ---------- -------- -------- -------- -------- --------
Weighted
Maximum Average average
Category of Weighted amount amount interest
aggregate Balance average outstanding outstanding rate
short-term at end interest during during during
borrowings of period rate the period the period the period
<S> <C> <C> <C> <C> <C>
Notes payable to banks
(bank borrowings):
FYE 3/31/96 $ 0 N/A N/A N/A N/A
FYE 3/31/95 $ 0 N/A N/A N/A N/A
FYE 3/31/94 $ 0 N/A N/A N/A N/A
The average amount outstanding during the period represents the average
daily principal balances outstanding during the period.
The weighted average interest rate during the period was computed by
dividing the actual interest incurred on short-term borrowings by the average
short-term borrowings.
- ------------------------------------------------------------------------------------------------------------------------------------
S5
EXHIBIT 11.2
ORBIS, INC. AND SUBSIDIARY
==========================
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
- ------------------------------------------------------------------------------------------------------------------------------------
Year Ended March 31
-------------------
1996 1995 1994
---- ---- ----
Primary:
Weighted average shares outstanding............................ 7,494,061 6,238,314 6,237,287
Net loss......................................................... $ (38,934) $ (33,333) $ (101,320)
-------------------------------------------------------
Loss per share................................................... $ (.01) $ (.01) $ (.02)
========================================================
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
S6
EXHIBIT G
TRIPLE I CORPORATION
BALANCE SHEET
as of June 30, 1996
(unaudited)
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Current assets:
Cash $ 79,100
Accounts receivable, net of allowance for doubtful accounts
of $20,000 118,367
Inventory 823,268
Prepaid expenses 18,074
-------------
Total current assets 1,038,809
Property and equipment, net 42,627
Patents, net 141,666
Other assets 10,786
-------------
Total assets $ 1,233,888
===========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Notes payable 481,367
Accounts payable 570,258
Deferred revenue 78,092
Accrued expenses 937,570
-------------
Total current liabilities 2,067,287
Shareholders' equity
Common stock, par value $.01 per share, authorized
8,700,000 shares, 4,367,037 shares issued and
outstanding at June 30, 1996 43,670
Series A Preferred Stock, par value $.01 per share, authorized 1,000,000
shares, 633,200 shares issued
and outstanding at June 30, 1996 6,332
Series B Preferred Stock, par value $.01 per share, authorized 300,000
shares, 0 shares issued and outstanding at June 30, 1996
Additional paid-in capital 5,364,104
Accumulated deficit ( 6,247,505)
------------
Total shareholders' equity (deficit) ( 833,399)
------------
Total liabilities and shareholders` equity (deficit) $ 1,233,888
============
</TABLE>
TRIPLE I CORPORATION
STATEMENT OF OPERATIONS
for the nine months ended June 30
(unaudited)
<TABLE>
<CAPTION>
1996 1995
----------- ------------
<S> <C> <C>
Revenues $1,120,377 $711,219
Cost of revenues 1,098,442 642,329
------------ ------------
Gross profit 21,935 68,890
------------ ------------
Operating expenses:
Research and development 543,146 396,404
Sales and marketing 156,330 155,782
General and administrative 671,808 640,336
------------ ------------
Total operating expenses 1,371,314 1,192,522
------------ ------------
Loss from operations
(1,349,379) (1,123,632)
Other income (expense):
Interest expense (106,806) (92,816)
Other 120,474) ( 3,388)
------------ ------------
Other income (expense), net 13,668 ( 96,204)
Loss before income taxes ( 1,335,711) ( 1,219,836)
Provision for income taxes ----------- -----------
Net loss $ (1,335,711) $ (1,219,836)
============ ============
</TABLE>
TRIPLE I CORPORATION
STATEMENT OF CASH FLOWS
for the nine months ended June 30
(unaudited)
<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
Cash flows from operating activities: $(1,335,711) $(1,219,836)
Net loss
Adjustments to reconcile net loss to net cash used in operating activities:
Forgiveness of debt (100,000)
Depreciation 26,970 17,317
Amortization 79,688 79,688
Changes in assets and liabilities:
Accounts receivable (63,839) 127,545
Inventory (28,447) (268,039)
Prepaid expenses (12,959) (22,467)
Accounts payable 270,885 409
Other assets (310)
Deferred revenue (601,633) 230,987
Accrued expenses 407,788 72,854
--------------- -------------
Net cash used in operating activities (1,357,258) (981,852)
--------------- -------------
Cash flows from investing activities:
Capital expenditures (19,417) -
--------------- -------------
Cash flows from financing activities:
Proceeds from issuance of nonconvertible debt 93,311 602,135
Proceeds from issuance of stock (net) 1,356,246 400,000
--------------- -------------
Net cash provided from financing activities 1,449,557 1,002,135
--------------- -------------
Net increase in cash 72,882 20,283
Cash, beginning of period 6,218 -
--------------- -------------
Cash, end of period $ 79,100 $ 20,283
=============== =============
Supplemental cash flows information:
Cash paid during the period for interest $ 23,804 $ 53,231
=============== =============
Non-cash items:
Debt and accrued interest converted to equity during the period $ 1,270,637 $ -
=========== ============
</TABLE>
TRIPLE I CORPORATION
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
Note A - Basis of Presentation
The accompanying financial statements of the Company as of June 30, 1996 and for
the nine months then ended are unaudited, but in the opinion of management
include all normal and recurring adjustments necessary for a fair presentation
of the results for the interim period. The results of operations for the nine
months ended June 30, 1996 are not necessarily indicative of the results of
operations to be expected for the full year or any future period.
Note B - Inventories
Inventories are stated at the lower of cost or market. Cost is determined on a
first-in, first-out (FIFO) basis. At June 30, inventories consist of the
following:
Raw materials $ 474,319
Work in process 307
Finished goods 61,308
------
$ 535,954
=========
Note C - Shareholders' Equity
The Company's Board of Directors approved a 20-for-1 stock split of the common
and preferred stock in February, 1996. Accordingly, share amounts of common and
preferred stock have been adjusted to reflect the split.
In October, 1995, the company issued warrants to purchase 255,000 shares of
common stock in conjunction with loans of $255,000 to the company from
shareholders. The warrants are convertible at a price of $1.00 per share and
expire on October 13, 1998.
From February 1996 through April 1996, the Company raised $880,000 through
Schneider Securities, Inc. (the "Placement Agent") from a private placement of
equity securities. In accordance with the private placement, the Company issued
to the placement agent warrants for the purchase of 88,000 shares of common
stock exercisable on April 27, 1997 at an exercise price of $1.20 per share. In
addition, the Company issued warrants to purchase 44,000 shares of the Company's
common stock to legal counsel in conjunction with the private offering. During
the quarter ending June 30, 1996, the Company raised an additional $650,000 of
equity through the sale of common stock.
As of June 30, 1996, the Company had not repaid various borrowings that had
become due. The Company and certain debtholders agreed to extend the maturity on
$200,000 in notes until October 23, 1996. In February, 1996, the Company and
various debt holders entered into an agreement to convert $1,270,637 of unpaid
debt and interest into 1,270,637 shares of the Company's common stock. In
addition, one debtholder agreed to forgive $100,000 of debt in exchange for
warrants to purchase 150,000 shares of the Company's common stock at $1.00 per
share through February 6, 1999.
Note D - Related Party Transactions
In March, 1996, the Company entered into a purchase agreement with Centennial
Technologies, Inc. whereby Centennial has agreed to purchase components and
materials up to $3 million for the Company and resell them to the Company. The
Company has agreed to pay Centennial upon full payment from the Company's
customers as systems are sold. The agreement is effective until June 30, 1997
and purchases must be specifically authorized by Centennial. As of June 30,
1996, Centennial had authorized purchases for the first $750,000. In accordance
with the agreement, the Company paid a one time fee of $200,000, which is
included in General and Administrative expense.
Note E - Subsequent Event
On November 16, 1995, the Board of Directors of the Company approved a merger
with Orbis, Inc. ("Orbis"), a publicy-held shell, whose only activity has been
expenses during the fiscal year relating to filing fees and minimal overhead
costs. Orbis has had no significant revenue for the last four fiscal years. At
this time, Orbis is in the process of filing an information statement with the
Securities and Exchange Commission which will enable Triple I to acquire 90% of
the outstanding common stock of Orbis. Orbis has received approval from its
Board of Directors and has received proxies voting in favor of the transaction
from holders of approximately 57.5% of the outstanding common stock. The
transaction will be accounted for as a capital stock transaction and will be
treated as a recapitalization of Triple I with Triple I as the acquiror (reverse
acquisition). We expect to record the transaction as the issuance of stock and
will charge to stockholders' equity any costs of the transaction, with no
goodwill recorded. Pro forma information giving effect to the transaction as if
it took place June 30, 1995, has not been presented as Orbis is a public shell
and pro forma information would not be meaningful.
