INVIVO CORP, S-2/A, 1999-02-17

INVIVO CORP
S-2/A, 1999-02-17
ELECTROMEDICAL & ELECTROTHERAPEUTIC APPARATUS

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 17, 1999

REGISTRATION NO. 333-72071

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1

FORM S-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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INVIVO CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S> <C>
DELAWARE 77-0115161
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
</TABLE>

4900 HOPYARD ROAD, #210
PLEASANTON, CALIFORNIA 94588
(925) 468-7600
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

JAMES B. HAWKINS
PRESIDENT AND CHIEF EXECUTIVE OFFICER
INVIVO CORPORATION
4900 HOPYARD ROAD, #210
PLEASANTON, CALIFORNIA 94588
(925) 468-7600
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)

COPIES TO:

<TABLE>
<S> <C>
DANIEL J. WINNIKE, ESQ. FAYE H. RUSSELL, ESQ.
JOHN E. STONER, ESQ. MICHAEL A. BARMETTLER, ESQ.
HOWARD, RICE, NEMEROVSKI, CANADY, BROBECK, PHLEGER & HARRISON LLP
FALK & RABKIN 550 WEST C STREET
A PROFESSIONAL CORPORATION SUITE 1300
1755 EMBARCADERO ROAD SAN DIEGO, CALIFORNIA 92101
PALO ALTO, CALIFORNIA 94303 (619) 234-1966
(650) 842-8500
</TABLE>

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]

If the registrant elects to deliver its latest annual report to security
holders, or a complete and legible facsimile thereof, pursuant to Item 11(a)(1)
of this form, check the following box. [ ]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.

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<PAGE> 2

THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.

SUBJECT TO COMPLETION, DATED FEBRUARY 17, 1999

PROSPECTUS

[INVIVO LOGO]

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1,050,000 SHARES OF COMMON STOCK

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Invivo Corporation is offering 850,000 shares of its common stock and the
selling stockholder is selling an additional 200,000 shares of common stock.
Invivo Corporation is traded on the Nasdaq National Market under the symbol
"SAFE." The last reported sale price of the common stock on the Nasdaq National
Market on February 9, 1999 was $16.875 per share.

SEE "RISK FACTORS" BEGINNING ON PAGE 8 FOR A DISCUSSION OF CERTAIN FACTORS THAT
YOU SHOULD CONSIDER BEFORE BUYING SHARES OF OUR COMMON STOCK.

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<TABLE>
<CAPTION>
THE OFFERING PER SHARE TOTAL
------------ --------- --------
<S> <C> <C>
Public Offering Price......................................
Underwriting Discounts and Commissions.....................
Proceeds to Invivo.........................................
Proceeds to the Selling Stockholder........................
</TABLE>

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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THE COMMON STOCK OR DETERMINED THAT THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

Invivo has granted the underwriters a 45-day option to purchase up to an
additional 107,500 shares of common stock to cover over-allotments. One of our
other stockholders (not the selling stockholder) has also granted the
underwriters a 45-day option to purchase up to 50,000 shares of common stock to
cover over-allotments. We will not receive any proceeds from the selling
stockholder selling shares in the offering or the other stockholder selling
shares to cover over-allotments.

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<TABLE>
<S> <C>
CRUTTENDEN ROTH GERARD KLAUER MATTISON
I N C O R P O R A T E D & CO., INC.
</TABLE>

THE DATE OF THIS PROSPECTUS IS , 1999
<PAGE> 3

Inside Front Cover: Pictures arranged within four boxes linked to a depiction
of a hospital illustrating the different settings within the hospital for our
patient monitoring products.

Box #1 (Upper left hand corner)
Caption: "The Omni-Trak 3150 in the MRI room"
Description: A nurse with child ready to be placed in an MRI scanner with
the Omni-Trak 3150 patient monitoring system located nearby.

Box #2 (Upper right hand corner)
Caption: "The Omni-Trak 3150 provides for remote viewing."
Description: A nurse in a control room of an MRI suite viewing the Millennia
component of the Omni-Trak 3150 illustrating the radio transmission feature
that allows the nurse to be outside the MRI room. The Omni-Trak 3150 mobile
unit can be seen in the background next to the MRI scanner.

Box #3 (Lower left hand corner)
Caption: "The Millennia used during patient transport"
Description: A patient being transported on a gurney with a Millennia monitor
attached to the patient illustrating the unit's portability feature.

Box #4 (Lower right hand corner)
Caption: "The Millennia used in the recovery room"
Description: A physician examining an unconscious patient's vital signs with
the Millennia monitor in a recovery room.

The caption below the artwork will read as follows: "Health care providers use
Invivo's products in a number of medical settings within the hospital and
stand-alone imaging centers."
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[INSERT GRAPHICS]

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TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
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<S> <C>
Prospectus Summary.............. 4
Risk Factors.................... 8
Use of Proceeds................. 17
Price Range of Common Stock..... 17
Dividend Policy................. 18
Capitalization.................. 19
Selected Financial Data......... 20
Management's Discussion and
Analysis of Financial
Condition and Results of
Operations.................... 21
Business........................ 30
</TABLE>

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Directors and Management........ 39
Selling Stockholder............. 40
Description of Capital Stock.... 41
Shares Eligible for Future
Sale.......................... 42
Underwriting.................... 43
Legal Matters................... 45
Experts......................... 45
Incorporation of Certain
Information by Reference...... 45
Additional Information.......... 46
Index to Financial Statements... F-1
</TABLE>

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NOTES TO READERS OF THIS PROSPECTUS

We were incorporated in 1986 in Delaware. When we refer to "us," "we,"
"our," "the Company" and "Invivo" in this prospectus, we mean Invivo Corporation
and its consolidated subsidiaries. Our executive offices are located at 4900
Hopyard Road, #210, Pleasanton, California 94588. Our telephone number at that
location is (925)468-7600. Information contained on our websites does not
constitute part of this prospectus.

This offering is for 1,050,000 shares. However, the underwriters have a
45-day option to purchase up to a total of 157,500 additional shares from us and
from one of our other stockholders (not the selling stockholder) to cover
over-allotments. Some of the disclosures in this prospectus would be different
if the underwriters exercise the option. Unless we tell you otherwise, the
information in this prospectus assumes that the underwriters will not exercise
the option.

Millennia(R) is a registered trademark of Invivo. Centurion(TM),
Invivo(TM), Invivo Research(TM), Lumidor(TM), MicroMax(TM), Omni-Trak(TM),
quickTemp(TM) and UniMax(TM) are trademarks of Invivo. Each other trademark,
trade name or service mark appearing in this prospectus belongs to its holder.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus (including the documents incorporated by reference in this
prospectus) may contain forward-looking statements regarding our plans,
expectations, estimates and beliefs. Our actual results could differ materially
from those discussed in, or implied by, these forward-looking statements.
Forward-looking statements are identified by words such as "believe,"
"anticipate," "expect," "intend," "plan," "will," "may" and other similar
expressions. In addition, any statements that refer to expectations, projections
or other characterizations of future events or circumstances are forward-looking
statements. Forward-looking statements in these documents include, but are not
necessarily limited to, those relating to:

- our intention to further penetrate the broad patient monitoring market

- the anticipated growth in medical applications of MRI equipment

- our ability to carry out our strategy

- our success in developing new or enhanced products to take advantage of
market opportunities or to respond to competition

- our ability to complete any future acquisitions of products or businesses

- our achieving year 2000 compliance or the impact on us of any third
party's year 2000 compliance

- our belief that patient monitors will become an integral component of MRI
equipment

Factors that could cause actual results or conditions to differ from those
anticipated by these and other forward-looking statements include those more
fully described in the "Risk Factors" section and elsewhere in this prospectus.
We are not obligated to update or revise these forward-looking statements to
reflect new events or circumstances.

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PROSPECTUS SUMMARY

This summary highlights some of the information contained elsewhere in this
prospectus. This summary is not complete and does not contain all of the
information that you should consider before investing in our common stock. To
understand this offering fully, you should read the entire prospectus carefully,
including the risk factors and the financial statements.

Business: Invivo Corporation designs, manufactures and markets
monitoring systems that measure and display vital signs
of patients in medical settings. Our systems
simultaneously monitor heart function, respiration,
heart rate, blood oxygen levels, invasive and
non-invasive blood pressure and exhaled carbon dioxide
levels. Our systems are used in various hospital
settings, including radiology units, operating rooms,
emergency rooms, critical care units, post-anesthesia
care units and delivery rooms, and in stand-alone
imaging centers. Our patient monitoring business has
been the key factor contributing to our six sequential
quarters of revenue and net income growth.

In addition to our patient monitoring business, we
offer a line of safety and industrial instrumentation
products. While these products are not our primary
focus, they historically have provided a stable source
of revenue and cash flow.

MRI Patient
Monitoring: We believe we are the world's leading provider of
equipment for monitoring patient vital signs during
magnetic resonance imaging. MRI is a non-invasive
diagnostic tool that uses magnetic fields and radio
frequencies to produce images of internal organs and
structures of the human body. The MRI environment
presents unique challenges for patient monitoring. A
monitor must not interfere with the MRI in a manner
that degrades the image. In addition, the monitor
signal must be protected from the MRI's magnetic field
and radio frequencies in order to maintain the accurate
performance of the monitor. Using our patented
technologies and proprietary shielding techniques, we
pioneered the first MRI patient monitoring system that
overcame these challenges. We provide an integrated
system that is convenient and easy to use. Customers
can configure our product for both direct and remote
viewing. Our latest product in the MRI patient
monitoring market is the Omni-Trak 3150.

With our patient monitoring capabilities, hospitals are
now able to safely and accurately perform MRI scans on
critically ill patients, patients under anesthesia and
children or claustrophobic patients who require
sedation. We believe that about 1,500 new MRI units
were placed worldwide in 1998 and that the MRI
marketplace will continue to grow as new uses for MRI
are developed. As such, we believe the need for MRI
patient monitors will continue to expand.
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<PAGE> 7

We have established relationships with most of the
world's largest MRI equipment manufacturers. We
presently maintain distribution agreements or other OEM
vendor relationships with Siemens A.G. Medical
Engineering Group, Philips Medical Systems, Hitachi
Medical Corporation, GE Medical Systems and Elscint,
Ltd. We estimate that GE Medical, Siemens Medical and
Philips Medical together control over 70% of the
worldwide MRI equipment market. We continue to work
with MRI equipment manufacturers to develop additional
customized features.

General Patient
Monitoring: Based on our reputation in the MRI patient monitoring
field and our technological expertise, we have
penetrated the highly competitive market for general
patient monitoring systems. We estimate the worldwide
market for patient monitoring products that measure
multiple vital signs, including general and MRI patient
monitoring, was approximately $1.5 billion in 1998.

The Millennia, our general patient monitor, is a
portable, lightweight and compact multi-parameter
monitor that provides space and transport flexibility.
These features enable a hospital to maximize its use of
the monitors because medical personnel can easily move
them to new locations or patients. In addition, the
Millennia features a large color display and
user-friendly interface. We recently introduced an
anesthetic agent identification and analysis module for
the Millennia that we believe will allow us to further
penetrate operating rooms and outpatient surgery
centers. The Centurion, our central station monitor,
networks Millennia patient monitors, allowing a single
healthcare professional to monitor up to eight patients
simultaneously.

Safety and Industrial
Instrumentation: We also design, manufacture and market gas detection
and oxygen monitoring instrumentation and pressure and
temperature sensing devices used in safety and
industrial applications. Gas detection monitors are
used for worker safety when toxic gases or low oxygen
levels are suspected. The primary use of our oxygen
monitoring products is for a self-contained breathing
apparatus for firefighters and hazardous material
clean-up workers. Our industrial instrumentation
products target a wide range of companies in the
automotive, food processing and pharmaceutical
industries.

Strategy: Our strategy includes the following key elements:

- exploit our leadership position in MRI patient
monitoring to grow with advances in MRI uses

- expand penetration of the Millennia product line

- acquire or develop additional medical products

- leverage the advantages provided by our dedicated
sales force

- continue to benefit from existing non-medical product
lines
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THE OFFERING

<TABLE>
<S> <C>
Common stock offered
By Invivo................................. 850,000 shares
By the selling stockholder................ 200,000 shares
Common stock to be outstanding after the
offering.................................. 4,138,268 shares
Use of proceeds............................. Working capital and general corporate
purposes, including research and
experimental expenses and future
acquisitions, final payment of an earn-out
to former stockholders of our medical
device subsidiary, including one of our
directors, and repayment of outstanding
debt. Please see "Use of Proceeds."
Nasdaq National Market Symbol............... "SAFE"
</TABLE>

6
<PAGE> 9

SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
FISCAL YEAR ENDED JUNE 30, DECEMBER 31,
--------------------------- ------------------
1996 1997 1998 1997 1998
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Sales......................... $31,391 $35,904 $40,651 $19,107 $23,411
Net income.................... $ 2,472 $ 316 $ 2,263 $ 1,003 $ 1,653
Basic net income per common
share...................... $ .77 $ .10 $ .69 $ .31 $ .50
Weighted average common shares
outstanding (basic)........ 3,216 3,239 3,265 3,261 3,274
Diluted net income per common
share...................... $ .72 $ .09 $ .66 $ .30 $ .47
Weighted average common shares
outstanding (diluted)...... 3,456 3,445 3,427 3,394 3,551
</TABLE>

<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31, 1998
--------------------------- -------------------------
1996 1997 1998 ACTUAL AS ADJUSTED(1)
------- ------- ------- ------- --------------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET
DATA:
Working capital........... $ 7,490 $ 7,474 $ 9,364 $11,448 $23,862
Total assets.............. 22,204 26,612 30,195 31,101 41,195
Long-term debt............ 730 1,584 1,480 2,067 1,428
Stockholders' equity...... 15,276 15,815 18,168 19,981 33,033
</TABLE>

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(1) Adjusted to reflect the estimated net proceeds from the sale of 850,000
shares of our common stock at an assumed public offering price of $16.875
per share. Please see "Use of Proceeds" and "Capitalization."

7
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RISK FACTORS

An investment in our common stock involves a high degree of risk. You
should carefully consider the following risks and other information in this
prospectus before purchasing our common stock. If any of the following risks
actually occur, our business or results of operations would likely suffer. In
such case, the trading price of our common stock could decline, and you may lose
all or part of the money you paid to buy our common stock.

RISKS RELATING TO OUR BUSINESS

WE ARE DEPENDENT ON A CONCENTRATED LINE OF PRODUCTS

Our future financial performance will be largely dependent on our patient
monitor product line, which includes a limited number of products. We expect our
recently introduced Omni-Trak 3150 MRI patient monitor and our Millennia
portable patient monitor to have a substantial impact on revenue growth. In the
MRI monitoring market, the success of our Omni-Trak 3150 is heavily dependent on
the continued acceptance of MRI technology as a diagnostic tool. In the general
patient monitoring market, our Millennia monitor is heavily dependent on our
ability to penetrate an already competitive market.

In addition, the recent consolidation in the medical care provider market
has resulted in a number of very large purchasers of medical devices. These
large purchasers typically prefer to establish relationships with medical device
manufacturers that have broad and diverse product lines.

The failure of our products to continue to gain market acceptance or an
increase in the concentration of the medical care provider market could have a
material adverse effect on our business and results of operations.

WE FACE INCREASED LEVELS OF COMPETITION

We have encountered and will continue to encounter significant competition
in the sale of our products. Our general patient monitoring competitors include
a number of large multinational corporations. Some of these competitors may be
able to adapt more quickly to new or emerging technologies and changes in
customer requirements, or to devote greater resources to the development,
promotion and sale of their products than we can. In the MRI patient monitoring
market, we have enjoyed a significant first-to-market advantage over our
competitors. However, we are aware that some of our competitors have introduced
products designed to compete with our MRI vital signs monitoring products. In
addition, as the market for MRI vital signs monitoring products expands it may
attract competitors with greater resources.

Additionally, competition may increase if new companies enter our markets
or if existing competitors expand their product lines or intensify efforts
within existing product lines. The introduction of competitive products may
result in a decrease in our market share and in a decrease in the prices at
which we are able to sell our products. Our market share may also be adversely
affected by increasing concentration in the medical care provider market. Any
decrease in our market share or decrease in the prices at which we are able to
sell our products could have a material adverse effect on our business and
results of operations.

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OUR FINANCIAL RESULTS MAY FLUCTUATE

Our financial results may fluctuate significantly from period to period
because of a variety of factors, many of which are beyond our control. These
factors include:

- increased competition

- changes in our pricing policies and those of our competitors

- changes in our operating expenses or capital expenditures

- timing and market acceptance of new and upgraded product introductions by
us and our competitors

- seasonal fluctuations in the demand for our products

- introduction of alternative technologies by us and our competitors

- effect of potential acquisitions

- other general economic factors

Fluctuations caused by these and other factors could have a material adverse
effect on our business and results of operations.

WE ARE DEPENDENT ON CAPITAL SPENDING POLICIES AND GOVERNMENT FUNDING

Capital spending trends by our medical device customers have a significant
effect on the demand for our products. These customers include hospitals,
stand-alone imaging centers, outpatient surgery centers, health care providers,
government agencies and public and private research institutions. Their capital
spending policies are based on a wide variety of factors, including:

- the resources available to make purchases

- the spending priorities among various types of equipment

- public policy

- the effects of different economic cycles

Any decrease in capital spending by any of our customers that account for a
significant portion of our sales could have a material adverse effect on our
business and results of operations.

WE ARE SUBJECT TO A SIGNIFICANT RISK OF NEW LAWS RELATED TO HEALTH CARE

Changes in the law or new interpretations of existing laws may have a
significant effect on our costs of doing business and the amount of
reimbursement we receive from both government and third-party payors. In
addition, economic forces, regulatory influences and political initiatives are
subjecting the health care industry to fundamental changes. Health care reform
proposals have been formulated by the current administration and by members of
Congress. Federal, state and local government representatives are likely to
continue to review and assess alternative health care delivery systems and
payment methods. We expect ongoing public debate on these issues. Any of these
efforts or reforms could have a material adverse affect on our business and
results of operations.

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OUR BUSINESS IS SUBJECT TO TECHNOLOGICAL CHANGE AND INTRODUCTION OF NEW PRODUCTS

The markets for our products are characterized by technological change,
evolving industry standards and new product introductions and enhancements. Many
of our products and products under development are technologically innovative,
and therefore require significant planning, design, development and testing.
These activities require us to make significant capital commitments and
investments. In addition, industry standards may change on short notice and new
products and technologies may render our existing products and technologies
uncompetitive. Additionally, the products that we are currently developing, and
those that we develop in the future, may not be technologically feasible or
accepted by the marketplace or they may not be completed in an acceptable time
frame. Any increased capital investments or loss in sales due to technological
change could have a material adverse effect on our business and results of
operations.

WE CURRENTLY ARE INVOLVED IN A LEGAL PROCEEDING

Our medical device subsidiary, Invivo Research, Inc., is one of two
third-party defendants named in a lawsuit by Southern Nevada Surgical Center and
Surgex Southern Nevada, Inc. in Nevada state court. The underlying action in
this matter stems from an incident involving a surgical patient undergoing a
procedure at the Southern Nevada Surgical Center. The patient suffered a serious
permanent brain injury. A lawsuit was filed on behalf of the patient against the
surgical center and the anesthesiologist who monitored the patient. A
substantial settlement was made to the patient by the defendants in that action.
Southern Nevada Surgical Center and Surgex are now seeking indemnity and
contribution of approximately $14 million from the manufacturer of the
anesthetic gas machine and Invivo Research, which manufactured the vital signs
monitor used in the procedure. Southern Nevada Surgical Center and Surgex are
alleging that both the anesthetic gas machine and the vital signs monitor were
defective. This matter is scheduled to commence trial on June 6, 1999. Any
judgment against us that exceeds the amount that our insurer is required to pay
could have a material adverse effect on our business and results of operations.

WE MAY NOT BE ABLE TO ENFORCE OUR INTELLECTUAL PROPERTY RIGHTS

We may not be able to detect unauthorized use of or to take appropriate
steps to enforce our intellectual property rights. We rely on a combination of
patent, trademark, trade secret and copyright law and contractual restrictions
to protect our technology, which provides only limited protection. The steps we
have taken may not deter competitors from misappropriating our proprietary
information. If we sued to enforce our rights, the resulting lawsuit would be
expensive, would divert management resources and may not be adequate to protect
our business. We also could be subject to claims alleging infringement of third-
party intellectual property rights. In addition, we may be required to indemnify
our distributors and customers for similar claims made against them. Any claims
against us could require us to spend significant time and money in litigation,
pay damages, develop non-infringing intellectual property or acquire licenses.
Whether or not successful, such claims could seriously damage our reputation and
our business. If successful, these claims could have a material adverse effect
on our business and results of operations.

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WE FACE INCREASED RISKS OF INTERNATIONAL OPERATIONS

International sales have accounted for over 20% of our sales for each of
the past three years and will likely increase over time. International sales are
subject to a number of risks, including the following:

- fluctuations in exchange rates may affect the demand for products and
services we provide in foreign markets

- adverse changes in local economic conditions, such as those recently
occurring in Asian and South American countries, could depress the demand
for our products

- agreements may be difficult to enforce and receivables difficult to
collect through a foreign country's legal system

- foreign customers may have longer payment cycles

- foreign countries may impose additional withholding taxes or otherwise
tax our foreign income, impose tariffs, or adopt other restrictions on
foreign trade

- U.S. export licenses may be difficult to obtain

- the protection of intellectual property in foreign countries may be more
difficult to enforce

Any of these factors could have a material adverse impact on our business and
results of operations.

WE FACE PRODUCT LIABILITY AND PRODUCT RECALL RISKS

With respect to all of our products, and particularly our medical devices,
we face the risk of potentially large product liability claims. The malfunction
or misuse of our products could potentially result in serious harm to a patient.
In addition, we may be required to indemnify our distributors and customers for
similar claims made against them.

Claims could be made against us even if our products did not contribute to
the injury that was sustained. Frequently, our products are used with products
developed by other manufacturers. Even if our products are not the cause of the
injury, we may not be able to prove that a claimant's injury was caused by some
other product malfunction or human error.

We have had product liability claims made against us in the past and may
have further claims made against us in the future. While we are insured for
certain product liability claims, not all claims will be covered and the level
of our insurance may not be sufficient to protect us from the full amount of a
successful claim. In addition, we may not be able to obtain adequate amounts of
insurance at an acceptable cost. Claims made against us that are not insured, or
that exceed the amount of our coverage, could have a material adverse effect on
our business and results of operations.

Similarly, our products are subject to the potential of being recalled by
government agencies for actual or potential deficiencies or problems. Any such
recall would likely be expensive and would have a material adverse effect on our
business and results of operations.

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WE MUST MANAGE OUR GROWTH EFFECTIVELY

If we are unable to manage our growth effectively, which includes
attracting and retaining additional qualified management, our business and
results of operations could be adversely affected. Our strategy is to expand our
product offerings through internal development and, if opportunities arise,
through acquisitions. Our internal information systems, procedures and controls
may not be adequate to support our operations as they expand. Any future growth
will impose significant added responsibilities on our senior management,
including the need to recruit and integrate new senior level managers and
executives.

THE GOVERNMENT EXTENSIVELY REGULATES OUR BUSINESS AND WE MAY NOT RECEIVE ALL
REGULATORY APPROVALS OR CLEARANCES WE NEED.

Our medical devices are subject to extensive regulation by the FDA and, to
varying degrees, by state and foreign regulatory agencies. The process to obtain
FDA and other foreign and domestic clearances and regulatory approvals may be
lengthy, expensive and uncertain. The time required to obtain approval for sale
in foreign countries may be longer or shorter than that required for FDA
clearance or approval and the requirements may differ. We may not be able to
obtain necessary regulatory approvals or clearances in a timely manner or at
all. Delays in receipt of or failure to receive such approvals or clearances,
the loss of previously received approvals or clearances, or failure to comply
with existing or future regulatory requirements would have a material adverse
effect on our business and results of operations.

We are required to manufacture our medical devices in compliance with FDA
regulations regarding current good manufacturing practices in the U.S. and
similar regulations in other countries, which include testing, control and
documentation requirements. Ongoing compliance with good manufacturing practices
and other applicable regulatory requirements, such as reporting requirements,
are monitored through periodic inspections by state and federal agencies,
including the FDA, and by comparable agencies in other countries.

If we do not comply with applicable regulatory requirements, including
marketing products only for approved uses, we could be subject to fines,
injunctions, civil penalties, recall or seizure of products, total or partial
suspension of production, refusal of the government to grant premarket clearance
or premarket approval for products, withdrawal of approvals and criminal
prosecution. In addition, changes in existing regulations or adoption of new
governmental regulations or policies could prevent or delay regulatory approval
of our products or result in increased regulatory costs. Furthermore, once
clearance or approval is granted, subsequent modifications to the approved
product or manufacturing process may require a new round of clearances or
approvals, which could require substantial additional clinical data and FDA
review.

The manufacture, sale and use of our products are subject to regulation by
other federal entities, such as OSHA and the EPA, and by various state and local
agencies. Federal, state and local regulations regarding the manufacture, sale
and use of our products are subject to future change and these changes could
have a material adverse effect on our business and results of operations.

12
<PAGE> 15

WE RELY HEAVILY ON OUR KEY PERSONNEL

We are highly dependent on the continuing efforts of our executive officers
and other key personnel. If any of these persons does not continue in his or her
management or other role until we are able to attract and retain a qualified
replacement, this could have a material adverse effect on our business and
results of operations.

WE MAY NEED ADDITIONAL CAPITAL IN THE FUTURE

We have funded our capital requirements primarily through cash flow from
operations, borrowings from third parties and capitalized leases. Our future
capital requirements depend on numerous factors, including the rate of market
acceptance of our products, our ability to maintain and expand our customer base
and potential acquisitions. We cannot accurately predict the timing and amount
of our capital requirements. If our capital requirements vary materially from
our plans, we may require additional financing sooner than anticipated. We have
no commitments for any additional financing other than a $7.5 million line of
credit from a bank, and we would need that bank's consent to receive further
debt financing.

Because we will have a limited number of authorized but unissued or
unreserved shares of common stock after the offering, our ability to raise
capital through common stock offerings or to use common stock for acquisitions
will be limited. Any future increase in authorized shares will require
stockholder approval. If we increase our authorized capital, any additional
equity financing may be dilutive to our stockholders. Debt financing, if
available, may involve further restrictions on our financing and operating
activities. If we are unable to obtain additional financing as needed, we may be
required to reduce the scope of our operations or anticipated expansion, which
could have a material adverse effect on our business and results of operations.

THE YEAR 2000 PROBLEM MAY AFFECT OUR BUSINESS

READINESS FOR YEAR 2000

Many existing computer systems and related software applications use only
two digits to identify a year in the date field, without considering the impact
of the upcoming change in the century. Such systems and applications could fail
or create incorrect or unintended results unless corrected so that they can
process data related to the year 2000 and thereafter. We rely on such computer
systems and applications in operating and monitoring most major aspects of our
business. We are evaluating the impact of the year 2000 issue on our business
and the related expenses incurred in attempting to remedy such impact. The year
2000 issue could affect us in at least three different ways:

- the software or the chips embedded within computers and other systems we
use in our offices and manufacturing facilities could be affected

- the software or the chips used in the products we sell could be affected

- third parties who do business with us may not be prepared for the year
2000

We have determined that regardless of the year 2000 issue, replacement of
existing office and other systems would provide more efficient operations and
added functionality. We have contracted with outside information consulting
companies both to install new hardware and to replace our current
mission-critical software systems with off-the-shelf

13
<PAGE> 16

year 2000 compliant software. We expect all information system upgrades and
conversions to be completed and fully operational by April 1, 1999. We are
currently assessing our electronic office and manufacturing equipment to
determine if such equipment is date-sensitive and will require upgrades. If we
determine after this assessment that some of our equipment needs to be upgraded
or replaced, we plan to finish the required work by September 1999.

We believe that our currently marketed products are, or will be by July 1,
1999, year 2000 compliant. Some of our products are not affected because they do
not contain a date field in the software. On some previously marketed products
which are not year 2000 compliant, we will make an upgrade available to our
customers to ensure year 2000 compliance.

We cannot predict the effect of year 2000 problems on our vendors,
customers and other entities with which we transact business, or with whose
products our products interact. We have undertaken a survey of the year 2000
readiness of these third parties and plan to complete this assessment by
mid-calendar 1999.

COSTS

Through December 31, 1998, we incurred approximately $275,000 of costs
associated with our new information systems, all of which have been capitalized.
Of this amount, approximately $200,000 has been spent on replacing old hardware,
and approximately $75,000 has been spent on replacing old software. We currently
estimate that the costs associated with the new systems will ultimately total
approximately $350,000 and should not have a material adverse effect on our
business or results of operations in fiscal 1999. We expect that most of the
remaining $75,000 will be spent on replacing existing hardware. Because we would
have replaced these systems even without the year 2000 problem, our year 2000
expenditures have not deferred other projects that we otherwise would have
undertaken.

RISKS

We expect to make the changes required to address the year 2000 problem for
the software and embedded chips in our offices and manufacturing facilities and
in the products we make. We presently believe that with the new software and
hardware we are currently purchasing and with any required modifications to our
office and other systems which our assessment shows to be needed, the year 2000
issue is not reasonably likely to pose significant problems with respect to our
operations or products. However, if unforeseen difficulties arise, such
modifications, conversions and replacements are not completed on time, or if our
customers' or suppliers' systems are not modified to become year 2000 compliant,
the year 2000 issue may have a material adverse effect on our business and
results of operations.

We cannot presently assess the likelihood that we will experience
significant problems due to the unresolved year 2000 problems of third parties
with which we do business. Although we have not been put on notice that any
known third-party problem will not be timely resolved, we have limited
information and no assurance can be made concerning the year 2000 readiness of
third parties. If third parties fail to achieve year 2000 compliance, the year
2000 issue may have a material adverse effect on our business and results of
operations. Similarly, there can be no assurance that we can timely mitigate our
risks related to a third party's failure to resolve its year 2000 issues. If we
fail to timely mitigate

14
<PAGE> 17

such risks, that failure may have a material adverse effect on our business and
results of operations.

CONTINGENCY PLANS

We have not attempted to quantify our most likely year 2000 worst-case
scenario nor have we considered any contingency plans in case the installations
by our outside information consulting companies are not satisfactory for year
2000 compliance. We believe that the installations will sufficiently address the
year 2000 issue. However, if the installations completed by April 1, 1999 are
not satisfactory for year 2000 compliance, we will then formulate appropriate
contingency plans.

WE MAY FACE PROBLEMS WITH LABOR RELATIONS

Although none of our employees currently are subject to collective
bargaining agreements, some of our employees may unionize in the future or we
may acquire companies with unionized employees. If our employees unionize, or we
acquire a company with unionized employees, we could incur higher ongoing labor
costs and could experience a significant disruption of operations in the event
of a strike or other work stoppage. This could have a material adverse effect on
our business and results of operations.

WE ARE SUBJECT TO STRINGENT ENVIRONMENTAL REGULATIONS

The manufacture and testing of our medical devices and safety products
requires us to handle and store small quantities of a wide variety of chemicals,
some of which are highly toxic. Certain of these chemicals pose a serious threat
to workers and others who may come in contact with them if improperly used or
handled. Most municipalities, including those in which we are presently located,
now require that the proposed storage and use of dangerous chemicals receive
local approval. State air quality boards, or similar agencies, must also approve
the venting, and certain other aspects of handling, of these types of chemicals.
These municipal and state agencies may, as a condition to the granting of
approvals and permits, impose certain procedural limitations on our storage and
handling of these chemicals and structural requirements on the facilities where
these chemicals are stored and used. They also impose record keeping and
reporting requirements on the users of these chemicals. The requirements imposed
by these environmental authorities, or our failure to comply with any such
requirements, could adversely affect our business and results of operations.

RISKS RELATING TO SHARE OWNERSHIP

OUR STOCK PRICE MAY BE HIGHLY VOLATILE AND YOU MAY LOSE MONEY ON YOUR INVESTMENT
IN OUR COMMON STOCK

The market price of our common stock is subject to significant fluctuations
in response to various factors and events which may or may not be related to our
performance. In addition, the stock market has from time to time experienced
significant price and volume fluctuations, which have particularly affected the
market prices of the stocks of medical device companies. Furthermore, our
operating results and prospects from time to time may be below the expectations
of public market analysts and investors. Any such event could result in a
material decline in the price of our common stock.

15
<PAGE> 18

WE DO NOT PLAN TO PAY CASH DIVIDENDS ON OUR COMMON STOCK

We have never declared or paid any cash dividends on our common stock and
do not anticipate paying cash dividends in the foreseeable future. In addition,
our credit facility prohibits the payment of dividends without written consent.

EXISTING MANAGEMENT, STOCKHOLDERS AND AFFILIATES WILL CONTROL 17.7% OF THE
OUTSTANDING SHARES

Following the completion of the offering, our executive officers, directors
and affiliates will beneficially own approximately 17.7% of the outstanding
shares of common stock. They would beneficially own 16.2% of the shares of
common stock if all outstanding options are exercised. They will beneficially
own approximately 16.2% if the underwriters' over-allotment option is exercised
in full and 14.8% if all outstanding options are exercised. These holders of
common stock, if acting in concert, will continue to exercise substantial
control over our affairs and to control the outcome of any matter submitted to a
vote of stockholders.

OUR BOARD OF DIRECTORS' ABILITY TO ISSUE PREFERRED STOCK MAY ADVERSELY AFFECT
HOLDERS OF COMMON STOCK

The rights of holders of any preferred stock we issue may adversely affect
the rights of holders of our common stock. Our ability to issue preferred stock
could make it more difficult for a third party to acquire a majority of our
voting stock. Our certificate of incorporation authorizes our board of directors
to issue up to 1,000,000 shares of preferred stock. The certificate of
incorporation also authorizes the board of directors to determine the price,
rights, preferences and privileges of those shares without any further vote or
action by the stockholders.

SHARES ELIGIBLE FOR FUTURE SALES MAY AFFECT SHARE PRICE

The market price of our common stock could drop as a result of sales of a
large number of shares of common stock in the market after the offering or the
perception that such sales could occur. These factors could also make it more
difficult for us to raise funds through future offerings of common stock.

There will be 4,138,268 shares of common stock outstanding immediately
after the offering. All of the shares sold in the offering will be, and all of
our outstanding shares of common stock are, freely transferable without
restriction or further registration under the Securities Act, except for shares
purchased or held by our "affiliates," as defined in Rule 144 under the
Securities Act of 1933. We have agreed, as have each of our Directors and our
Chief Executive Officer, subject to certain exceptions, not to sell any shares
of common stock for a period of 75 days after the date of this prospectus
without the prior written consent of Cruttenden Roth Incorporated. During this
lock-up period, however, we will be permitted to (i) grant options to purchase
shares of common stock pursuant to our stock option plans and (ii) issue shares
of common stock upon the exercise of options granted pursuant to the stock
option plans.

We cannot predict the effect, if any, that future sales of shares of our
common stock or the availability of shares for future sale will have on the
market price of our common stock. Sales of substantial amounts of our common
stock in the market after the offering could adversely affect prevailing market
prices for our common stock and our ability to raise additional capital in the
future.

16
<PAGE> 19

USE OF PROCEEDS

The net proceeds to us from the sale of the 850,000 shares of common stock
we are offering hereby are estimated to be approximately $13.1 million ($14.7
million if the underwriters' over-allotment option is exercised in full),
assuming a public offering price of $16.875 per share and after deducting
estimated underwriting discounts and commissions and offering expenses. We
currently intend to use approximately $7.2 million of the net proceeds for
general corporate purposes, which includes working capital and research and
experimental expenses and may include future acquisitions. While we from time to
time may consider possible acquisition prospects as part of our growth strategy,
we presently have no agreements, arrangements or other understandings with
respect to any such acquisitions. We currently intend to use approximately $2.9
million to fund the final payment of an earn-out due to the former stockholders
of Invivo Research, Inc., which we acquired in 1992. This payment may be reduced
if we pay a portion of the earn-out in common stock under the terms of the
earn-out. Please see "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources" for a
discussion of the earn-out. We intend to use approximately $3 million to repay
the outstanding balance under our revolving credit facility, which matures on
December 1, 1999, and bears interest at LIBOR plus 1.75% or the prime rate, and
a three-year term loan which matures on September 30, 2001, and bears interest
at LIBOR plus 1.75%. Prior to their use, we intend to invest the net proceeds of
this offering in short-term, high grade interest-bearing investments or
accounts.

PRICE RANGE OF COMMON STOCK

Our common stock is traded on the Nasdaq National Market under the symbol
"SAFE." The following table describes, for the quarters indicated, the high and
low closing sale prices for a share of our common stock as reported on the
Nasdaq National Market.

<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
YEAR ENDED JUNE 30, 1997
First Quarter............................................. 11 9 1/4
Second Quarter............................................ 14 1/4 10
Third Quarter............................................. 15 3/8 12
Fourth Quarter............................................ 11 3/4 6 5/8
YEAR ENDED JUNE 30, 1998
First Quarter............................................. 7 1/2 6 3/4
Second Quarter............................................ 10 7/8 7
Third Quarter............................................. 10 3/4 8 7/16
Fourth Quarter............................................ 13 1/2 10 3/4
YEAR ENDED JUNE 30, 1999
First Quarter............................................. 14 3/4 9 1/4
Second Quarter............................................ 16 7/16 12
Third Quarter (through February 9, 1999).................. 18 1/2 15
</TABLE>

As of January 31, 1999, we had 64 shareholders of record of our common
stock, although there are a larger number of beneficial holders. On February 9,
1999, the last reported sale price on the Nasdaq National Market for our common
stock was $16.875.

17
<PAGE> 20

DIVIDEND POLICY

We intend to retain all earnings, if any, to finance the expansion of our
business. We do not anticipate paying any cash dividends on our common stock in
the foreseeable future. If we were to declare dividends in the future, such
dividends would be paid at the discretion of our board of directors after taking
into account various factors, including, among other things, our financial
condition, results of operations, cash flows from operations, current and
anticipated cash needs and expansion plans, the income tax laws then in effect
and the requirements of Delaware law. In addition, our credit facility prohibits
the payment of dividends to our stockholders without written consent from our
lender. Please see "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital Resources" for a more
detailed description of the terms of our credit facility.

18
<PAGE> 21

CAPITALIZATION

The following table sets forth, as of December 31, 1998, (i) our actual
capitalization and (ii) our capitalization as adjusted to give effect to receipt
by us of the estimated net proceeds from the sale of 850,000 shares of our
common stock offered hereby at an assumed public offering price of $16.875 per
share. This table should be read in conjunction with the more detailed
consolidated financial statements and notes appearing elsewhere in this
prospectus.

<TABLE>
<CAPTION>
DECEMBER 31, 1998
-------------------
AS
ACTUAL ADJUSTED
------- --------
(IN THOUSANDS)
<S> <C> <C>
Short-term debt (including current portion of long-term
debt).................................................... $ 2,425 $ 104
======= =======
Long-term debt (excluding current portion)................. 2,067 1,428
------- -------
Stockholders' equity:
Preferred stock, $0.01 par value, 1,000,000 shares
authorized; none issued and outstanding.................. -- --
Common stock, $0.01 par value, 5,000,000 shares authorized;
3,286,768 shares issued and outstanding actual; and
4,136,768 shares issued and outstanding as adjusted(1)... 33 41
Additional paid-in capital................................. 13,038 26,082
Retained earnings.......................................... 6,910 6,910
------- -------
Total stockholders' equity....................... 19,981 33,033
------- -------
Total capitalization............................. $22,048 $34,461
======= =======
</TABLE>

- -------------------------
(1) Excludes 751,875 shares of common stock issuable upon exercise of
outstanding stock options at a weighted average exercise price of $8.76 per
share as of December 31, 1998.

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<PAGE> 22

SELECTED FINANCIAL DATA

The operations data set forth below with respect to the fiscal years ended
June 30, 1996, 1997 and 1998 and the balance sheet data at June 30, 1997 and
1998 are derived from, and are qualified by reference to, our audited financial
statements included elsewhere in this prospectus and should be read in
conjunction with those financial statements and the notes thereto. The
operations data set forth below with respect to the fiscal years ended June 30,
1994 and 1995 and the balance sheet data at June 30, 1994, 1995 and 1996 are
derived from audited financial statements not included in this prospectus. The
operations data for the six months ended December 31, 1997 and 1998 and the
balance sheet data at December 31, 1998 are derived from unaudited financial
statements. The unaudited financial statements have been prepared on the same
basis as the audited financial statements and, in the opinion of management,
contain all adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of the operations data for such periods. The
operations data for the six months ended December 31, 1998 are not necessarily
indicative of results to be expected for the full fiscal year.

<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
-------------------------------------------------------------------
SIX MONTHS
ENDED
FISCAL YEAR ENDED JUNE 30, DECEMBER 31,
----------------------------------------------- -----------------
1994 1995 1996 1997 1998 1997 1998
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Sales..................................... $27,801 $32,489 $31,391 $35,904 $40,651 $19,107 $23,411
Gross profit.............................. 14,129 16,646 15,580 17,285 19,695 9,159 11,746
Operating expenses
Selling, general and administrative..... 7,934 9,501 9,691 14,174 13,429 6,256 7,707
Research and experimental............... 1,549 1,841 2,095 2,449 2,455 1,250 1,413
Other income (expense).................... (91) (51) (49) (184) (383) (171) (161)
Income tax expense........................ 1,674 1,905 1,273 162 1,165 479 812
Net income................................ $ 2,881 $ 3,348 $ 2,472 $ 316 $ 2,263 $ 1,003 $ 1,653
Basic net income per common share......... $ .91 $ 1.05 $ .77 $ .10 $ .69 $ .31 $ .50
Weighted average common shares outstanding
(basic)................................. 3,163 3,186 3,216 3,239 3,265 3,261 3,274
Diluted net income per common
share................................... $ .86 $ .99 $ .72 $ .09 $ .66 $ .30 $ .47
Weighted average common shares outstanding
(diluted)............................... 3,359 3,390 3,456 3,445 3,427 3,394 3,551
</TABLE>

<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31, 1998
----------------------------------------------- ------------------------
1994 1995 1996 1997 1998 ACTUAL AS ADJUSTED(1)
------- ------- ------- ------- ------- ------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital.................... $ 5,477 $ 6,428 $ 7,490 $ 7,474 $ 9,364 $11,448 $23,862
Total assets....................... 17,427 19,860 22,204 26,612 30,195 31,101 41,195
Long-term debt..................... 3,367 926 730 1,584 1,480 2,067 1,428
Stockholders' equity............... 9,137 12,616 15,276 15,815 18,168 19,981 33,033
</TABLE>

20
<PAGE> 23

MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with
the financial statements and the respective notes and "Selected Financial Data"
appearing elsewhere in this prospectus. Except for the historical information,
the discussion in this prospectus may contain certain forward-looking statements
that involve risks and uncertainties, such as statements regarding our plans,
objectives, expectations and intentions. You should read the cautionary
statements made in this prospectus as being applicable to all related forward-
looking statements wherever they appear in this prospectus. Our actual results
could differ materially from those discussed here. Factors that could cause or
contribute to such differences include those discussed in "Risk Factors" as well
as those discussed elsewhere in this prospectus.

OVERVIEW

Through our medical devices subsidiary, Invivo Research, we offer a line of
patient monitors capable of continuous measurement of multiple vital signs in
the medical care environment. Prior to fiscal 1997, our patient monitoring
business was primarily focused on products for use in the MRI environment, in
which we were the pioneer. In the mid-1990s, we undertook to develop a
full-featured, competitively priced monitor for general applications. This
effort culminated in our introduction of the Millennia monitor in early fiscal
1997. We substantially increased our sales force and marketing efforts in fiscal
1996 and 1997 to promote our entry into this new market. This increase was the
primary cause of operating expenses growing more rapidly than revenue in those
years. The improved operating results in fiscal 1998 and for the six months
ended December 31, 1998 reflect, in part, the ongoing market penetration of the
Millennia product.

Our line of safety products includes monitors used to detect harmful levels
of toxic and other gases in the workplace and other environments. We offer these
monitors through our Lumidor Safety Products subsidiary. Our other safety
products include a line of oxygen monitoring equipment, pressure gauges and
calibration devices and equipment that sets and verifies the accuracy of gas
monitors. We also manufacture and market products for our industrial
instrumentation business. Our products for this market consist of pressure
sensors and non-contact infrared temperature measuring devices.

The percentage of our sales contributed by our medical device line of
products was 49%, 55% and 57% for fiscal years 1996, 1997, and 1998. The
percentage of our sales contributed by our safety and industrial instrumentation
products was 51%, 45% and 43% for fiscal years 1996, 1997, and 1998. Our medical
device line accounted for 57% and 62% of our sales for the six months ended
December 31, 1997 and 1998. Our safety and industrial instrumentation products
accounted for 43% and 38% of our sales for the six months ended December 31,
1997 and 1998.

RESULTS OF OPERATIONS

SIX MONTHS ENDED DECEMBER 31, 1998 COMPARED TO SIX MONTHS ENDED DECEMBER 31,
1997

SALES. Sales for the six months ended December 31, 1998 increased 22.5% to
$23,410,800 compared with $19,107,300 for the same period last year. The sales
increase for the six months ended December 31, 1998 was primarily due to sales
growth at our

21
<PAGE> 24

patient monitoring business. Continued strong demand for our next-generation MRI
vital signs monitor, the Omni-Trak 3150, was largely responsible for the sales
increase. Sales of the Millennia portable vital signs monitor and Centurion
central station monitor also contributed to the sales increase. Increased sales
at our gas detection and oxygen monitoring businesses positively affected sales
for the six-month period ended December 31, 1998.

GROSS PROFIT. The gross profit margin increased for the six-month period
ended December 31, 1998 to 50.2% from 47.9% for the same period last year. The
increase was largely attributable to the sales growth of our MRI vital signs
monitoring products, which have higher gross margins than the Millennia vital
signs monitor and other monitoring products.

OPERATING EXPENSES. Selling, general and administrative expenses for the
six-month period ended December 31, 1998 increased 23.2% or $1,451,200 over the
same period last year. Selling, general and administrative expenses were 32.9%
of sales for the six-month period ended December 31, 1998 compared with 32.7%
for the same period last year. The increase in these expenditures in absolute
dollars was largely due to higher sales commission expenses on the higher sales
volume at our patient monitoring and gas detection businesses. Higher
administrative expenses in support of the incremental sales volume at our
patient monitoring business also contributed to the increase.

Research and experimental expenses were $1,413,100 or 6.0% of sales for the
six-month period ended December 31, 1998 compared to $1,250,200 or 6.5% for the
same period last year. A substantial amount of the total research and
experimental expenses was on behalf of our patient monitoring business as we
continued to develop additional features for our Millennia vital signs monitor
for specialized market areas.

OTHER INCOME AND EXPENSE. Interest expense decreased to $159,900 for the
six months ended December 31, 1998 compared with $195,200 for the same period
last year. This decrease was primarily the result of lower average balances on
our revolving bank line of credit for the six months ended December 31, 1998.

PROVISION FOR INCOME TAXES. Our effective tax rate for the six months ended
December 31, 1998 was 32.9% compared with 32.3% for last year. The effective tax
rate differs from the statutory rate principally due to the benefit of a foreign
sales corporation and utilization of research, experimental and other credits.

YEAR ENDED JUNE 30, 1998 COMPARED TO YEAR ENDED JUNE 30, 1997

SALES. Our sales for fiscal 1998 increased 13.2% to $40,651,400 from
$35,903,500 in fiscal 1997. The sales increase in fiscal 1998 was primarily
attributable to the sales growth at our patient monitoring business as sales of
the Millennia portable multi-parameter vital signs monitor continued to increase
from prior year levels. Growth in our safety and industrial instrumentation
businesses also positively affected sales.

GROSS PROFIT. Our gross profit margin increased slightly in fiscal 1998 to
48.5% from 48.1% in fiscal 1997. Continued improvement in the gross margin of
the Millennia monitor was primarily due to material cost reductions and
manufacturing efficiencies. In addition, higher gross margins at our gas
detection and industrial instrumentation businesses offset a decline in the
gross margin at our oxygen monitoring business.

22
<PAGE> 25

OPERATING EXPENSES. Our selling, general and administrative expenses in
fiscal 1998 decreased 5.3% or $745,800 over fiscal 1997 levels. Our selling,
general and administrative expenses were 33.0% of sales in fiscal 1998 compared
with 39.5% for fiscal 1997. The decrease in these expenditures in absolute
dollars and as a percentage of sales was primarily due to reduced selling,
general and administrative expenses at our patient monitoring business. This
reduction occurred as many of the expenses associated with the significant
expansion of our direct sales force in fiscal 1997 decreased.

Our research and experimental expenses remained nearly constant in absolute
dollars at $2,455,000 or 6.0% of sales in fiscal 1998 as compared to $2,448,800
or 6.8% of sales in fiscal 1997. A substantial amount of our research and
experimental expenses was on behalf of our patient monitoring business as we
continued to develop additional features for our Millennia vital signs monitor
for specialized market areas.

OTHER INCOME AND EXPENSE. Interest expense increased to $387,300 for fiscal
1998 compared with $251,400 in fiscal 1997. The increase in interest expense was
the result of higher outstanding balances on our revolving bank line of credit
along with the increased mortgage on our expanded patient monitoring facility.

PROVISION FOR INCOME TAXES. Our effective tax rate for fiscal 1998 remained
stable at 34.0%.

YEAR ENDED JUNE 30, 1997 COMPARED TO YEAR ENDED JUNE 30, 1996

SALES. Our sales for fiscal 1997 increased 14.4% to $35,903,500 from
$31,390,900 in fiscal 1996. The sales increase in fiscal 1997 was primarily due
to sales of the Millennia vital signs monitor introduced by our patient
monitoring business in the first quarter of fiscal 1997. Sales growth at our
oxygen monitoring and industrial instrumentation businesses for fiscal 1997
offset a sales decline at our gas detection business.

GROSS PROFIT. Our gross profit margin declined in fiscal 1997 to 48.1% from
49.6% in fiscal 1996. The decline was primarily due to the product mix of sales
at our patient monitoring business as the Millennia monitor has lower gross
margins than the MRI vital signs monitor. The increased sales at our oxygen
monitoring business also contributed to the margin decline as that business has
lower gross margins than our other businesses.

OPERATING EXPENSES. Our selling, general and administrative expenses in
fiscal 1997 increased 46.3% or $4,483,600 over fiscal 1996 levels. Selling,
general and administrative expenses were 39.5% of sales in fiscal 1997 compared
with 30.9% for fiscal 1996. The total dollar and percentage of sales increases
in these expenditures were due to the significant investment made in our sales
and marketing infrastructure. This investment consisted of an overhaul and
increase of our direct sales force and added sales and marketing management
capabilities at our patient monitoring business in connection with the
introduction of the Millennia monitor.

Our research and experimental expenses were $2,448,800 in fiscal 1997,
remaining stable as a percentage of sales at 6.8%. The absolute dollar increase
of $353,400 in research and experimental expenses in fiscal 1997 was due to
higher research and experimental expenditures on behalf of our patient
monitoring business as we continued to develop additional features for our
Millennia vital signs monitor for specialized market areas.

23
<PAGE> 26

OTHER INCOME AND EXPENSE. Interest expense increased to $251,400 for fiscal
1997 compared with $175,200 in fiscal 1996. The increase was the result of
increased borrowings on our revolving bank line of credit along with the
increased mortgage on our recently expanded patient monitoring facility.

PROVISION FOR INCOME TAXES. Our effective tax rate for fiscal 1997 remained
stable at 34.0%.

QUARTERLY RESULTS OF OPERATIONS

The following graphs depict our unaudited sales and net income for the six
quarters ended December 31, 1998. This data has been derived from unaudited
interim consolidated financial statements prepared on the same basis as the
audited consolidated financial statements contained in this prospectus. Results
for the quarters ended September 30 and December 31, 1998 are not necessarily
indicative of results to be expected for the full fiscal year.

[GRAPH]

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<PAGE> 27

[GRAPH]

INFLATION

We do not believe that inflation had a significant impact on our results of
operations during any of the last three fiscal years.

LIQUIDITY AND CAPITAL RESOURCES

Working capital at December 31, 1998 increased to $11,448,200 compared with
$9,363,700 at June 30, 1998. Cash and cash equivalents at December 31, 1998 were
$606,500 compared with $554,100 at June 30, 1998. Net cash provided by operating
activities was $780,700 for the six months ended December 31, 1998 compared with
$345,400 provided by operations for the six months ended December 31, 1997. This
increase was largely the result of the increase in net income offset by
reductions in operating assets and liabilities, particularly inventories,
accounts receivable, accounts payable and income taxes payable.

Capital expenditures were $777,300 for the first six months of fiscal 1999
compared to $217,400 for the prior year period. The increase was primarily the
result of costs associated with our new information systems and sales
demonstration equipment at our patient monitoring business.

In December 1992, we purchased 80% of the outstanding common stock of
Invivo Research. The stock purchase agreement provided for a contingent payment
resulting in an initial payment of $1,000,000 made on July 15, 1994 and a final
payment of $2,000,000 paid on July 15, 1995.

In July 1993, we amended the stock purchase agreement to acquire the
remaining 20% of the common stock of Invivo Research. The purchase price for the
additional shares vested one-fifth on each of January 1, 1996, 1997 and 1998 and
two-fifths vested on January 1, 1999. While the right to payments has vested,
the amount of each vested payment is not fixed. Instead, each payment is based
on the after-tax profits of Invivo

25
<PAGE> 28

Research for the calendar year prior to the calendar year in which the former
Invivo Research stockholders elect payment, subject to certain minimums. In
March 1996, the former Invivo Research stockholders elected to receive their
first vested payment, which amounted to approximately $987,000, and they were
paid that amount in full on June 1, 1996. In March 1998, the former Invivo
Research stockholders elected to receive their second vested payment, which
amounted to approximately $465,000 and has been paid in full. The former Invivo
Research stockholders may elect to receive any of the three remaining vested
payments on June 1, 1999, by giving notice to us by March 15, 1999, or may
choose to defer any vested payments to future years. If the former stockholders
elect to receive a vested payment, we must make the payment on June 1, 1999. The
payments are to be made in cash. However, if the stockholders require that the
payment that vested in 1998 and one or more of the payments that vested in 1999
all be made in any one year, we can elect to make the payment that vested in
1998 in the form of our shares. Beginning March 31, 1999, we have the right to
elect to pay any or all of the remaining three payments. If we exercise our
rights, we must make the payment in cash. As of February 1999, the total
remaining purchase price is estimated to be approximately $2,900,000.

In October 1998, we increased our bank line of credit to $7,500,000 from
$5,000,000 and added a $1,000,000 three-year term loan. We also renewed the line
of credit from December 1, 1998 to December 1, 1999. Our revolving bank line of
credit and term loan are collateralized by our accounts receivable, inventory
and equipment. At December 31, 1998, $1,987,100 was outstanding on the line of
credit and $972,200 was outstanding on the term loan. All of our subsidiaries
have guaranteed our payments due under our bank line and term loan.

We believe that our cash flow from operations and amounts available from
the bank line of credit and the proceeds from this offering will be adequate to
meet our anticipated cash needs for working capital and capital expenditures
throughout fiscal 2000. We will continue to explore opportunities for the
possible acquisitions of technologies or businesses, which may require us to
seek additional financing. Our capital requirements depend on numerous factors
and we cannot accurately predict their timing or amount. We may be required to
raise additional capital over a period of several years in order to continue to
internally develop new products or to acquire complementary products or
businesses. We have no commitments for additional financing other than our line
of credit, and we cannot be sure that we can obtain additional financing on
favorable terms, if at all. Additional equity financing, if available, may
dilute our stockholders. Debt financing, if available, may restrict our ability
to declare and pay dividends and raise future capital. If we are unable to
obtain additional needed financing, we may be required to reduce the scope of
operations or anticipated expansion, which could materially and adversely affect
us. Please see "Risk Factors -- We May Need Additional Capital in the Future."

RECENT ACCOUNTING PRONOUNCEMENTS

REPORTING COMPREHENSIVE INCOME

In 1997, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 130, Reporting Comprehensive
Income, which establishes standards for reporting and displaying comprehensive
income and its components. The statement is effective for fiscal years beginning
after December 15, 1997. We adopted this statement in fiscal year 1999. However,
our comprehensive income currently does not include any of the components that
SFAS No. 130 requires companies

26
<PAGE> 29

to reconcile, and therefore through December 31, 1998, comprehensive income
equals net income.

DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION

In 1997, the FASB issued SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information, which establishes standards for the way
public business enterprises are to report selected information about operating
segments in interim financial reports issued to stockholders. The statement is
effective for years beginning after December 15, 1997, and will be adopted by us
in our annual reporting for fiscal year 1999.

EMPLOYERS' DISCLOSURES ABOUT PENSIONS AND OTHER POSTRETIREMENT BENEFITS

In February 1998, the FASB issued SFAS No. 132. SFAS No. 132 revises
employers' disclosures about pension and other postretirement benefit plans.
SFAS No. 132 is effective for fiscal years beginning after December 15, 1997 and
requires restatement of disclosures for earlier periods provided for comparative
purposes, if available. Because we do not have any of these types of plans, we
believe that SFAS No. 132 will have no impact on our consolidated financial
statements.

ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, which establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities. The statement is
effective for fiscal quarters of fiscal years beginning after June 15, 1999. As
we do not currently have any derivative instruments or engage in hedging
activities, we believe that SFAS No. 133 will have no impact on our consolidated
financial statements.

YEAR 2000

READINESS FOR YEAR 2000

- the software or the chips embedded within computers and other systems we
use in our offices and manufacturing facilities could be affected

- the software or the chips used in the products we sell could be affected

- third parties who do business with us may not be prepared for the year
2000

27
<PAGE> 30

hardware and to replace our current mission-critical software systems with
off-the-shelf year 2000 compliant software. We expect all information system
upgrades and conversions to be completed and fully operational by April 1, 1999.
We are currently assessing our electronic office and manufacturing equipment to
determine if such equipment is date-sensitive and will require upgrades. If we
determine after this assessment that some of our equipment needs to be upgraded
or replaced, we plan to finish the required work by September 1999.

COSTS

RISKS

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<PAGE> 31

related to a third party's failure to resolve its year 2000 issues. If we fail
to timely mitigate such risks, that failure may have a material adverse effect
on our business and results of operations.

CONTINGENCY PLANS

29
<PAGE> 32

BUSINESS

OVERVIEW

Invivo Corporation designs, manufactures and markets monitoring systems
that measure and display vital signs of patients in medical settings. Our
systems simultaneously monitor heart function, respiration, heart rate, blood
oxygen levels, invasive and non-invasive blood pressure and exhaled carbon
dioxide levels.

We developed the first multi-parameter vital sign patient monitoring system
for use during magnetic resonance imaging. As a result we have enjoyed a
significant first-to-market advantage. Based on our reputation in the MRI
patient monitoring field and our technological expertise, we have made inroads
into the general patient monitoring market. We believe that several new product
offerings will bolster our ability to gain greater market share and to better
target what we believe to be substantial specialized markets for patient
monitors.

We have established relationships with most of the world's largest MRI
equipment manufacturers. We presently maintain distribution agreements or other
OEM vendor relationships with Siemens A.G. Medical Engineering Group, Philips
Medical Systems, Hitachi Medical Corporation, GE Medical Systems and Elscint,
Ltd. GE Medical and Siemens Medical have approved the use of our monitors for
incorporation into their MRI equipment. We continue to work with MRI equipment
manufacturers to develop additional customized features.

In addition to our medical business, we offer a line of safety and
industrial instrumentation products. While these products are not our primary
focus, they historically have provided a stable source of revenue and cash flow.

Based on our comprehensive offerings, we believe that we are capable of
addressing the cost, quality and ease-of-use concerns of our customers while
adding value above what is currently available in the product offerings of our
competitors.

INDUSTRY

MRI

MRI is a non-invasive diagnostic tool that uses magnetic fields and radio
frequencies to produce images of internal organs and structures of the body. As
the technology has improved, MRI has become a widely accepted method of
performing diagnostic procedures. As a result, MRI scanners are used worldwide,
and are located principally in hospitals and stand-alone imaging centers. We
believe that roughly half of these MRI scanners are located in the United
States. We estimate that GE Medical, Siemens Medical and Philips Medical
together control over 70% of the worldwide MRI equipment market.

We believe the MRI marketplace will continue to grow as new uses for MRI
are developed. We believe that about 1,500 new MRI units were placed worldwide
in 1998. Over the next three years, we believe that there will be 10% to 15%
annual growth in MRI unit sales as old equipment is replaced and new equipment
is added in hospitals and imaging centers.

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<PAGE> 33

While not every MRI use requires a patient monitor, as uses continue to
expand, we believe patient monitoring during the MRI procedure will become
increasingly important. MRI patient monitoring technology enables physicians to
track vital signs while the patient is undergoing an MRI procedure. The MRI
environment presents unique challenges for patient monitoring. A monitor must
not interfere with the MRI in a manner that degrades the image. In addition, the
monitor signal must be protected from the MRI's magnetic field and radio
frequencies in order to maintain the accurate performance of the monitor. In
light of these challenges, only three companies are currently manufacturing MRI
patient monitors. We believe we are the market leader.

We expect that growth in the MRI monitoring market will come from new MRI
unit placements, outfitting existing MRI equipment not presently equipped with
monitoring devices and replacing existing MRI patient monitors.

GENERAL PATIENT MONITORING

General patient monitoring products measure, display and document vital
signs information obtained from sensors attached to the patient. The principal
customers of patient monitoring products include hospitals and outpatient
surgery centers.

We estimate the worldwide market for patient monitoring products that
measure multiple vital signs, including MRI and general patient monitoring, was
approximately $1.5 billion in 1998. This market consists of three segments
identified by their environments. The first segment is the portable monitoring
market that includes the emergency room, bedsides, cath labs and neo-natal care
units of hospitals. The second segment is the inpatient and outpatient operating
room market. The final segment includes intensive and critical care units in
hospitals.

The general patient monitoring market is mature and therefore highly
competitive. We believe the two greatest factors contributing to product success
are price and features.

SAFETY & INDUSTRIAL INSTRUMENTATION

The safety products market is comprised of gas detection and monitoring
devices that are offered in portable and fixed settings. OSHA and other
regulatory agencies require the use of such devices in confined spaces where
toxic gases or low levels of oxygen are suspected. The industrial
instrumentation market includes pressure and infrared sensor instrumentation
that are frequently utilized in industrial settings. We expect both of these
markets to experience only modest growth in the foreseeable future.

STRATEGY

Our strategy includes the following key elements:

EXPLOIT OUR LEADERSHIP POSITION IN MRI PATIENT MONITORING TO GROW WITH
ADVANCES IN MRI USES. We believe that physicians and medical researchers will
continue to develop additional uses for MRIs in diagnostic, surgical and other
medical and patient care areas. We believe that a number of these new uses will
require effective monitoring of a patient's vital signs. We intend to capitalize
on our technology and relationships with our OEMs, hospitals and stand-alone
imaging centers to participate in the growth of MRI uses. We

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<PAGE> 34

further intend to pursue refinements in our MRI monitors to suit new uses of MRI
equipment.

EXPAND PENETRATION OF THE MILLENNIA PRODUCT LINE. We believe there is an
increasing awareness in the medical community of our patient monitoring
capabilities outside of the MRI room since the introduction of the Millennia
product line. We intend to take advantage of this growing familiarity with the
Millennia to expand its market opportunities.

ACQUIRE OR DEVELOP ADDITIONAL MEDICAL PRODUCTS. We intend to leverage our
growing reputation within the medical community by expanding our medical product
line. We believe an expanded medical product line will enable us to achieve
economies of scale and present cross-selling opportunities for all of our
medical products. To expand our product lines, we will evaluate the acquisition
and licensing of attractive products and complementary businesses and the
internal development of complementary products.

LEVERAGE THE ADVANTAGES PROVIDED BY OUR DEDICATED SALES FORCE. Unlike many
other medical device companies our size, we use a dedicated sales force
currently comprised of approximately 35 salespeople to sell our patient
monitoring products. Our dedicated sales force provides us with direct access to
our customers, which we believe enables us to establish strong relationships and
to better understand our customers' needs. We intend to use our sales force to
further expand our market opportunities.

CONTINUE TO BENEFIT FROM EXISTING NON-MEDICAL PRODUCT LINES. We have a
number of well-established safety and industrial instrumentation product lines
that serve mature markets. We believe these products will continue to provide a
stable source of revenue and cash flow. We plan to continue to serve these
markets with our existing products and to evaluate the potential return from
enhancements of or modifications to these product lines.

PRODUCTS

MRI PATIENT MONITORS

Through our patented technologies and our proprietary shielding techniques,
we are able to monitor a patient's vital signs without disrupting the magnetic
resonance imaging process.

OMNI-TRAK 3100. In the late 1980s, we pioneered the development of vital
signs monitoring during magnetic resonance imaging with the introduction of the
Omni-Trak 3100. The Omni-Trak 3100 provides continuous monitoring of all key
aspects of a patient's vitality, including electrocardiograph, respiration,
heart rate, blood oxygen levels, invasive and non-invasive blood pressure and
expired carbon dioxide levels.

OMNI-TRAK 3150. In April 1998, we introduced our next-generation MRI
monitor. The Omni-Trak 3150 incorporates all of the features of the Omni-Trak
3100 plus it is compact, mobile and easy to use. Through state-of-the-art radio
transmission, the Omni-Trak 3150 communicates with our Millennia remote display
controller, allowing critical data to be viewed by physicians and technicians in
both the MRI room and the control room.

GENERAL PATIENT MONITORING

Based on our reputation in the MRI patient monitoring field and our
technological expertise, we have penetrated the general patient monitoring
market.

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<PAGE> 35

MILLENNIA. The Millennia portable patient monitor is a compact
multi-parameter vital signs monitor which weighs under 15 pounds.
Ease-of-transport enables a hospital to maximize use of the monitors because
they can easily be moved with a patient or between locations. The Millennia also
features a large color display and user-friendly interface that medical
personnel can easily use.

In January 1999, we introduced two new products in the Millennia line that
target substantial specialized markets for patient monitors. The first of these
is a module for anesthetic agent identification and analysis that allows an
anesthesiologist to confirm the type and amount of anesthetic gas that is
administered to a patient. The second incorporates the ability to measure blood
oxygen levels in non-tranquil patients (such as newborns)whose frequent and
unpredictable movements make the use of many traditional monitors difficult. We
are developing a product that will measure multiple anesthetic agents
simultaneously.

We also recently developed a modified version of the Millennia for
incorporation into GE Medical's CT scanners for use in cardiology. This
represents the first use of our patient monitors in radiology applications
outside the MRI room.

CENTURION. Our Centurion central station monitoring system networks
Millennia patient monitors, allowing a single healthcare professional to monitor
up to eight patients simultaneously. The main monitoring screen provides for
rapid interpretation of vital signs information by a single health care
professional.

With the recent FDA approval of our arrythmia detection enhancement for the
Centurion, we are continuing to upgrade our total product offering.

OTHER. Our other monitors include:

- a non-invasive blood pressure monitor that uses digital signal processing
for fast and consistent measurements

- an inexpensive multi-parameter vital signs monitor designed specifically
for the low-end international market

- a stand-alone unit to measure blood oxygen levels

- a monitor for blood pressure and blood oxygen levels

- a portable, hand-held blood oxygen level monitor offering a low-cost,
transportable monitoring unit

SAFETY AND INDUSTRIAL INSTRUMENTATION

We offer single-gas and multi-gas detection and monitoring instruments in
both portable and fixed models. Gas detection monitors increase worker safety
when toxic gases or low oxygen levels are suspected. The user carries or wears
portable units that are equipped with audible and visual alarms to warn the user
that potential dangers exists. Typical applications for these units are in
industrial or other settings where the user expects to move about, including
underground spaces housing telephone cables and waste water sewers, mines and
large factories. Fixed gas area monitors are appropriate for confined spaces
where chemicals or gases are used or stored. Typical applications for these
monitors are oil refineries, chemical plants and semiconductor fabrication
facilities.

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<PAGE> 36

Our flagship safety product, the MicroMax, is a hand-sized,
microprocessor-based, portable, multi-gas detector. The MicroMax simultaneously
detects up to four gases. In fiscal 1998, we introduced the UniMax, a
pocket-sized, microprocessor-based, portable, single-gas detector. UniMax is
available with up to nine interchangeable plug-in sensors for various types of
gases and allows for audible and visual alarm combinations.

Our oxygen monitoring products measure oxygen levels in air cylinders used
by individuals in oxygen-deprived situations. The primary use for this equipment
is for a self-contained breathing apparatus for fire fighters and hazardous
material clean-up workers.

Our industrial sensor and instrumentation products consist of pressure
sensors and infrared non-contact temperature measuring devices.

The infrared non-contact temperature measuring products are used in a wide
variety of industrial instrumentation uses. These include the fabrication of
semiconductors, the manufacturing of metals and glass, and miscellaneous
automotive, plant maintenance, construction and food preparation applications.
In fiscal 1997, we introduced the quickTemp, a hand-held, pocket-sized, infrared
non-contact thermometer.

We sell our pressure sensing devices primarily to plastic extrusion
equipment manufacturers who use these devices in their production processes.
Manufacturers in the food, beverage, synthetic fiber and pharmaceutical
industries use these devices to measure the pressure of processing ingredients.

SALES AND MARKETING

Unlike many other medical device companies our size, we sell our patient
monitoring products in the United States through a direct sales force. Our
domestic sales force includes 30 salespersons organized into five regions in the
United States. Distributors, assisted by our five international sales personnel
located in Europe and in the Far East, handle sales throughout the rest of the
world.

We sell our patient monitoring products primarily to hospitals and, to a
lesser degree, to stand-alone imaging centers, outpatient surgery centers and
OEM customers. We have OEM or worldwide distribution agreements with Siemens
A.G. Medical Engineering Group, Philips Medical Systems, Hitachi Medical
Corporation, GE Medical Systems and Elscint, Ltd. for our MRI monitoring
equipment. These relationships facilitate the sale of our monitors with the MRI
equipment manufactured by these companies.

We have also established relationships with leading group purchasing
organizations such as Premier Technology Management and AmeriNet, Inc. and
health care providers such as Kaiser Permanente and Columbia/HCA.

We market our gas detection, gas calibration and oxygen monitoring products
mostly through distributors and our own sales personnel. We sell these products
primarily to municipalities, utilities, telephone companies, oil refineries,
manufacturers and OEMs. We sell our industrial instrumentation products
primarily through distributors.

Foreign sales represented 20%, 22% and 23% of our total sales in fiscal
1996, 1997 and 1998 and 22% of our total sales for the six months ended December
31, 1998. We are actively trying to expand our international presence,
especially in the patient monitoring business.

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<PAGE> 37

Our backlog of unfilled purchase orders for all our products was
approximately $8.8 million as of December 31, 1998. Within the next 12 months,
we expect to ship all of our current backlog. Because of customer changes in
delivery schedules and the possible cancellation of orders, our backlog as of
any particular date may not be representative of our actual sales for any
succeeding fiscal period. Historically, order cancellations have not been
significant. Our businesses are not inherently seasonal, although for some of
our businesses orders and shipments in our first and second fiscal quarters have
been historically lower than the third and fourth quarters.

MANUFACTURING AND ASSEMBLY

Other companies manufacture components and subassemblies to our
specifications. We then assemble our products at our facilities in California
and Florida. Our patient monitoring and gas detection manufacturing facilities
are all ISO 9001 certified. We generally obtain from a wide variety of suppliers
the materials and supplies that we use to produce our products. We have not
experienced any significant shortages. Although certain materials that we use in
the manufacture of certain patient monitoring and gas detection devices are
readily available from only a few suppliers, we do not anticipate any
significant difficulties in obtaining any of these materials in the foreseeable
future.

COMPETITION

The patient monitoring markets in which we compete include MRI and general
monitoring. We are aware of three current competitors in the worldwide MRI
monitoring market. The general patient monitoring market is highly competitive
and includes companies that are much larger than us with significantly greater
financial resources. We estimate there are approximately 15 to 20 competitors in
the general patient monitoring market.

In the patient monitoring business, price is an important factor in
hospital purchasing patterns as a result of cost containment pressures on the
health care industry. To the extent that healthcare reform measures negatively
affect the financial condition of hospitals and thereby reduce their capital
purchases, we expect price to continue to play a large part as a basis of
competition.

The markets for our non-medical products are, in general, characterized by
a relatively limited number of competitors; however, these markets are highly
competitive. We estimate there are generally five to ten competitors in each of
these markets.

GOVERNMENTAL REGULATION

The patient monitoring devices we manufacture and market are subject to
regulation by the FDA and, in some instances, corresponding state and foreign
governmental agencies.

Our existing medical devices were cleared for marketing in the United
States through the FDA's section 510(k) premarket notification process. The
510(k) premarket notification process is available where the new product being
submitted to the FDA can be compared to a pre-existing commercially available
product that performs similar functions the FDA considers to be substantially
equivalent. If a product does not meet the eligibility requirements for the
510(k) process, then its application must be submitted, instead, under the more
time consuming and costly premarket approval procedure.

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<PAGE> 38

Our manufacturing facilities and the manufacture of our products are
subject to FDA regulations regarding registration of manufacturing facilities,
compliance with FDA good manufacturing practices and the reporting of adverse
events. The FDA's recently revised good manufacturing practices, titled "Quality
System Regulation", now require preproduction design controls and implementation
of a full quality assurance system along with standards for manufacturing
processes and facilities and record keeping for device failure and complaint
investigations. We are subject to periodic on-site inspection for compliance
with such regulations. The FDA may also conduct investigations and evaluations
of our products at its own initiative or in response to customer complaints or
reports of malfunctions. If the FDA believes that its regulations have been
violated, it has extensive enforcement authority including the power to seize,
embargo or restrain entry of products from the market and to prohibit the
operation of manufacturing facilities until the noted deficiencies are corrected
to their satisfaction. We believe we are in compliance with all applicable FDA
regulations.

We seek, where appropriate, to comply with the certification and safety
standards of various organizations such as Underwriters' Laboratories, the
Canadian Standards Association and the various safety and test regulations of
the European Community.

The manufacture and testing of our safety products and medical devices
requires us to handle and store small quantities of a wide variety of chemicals,
some of which are highly toxic. Certain of these chemicals pose a serious threat
to workers and others who may come in contact with them if improperly used or
handled. Most municipalities, including those in which we are presently located,
now require that the proposed storage and use of dangerous chemicals receive
local approval. State air quality boards, or similar agencies, must also approve
the venting, and certain other aspects of handling, of these types of chemicals.
These municipal and state agencies may, as a condition to the granting of
approvals and permits, impose certain procedural limitations on our storage and
handling of these chemicals and structural requirements on the facilities where
these chemicals are stored and used. They also impose record keeping and
reporting requirements on the users of these chemicals.

We believe that we presently are in compliance with all applicable material
environmental regulations. Compliance with these requirements has not, to date,
had a material effect on our capital expenditures, earnings or competitive
position. Nonetheless, environmental regulation at the local, state and national
levels is still evolving, and the possibility exists that more stringent
limitations and requirements may become applicable to us.

EMPLOYEES

As of December 31, 1998 we had 297 employees, all of whom were full-time.
We are not a party to any collective bargaining agreement and have not
experienced a strike or work stoppage. We consider our relations with our
employees to be good.

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<PAGE> 39

PROPERTIES

The following table sets forth information with respect to the real
property owned or leased by us which we consider material to our business.

- -------------------------------------------------------------------------------
GENERAL CHARACTER OWNERSHIP OR DATE OF
LOCATION AND USE OF THE PROPERTY EXPIRATION OF LEASE
- -------------------------------------------------------------------------------
<C> <S> <C>
Pleasanton, California 3,200 square-foot April 2001
headquarters facility
- -------------------------------------------------------------------------------
Fremont, California 17,000 square-foot March 2001
building used as our
manufacturing and
distribution facility for
our gas calibration and
process control products
- -------------------------------------------------------------------------------
Orlando, Florida 42,000 square-foot Owned
building used as the
manufacturing,
distribution and
administrative facility
for our patient
monitoring products
- -------------------------------------------------------------------------------
Cucamonga, California 24,000 square-foot December 1999
building used as the
manufacturing,
distribution and
administrative facility
for our oxygen monitoring
products
- -------------------------------------------------------------------------------
Miramar, Florida 9,000 square-foot August 1999
building used as the
manufacturing,
distribution and
administrative facility
for our gas detection and
monitoring products
- -------------------------------------------------------------------------------
</TABLE>

We are currently negotiating new leases for our facilities in Cucamonga and
Miramar. These facilities may be moved to different locations in the same area.
We do not believe that the cost of any such relocation would be material to us.
We also believe that this will not interrupt our business.

We consider our present facilities to be sufficient for our current
operations. However, from time to time, we may lease smaller facilities as our
needs dictate.

LEGAL PROCEEDINGS

Our medical device subsidiary, Invivo Research, is one of two third-party
defendants named in a lawsuit by Southern Nevada Surgical Center and Surgex
Southern Nevada, Inc. in Nevada state court. The underlying action in this
matter stems from an incident involving a surgical patient undergoing a
procedure at the Southern Nevada Surgical Center. The patient suffered a serious
permanent brain injury. A lawsuit was filed on

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<PAGE> 40

behalf of the patient against the surgical center and the anesthesiologist who
monitored the patient. A substantial settlement was made to the patient by the
defendants in that action. Southern Nevada Surgical Center and Surgex are now
seeking indemnity and contribution of approximately $14 million from the
manufacturer of the anesthetic gas machine and Invivo Research, which
manufactured the vital signs monitor used in this procedure. Southern Nevada
Surgical Center and Surgex are alleging that both the anesthetic gas machine and
the vital signs monitor were defective. This matter is scheduled to commence
trial on June 6, 1999. Any judgment against us that exceeds the amount that our
insurer is required to pay could have a material adverse effect on our business
and results of operations.

In addition to the legal proceeding described above, we are subject to
other various legal proceedings that arise in the ordinary course of business.
While the outcome of these proceedings cannot be predicted with certainty, we
believe that none of such proceedings, individually or in the aggregate, will
have a material adverse effect on our business or results of operations.

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<PAGE> 41

DIRECTORS AND MANAGEMENT

Our executive officers and directors as of December 31, 1998, are listed
below, together with brief accounts of their business experience and certain
other information.

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
James B. Hawkins..................... 43 President, Chief Executive Officer,
Secretary and Director
John F. Glenn........................ 37 Vice President, Finance and Chief
Financial Officer
F. Larry Young....................... 39 Vice President, Operations
Ernest C. Goggio..................... 76 Chairman of the Board of Directors
Laureen DeBuono...................... 41 Director
George S. Sarlo...................... 61 Director
Roger Susi........................... 45 Director
</TABLE>

James B. Hawkins has been President, Chief Executive Officer and a Director
of Invivo and its predecessor since August 1985. He also has served as Secretary
of Invivo since July 1986. Mr. Hawkins has served as a Director of Pillar
Corporation, a major stockholder in Invivo, since August 1987. Pillar
Corporation, based in Milwaukee, Wisconsin, manufactures heat induction and
melting equipment for the metals industry. He earned his undergraduate degree in
Business Commerce from Santa Clara University and a MBA in Finance from San
Francisco State University.

John F. Glenn was appointed Vice President, Finance and Chief Financial
Officer of Invivo in November 1990. From September 1988 to November 1990, Mr.
Glenn was employed by Pillar Corporation as Vice President, Finance and Chief
Financial Officer. From August 1983 to September 1988, he served in various
capacities with First Interstate Bank. Mr. Glenn earned his undergraduate degree
in Business Administration from University of Nevada, Reno and his MBA in
Finance from the University of Santa Clara.

F. Larry Young has been Vice President, Operations of Invivo since April
1990 and the Chief Operating Officer of our Lumidor Safety Products subsidiary
since August 1996. From September 1986 to April 1990, Mr. Young was Vice
President, Manufacturing of Invivo. Prior to joining Invivo's predecessor as
Manufacturing Manager in July 1985, he served for four years in various
managerial capacities with Apple Computer, Inc.

Ernest C. Goggio has served as Chairman of the Board of Directors of Invivo
since November 1986. He has been the President and Chairman of the Board of
Pillar Corporation since 1966 and is Pillar's majority stockholder.

Laureen DeBuono has been a Director of Invivo since February 1998. Ms.
DeBuono is Chief Operating Officer and Chief Financial Officer of ReSound
Corporation, a health care company that manufactures and markets advanced
hearing devices, a position she has held since October 1998. From 1992 to April
1998, Ms. DeBuono was Executive Vice President and General Counsel of Nellcor
Puritan Bennett Inc., a medical device company.

George S. Sarlo has been a Director of Invivo since January 1991. He has
been a general partner of the Walden Group of venture capital funds since 1974.
Mr. Sarlo also founded and has served as Chairman of the Board of Directors of
Ashfield and Co., Inc., an investment management company, since 1973.

Roger Susi has been a Director of Invivo since December 1998. Mr. Susi is
Chairman of the Board of Directors of our Invivo Research subsidiary. Mr. Susi
founded and served as President of Invivo Research from 1979 to November 1998.

39
<PAGE> 42

SELLING STOCKHOLDER

The following table sets forth certain information regarding the beneficial
ownership of our common stock for the selling stockholder immediately prior to
the offerings and after giving effect to the sale by him of shares of our common
stock in connection with the offering. Except as otherwise indicated, we believe
that the person listed below, based on information provided by such owner, has
sole investment and voting power with respect to the common stock shown below as
being beneficially owned by him, subject to community property laws where
applicable.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY NUMBER OF SHARES BENEFICIALLY
OWNED PRIOR TO SHARES OWNED AFTER THE
OFFERING OFFERED OFFERING
-------------------- --------- -------------------
NUMBER PERCENT NUMBER PERCENT
-------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Ernest C. Goggio.................. 514,986(1) 15.5% 200,000 314,986 7.6%
4900 Hopyard Rd. Suite 210
Pleasanton, CA 94588
</TABLE>

- -------------------------

(1) Includes 28,000 shares of common stock issuable upon the exercise of stock
options exercisable within 60 days and 463,986 shares of our common stock
owned by Pillar Corporation, of which Mr. Goggio is President and majority
stockholder.

Mr. Goggio has served as Chairman of the Board of Directors of Invivo since
November 1986. He is also the President, Chairman of the Board and majority
stockholder of Pillar Corporation, which is an affiliate of Invivo.

40
<PAGE> 43

DESCRIPTION OF CAPITAL STOCK

GENERAL

Our authorized capital stock consists of 5,000,000 shares of common stock,
par value $0.01 per share and 1,000,000 shares of preferred stock, par value
$0.01 per share. The following discussion of the material features of our
capital stock is intended as a summary only and is qualified in its entirety by
reference to our certificate of incorporation (as amended) and restated bylaws,
which are incorporated by reference to the registration statement of which this
prospectus is a part.

COMMON STOCK

On December 31, 1998, 3,286,768 shares of common stock were outstanding.
The outstanding shares are, and the shares offered by us will be, when issued,
fully paid and nonassessable. Upon completion of this offering, we will have
outstanding 4,138,268 shares of common stock. If the over-allotment option is
exercised in full, we will have outstanding 4,245,768 shares of common stock. As
of December 31, 1998, we had outstanding options to purchase 751,875 shares of
our common stock, 385,750 of which were then exercisable.

The holders of shares of common stock elect all directors, are entitled to
one vote per share and are not entitled to cumulate their votes in the election
of directors. Holders of record are entitled to receive dividends when and if
declared by the board of directors out of legally available funds. Upon any
liquidation, dissolution or winding up of us, holders of common stock are
entitled to share pro rata in any amounts available for distribution to the
stockholders after payment of all creditors and liquidation preferences of any
preferred stock that may be outstanding. Stockholders have no preemptive,
subscription, redemption or conversion rights. The rights, preferences and
privileges of holders of common stock may become subject to those of holders of
preferred stock if we were to issue preferred stock in the future.

Following the completion of this offering, our officers and directors and
their affiliates will own approximately 17.7% (16.2% if the underwriters'
over-allotment option is exercised in full) of our outstanding common stock,
assuming no exercise of outstanding stock options. As a result, such persons
will continue to be able to exert significant influence over the outcome of
matters submitted to a vote of stockholders, including the election of
directors.

We have agreed, as have each of our Directors and our Chief Executive
Officer, subject to certain exceptions, not to sell any shares of common stock
for a period of 75 days after the date of completion of this offering without
the prior written consent of Cruttenden Roth Incorporated. During this lock-up
period, however, we will be permitted to (i) grant options to purchase shares of
common stock pursuant to our stock option plans and (ii) issue shares of common
stock upon the exercise of options granted pursuant to the stock option plans.

PREFERRED STOCK

The board of directors has authority to establish, from time to time,
various series of preferred stock. When the board of directors establishes a
series of preferred stock, it will determine the rights, preferences and
privileges of that series, including, among other matters, any dividend rights,
dividend rates, conversion rights, voting rights, terms of redemption,
liquidation preferences, sinking fund terms, the number of shares constituting

41
<PAGE> 44

any such series and the description thereof. No shares of preferred stock have
been issued, and we have no present plans to issue any such shares. The board of
directors can, without stockholder approval, issue preferred stock with voting
and conversion rights which could dilute the voting rights of the common
stockholders. In addition, the ability to issue such shares could deter tender
offers which could be in the best interest of our stockholders and prolong the
tenure of management.

DELAWARE LAW

We are a Delaware corporation and subject to Section 203 of the Delaware
General Corporation Law, an anti-takeover law. In general, Section 203 prevents
an "interested stockholder" (defined generally as a person owning 15% or more of
a corporation's outstanding voting stock) from engaging in a "business
combination" (as defined) with a Delaware corporation for three years following
the date on which such person became an interested stockholder. This limitation
is subject to certain exceptions, such as the approval of such a business
combination by the board of directors and the holders of at least two-thirds of
the outstanding shares of voting stock not owned by the interested stockholder.
The existence of Section 203 would be expected to have an anti-takeover effect,
possibly inhibiting takeover attempts that might otherwise result in a premium
over the market price being paid for the shares of common stock held by
stockholders.

TRANSFER AGENT

Our transfer agent and registrar for our common stock is U.S. Stock
Transfer, Glendale, California.

SHARES ELIGIBLE FOR FUTURE SALE

There will be 4,138,268 shares of common stock outstanding immediately
after the offering. All of the shares sold in the offering will be freely
transferable without restriction or further registration under the Securities
Act, except for shares purchased by our "affiliates," as defined in Rule 144
under the Securities Act. All of the remaining shares are also freely tradable,
except that shares held by affiliates are subject to Rule 144 or the
availability of another exemption. We, our Chief Executive Officer and each of
our Directors have agreed, subject to certain exceptions, not to sell any shares
of common stock for a period of 75 days after the date of completion of this
offering without the prior written consent of Cruttenden Roth Incorporated.
During this lock-up period, however, we will be permitted to (i) grant options
to purchase shares of common stock pursuant to our stock option plan and (ii)
issue shares of common stock upon the exercise of options granted pursuant to
the stock option plan.

42
<PAGE> 45

UNDERWRITING

Subject to the terms and conditions set forth in the underwriting
agreement, the underwriters named below, for whom Cruttenden Roth Incorporated
is acting as representative, have agreed to purchase from us and the selling
stockholder, and we and the selling stockholder have agreed to sell to the
underwriters, the respective number of shares of common stock set forth opposite
each underwriter's name below.

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
------------ ---------
<S> <C>
Cruttenden Roth Incorporated................................
Gerard Klauer Mattison & Co., Inc...........................
---------
Total............................................. 1,050,000
=========
</TABLE>

The underwriting agreement provides that the obligations of the several
underwriters are subject to certain conditions precedent, including the absence
of any material adverse change in our business and the receipt of certain
certificates, opinions and letters from our counsel and independent public
accountants. The nature of the underwriters' obligation is such that they are
committed to purchase and pay for all the shares of common stock if any are
purchased.

We and the selling stockholder have been advised by the representative that
the underwriters propose to offer the shares of common stock directly to the
public at the public offering price set forth on the cover page of this
prospectus and to certain securities dealers at such price less a concession not
in excess of $ per share. The underwriters may allow, and such selected
dealers may reallow, a discount not in excess of $ per share to certain
brokers and dealers. After the public offering of the shares, the public
offering price and other selling terms may be changed by the representative. No
change in such terms shall change the amount of proceeds to be received by us as
set forth on the cover page of this prospectus.

We have granted an option to the underwriters, exercisable for a period of
45 days after the date of this prospectus, to purchase up to an additional
107,500 shares of our common stock at the public offering price set forth on the
cover page of this prospectus, less the underwriting discounts and commissions.
James B. Hawkins, our Chief Executive Officer, has granted an option to the
underwriters to purchase an additional 50,000 shares of our common stock on the
same terms and conditions. The underwriters may exercise this option only to
cover over-allotments, if any. To the extent that the underwriters exercise this
option, each of the underwriters will be committed, subject to certain
conditions, to purchase such additional shares of common stock in approximately
the same proportion as set forth in the above table.

Our Chief Executive Officer and our Directors have agreed that they will
not, without the prior written consent of Cruttenden Roth Incorporated (which
consent may be withheld in its sole discretion) and subject to certain limited
exceptions, offer, pledge, sell, contract to sell, sell any option or contract
to purchase, sell short, purchase any option or contract to sell, grant any
option, right or warrant to purchase, lend or otherwise transfer or

43
<PAGE> 46

dispose of, directly or indirectly, any shares of common stock or any securities
convertible into or exercisable or exchangeable for common stock, or enter into
any swap or similar agreement that transfers, in whole or in part, any of the
economic consequences of ownership of the common stock, for a period of 75 days
after the date of completion of this offering. Cruttenden Roth Incorporated, on
behalf of the underwriters, may, in its sole discretion and at any time without
notice, release all or any portion of the securities subject to these lock-up
agreements. In addition, we have agreed that, for a period of 75 days after the
date of completion of this offering, we will not, without the consent of
Cruttenden Roth Incorporated, make any offering, purchase, or sale or other
disposition of any shares of our common stock or other securities convertible
into or exchangeable or exercisable for shares of common stock (or agreement for
such) except for (i) the grant of options to purchase shares of common stock
pursuant to our stock option plans and (ii) the issuance of shares of common
stock issued pursuant to the exercise of options granted under such plan.

The representative has advised us that it does not expect any sales of the
shares of common stock offered hereby to be made to discretionary accounts
controlled by the underwriters.

The underwriting agreement provides that we will indemnify the underwriters
and their controlling persons against certain liabilities under the Securities
Act or will contribute to payments the underwriters and their controlling
persons may be required to make in respect thereof. We are generally obligated
to indemnify the underwriters and their respective controlling persons in
connection with losses or claims arising out of any untrue statement of a
material fact contained in this prospectus or in related documents filed with
the Securities and Exchange Commission or with any state securities
administrator or arising out of any omission to state in any of such documents
any material fact required to be stated in such documents or necessary to make
the statements made in such documents, in light of the circumstances under which
they were made, not misleading. In addition, we are generally obligated to
indemnify the underwriters and their respective controlling persons in
connection with losses or claims arising out of any breach of any
representation, warranty, agreement or covenant of Invivo contained in the
underwriting agreement. The selling stockholder has similar indemnification
obligations to the underwriters and their respective controlling persons in
connection with losses or claims arising out of his representations, warranties,
agreements, covenants, statements and omissions.

The foregoing is a summary of the principal terms of the underwriting
agreement; it does not purport to be complete and is qualified in its entirety
by reference to the form of underwriting agreement that has been filed as an
exhibit to our registration statement of which this prospectus is a part.

To facilitate this offering, the underwriters may engage in transactions
that stabilize, maintain or otherwise affect the market price of the common
stock. Specifically, the underwriters may over-allot shares in connection with
this offering (i.e., sell more shares than are set forth on the cover page of
this prospectus), thereby creating a "short position" in the underwriters'
syndicate account. To cover such over-allotments or to stabilize the market
price of the shares, the underwriter may bid for, and purchase, shares in the
open market. The underwriters may also elect to reduce any short position by
exercising all or part of the over-allotment option described above. Any of
these activities may maintain the market price of the shares at a level above
that which might otherwise prevail in the open

44
<PAGE> 47

market. The underwriters are not required to engage in these activities, and, if
commenced, any such activities may be discontinued at any time.

LEGAL MATTERS

The legality of the common stock offered hereby will be passed on for us by
Howard, Rice, Nemerovski, Canady, Falk & Rabkin, A Professional Corporation,
Palo Alto, California. Certain legal matters will be passed on for the
underwriters by Brobeck, Phleger & Harrison LLP, San Diego, California.

EXPERTS

The consolidated financial statements of Invivo Corporation and
subsidiaries as of June 30, 1997 and 1998, and for each of the years in the
three-year period ended June 30, 1998, have been included herein and in the
registration statement in reliance upon the reports of KPMG LLP, independent
certified public accountants, appearing elsewhere herein, and upon the authority
of said firm as experts in accounting and auditing.

INCORPORATION OF CERTAIN INFORMATION BY REFERENCE

The following documents previously filed by us with the Securities and
Exchange Commission under Section 13(a) or 15(d) of the Exchange Act (File No.
0-15963) are incorporated herein by reference: (i) annual report on Form 10-K/A
for the year ended June 30, 1998 (filed February 9, 1999); and (ii) quarterly
reports on Form 10-Q for the quarters ended September 30, 1998 (filed November
12, 1998) and December 31, 1998 (filed February 9, 1999).

In this prospectus we have incorporated certain documents by reference. If
any statement in this prospectus modifies or supersedes a statement in one of
those documents, we incorporate the earlier statement only to the extent that
the later statement does not modify or supersede it. The same applies for any
statement in an earlier document which is modified or superseded by a statement
in a later document which this prospectus incorporates by reference.

We will provide without charge to each person to whom this prospectus is
delivered, upon the written or oral request of such person, a copy of any or all
of the foregoing documents incorporated by reference herein (other than exhibits
to any such document unless such exhibits are specifically incorporated by
reference into such document). Requests for such copies should be directed to:

Corporate Secretary
Invivo Corporation
4900 Hopyard Road, #210,
Pleasanton, California 94588
Telephone (925) 468-7600

45
<PAGE> 48

ADDITIONAL INFORMATION

We have filed with the Securities and Exchange Commission a registration
statement on Form S-2 under the Securities Act of 1933, as amended, with respect
to the common stock offered hereby. This prospectus, which forms a part of the
registration statement, does not contain all of the information set forth in the
registration statement. For further information with respect to us and our
common stock, reference is made to the registration statement. Statements
contained in this prospectus as to the contents of any contract or other
document are not necessarily complete, and, in each instance, reference is made
to the copy of such contract or document filed as an exhibit to the registration
statement, each such statement being qualified in all respects by such reference
to such exhibit.

Copies of the registration statement, the documents incorporated by
reference into this prospectus and other documents that we file with the
Securities and Exchange Commission may be examined without charge at the Public
Reference Room of the Securities and Exchange Commission, 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549, and the Securities and Exchange
Commission's Regional Offices located at Seven World Trade Center, 13th Floor,
New York, New York 10048 and Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661. Copies of all or any portion of the registration
statement can be obtained from the Public Reference Section of the Commission,
450 Fifth Street, N.W., Washington, D.C. 20549, upon payment of certain fees
prescribed by the Commission. You may obtain information regarding the Public
Reference Room by calling the Securities and Exchange Commission at
1-800-SEC-1330. The Commission maintains a World Wide Web site that contains
registration statements, reports, proxy and information statements and other
information regarding registrants (including Invivo) that file electronically
with the Commission. The address of such World Wide Web site is
http://www.sec.gov.

46
<PAGE> 49

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report................................ F-2
Consolidated Balance Sheets -- as of June 30, 1997 and 1998
and December 31, 1998 (unaudited)......................... F-3
Consolidated Statements of Income -- years ended June 30,
1996, 1997 and 1998 and six months ended December 31, 1997
and 1998 (unaudited)...................................... F-4
Consolidated Statements of Stockholders' Equity -- years
ended June 30, 1996, 1997 and 1998 and six months ended
December 31, 1998 (unaudited)............................. F-5
Consolidated Statements of Cash Flows -- years ended June
30, 1996, 1997 and 1998 and six months ended December 31,
1997 and 1998 (unaudited)................................. F-6
Notes to Consolidated Financial Statements.................. F-7
</TABLE>

F-1
<PAGE> 50

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders
Invivo Corporation:

We have audited the accompanying consolidated balance sheets of Invivo
Corporation and subsidiaries (the Company) as of June 30, 1998 and 1997, and the
related consolidated statements of income, stockholders' equity, and cash flows
for each of the years in the three-year period ended June 30, 1998. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Invivo
Corporation and subsidiaries as of June 30, 1998 and 1997, and the results of
their operations and their cash flows for each of the years in the three-year
period ended June 30, 1998, in conformity with generally accepted accounting
principles.

KPMG LLP

July 30, 1998

F-2
<PAGE> 51

INVIVO CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

ASSETS

<TABLE>
<CAPTION>
JUNE 30, JUNE 30, DECEMBER 31,
1997 1998 1998
----------- ---------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents............ $ 171,100 554,100 606,500
Trade receivables, less allowance for
doubtful accounts of $371,000 as
of June 30, 1997, $288,000 as of
June 30, 1998, and $455,748 as of
December 31, 1998................. 7,898,800 10,277,000 10,583,800
Inventories.......................... 7,100,900 7,282,400 7,495,300
Deferred income taxes................ 802,300 1,138,000 1,138,000
Prepaid expenses and other current
assets............................ 516,200 451,400 470,400
----------- ---------- ----------
Total current assets......... 16,489,300 19,702,900 20,294,000
Property and equipment, net............ 4,460,100 4,441,100 4,856,500
Intangible assets...................... 5,442,400 5,748,700 5,664,300
Other assets........................... 219,700 302,600 286,200
----------- ---------- ----------
$26,611,500 30,195,300 31,101,000
=========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable..................... 2,871,000 3,139,100 2,353,900
Accrued expenses..................... 2,153,200 2,679,700 2,920,600
Current portion of long-term debt and
bank borrowings................... 3,487,900 3,087,200 2,424,800
Income taxes payable................. 481,200 1,433,200 1,146,500
Other................................ 21,900 -- --
----------- ---------- ----------
Total current liabilities.... 9,015,200 10,339,200 8,845,800
Long-term debt, excluding current
portion.............................. 1,584,400 1,479,800 2,066,600
Deferred income taxes.................. 145,400 156,000 156,000
Other.................................. 52,000 52,000 52,000
----------- ---------- ----------
Total liabilities............ 10,797,000 12,027,000 11,120,400
----------- ---------- ----------
Stockholders' equity:
Common stock, $.01 par value;
authorized shares -- 5,000,000;
issued and outstanding
shares -- 3,255,668 as of June 30,
1997, 3,269,418 as of June 30,
1998, and 3,286,768 as of December
31, 1998.......................... 32,557 32,694 32,868
Additional paid-in capital........... 12,787,443 12,878,606 13,038,232
Retained earnings.................... 2,994,500 5,257,000 6,909,500
----------- ---------- ----------
Total stockholders' equity... 15,814,500 18,168,300 19,980,600
Commitments and contingencies..........
----------- ---------- ----------
$26,611,500 30,195,300 31,101,000
=========== ========== ==========
</TABLE>

See accompanying notes to consolidated financial statements.
F-3
<PAGE> 52

INVIVO CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JUNE 30, DECEMBER 31,
------------------------------------- -------------------------
1996 1997 1998 1997 1998
----------- ---------- ---------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Sales................. $31,390,900 35,903,500 40,651,400 19,107,300 23,410,800
Cost of goods sold.... 15,810,900 18,618,900 20,956,600 9,948,000 11,665,300
----------- ---------- ---------- ---------- ----------
Gross
profit... 15,580,000 17,284,600 19,694,800 9,159,300 11,745,500
----------- ---------- ---------- ---------- ----------
Operating expenses:
Selling, general,
and
administrative... 9,690,700 14,174,300 13,428,500 6,256,000 7,707,200
Research and
experimental..... 2,095,400 2,448,800 2,455,000 1,250,200 1,413,100
----------- ---------- ---------- ---------- ----------
Total
operating
expenses... 11,786,100 16,623,100 15,883,500 7,506,200 9,120,300
----------- ---------- ---------- ---------- ----------
Income from
operations... 3,793,900 661,500 3,811,300 1,653,100 2,625,200
Other income
(expense):
Interest expense.... (175,200) (251,400) (387,300) (195,200) (159,900)
Other, net.......... 126,700 67,900 4,000 24,100 (1,300)
----------- ---------- ---------- ---------- ----------
Income
before
income
taxes.... 3,745,400 478,000 3,428,000 1,482,000 2,464,000
Income tax expense.... 1,273,400 162,500 1,165,500 478,900 811,500
----------- ---------- ---------- ---------- ----------
Net
income... $ 2,472,000 315,500 2,262,500 1,003,100 1,652,500
=========== ========== ========== ========== ==========
Basic net income per
common share........ $ .77 .10 .69 .31 .50
=========== ========== ========== ========== ==========
Weighted average
common shares
outstanding
(basic)............. 3,216,362 3,239,187 3,264,966 3,260,646 3,273,667
=========== ========== ========== ========== ==========
Diluted net income per
common share........ $ .72 .09 .66 .30 .47
=========== ========== ========== ========== ==========
Weighted average
common shares
outstanding
(diluted)........... 3,455,501 3,445,326 3,426,718 3,393,748 3,551,454
=========== ========== ========== ========== ==========
</TABLE>

See accompanying notes to consolidated financial statements.
F-4
<PAGE> 53

INVIVO CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
------------------- PAID-IN RETAINED STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS EQUITY
--------- ------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Balances as of June 30,
1995.................... 3,200,043 $32,000 12,377,100 207,000 12,616,100
Exercise of stock
options................. 25,950 260 83,840 -- 84,100
Tax benefit from exercise
of options.............. -- -- 103,400 -- 103,400
Net income................ -- -- -- 2,472,000 2,472,000
--------- ------- ---------- ---------- ----------
Balances as of June 30,
1996.................... 3,225,993 32,260 12,564,340 2,679,000 15,275,600
Exercise of stock
options................. 29,675 297 160,703 -- 161,000
Tax benefit from exercise
of Options.............. -- -- 62,400 -- 62,400
Net income................ -- -- -- 315,500 315,500
--------- ------- ---------- ---------- ----------
Balances as of June 30,
1997.................... 3,255,668 32,557 12,787,443 2,994,500 15,814,500
Exercise of stock
options................. 13,750 137 76,863 -- 77,000
Tax benefit from exercise
of Options.............. -- -- 14,300 -- 14,300
Net income................ -- -- -- 2,262,500 2,262,500
--------- ------- ---------- ---------- ----------
Balances as of June 30,
1998.................... 3,269,418 32,694 12,878,606 5,257,000 18,168,300
Exercise of stock options
(unaudited)............. 17,350 174 107,926 -- 108,100
Tax benefit from exercise
of options
(unaudited)............. -- -- 51,700 -- 51,700
Net income (unaudited).... -- -- -- 1,652,500 1,652,500
--------- ------- ---------- ---------- ----------
Balances as of December
31, 1998 (unaudited).... 3,286,768 $32,868 13,038,232 6,909,500 19,980,600
========= ======= ========== ========== ==========
</TABLE>

See accompanying notes to consolidated financial statements.
F-5
<PAGE> 54

INVIVO CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JUNE 30, DECEMBER 31,
--------------------------------------- -------------------------
1996 1997 1998 1997 1998
----------- ----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Net income.................... $ 2,472,000 315,500 2,262,500 1,003,100 1,652,500
Adjustments to reconcile net
income to net cash provided
by (used in) operating
activities:
Depreciation and
amortization.............. 601,400 745,900 760,000 386,500 437,000
Loss on disposal of property
and equipment............. 31,200 21,200 64,800 -- 9,200
Changes in operating assets
and liabilities:
Trade receivables......... (215,900) (1,483,300) (2,378,200) (1,911,600) (306,800)
Inventories............... (412,500) (1,596,500) (181,500) 268,000 (212,900)
Deferred income taxes..... (72,300) (230,600) (310,700) -- --
Prepaid expenses and other
current assets......... (128,000) 68,300 64,800 121,700 (19,000)
Accrued expenses.......... (65,900) 251,900 526,500 (91,000) 240,900
Accounts payable.......... 292,800 1,234,700 268,100 (24,000) (785,200)
Income taxes payable...... 220,500 158,700 952,000 595,800 (235,000)
Other current
liabilities............ 2,600 (71,000) (21,900) (3,100) --
----------- ----------- ----------- ----------- ----------
Net cash provided by
(used in) operating
activities........... 2,725,900 (585,200) 2,006,400 345,400 780,700
----------- ----------- ----------- ----------- ----------
Cash flows from investing
activities:
Capital expenditures.......... (769,300) (2,380,500) (646,800) (217,400) (777,300)
Proceeds from sale of property
and equipment............... 17,000 69,400 -- -- --
Intangible assets............. (987,900) -- (232,600) -- (232,600)
Other assets.................. (297,400) 149,800 (82,900) (108,000) 16,400
----------- ----------- ----------- ----------- ----------
Net cash used in
investing
activities........... (2,037,600) (2,161,300) (962,300) (325,400) (993,500)
----------- ----------- ----------- ----------- ----------
Cash flows from financing
activities:
Issuances of common stock..... 84,100 161,000 76,900 71,000 108,200
Bank borrowings (repayments),
net......................... 1,800,000 2,545,000 (645,000) (62,400) 209,000
Principal payments under long-
term debt and other
liabilities................. (2,457,800) (224,600) (93,000) (40,800) (52,000)
----------- ----------- ----------- ----------- ----------
Net cash provided by
(used in) financing
activities........... (573,700) 2,481,400 (661,100) (32,200) 265,200
----------- ----------- ----------- ----------- ----------
Net increase (decrease) in cash
and cash equivalents.......... 114,600 (265,100) 383,000 (12,200) 52,400
Cash and cash equivalents at
beginning of year............. 321,600 436,200 171,100 171,100 554,100
----------- ----------- ----------- ----------- ----------
Cash and cash equivalents at end
of year....................... $ 436,200 171,100 554,100 158,900 606,500
=========== =========== =========== =========== ==========
</TABLE>

See accompanying notes to consolidated financial statements.
F-6
<PAGE> 55

INVIVO CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) BUSINESS AND ACCOUNTING POLICIES

THE COMPANY

Invivo Corporation and subsidiaries (the Company) are engaged in the
design, manufacture, and marketing of sensor-based instruments for health,
safety, and industrial process control applications.

PRINCIPLES OF CONSOLIDATION

The accompanying consolidated financial statements include the accounts of
the Company and its subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation.

CASH EQUIVALENTS

The Company considers all highly liquid investments with original
maturities of three months or less to be cash equivalents. Cash equivalents are
comprised primarily of U.S. Treasury securities and money market funds.

INVENTORIES

Inventories are stated at the lower of cost or market on a first-in,
first-out basis.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost, net of accumulated depreciation
and amortization. Depreciation is calculated on the straight-line method over
the estimated useful lives of the related assets, generally three to seven
years. Leasehold improvements and assets under capital leases are amortized on
the straight-line method over the shorter of the lease term or the estimated
useful life of the related asset.

INCOME TAXES

The Company utilizes the asset and liability method of accounting for
income taxes. Deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. The measurement of deferred tax assets is reduced, if necessary, by a
valuation allowance for any tax benefits that are not expected to be realized.

INTANGIBLE ASSETS

Intangible assets include patents and the cost in excess of amounts
otherwise assigned to net assets of businesses acquired (goodwill). Patents are
amortized on a straight-line basis over their approximate useful lives, not to
exceed 17 years. Goodwill is amortized on a straight-line basis over 40 years.
The Company assesses the recoverability of goodwill by projecting results of
operations over the remaining useful lives of the businesses acquired.

F-7
<PAGE> 56
INVIVO CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Accumulated amortization as of June 30, 1997 and 1998 was approximately $708,400
and $867,500, respectively. Amortization expense was approximately $136,100,
$153,400 and $159,100 for 1996, 1997, and 1998, respectively.

BASIC AND DILUTED NET INCOME PER COMMON SHARE

The Financial Accounting Standards Board (FASB) Statement of Financial
Accounting Standards (SFAS) No. 128, Earnings Per Share, requires the
presentation of basic net income per share and diluted net income per share. The
Company adopted the provisions of SFAS No. 128 for the year ended June 30, 1998
and prior periods have been restated to conform to SFAS No. 128.

REVENUE RECOGNITION

The Company recognizes revenue and all related costs upon shipment of
products to its customers.

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
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

IMPAIRMENT OF LONG-LIVED ASSETS

Long-lived assets and certain identifiable intangibles held and used by the
Company are reviewed for impairment whenever events or changes indicate that the
carrying amount of an asset may not be recoverable. The Company has identified
no long-lived assets or identifiable intangibles which are considered impaired.

FAIR VALUE OF FINANCIAL INSTRUMENTS

Carrying amounts of certain of the Company's financial instruments
including cash and cash equivalents, accounts receivable, accounts payable and
accrued expenses approximate their fair values because of their short
maturities.

RESEARCH AND DEVELOPMENT COSTS

Research and development costs related to the design, development and
testing of new monitors, applications and technologies are charged to expense as
incurred.

ACCOUNTING FOR STOCK OPTIONS

Prior to June 30, 1996, the Company accounted for its stock option plan in
accordance with the provisions of Accounting Principles Board (APB) Opinion No.
25,

F-8
<PAGE> 57
INVIVO CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Accounting for Stock Issued to Employees, and related interpretations. As such,
compensation expense would be recorded on the date of grant only if the current
market price of the underlying stock exceeded the exercise price. On June 30,
1996, the Company adopted Statement of Financial Accounting Standards No. 123
(SFAS No. 123), Accounting for Stock-Based Compensation, which permits entities
to recognize as expense over the vesting period the fair value of all
stock-based awards on the date of grant. Alternatively SFAS No. 123 also allows
entities to continue to apply the provisions of APB Opinion No. 25 and provide
pro forma net income and pro forma earnings per share disclosures for employees
stock option grants made in 1996 and future years as if the fair-value-based
method defined in SFAS No. 123 had been applied. The Company has elected to
continue to apply the provisions of APB Opinion No. 25 and provide the pro forma
disclosure as required by SFAS No. 123.

NEW ACCOUNTING PRONOUNCEMENTS

SFAS No. 131, Disclosures About Segments of an Enterprise and Related
Information, is effective for years beginning after December 15, 1997. The
Company will adopt this standard for fiscal year 1999.

UNAUDITED INTERIM INFORMATION

The information presented as of December 31, 1998, and for the six-month
periods ended December 31, 1997 and 1998, has not been audited. In the opinion
of management, the unaudited interim financial statements include all
adjustments necessary to present fairly the Company's financial position as of
December 31, 1998, and the results of its operations and its cash flows for the
six months ended December 31, 1997 and 1998.

(2) ACQUISITION OF INVIVO RESEARCH INC.

On December 31, 1992, the Company acquired 80% of the outstanding common
stock of Invivo Research Inc., a company which designs, manufactures, and
markets sensor-based patient safety devices.

In fiscal 1994, the Company entered into an agreement to acquire the
remaining 20% of the Invivo Research Inc. shares. Under this agreement, the
purchase price for the remaining shares is to be paid in five installments. One
installment in the amount of $987,000 was paid during fiscal 1996. During fiscal
1998, the Company accrued for a second installment in the amount of $465,000, of
which $232,600 was paid as of June 30, 1998. The three remaining installments
will become payable on March 15, 1999 and will be based on calendar year 1998
results. The value of each installment will be determined based upon a formula
involving after-tax profits, subject to a minimum share price if certain
milestones are achieved. As of February 1999, the total remaining purchase price
is estimated to be approximately $2,900,000 (unaudited).

F-9
<PAGE> 58
INVIVO CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(3) INVENTORIES

A summary of inventories as of June 30 follows:

<TABLE>
<CAPTION>
1997 1998
---------- ---------
<S> <C> <C>
Raw materials.......................... $3,804,500 3,842,100
Work in process........................ 1,180,100 2,126,000
Finished goods......................... 2,116,300 1,314,300
---------- ---------
$7,100,900 7,282,400
========== =========
</TABLE>

(4) PROPERTY AND EQUIPMENT

A summary of property and equipment as of June 30 follows:

<TABLE>
<CAPTION>
1997 1998
----------- ----------
<S> <C> <C>
Land and building.................... $ 2,324,800 2,329,500
Equipment............................ 3,935,800 4,467,900
Furniture and fixtures............... 960,100 1,003,800
Vehicles............................. 147,000 148,500
----------- ----------
7,367,700 7,949,700
Less accumulated depreciation and
amortization....................... (2,907,600) (3,508,600)
----------- ----------
$ 4,460,100 4,441,100
=========== ==========
</TABLE>

F-10
<PAGE> 59
INVIVO CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(5) DEBT AND BANK BORROWINGS

A summary of debt and bank borrowings as of June 30 follows:

<TABLE>
<CAPTION>
1997 1998
----------- ----------
<S> <C> <C>
Installments payable on the purchase
of the remaining shares of Invivo
Research (note 2). Amount is
payable in monthly installments of
$38,778 through December 31,
1998............................... $ -- 232,600
Term loan payable in monthly
installments of approximately
$8,700, including interest at
8 1/2%; secured by land and
building........................... 1,677,300 1,584,400
Borrowings under the $5,000,000
revolving loan, which expires and
is payable on December 1, 1998;
collateralized by accounts
receivable and inventory and
equipment; interest payable monthly
at LIBOR plus 2.0% or the prime
rate............................... 3,395,000 2,750,000
----------- ----------
5,072,300 4,567,000
Less current portion................. (3,487,900) (3,087,200)
----------- ----------
$ 1,584,400 1,479,800
=========== ==========
</TABLE>

The aggregate maturities of long-term debt as of June 30, 1998 are as
follows:

<TABLE>
<S> <C>
Year ending June 30,
1999..................................... $3,087,200
2000..................................... 104,600
2001..................................... 104,600
2002..................................... 104,600
2003..................................... 104,600
Thereafter................................. 1,061,400
----------
$4,567,000
==========
</TABLE>

In December 1997, the Company and its bank lender agreed to renew the
revolving $5,000,000 loan to December 1, 1998. In the second quarter of fiscal
1999, the Company increased its bank line of credit to $7,500,000 from
$5,000,000, renewed the line of credit from December 1, 1998 to December 1,
1999, and added a $1,000,000 three-year term loan (unaudited). The revolving
loan requires the Company to maintain a minimum tangible net worth, a maximum
ratio of total liabilities to tangible net worth, a minimum working capital
balance, quarterly profitability, a minimum debt service ratio, and prohibits
the Company from paying dividends. As of June 30, 1998, $2,250,000 was available
under the line of credit.

F-11
<PAGE> 60
INVIVO CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(6) ACCRUED EXPENSES

A summary of accrued expenses as of June 30 follows:

<TABLE>
<CAPTION>
1997 1998
---------- ---------
<S> <C> <C>
Accrued compensation and benefits...... $1,245,400 2,062,500
Other.................................. 907,800 617,200
---------- ---------
$2,153,200 2,679,700
========== =========
</TABLE>

(7) LEASE COMMITMENTS

The Company leases certain facilities and equipment under operating leases.
The facilities' leases require the Company to pay certain executory costs such
as taxes, insurance, and maintenance. Rent expense related to operating leases
was approximately $416,900, $385,000 and $422,200 for the years ended June 30,
1996, 1997, and 1998, respectively.

A summary of future minimum lease payments required under noncancelable
operating leases with terms in excess of one year, net of sublease rental
income, as of June 30, 1998 follows:

<TABLE>
<S> <C>
Fiscal year ending
1999....................................... $411,500
2000....................................... 250,500
2001....................................... 156,300
2002....................................... 5,100
2003....................................... 1,900
--------
Future minimum lease payments.............. $825,300
========
</TABLE>

F-12
<PAGE> 61
INVIVO CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(8) INCOME TAXES

A summary of the components of income tax expense (benefit) for the years
ended June 30 are as follows:

<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
---------- -------- ---------
<S> <C> <C> <C>
1996:
Federal......................... $1,101,800 (56,400) 1,045,400
State........................... 243,900 (15,900) 228,000
---------- -------- ---------
$1,345,700 (72,300) 1,273,400
========== ======== =========
1997:
Federal......................... 206,000 (179,000) 27,000
State........................... 187,100 (51,600) 135,500
---------- -------- ---------
$ 393,100 (230,600) 162,500
========== ======== =========
1998:
Federal......................... 1,252,500 (284,000) 968,500
State........................... 237,000 (40,000) 197,000
---------- -------- ---------
$1,489,500 (324,000) 1,165,500
========== ======== =========
</TABLE>

Amounts are based upon estimates and assumptions as of the date of this
report and could vary significantly from amounts shown on the tax returns as
filed.

Deferred income taxes are attributable primarily to depreciation, accrued
expenses, and allowances.

The effects of temporary differences that give rise to significant portions
of the deferred tax assets and liabilities as of June 30 are as follows:

<TABLE>
<CAPTION>
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
Deferred tax assets:
Reserves and other accruals....... $ 587,000 800,600 1,138,000
Capital loss carryover............ 1,500 199,400 199,400
Accumulated depreciation.......... -- 1,700 --
--------- --------- ---------
Gross deferred tax
assets................. 588,500 1,001,700 1,337,400
Valuation allowance................. (1,500) (199,400) (199,400)
--------- --------- ---------
Total deferred tax assets,
less valuation
allowance.............. 587,000 802,300 1,138,000
--------- --------- ---------
Deferred tax liabilities:
Federal depreciation in excess
of books....................... (11,000) -- (15,000)
Acquired intangibles from
acquisitions................... (149,700) (145,400) (141,000)
--------- --------- ---------
Total deferred tax
liabilities............ (160,700) (145,400) (156,000)
--------- --------- ---------
Net deferred tax asset.............. $ 426,300 656,900 982,000
========= ========= =========
</TABLE>

F-13
<PAGE> 62
INVIVO CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

There was no net change in the valuation allowance for the year ended June
30, 1998.

Management believes that it is more likely than not that the results of
future operations will generate sufficient taxable income to realize the net
deferred tax asset or that the amounts will be recovered from previously paid
taxes.

The following summarizes the differences between the income tax expense and
the amount computed by applying the 34% federal statutory corporate rate to
income before income taxes as follows:

<TABLE>
<CAPTION>
1996 1997 1998
---------- -------- ---------
<S> <C> <C> <C>
Federal income tax at statutory
rate.............................. $1,273,400 162,500 1,165,500
State income taxes.................. 150,500 103,000 156,000
Utilization of research,
experimental, and other credits... -- (50,000) (57,000)
Benefit of foreign sales
corporation....................... (111,500) (135,500) (204,000)
Permanent differences............... 21,000 44,000 54,000
Other............................... (60,000) 38,500 51,000
---------- -------- ---------
$1,273,400 162,500 1,165,500
========== ======== =========
</TABLE>

(9) STOCK OPTION PLAN

The Company has established stock option plans to provide for the granting
of stock options to employees (including officers and directors) at prices not
less than the fair market value of the Company's common stock at the date of
grant. Options vest ratably over 4 years and expire in 10 years. The Company has
reserved 314,400 and 600,000 shares of its common stock for issuance under the
1986 and 1994 Plans, respectively. During 1998, the Company granted 123,500
shares of common stock.

The fair value of each option was estimated on the date of grant using the
Black-Scholes option-pricing model in accordance with SFAS No. 123 with the
following assumptions for 1996, 1997 and 1998, respectively: risk free interest
rates of 5.96%, 6.39% and 5.76%, dividend yield of 0% for all years, average
expected lives of five years for all years and volatility of 55%, 55% and 58%.

Had the Company determined compensation costs related to its stock option
plans pursuant to SFAS No. 123, the Company's net income and net income per
share would have been reduced to the pro forma amounts indicated below for the
years noted:

<TABLE>
<CAPTION>
1996 1997 1998
---------- ------- ---------
<S> <C> <C> <C> <C>
Net income................... As reported $2,472,000 315,500 2,262,500
Pro forma 2,456,800 70,800 2,151,899
Basic net income per share... As reported .77 .10 .69
Pro forma .75 .02 .66
Diluted net income per
share...................... As reported .72 .09 .66
Pro forma .71 .02 .63
</TABLE>

F-14
<PAGE> 63
INVIVO CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Pro forma net income reflects only options granted in 1996, 1997 and 1998.
Therefore, the full impact of calculating compensation cost for the Company's
Plan under SFAS No. 123 is not reflected in the option's vesting period and
compensation costs for options granted prior to July 1, 1995 are not considered.

A summary of stock option activity for the years ended June 30, 1997 and
1998 follows:

<TABLE>
<CAPTION>
WEIGHTED-
AVERAGE
WEIGHTED- EXERCISE
AVERAGE PRICE
WEIGHTED- GRANT OPTIONS BY OPTIONS
AVERAGE DATE EXERCISABLE EXERCISABLE
EXERCISE FAIR AT AT
OPTIONS PRICE VALUE YEAR END YEAR END
------- --------- ---------- ----------- --------------
<S> <C> <C> <C> <C> <C>
June 30, 1996................... 364,400 234,675 $3.59
Granted....................... 197,000 11.47 5.39
Exercised..................... (29,675) 5.54
Canceled...................... (15,625) 8.74
-------
June 30, 1997................... 516,100 7.36 267,638 4.19
Granted....................... 123,500 10.00 5.41
Exercised..................... (13,750) 5.60
Canceled...................... (9,875) 7.29
-------
June 30, 1998................... 615,975 7.77 328,401 5.51
=======
</TABLE>

<TABLE>
<CAPTION>
NUMBER WEIGHTED- NUMBER
OUTSTANDING AVERAGE WEIGHTED EXERCISABLE WEIGHTED-
RANGE OF AT REMAINING AVERAGE AT AVERAGE
EXERCISE JUNE 30, CONTRACTUAL EXERCISE JUNE 30, EXERCISE
PRICES 1998 LIFE PRICE 1998 PRICE
-------- ----------- ----------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C>
$ 2.00- 5.13..................... 188,050 2.54 $2.80 188,050 $2.80
7.00- 8.75..................... 128,175 6.86 7.35 82,225 4.53
10.00-16.13..................... 299,750 8.74 11.07 58,126 12.15
------- ---- ----- ------- -----
615,975 6.46 7.77 328,401 4.89
======= =======
</TABLE>

(10) SALARY DEFERRAL PLAN

The Company's executive officers, together with all other eligible
employees, may participate in the Company's 401(k) Salary Deferral Plan (the
Plan). Employees become eligible upon completion of one year of service. Each
eligible employee receives a retirement benefit based upon accumulated
contributions to the Plan by the employee and the Company plus any earnings on
such contributions. The Company contributes an amount equal to 25% of the first
4% of compensation that the employee contributes. The Plan currently provides
that participants vest 25% each year over a four year period in the

F-15
<PAGE> 64
INVIVO CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Company's contributions. Company contributions to the Plan for the years ended
June 30, 1996, 1997, and 1998 were $43,200, $56,700 and $70,600, respectively.

(11) LEGAL PROCEEDINGS

The Company is involved in litigation arising in the ordinary course of its
business. While the ultimate results of such proceedings cannot be predicted
with certainty, management expects that these matters will not have a material
adverse effect on the Company's financial position or results of operations.

(12) MAJOR CUSTOMERS AND CREDIT RISK

In fiscal 1996, 1997, and 1998 no individual customer accounted for greater
than 10% of the Company's revenues or trade accounts receivable.

The Company has a customer base that is diverse geographically and by
industry. Customer credit evaluations are performed on an ongoing basis, and
collateral is generally not required for trade accounts receivable. Management
does not believe the Company has any significant concentration of credit risk as
of June 30, 1998.

(13) INDUSTRY AND GEOGRAPHIC INFORMATION

The Company operates in multiple industry segments and it markets its
products in the United States and in foreign countries through its sales
personnel and distributors. Export sales account for a portion of the Company's
net revenue and are approximately summarized by geographic area as follows (in
thousands):

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
---------------------------
1996 1997 1998
------- ------ ------
<S> <C> <C> <C>
United States.............................. $25,000 27,900 31,300
Export:
Europe................................... 1,400 2,200 2,400
Pacific Rim.............................. 2,300 2,600 2,000
Other international...................... 2,700 3,200 5,000
------- ------ ------
Total net sales.................. $31,400 35,900 40,700
======= ====== ======
</TABLE>

F-16
<PAGE> 65
INVIVO CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(14) SUPPLEMENTAL CASH FLOWS INFORMATION

Noncash investing and financing activities and supplemental cash flow
information are summarized as follows:

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JUNE 30, DECEMBER 31,
------------------------------ -------------------------
1996 1997 1998 1997 1998
---------- ------- ------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Tax benefit associated with
exercise of stock
options................... $ 103,400 62,400 14,300 11,300 51,700
Cash paid:
Income taxes.............. 1,076,700 234,800 875,158 211,000 1,033,300
Interest.................. 175,300 293,100 389,274 195,200 157,000
</TABLE>

F-17
<PAGE> 66

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

, 1999

LOGO

1,050,000 SHARES OF COMMON STOCK

-----------------
PROSPECTUS
-----------------

CRUTTENDEN ROTH
INCORPORATED

GERARD KLAUER MATTISON & CO., INC.

- --------------------------------------------------------------------------------

YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO
WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. THIS DOCUMENT MAY ONLY BE USED WHERE IT IS LEGAL
TO SELL THESE SECURITIES. THE INFORMATION IN THIS DOCUMENT MAY ONLY BE ACCURATE
ON THE DATE OF THIS DOCUMENT.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 67

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth the costs and expenses payable by the
Registrant in connection with the sale of the Common Stock being registered
hereby, other than underwriting commissions and discounts. All amounts are
estimates, other than the SEC registration fee, the NASD filing fee and the
Nasdaq National Market listing fee.

<TABLE>
<CAPTION>
ITEM AMOUNT
---- --------
<S> <C>
SEC registration fee........................................ $ 5,665
NASD filing fee............................................. 2,538
Nasdaq National Market listing fee.......................... 17,500
Blue Sky fees and expenses.................................. 10,000
Printing and engraving expenses............................. 60,000
Legal fees and expenses..................................... 75,000
Accounting fees and expenses................................ 100,000
Transfer Agent and Registrar fees........................... 5,000
Miscellaneous expenses...................................... 11,297
--------
Total............................................. $287,000
========
</TABLE>

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Invivo has included in its Certificate of Incorporation, as amended, and
its Bylaws provisions to eliminate the personal liability of its directors for
monetary damages resulting from breaches of their fiduciary duty to the extent
permitted by the General Corporation Law of the State of Delaware (the "DGCL").

Section 145 of the DGCL permits a corporation, under specified
circumstances, to indemnify its directors, officers, employees or agents against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlements actually and reasonably incurred by each in connection with any
action, suit or proceeding brought by third parties by reason of the fact that
they were or are directors, officers, employees or agents of the corporation, if
such directors, officers, employees or agents acted in good faith and in a
manner they reasonably believed to be in, or not opposed to, the best interests
of the corporation and, with respect to any criminal action or proceeding, had
no reason to believe their conduct was unlawful. In a derivative action, i.e.,
one by or in the right of the corporation, indemnification may be made only for
expenses (including attorneys' fees) actually and reasonably incurred by
directors, officers, employees or agents in connection with the defense or
settlement of an action or suit, and only with respect to a matter as to which
they shall have acted in good faith and in a manner they reasonably believed to
be in, or not opposed to, the best interests of the corporation, except that no
indemnification shall be made if such person shall have been adjudged liable to
the corporation, unless and only to the extent that the court in which the
action or suit was brought shall determine upon application that the defendant
director, officer, employee or agent is fairly and reasonably entitled to
indemnity for such expenses despite such adjudication of liability. Invivo has
entered into Indemnification Agreements with its directors and certain key
officers pursuant to which Invivo is generally obligated to indemnify its
directors and such officers to the full extent permitted by the DGCL as
described above.

II-1
<PAGE> 68

Invivo maintains insurance for its directors and officers indemnifying them
against certain civil liabilities, including liabilities under the federal
securities laws, which might be incurred by them in such capacity.

The Underwriting Agreement (Exhibit 1.01) provides for indemnification by
the Underwriters of Invivo, its directors and officers, and by Invivo of the
Underwriters, for certain liabilities, including liabilities arising under the
Securities Act of 1933, as amended (the "Securities Act"), and affords certain
rights of contribution with respect thereto.

ITEM 16. EXHIBITS.

<TABLE>
<CAPTION>
NUMBER DESCRIPTION OF DOCUMENT
------ -----------------------
<C> <S>
1.01 Form of Underwriting Agreement*
3.01 Restated Certificate of Incorporation of the Registrant*
3.02 Restated By-Laws of the Registrant(1)
4.01 Form of Common Stock Certificate(1)
5.01 Opinion of Howard, Rice, Nemerovski, Canady, Falk & Rabkin,
A Professional Corporation, as to the validity of the issues
of the shares registered hereby*
10.01 Sensor Control Corporation 1986 Incentive Stock Option Plan
and 1986 Non-statutory Stock Option Plan, as amended(2)
10.02 Indemnity Agreement(1)
10.03 SafetyTek 1994 Stock Option Plan(3)
10.04 Share purchase agreement dated as of January 5, 1990 by and
between Data-Design Laboratories and Sensor Control
Corporation(4)
10.05 Stock purchase agreement dated January 14, 1991 between G.C.
Industries Inc. and Sensor Control Corporation(5)
10.06 Asset purchase agreement dated June 21, 1991 by and between
Electronic Safety Products Inc. and Sensor Control
Corporation(6)
10.07 Stock purchase agreement dated December 31, 1992 by and
between Invivo Research Inc. and SafetyTek Corporation(7)
10.08 Real Estate Unconditional Guaranty dated January 21, 1993 by
and between First Union National Bank of Florida and
SafetyTek Corporation(8)
10.09 First Amendment to Stock Purchase Agreement dated July 1,
1993 and related Stock Pledge Agreement dated July 1, 1993
by and between Invivo Research Inc. and SafetyTek
Corporation(9)
10.10 Lease between Lincoln-Whitehall Realty LLC and SafetyTek
Corporation for the 5696 Stewart Ave. Fremont, CA
facility(10)
10.11 Construction Loan Agreement between Invivo Research and
First Union Bank dated July 31, 1996(11)
10.12 Credit Agreement between Wells Fargo Bank and Invivo Corp.
dated October 6, 1998(12)
10.13 First Amendment to Credit Agreement between Invivo Corp. and
Wells Fargo Bank dated November 1, 1998(12)
10.14 Stock Option Agreement with Walden Management Corporation
Pension Fund for the Benefit of George S. Sarlo***/****
11.01 Statement regarding computation of per share earnings****
</TABLE>

II-2
<PAGE> 69

<TABLE>
<CAPTION>
NUMBER DESCRIPTION OF DOCUMENT
------ -----------------------
<C> <S>
23.01 Consent of Howard, Rice, Nemerovski, Canady, Falk & Rabkin,
A Professional Corporation (included in Exhibit 5.1)*
23.02 Consent of KPMG LLP**
24.01 Powers of Attorney (included on signature page)****
</TABLE>

- ---------------

* To be filed by amendment.

** Filed herewith.

*** Compensatory plan or management contract.

**** Previously filed.

(1) Incorporated by reference to corresponding Exhibit included with
Registrant's Form 10-K filed September 28, 1990. (File No. 0-15963)

(2) Incorporated by reference to corresponding Exhibit included with
Registrant's Form 8-K filed January 28, 1991. (File No. 0-15963)

(3) Incorporated by reference to corresponding Exhibit included with
Registrant's Form S-8 filed January 27, 1995. (File No. 33-88798)

(4) Incorporated by reference to corresponding Exhibit included with
Registrant's Registration Statement on Form S-1 filed on December 23, 1991.
(File No. 33-44623)

(5) Incorporated by reference to corresponding Exhibit included with
Registrant's Amended Registration Statement on Form S-1 filed on February
5, 1992. (File No. 33-44623)

(6) Incorporated by reference to corresponding Exhibit included with
Registrant's Form 10-Q filed March 13, 1992. (File No. 0-15963)

(7) Incorporated by reference to corresponding Exhibit included with
Registrant's Form 8-K filed January 14, 1993. (File No. 0-15963)

(8) Incorporated by reference to corresponding Exhibit included with
Registrant's Form 10-K filed September 24, 1993. (File No. 0-15963)

(9) Incorporated by reference to corresponding Exhibit included with
Registrant's Form 10-Q filed November 1, 1993. (File No. 0-15963)

(10) Incorporated by reference to corresponding Exhibit included with
Registrant's Form 10-Q filed May 15, 1996. (File No. 0-15963)

(11) Incorporated by reference to corresponding Exhibit included with
Registrant's Form 10-K filed September 27, 1996. (File No. 0-15963)

(12) Incorporated by reference to corresponding Exhibit included with
Registrant's Form 10-Q filed November 12, 1998. (File No. 0-15963)

II-3
<PAGE> 70

ITEM 17. UNDERTAKINGS.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described in Item 14, or otherwise, the
registrant has been advised that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.

The undersigned registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.

II-4
<PAGE> 71

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 1 to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of San Francisco, State of
California, on the 17th day of February, 1999.

INVIVO CORPORATION

By: /s/ JAMES B. HAWKINS
-----------------------------------
James B. Hawkins
President and Chief Executive
Officer

Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 has been signed by the following persons in the capacities and on the
dates indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* Chairman of the Board February 17, 1999
- ------------------------------------------
Ernest C. Goggio

/s/ JAMES B. HAWKINS President, Chief Executive February 17, 1999
- ------------------------------------------ Officer and Director
James B. Hawkins (Principal Executive
Officer)

* Chief Financial Officer February 17, 1999
- ------------------------------------------ (Principal Financial and
John F. Glenn Accounting Officer)

* Director February 17, 1999
- ------------------------------------------
George S. Sarlo

* Director February 17, 1999
- ------------------------------------------
Laureen DeBuono

* Director February 17, 1999
- ------------------------------------------
Roger Susi
</TABLE>

*By: /s/ JAMES B. HAWKINS

------------------------------

James B. Hawkins,

Attorney-in-Fact

II-5
<PAGE> 72

EXHIBIT INDEX

<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
NUMBER DESCRIPTION OF DOCUMENT PAGE
------ ----------------------- ------------
<C> <S> <C>
1.01 Form of Underwriting Agreement*.....................
3.01 Restated Certificate of Incorporation of the
Registrant*.........................................
3.02 Restated By-Laws of the Registrant(1)...............
4.01 Form of Common Stock Certificate(1).................
5.01 Opinion of Howard, Rice, Nemerovski, Canady, Falk &
Rabkin, A Professional Corporation, as to the
validity of the issues of the shares registered
hereby*.............................................
10.01 Sensor Control Corporation 1986 Incentive Stock
Option Plan and 1986 Non-statutory Stock Option
Plan, as amended(2).................................
10.02 Indemnity Agreement(1)..............................
10.03 SafetyTek 1994 Stock Option Plan(3).................
10.04 Share purchase agreement dated as of January 5, 1990
by and between Data-Design Laboratories and Sensor
Control Corporation(4)..............................
10.05 Stock purchase agreement dated January 14, 1991
between G.C. Industries Inc. and Sensor Control
Corporation(5)......................................
10.06 Asset purchase agreement dated June 21, 1991 by and
between Electronic Safety Products Inc. and Sensor
Control Corporation(6)..............................
10.07 Stock purchase agreement dated December 31, 1992 by
and between Invivo Research Inc. and SafetyTek
Corporation(7)......................................
10.08 Real Estate Unconditional Guaranty dated January 21,
1993 by and between First Union National Bank of
Florida and SafetyTek Corporation(8)................
10.09 First Amendment to Stock Purchase Agreement dated
July 1, 1993 and related Stock Pledge Agreement
dated July 1, 1993 by and between Invivo Research
Inc. and SafetyTek Corporation(9)...................
10.10 Lease between Lincoln-Whitehall Realty LLC and
SafetyTek Corporation for the 5696 Stewart Ave.
Fremont, CA facility(10)............................
10.11 Construction Loan Agreement between Invivo Research
and First Union Bank dated July 31, 1996(11)........
10.12 Credit Agreement between Wells Fargo Bank and Invivo
Corp. dated October 6, 1998(12).....................
10.13 First Amendment to Credit Agreement between Invivo
Corp. and Wells Fargo Bank dated November 1,
1998(12)............................................
10.14 Stock Option Agreement with Walden Management
Corporation Pension Fund for the Benefit of George
S. Sarlo***/****....................................
11.01 Statement regarding computation of per share
earnings****........................................
</TABLE>

<PAGE> 73

<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
NUMBER DESCRIPTION OF DOCUMENT PAGE
------ ----------------------- ------------
<C> <S> <C>
23.01 Consent of Howard, Rice, Nemerovski, Canady, Falk &
Rabkin, A Professional Corporation (included in
Exhibit 5.1)*.......................................
23.02 Consent of KPMG LLP**...............................
24.01 Powers of Attorney (included on signature
page)****...........................................
</TABLE>