UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-QSB
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number: 333-3098
n-Vision, Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or 54-1741313
organization) (IRS Employer Identification No.)
7680 Old Springhouse Road
Madison Building, First Floor
McLean, Virginia 22102
(Address of principal executive offices)
Registrant's telephone number, including area code: (703) 506-8808
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or Section 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes (X) No ( )
The number of outstanding shares of the registrant's Common Stock, par
value $.01 per share, was 5,362,625 on March 31, 1997.
1
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FORM 10-QSB
INDEX
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PAGE
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PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Report of Independent Accountants ......................... 3
Balance Sheets as of March 31, 1997
and December 31, 1996 ......................... 4
Statements of Operations For the
three months ended March 31, 1997
and March 31, 1996 ......................... 5
Statements of Cash Flows For the
three months ended March 31, 1997 and
March 31, 1996. ......................... 6
Notes to Financial Statements ......................... 7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations . ......................... 8
PART II OTHER INFORMATION
Item 6 Reports and Exhibits on Form 8-K. ......................... 11
SIGNATURES ......................... 12
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PART I FINANCIAL INFORMATION
Item 1 Financial Statements
ACCOUNTANT'S REVIEW REPORT
Board of Directors
n-Vision, Inc.
We have reviewed the accompanying balance sheet of n-Vision, Inc. as of March
31, 1997, and the related statements of operations and cash flows for the
three-month periods ended March 31, 1997 and 1996. These financial statements
are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquires of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements for them to be in conformity
with generally accepted accounting principals.
We have previously audited, in accordance with generally accepted auditing
standards, the balance sheet of n-Vision, Inc. as of December 31, 1996, and the
related consolidated statements of operations, stockholder's equity, and cash
flows for the year then ended (not presented herein), and in our report dated
February 18, 1997 we expressed an unqualified opinion on those consolidated
financial statements. In our opinion, the information set for the in the
accompanying condensed consolidated balance sheet as of December 31, 1996 is
fairly stated, in all material respects, in relation to the consolidated balance
sheet form which it has been derived.
/s/ Grant Thornton LLP
________________________
GRANT THORNTON LLP
Vienna, Virginia
May 3, 1997
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n-VISION, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
March 31 December 31
1997 1996
---------------- ---------------
(Unaudited) (Audited)
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ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 2,060,258 $ 2,422,839
Investments 1,234,375 1,250,000
Accounts Receivable - -
Trade 308,816 194,910
Officer & Employee Travel Advances 3,673 1,943
Interest Receivable 26,953 -
Inventories 718,421 716,590
Prepaid Expenses 37,605 48,731
Income Tax Refund Receivable 17,389 17,389
-------------- ----------------
Total Current Assets 4,407,490 4,652,402
PROPERTY AND EQUIPMENT
(Net of Accumulated Depreciation) 351,178 302,745
OTHER ASSETS
Organization Costs (Net of Accumulated Amortization) 37,237 40,845
-------------- ----------------
$ 4,795,905 $ 4,995,732
============== ================
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Current Maturities --Note To ATS & Accrued Interest $ 132,000 $ 120,000
Current Portion, Capital Lease Obligations 22,278 21,554
Accounts Payable 139,346 52,131
Accrued Salaries and Benefits 86,979 81,950
Accrued Warranty Liability and Deferred Revenue 53,281 144,114
-------------- ----------------
Total Current Liabilities 433,884 419,749
NON-CURRENT LIABILITIES
Note Payable-ATS 480,000 480,000
Capital Lease Obligations 21,429 27,334
-------------- ----------------
501,429 507,334
STOCKHOLDER'S EQUITY
Common Stock 53,126 53,126
Common Stock Subscriptions and Notes Receivable (91,722) (91,722)
Securities revaluation (15,625) -
Paid in Capital 10,529,492 10,529,492
Accumulated Deficit (6,614,678) (6,422,247)
-------------- ----------------
Total Stockholder's Equity 3,860,593 4,068,649
-------------- ----------------
$ 4,795,906 $ 4,995,732
============== ================
</TABLE>
The accompanying notes are an integral part of these statements.
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n-VISION, INC.
STATEMENTS OF OPERATIONS
Three Months ended
March 31
------------------------------
1997 1996
-------------- ------------
(unaudited)
Sales $ 628,871 $ 256,753
Cost of Sales 334,386 98,298
------------- ---------------
Gross Margin 294,485 158,455
Operating Expenses
General and Administrative 315,591 168,016
Product Development 94,018 141,586
Marketing and Sales 119,855 25,646
------------- ---------------
Loss from operations (234,979) (176,793)
Interest Income 56,114 -
Interest Expense (13,566) (44,032)
------------- ---------------
Loss before income taxes (192,431) (220,825)
Income Tax Benefit 0 0
------------- ---------------
NET LOSS $ (192,431) $ (220,825)
============= ===============
Weighted average shares
outstanding 5,362,625 3,750,000
============= ===============
Loss per Share $ (.04) $ (.06)
============= ===============
The accompanying notes are an integral part of these statements.
5
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n-VISION, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three months ended
-----------------------------------
Mar 31 1997 Mar 31 1996
--------------- ---------------
(Unaudited) (Unaudited)
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Cash Flows from operating activities
Net Income (Loss) (192,431) (220,825)
Provision for contributed services - 78,125
Depreciation and amortization 45,076 6,697
Accrued interest on stockholder's notes - (11,146)
Loss on Disposal of Fixed Assets 5,816 -
Changes in assets and liabilities - -
(Increase) decrease in accounts receivable (113,906) (47,316)
(Increase) Decrease in inventories (1,832) (32,015)
(Increase) increase in prepaid expenses 11,126 (22)
(Decrease) Increase in accrued interest (26,953) (226,115)
(Decrease) Increase in accounts payable 87,215 (76,590)
(Decrease) Increase in accrued salaries and benefits 5,029 (1,844)
(Decrease) Increase in other accrued liabilities (1,730) 52,621
(Increase) Decrease in Deferred Revenue & Warranty Res. (90,833) 47,274
(Decrease) Increase in net cash used in investing
activities 12,000 -
--------------- ----------------
Total Adjustments (68,992) (33,448)
--------------- ----------------
Net cash used in operating activities (261,423) (254,313)
Cash flows form investing activities
Purchase of property and equipment (95,977) (3,780)
Capital Lease (5,181) -
--------------- ----------------
Net cash used in investing activities (101,158) (3,780)
Cash flows from financing activities
(Decrease) Increase in ATS line of credit - 107,731
(Decrease) Increase in Bank Line of Credit - 48,397
Proceeds From Convertible Notes Payable - 250,000
--------------- ----------------
Net Cash provided by financing activities - 406,128
--------------- ----------------
Net Increase (Decrease) in Cash and Cash Equivalents $ (362,581) $ 148,035
=============== ================
Beginning Cash Balance 2,422,839 6,088
--------------- ----------------
Ending Cash Balance $ 2,060,258 $ 154,123
=============== ================
</TABLE>
The accompanying notes are an integral part of these statements.
6
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n-VISION, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note A Interim Financial Statements
The condensed financial statements for the three month period ended
March 31, 1997 and March 31, 1996 are unaudited and reflect all adjustments
(consisting only of normal recurring adjustments) which are, in the opinion of
management, necessary for a fair presentation of the financial position and
operating results for the interim period. The condensed financial statements
should be read in conjunction with the audited financial statements and notes
thereto, together with management's discussion and analysis of financial
condition and results of operations, contained in the Company's Annual Report to
Shareholders, for the period ending December 31, 1996. The results of operations
for the three months ended March 31, 1997 are not necessarily indicative of the
results for the entire fiscal year ending December 31, 1997.
7
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Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Some statements in this Management's Discussion and Analysis contain forward
looking information that involve a number of risks and uncertainties, the
possible realization of which could have material adverse effects on the
Company's operating results. Factors that may cause actual results to differ
materially include: development of new products and rapid change in technology
that may displace a product sold by the Company; the highly competitive market,
the Company's dependence upon a limited number of suppliers for product
components, fluctuation in the Company's quarterly results of operations due to
the timing of orders from customers; and other risk factors listed in the
company's SEC filings including, but not limited to, the SB-2 Registration
Statement dated May 28, 1996, The 10-KSB for the year ended December 31, 1996,
and the Annual Report to Shareholders for December 31, 1996.
General
n-Vision, Inc. ("Company"), a Delaware Corporation, designs, develops,
manufactures, and markets state-of-the-art, proprietary 3D immersive displays
for use in advanced visualization applications, products, and systems for a
variety of commercial, industrial, and military applications. The Company's
products and systems are marketed worldwide, but principally to customers in
North America, Europe, and the Pacific Rim, e.g., U.S. Air Force, U.S. Navy,
NASA Langley Research Center, University of Illinois, Iowa State University,
Lockheed Martin, Inc., Silicon Graphics, Inc., UK Defense Research Establishment
(Farnborough), Volvo, Volkswagen, Daimler-Benz, BMW, Thomson CSF, KPMG Peat
Marwick, and Raytheon among others.
Results of Operations
Quarter Ended March 31, 1997 Compared to Quarter Ended March 31, 1996.
For the Quarter ended March 31, 1997, the Company reported revenue of
$628,871 from the sale of 11 units of its VR products and systems, a 145%
increase compared to the same period ended March 31, 1996 where the Company
reported revenue of $256,753 from the sale of 4 units. The increase was
primarily attributable to the delivery of the second order for two production
units of the Datavisor 80 and four units of the Datavisor HiRes. In addition,
the Company delivered its first DV-4 unit which was a result of the December
1996 marketing agreement with Virtuality Ltd. of England. As of May 1, 1997, the
Company had a backlog of delivered and undelivered orders and services of
approximately $340,000.
The Company's gross margin on sales decreased to 47% in the first
quarter 1997 from 62% in the first quarter 1996. The first quarter 1997 margin
is not fully comparable to the first quarter 1966 margin but is more comparable
to the full 1996 year margins which were 43%. The Company believes that the
introduction of the Datavisor-80, a high margin product will tend to stabilize
margins. This however may be tempered to the extent that the product mix
contains a higher or lesser volume of high margin products versus low margin
products and whether or not the products are sold directly to end users or sold
and discounted through the Company's increasing number of distributors. The
Company can make no determination at present as to the composition of the
product mix in the future. For a detailed discussion of volatility see the
Annual Report to Shareholders for 1996.
Operating Expenses increased to $529,464 in the first quarter of 1997
from $335,248 in the first quarter of 1996, or 58%. General and Administrative
expenses increased from $168,018 in the first quarter of 1996 to $315,951, or
88% in the first quarter of 1997 with increases in audit, insurance, and
executive costs. These costs are base infrastructure costs of being a public
company. The Company believes these costs will grow far slower than other costs
as revenue rises. Marketing and Sales costs rose from $25,646 in the first
quarter 1996 to $119,855 in the first quarter 1997 as the Company promoted four
new products
8
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and is seeking to strategically position its products as the immersive display
market develops. Additional marketing costs are expected as the Company
continues sales development efforts. Research and Development costs declined
in the first quarter of 1997 to $94,018 from $141,586 in the first quarter
of 1996. This occurred due to the increased funding by customers for custom
applications of the Company's technology and products. Management expects R&D
to stabilize as the Company seeks development support directly from customers
for R&D.
Net interest earned increased to $42,548 in the first quarter of 1997
when compared to an expense of $44,032 in the first quarter of 1996. This is
attributable to significant funds remaining from the public offering being held
for development and acquisitions. The Company expects net interest to remain
positive for the next year.
The Company's operating results could be affected by a number of
factors. They include the availability and cost of components, an unexpected
inability to manage expenses relative to revenue growth, and an inability to
anticipate downward price pressures. Also, there is the potential problem of
competing with companies having significantly greater financial, technical, and
market resources than the Company.
A significant percentage of the Company's sales historically has
occurred in the last month of a quarter. The ability of the Company to
anticipate in advance the mix of customer orders and its ability to ship the
necessary quantities of product near the end of a fiscal quarter could result in
material fluctuations in quarterly operating results.
Finally, any shortfall in revenue or earnings from the level expected
by securities analysts could have an immediate and significant effect on the
trading price of the Company's common stock in any given period, especially with
the demise of Stratton Oakmont, Inc. the Company investment banker for the IPO.
Moreover, it is possible the Company may not learn of such shortfalls until late
in the fiscal quarter, which could result in an even more immediate and adverse
effect on the trading price of the Company's stock. Finally, the Company
participates in a competitive industry marked by changing technology, which
could result in volatility of the Company's common stock price.
Liquidity and Capital Resources
Working capital, which consists primarily of cash and cash equivalents,
trade receivables, and inventories, totaled $4,321,871 as of March 31, 1997
compared to a working capital deficiency of $1,045,300 at March 31, 1996. The
increase in working capital was due to an initial public offering of the
Company's common stock in May of 1996 from which the Company retired $825,461 in
short term debt and accrued interest due to Advanced Technology Systems(ATS).
Cash and cash equivalents totaling $3,293,399 consists primarily of over-night
repurchase agreements and investment grade instruments. The Company believes the
current level of cash should provide sufficient liquidity and working capital to
fund its operations through the current year.
Longer term cash requirements, other than normal operating expenses are
anticipated for the development of new products, enhancements of existing
products, financing anticipated growth, and the possible acquisitions of related
businesses and technologies. The Company believes that existing cash will be
sufficient to satisfy the anticipated cash requirements through the end of 1997.
In the event that the Company has insufficient cash flow to meet its needs, the
Company believes that proceeds from the exercise of 1,380,000 Class A warrants
for $5.50 per share should more than make up the short fall. The warrants may be
exercised during a four year period commencing May 29, 1997 unless redeemed by
the Company. The Company, however, can make no assurances that investors would
elect to exercise the warrants.
Income Taxes
The Company is organized as a C Corporation and pays income taxes based
upon accrual based taxable income adjusted for differences in the timing of
reporting certain expenses for tax and financial
9
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statement purposes. The Company's income taxes payable, if any, that may arise
in the future may be offset by credits available for certain research and
development expenditures incurred.
As of December 31, 1996, the Company had a net operating loss carry
forward available to offset future taxable income of approximately $1,450,000
available to offset future taxable income generated through 2010. In the event
of a change in control of the Company, use of such carry forwards could be
reduced.
Seasonality
Based on experience to date, the Company believes that its future
operating results will not be subject to seasonal changes. Such effects, should
they occur, may be apparent in the Company's operating results during a period
of expansion. However, the Company can make no assurances that its business can
continue to be significantly expanded.
10
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PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
No reports on From 8-K were filed during the quarter ended March 31, 1997.
11
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Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed by the undersigned thereunto
duly authorized.
Dated: May 9, 1997
n-VISION, INC.
(Registrant)
/s/ Robert B. Hamilton
_________________________________________________
Robert B. Hamilton
Executive Vice President, Chief Financial Officer
(Principal Financial and Accounting Officer)
12
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<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the form
10-QSB for the period ended March 31, 1997 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> US$
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<CASH> 2,060,258
<SECURITIES> 1,234,375
<RECEIVABLES> 394,436
<ALLOWANCES> 0
<INVENTORY> 718,421
<CURRENT-ASSETS> 4,795,905
<PP&E> 528,731
<DEPRECIATION> (177,553)
<TOTAL-ASSETS> 4,795,905
<CURRENT-LIABILITIES> 433,884
<BONDS> 0
0
0
<COMMON> 53,126
<OTHER-SE> 3,860,593
<TOTAL-LIABILITY-AND-EQUITY> 4,795,906
<SALES> 628,871
<TOTAL-REVENUES> 628,871
<CGS> 334,386
<TOTAL-COSTS> 334,386
<OTHER-EXPENSES> 529,464
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (13,566)
<INCOME-PRETAX> (192,431)
<INCOME-TAX> 0
<INCOME-CONTINUING> (192,431)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (192,431)
<EPS-PRIMARY> (.04)
<EPS-DILUTED> (.04)
</TABLE>
