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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarterly Period Ended December 31, 2003 Commission File Number 0-8623
ROBOTIC VISION SYSTEMS, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 11-2400145
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
486 AMHERST STREET, NASHUA, NH 03063
(Address of principal executive offices)
Registrant's telephone number, including area code (603) 598-8400
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding twelve 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 [ ]
Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes [ ] No [X]
Number of shares of common stock outstanding as of February 9, 2004: 17,326,751
Unless otherwise indicated, the information contained in this quarterly report
gives effect to a one-for-five reverse split of our common stock effected on
November 26, 2003.
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE)
(UNAUDITED)
DECEMBER 31, SEPTEMBER 30,
2003 2003
------------ -------------
ASSETS
Current Assets:
Cash and cash equivalents $ 53 $ 367
Accounts receivable, net 10,667 9,501
Inventories 9,326 10,995
Prepaid expenses and other current assets 2,204 1,561
--------- ---------
Total current assets 22,250 22,424
Plant and equipment, net 2,331 2,218
Goodwill 1,333 1,333
Software development costs, net 4,889 5,227
Other assets 2,622 2,791
Note receivable 2,265 --
Deferred financing costs 8,107 --
--------- ---------
$ 43,797 $ 33,993
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Revolving credit facility $ 10,571 $ 4,635
Notes payable and current portion of long-term debt 9,492 8,835
Accounts payable current 1,941 3,019
Accounts payable past-due 6,278 6,546
Accrued expenses and other current liabilities 16,685 18,430
Deferred gross profit 1,703 1,693
--------- ---------
Total current liabilities 46,670 43,158
Long-term debt 1,408 1,285
Deferred gain 2,185 --
--------- ---------
Total liabilities 50,263 44,443
Commitments and contingencies -- --
Stockholders' Deficit:
Common stock, $.01 par value; shares authorized 100,000 shares,
issued and outstanding; December 31, 2003 - 17,292
and September 30, 2003 - 14,724 173 147
Additional paid-in capital 308,263 299,768
Accumulated deficit (313,557) (308,920)
Accumulated other comprehensive loss (1,345) (1,445)
--------- ---------
Total stockholders' deficit (6,466) (10,450)
--------- ---------
$ 43,797 $ 33,993
========= =========
See notes to consolidated financial statements.
2
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED DECEMBER 31,
-------------------------------
2003 2002
-------- --------
Revenues $ 10,337 $ 10,388
Cost of revenues 5,283 7,279
-------- --------
Gross profit 5,054 3,109
-------- --------
Operating costs and expenses:
Research and development expenses 2,644 3,173
Selling, general and administrative expenses 6,381 8,146
Restructuring and other charges -- 200
-------- --------
Loss from operations (3,971) (8,410)
Other (losses) gains (77) 197
Interest expense, net (589) (321)
-------- --------
Loss before income taxes (4,637) (8,534)
Provision for income taxes -- --
-------- --------
Net loss $ (4,637) $ (8,534)
======== ========
Loss per share
Basic and diluted $ (0.31) $ (0.70)
======== ========
Weighted Average Shares
Basic and diluted 15,129 12,178
See notes to consolidated financial statements.
3
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
FOR THE THREE MONTHS ENDED DECEMBER 31, 2003
(UNAUDITED)
ACCUMULATED
COMMON STOCK OTHER
------------------------ ADDITIONAL COMPREHENSIVE TOTAL
NUMBER PAID-IN ACCUMULATED INCOME STOCKHOLDERS'
OF SHARES AMOUNT CAPITAL DEFICIT (LOSS) DEFICIT
--------- --------- ---------- ----------- ------------- -------------
(IN THOUSANDS)
BALANCE, OCTOBER 1, 2003 ............. 14,724 $ 147 $ 299,768 $(308,920) $ (1,445) $ (10,450)
Shares issued in connection with
the exercise of stock options
and warrants ....................... 2,202 22 7,210 -- -- 7,232
Shares and warrants issued for
professional services .............. 3 -- 12 -- -- 12
Shares and warrants issued in
connection with the private
placement of common stock .......... 400 4 961 -- -- 965
Shares issued in exchange for debt.... 25 -- 96 -- -- 96
Warrants issued ...................... -- -- 216 -- -- 216
Cancellation of restricted shares .... (62) -- -- -- -- --
Translation adjustment ............... -- -- -- 100 100
Net loss ............................. -- -- -- (4,637) -- (4,637)
--------- --------- --------- --------- --------- ---------
BALANCE, DECEMBER 31, 2003 ........... 17,292 $ 173 $ 308,263 $(313,557) $ (1,345) $ (6,466)
========= ========= ========= ========= ========= =========
See notes to consolidated financial statements.
4
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
THREE MONTHS
ENDED DECEMBER 31,
------------------
2003 2002
------- -------
OPERATING ACTIVITIES:
Net loss $(4,637) $(8,534)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization 1,293 1,788
Non cash interest 28 --
Loss on shares exchanged for debt 77 --
Issuance of warrants and shares in lieu of cash -- 21
Bad debt provision 50 603
Inventory provision -- 300
Warranty provision 6 80
Changes in operating assets and liabilities (net of effects of business
acquired and assets sold)
Accounts receivable (1,216) 3,131
Inventories 876 2,113
Prepaid expenses and other current assets (368) (557)
Other assets (2) 240
Accounts payable current (1,078) (1,981)
Accounts payable past-due (249) 2,274
Accrued expenses and other current liabilities (1,110) (77)
Deferred gross profit 10 240
------- -------
Net cash used in operating activities (6,320) (359)
INVESTING ACTIVITIES:
Additions to plant and equipment, net (19) (302)
Additions to software development costs (177) (377)
Payments received from sale of assets 68 --
------- -------
Net cash used in by investing activities (128) (679)
------- -------
FINANCING ACTIVITIES:
Issuance of convertible note -- 500
Proceeds from exercise of stock options and warrants 25 --
Proceeds from private placement of common stock, net of offering costs 960 --
Loan refinancing costs (535) --
Net proceeds from revolving credit facility 5,936 1,221
Repayment of long-term borrowings (248) (369)
------- -------
Net cash provided by financing activities 6,138 1,352
------- -------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (4) (71)
------- -------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (314) 243
Beginning of period 367 220
======= =======
End of period $ 53 $ 463
======= =======
Supplemental Cash Flow Information:
Interest paid $ 143 $ 119
======= =======
Taxes paid $ 34 $ --
======= =======
NONCASH INVESTING AND FINANCING ACTIVITIES:
Discount on convertible debt $ -- $ 65
======= =======
Trade payables exchanged with shares of common stock $ 19 $ --
======= =======
Estimated fair value of promissory note received on sale of certain assets,
including inventory of $423 (deferred gain recorded on sale of $2,185) $ 2,540 $ --
======= =======
See notes to consolidated financial statements.
5
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1. BUSINESS OVERVIEW AND GOING CONCERN CONSIDERATIONS
The unaudited consolidated financial statements of Robotic Vision
Systems, Inc. and its subsidiaries (the "Company") include the consolidated
balance sheet as of December 31, 2003, the consolidated statements of
operations, cash flows and stockholders' deficit for the three months ended
December 31, 2003 and December 31, 2002 have been prepared by the Company. In
the opinion of management, all adjustments (which include mainly recurring
adjustments) necessary to present fairly the financial condition, results of
operations and cash flows as of December 31, 2003 and for all periods presented
have been made.
Certain information and footnote disclosures normally included in the
financial statements prepared in accordance with accounting principles generally
accepted in the United States of America have been condensed or omitted. It is
suggested that these consolidated financial statements be read in conjunction
with the consolidated financial statements and notes thereto included in the
Company's annual report on Form 10-K for the year ended September 30, 2003. The
operating results for the three months ended December 31, 2003 are not
necessarily indicative of the operating results for the full fiscal year.
The accompanying consolidated financial statements have been prepared
assuming the Company will continue as a going concern. The Company has incurred
operating losses for the quarter ended December 31, 2003, fiscal 2003, 2002 and
2001 amounting to $3,971, $31,488, $40,539 and $83,226, respectively, and
negative cash flows from operations for the quarter ended December 31, 2003,
fiscal 2003, 2002 and 2001 amounting to $6,320, $2,872, $25,905 and $12,584,
respectively. Further, the Company has debt payments due which relate to
acquisitions the Company has made. These conditions raise doubt about the
Company's ability to continue as a going concern.
The Company has prepared and is executing a plan to meet its financial
needs. The Company has undertaken several measures during fiscal 2003 and
subsequently to reduce its losses, strengthen its working capital position and
provide additional liquidity. During fiscal 2003 it reduced its fixed costs
significantly, reduced its operating losses and lowered its breakeven level of
revenues. In November 2002, it began the process of selling the Semiconductor
Equipment Group ("SEG") business. On December 4, 2002, the Company received $500
from the issuance of a convertible note. On April 11, 2003, the Company received
a $1,000 settlement payment and the first one-half of a $4,000 loan from a major
customer. On September 26, 2003, the Company completed a private placement of
its common stock, which, along with the exercise on December 1, 2003, of an
option to purchase additional shares by its lead investor, raised gross proceeds
of $6,000. The proceeds as of September 30, 2003, net of offering expenses,
totaled approximately $4,600. On November 26, 2003, the Company replaced its
existing revolving credit facility with a new facility, which increased its
maximum borrowing availability to $13,000. In December 2003, the Company
informed the major customer of its desire to draw down the second tranche of the
$4,000 loan. In response, the major customer stated that it will advance the
second tranche loan only if the Company agrees to substantial modifications to
the settlement and release agreement. The Company has not as yet determined
whether it is prepared to accept such modifications.
In November 2002, the Company adopted a formal plan to sell the SEG
business. In the period since the formal plan was adopted, the semiconductor
equipment industry has entered the early stages of a growth cycle driven by
rising semiconductor industry sales. Also, during this period the SEG business
has (a) lowered its fixed costs and breakeven level of revenues, (b) reduced its
liabilities through a series of debt-for-equity exchanges, and (c) recruited an
experienced high technology executive to run the operations and oversee its
eventual sale. While there can be no assurance of a successful outcome, the
Company believes that given these changes in the business and the concurrent
improvement in the semiconductor capital spending environment, the SEG business
has the potential to generate positive cash flow from operations and return to
profitability. Accordingly, the Company believes the timing of the SEG business'
sale should be lengthened to allow for the realization of a sale price that more
closely reflects what it believes is the business' inherent value. Given this
change in circumstances, there exists the possibility that a disposition of the
SEG business may not occur within the timeframe imposed by generally accepted
accounting principles to present the SEG business as a discontinued operation in
the Company's financial statements. Accordingly, beginning in the quarter ended
June 30, 2003, the Company began reflecting the SEG business as a continuing
operation. Therefore, the results of operations and cash flows for the period
ended December 31, 2002 reflect this reclassification.
The sale of SEG, if completed, is expected to result in sufficient
proceeds to pay down a significant portion of the Company's debt, reduce
accounts payable, and provide working capital for the Company's remaining
business. However, no assurance can be given that SEG will be sold at a price,
or on sufficient terms, to allow for such a result. Because the timing and
proceeds of a prospective sale of SEG is uncertain, the Company took steps
during fiscal 2003 and the first quarter of fiscal 2004 to increase its working
capital.
6
If the Company does not succeed in selling the Semiconductor Equipment
Group, it may not have sufficient working capital to continue in business. While
management believes that it will complete such a sale, there can be no assurance
that the proceeds of a sale will be sufficient to finance the Company's
remaining businesses. In that event, the Company may be forced either to seek
additional financing or to sell some or all of the remaining product lines.
2. INVENTORIES
Inventories consisted of the following:
DECEMBER 31, 2003 SEPTEMBER 30, 2003
----------------- ------------------
Raw Materials $ 3,609 $ 4,875
Work-in-Process 2,147 1,588
Finished Goods 3,570 4,532
--------- ----------
Total $ 9,326 $ 10,995
========= ==========
Finished goods inventory includes $288 and $386 that have been placed
on consignment with distributors at December 31, 2003 and September 30, 2003,
respectively.
3. LOSS PER SHARE
Basic net loss per share is computed using the weighted average number of shares
outstanding during each period. Diluted net loss per share reflects the effect
of the Company's outstanding stock options and warrants (using the treasury
stock method), except where such options and warrants would be anti-dilutive.
The calculations of net loss per share for the following periods are as follows:
THREE MONTHS ENDED
DECEMBER 31,
--------------------------
2003 2002
--------- ----------
BASIC AND DILUTED EPS
Net loss $ (4,637) $ (8,534)
--------- ----------
Net loss - numerator (4,637) (8,534)
Weighted average number of common shares - denominator 15,129 12,178
--------- ----------
Net loss per share - basic and diluted $ (0.31) $ (0.70)
========= ==========
For the three months ended December 31, 2003 and 2002, potential common
shares were anti-dilutive due to the loss for the period. For the three months
ended December 31, 2003 and 2002, the Company had potential common shares,
representing outstanding options and warrants, excluded from the earnings per
shares calculation of 1,569 and 1,426, respectively, as they were considered
anti-dilutive.
4. COMPREHENSIVE LOSS
In addition to net income or loss, the only item that the Company
currently records as other comprehensive income or loss is the change in the
cumulative translation adjustment resulting from the changes in exchange rates
and the effect of those changes upon translation of the financial statements of
the Company's foreign operations. The following table presents information about
the Company's comprehensive loss for the following periods:
THREE MONTHS ENDED
DECEMBER 31,
--------------------------
2003 2002
--------- ----------
Net loss $ (4,637) $ (8,534)
Effect of foreign currency translation adjustments 100 (69)
--------- ----------
Comprehensive loss $ (4,537) $ (8,603)
========= ==========
7
5. REVOLVING CREDIT FACILITY, NOTES PAYABLE AND LONG-TERM DEBT
REVOLVING CREDIT FACILITY
The Company had a $10,000 revolving credit facility, which was due to
expire on April 28, 2003. The termination date had been extended eight times by
the lender. This credit facility allowed for borrowings of up to 90% of eligible
foreign receivables up to $10,000 of availability provided under the
Export-Import Bank of the United States guarantee of certain foreign receivables
and inventories, less the aggregate amount of drawings under letters of credit
and any bank reserves.
On November 26, 2003, the Company replaced its $10,000 revolving credit
line with a $13,000 facility. The new facility has two revolving credit lines.
The first of which accords the Company a maximum of $10,000 and is
collateralized by certain foreign receivables and inventory with availability
subject to a borrowing base formula. This line, which is guaranteed by the
Export-Import Bank of the United States expires on November 30, 2005 and has a
7% interest rate. The second line is for a maximum of $3,000 and is
collateralized by certain domestic receivables. Availability under this line is
subject to a borrowing base formula, which, as defined in the credit agreement,
includes a $1,500 overadvance feature. It expires on November 25, 2006 and has a
17% interest rate of which 5% can be capitalized at the Company's option (as
defined in the agreement). The facility contains covenants pertaining to the
Company's net worth and to fixed charge coverage (as defined). The Company can
prepay the facility at its discretion. In the event of the sale of SEG, the
Company is required to repay in full the $10,000 credit line. The $3,000 credit
line continues subject to the Company meeting certain financial conditions. The
facility also includes an annual commitment fee of 0.5% based on the unused
portion of the facility. At December 31, 2003, the aggregate amount available
under the lines was approximately $11,560, against which the Company had $10,571
of borrowings.
In connection with the facility, the Company issued a warrant to
purchase 2,200 shares of the Company's common stock at an exercise price of
$0.01 per share to the lender and a warrant to purchase 60 shares of the
Company's common stock at an exercise price of $0.01 per share to the placement
agent. The Company recorded a deferred financing cost for the fair value of the
warrants, of approximately $7,400 using the Black-Scholes valuation model with
the following assumptions: volatility of 185% and risk-free interest rate of
2.48%. The deferred financing cost is being amortized and charged to interest
expense over the life of the facility. The lender exercised its warrant on
December 18, 2003.
In addition, the Company incurred costs in connection with the
financing of approximately $465 which are being amortized and charged to
interest expense over the life of the facility. Upon the maturity or payoff of
the facility the Company will also be obligated to pay $400 reflecting deferred
interest and closing costs and which are being amortized and charged to interest
expense over the life of the facility.
NOTES PAYABLE AND LONG-TERM DEBT:
Notes payable and long-term debt at December 31, 2003 and September 30,
2003 consisted of the following:
DEC 31 SEPT 30
2003 2003
-------- ---------
Subordinated note payable - 8.25%, payable in equal quarterly installments of $281, currently due $ 565 $ 565
Abante note payable - 8%, currently due 900 1,000
Abante payable - non-interest bearing, discounted at 8%, payable in annual
installments of $500, through November 2006 1,762 1,786
AIID notes payable -- prime rate (4.00% at December 31, 2003 and September 30, 2003) 4,232 4,245
Promissory note, 10%, due April 11, 2004 2,000 2,000
9% Convertible Senior Note - due December 4, 2005 458 454
Promissory note, 8.7%, due September 20, 2006 905 --
Other long-term debt 78 70
-------- --------
Total notes payable and long-term debt 10,900 10,120
Less notes payable and current portion of long-term debt (9,492) (8,835)
-------- --------
Long-term debt $ 1,408 $ 1,285
======== ========
8
As of December 31, 2003, deferred financing costs totaled $8,107 and
consisted of the fair value of placement agent and lender warrants of $7,138 and
deferred interest, closing costs and financing costs of $969.
The subordinated note payable to General Scanning matured in June 2003,
bearing interest at the prime lending rate (4.0% at December 31, 2003) and
called for quarterly payments of $281 commencing September 12, 2001. The Company
did not make either the March 12, 2003 or June 12, 2003 note principal payments.
The Company is currently a defendant in an action entitled GSI Lumonics Inc. v.
Robotic Vision Systems, Inc., C.A. No. CV-03-4474 (E.D.N.Y.) in which the
plaintiff, GSI Lumonics Inc. ("GSLI") as successor to General Scanning, alleges
breach of contract and conversion, and seeks injunctive relief and unspecified
damages. GSLI alleges that RVSI breached a 1998 Settlement Agreement by failing
to terminate a license relating to certain lead scanning technology in March
2003. On or about January 30, 2004, the court entered an injunction against the
Company enjoining it from, among other things, disclosing, licensing, selling or
assigning the disputed technology. Meanwhile, RVSI has terminated the disputed
license. Plaintiff has moved for summary judgment on its breach of contract
claim, and RVSI has moved to dismiss the case as moot and for failure to state a
claim.
On November 21, 2001, the $1,500 note payable issued to the former
principals of Abante Automation Inc. ("Abante") came due, together with 8%
interest thereon from November 29, 2000. In connection with the acquisition of
Abante, the Company agreed to make post-closing installment payments to the
selling shareholders of Abante. These non-interest bearing payments were payable
in annual installments of not less than $500 through November 2005. On November
21, 2001, the first of five annual installments on the Abante payable also
became due, in the amount of $500. Pursuant to an oral agreement with the former
principals of Abante, the Company paid on November 21, 2001 the interest, $250
of note principal and approximately $112 of the first annual installment. The
balance of the sums originally due on November 21, 2001, were rescheduled for
payment in installments through the first quarter of fiscal 2003. The Company
continued to make certain payments in accordance with the terms of that
agreement, paying the interest, $250 of note principal and approximately $150 of
the first annual installment on February 21, 2002, and paying approximately $238
of the first annual installment on May 21, 2002. The Company did not make either
the November 2002 note principal payment of $1,000 or a significant portion of
the November 2002 annual installment payment of $500. In addition, the Company
did not make a significant portion of the November 2003 annual installment
payment of $500. On December 19, 2003, the Company entered into a settlement
agreement with the former principals of Abante who agreed to forbear from taking
action against the Company for fifteen months. Pursuant to this agreement, the
Company paid $300 in January 2004, agreed to make additional monthly payments of
at least $35, and agreed to pay the remaining balance due upon the sale of SEG,
subject to certain conditions. During the three months ended December 31, 2003,
the Company also made two principal payments of $50 each. As of December 31,
2003, the remaining outstanding balances on the note payable and post-closing
installment payments were $900 and $1,762, respectively.
On January 3, 2002, a payment of $1,855 under notes issued to the
former shareholders of Auto Image ID, Inc. ("AIID") came due together with
interest at prime rate. On the due date, the Company paid the interest and
approximately $240 of note principal to certain of these shareholders. The
Company reached an agreement with the other former shareholders to pay the sums
originally due on January 3, 2002, in three approximately equal principal
installments in April 2002, August 2002 and December 2002. In exchange for the
deferral, the Company issued warrants to purchase 183 shares of its common stock
with an exercise price of $5.70 per share. The fair value of these warrants
(determined using Black-Scholes pricing model), totaling approximately $137, was
charged to operations through January 2003. In accordance with the agreement
with the other former stockholders, the Company made note principal and interest
payments on April 1, 2002 of approximately $516 and $31, respectively, and note
principal and interest payments on August 1, 2002 of $536 and $29, respectively.
The Company did not make the December 2002 and January 2003 installment payments
due of $535 and $1,855, respectively, and is therefore in default. Seven of the
former shareholders filed lawsuits against the Company seeking payment of all
amounts currently past due. These noteholders agreed to forbear from taking
action to enforce their notes until May 1, 2004 or the earlier occurrence of
certain events. On October 29, 2003, additional noteholders agreed to forbear
from taking action until May 1, 2004. The Company agreed to issue these
noteholders warrants to purchase 59 shares of its common stock at exercise
prices ranging from $2.50 per share to $3.60 per share and paid these
noteholders the outstanding interest that had accrued through June 1, 2003. The
balance of the notes of $1,855 became due on January 3, 2004 and was not paid by
the Company.
On December 4, 2002, Pat V. Costa, the Company's Chief Executive
Officer, loaned the Company $500 and the Company issued a 9% Convertible Senior
Note in the amount of $500. Under the terms of this note, the Company is
required to make semiannual interest payments in cash on May 15 and November 15
of each year commencing May 2003, and pay the principal amount on December 4,
2005. This note allows Mr. Costa to require earlier redemption by the Company in
certain circumstances including the sale of a division at a purchase price at
least equal to the amounts then due under this note. Thus, Mr. Costa may require
redemption at the time of the sale of SEG. This note also allows for conversion
into shares of common stock. The note may be converted at any time by Mr. Costa
until the note is paid in full or by the Company if at any time following the
closing date the closing price of the Company's Common Stock is greater, for 30
consecutive trading days, than 200% of the conversion price. Mr. Costa's
conversion
9
price is equal to 125% of the average closing price of the Company's common
stock for the thirty consecutive trading days ending December 3, 2002, or $2.10
per share. This convertible debt contained a beneficial conversion feature, and
as the debt is immediately convertible, the Company recorded a dividend in the
amount of approximately $18 on December 4, 2002. The Company did not make the
semiannual interest payment due on May 15, 2003. On October 28, 2003, Mr. Costa
agreed to forbear from exercising his rights with respect to this interest
payment until January 14, 2005.
In connection with the 9% Convertible Senior Note, on December 4, 2002,
the Company issued warrants to Mr. Costa. Under the terms of the warrants, Mr.
Costa is entitled to purchase from the Company shares equal to 25% of the total
number of shares of Common Stock into which the Convertible Senior Note may be
converted or approximately 60 shares. The warrants have an exercise price of
$3.15. The Company recorded the fair value of these warrants of approximately
$65 as a discount to the debt using the Black-Scholes valuation model with the
following assumptions: volatility of 107% and risk-free interest rate of 2.49%.
This discount is being amortized over the period from December 4, 2002 to
December 4, 2005.
On December 4, 2002, as a condition to making the loan mentioned above
and in order to secure the prompt and complete repayment, the Company entered
into a Security Agreement with Mr. Costa. Under the terms of this agreement, the
Company granted Mr. Costa a security interest in certain of the Company's
assets.
On April 11, 2003, the Company entered into a settlement and release
agreement with a major customer, which provided for the release of certain
claims among the parties and the payment of $1,000 to the Company. On the same
date, the Company entered into a loan agreement with this customer which
afforded the Company the right to borrow an aggregate of $4,000, in two equal
tranches, subject to the conditions of each closing. The first closing occurred
on April 11, 2003, at which time the Company delivered to the major customer a
secured promissory note in the amount of $2,000 with a maturity date of April
11, 2004, bearing an interest rate of 10%. The second closing for the delivery
of a separate promissory note is subject to additional terms and conditions. In
December 2003, the Company informed the major customer of its desire to draw
down the second tranche of the loan. In response, the major customer stated that
it will advance the second tranche loan only if the Company agrees to
substantial modifications to the settlement and release agreement. The Company
has not as yet determined whether it is prepared to accept such modifications.
On October 31, 2003, the Company reached a settlement with the landlord
of its New Berlin, Wisconsin facility at which it had ceased operations in
February 2003. In exchange for the release of all past and future obligations,
the Company issued the landlord a $1,000 note payable in 36 equal payments of
approximately $31 each. The note reflects an effective interest rate of
approximately 8.7%. The note is payable in full upon the occurrence of certain
events, including the sale of SEG. In addition to the note, the Company issued a
three-year warrant to purchase 20 shares of common stock at an exercise price of
$0.05 per share. The Company determined the fair value of the warrant of
approximately $65 using the Black-Scholes valuation model with the following
assumptions: volatility of 185% and risk-free interest rate of 2.28%.
As of February 6, 2004, the Company was in default on an aggregate of
$4,301 of its borrowings.
Principal maturities of notes payable and long-term debt as of December
31, 2003 are as follows:
2005 $ 9,492
2006 1,408
----------
Total $ 10,900
==========
6. RESTRUCTURING CHARGES
During the three month periods ended December 31, 2003 and 2002, the
Company recorded restructuring charges of $0 and $200, respectively. During the
three month period ended December 31, 2002, certain SEG senior management and
technical employees were granted retention agreements. These agreements allow
for employees to receive cash and stock benefits for remaining with the Company
and continuing through the sale of SEG. The current cash value of the award is
approximately $720. The Company is accruing these agreements over the expected
service period, which has been based upon the estimated timing of the sale of
SEG. The Company accrued approximately $200 as of December 31, 2002.
10
A summary of the remaining restructuring costs as of December 31, 2003
is as follows:
LIABILITY AT CASH NON-CASH LIABILITY AT
SEPT. 30, AMOUNTS AMOUNTS AMOUNTS DECEMBER 31,
2003 ACCRUED INCURRED INCURRED 2003
------------ ------- -------- -------- ------------
Severance payments to employees $ 46 $ -- $ 29 $ -- $ 17
Exit costs from facilities 1,316 -- 10 1,000 306
Retention agreements 600 -- -- -- 600
------ ------ ------ ------- -------
Total $1,962 $ -- $ 39 $ 1,000 $ 923
====== ====== ====== ======= =======
7. WARRANTY COSTS
We estimate the cost of product warranties at the time revenue is
recognized. While we engage in extensive product quality programs and processes,
including actively monitoring and evaluating the quality of our component
suppliers, our warranty obligation is affected by product failure rates,
material usage and service delivery costs incurred in correcting a product
failure. Should actual product failure rates, material usage or service delivery
costs differ from our estimates, revisions to the estimated warranty liability
may be required. We recorded warranty provisions totaling $6 and $80 during the
three months ended December 31, 2003 and December 31, 2002, respectively.
8. SALE OF CERTAIN ASSETS
On October 20, 2003 the Company entered into an agreement to sell
certain assets of its Systemation Business consisting primarily of inventory and
intellectual property. Under the terms of the sale agreement, the Company
received $40 in cash and a promissory note for the nominal amount of
approximately $3,600. The note is repayable in increasing periodic payments
through November 15, 2008. The Company has reflected the note at its estimated
fair value of approximately $2,600 at an estimated effective interest rate
of 18%. The Company made certain assumptions in valuing the promissory note,
including existing market conditions, marketability of the note, and other
market variables affecting the realization of the note during the long period
involved. The Company has concluded that collection of the note cannot be
reasonably assured, on the basis that the buyer is a new entity with limited
financial history upon which to make a determination. Henceforth, the Company
has also deferred the gain on this sale of approximately $2,200, which will be
recognized as payments are received on the note.
9. SEGMENT INFORMATION
The Company operates in two reportable segments serving the machine
vision industry. The Company has determined its reporting segments primarily
based on the nature of the products offered by the Semiconductor Equipment Group
and the Acuity CiMatrix division. The Semiconductor Equipment Group, which is
comprised of the Electronics subdivision, including Abante Automation, supplies
inspection equipment to the semiconductor industry. The Acuity CiMatrix division
designs, manufactures and markets 2-D data collection products and barcode
reading systems, as well as 2-D machine vision systems and lighting products for
use in industrial automation. The Company categorizes as "Other" in the table
below, activities relating primarily to corporate.
The accounting policies of each segment are the same as those described
in the annual report on Form 10-K. Sales between segments are determined based
on an intercompany price that is consistent with external customers.
Intersegment sales by the Acuity CiMatrix division were approximately $93 and
$11 for the three months ended December 31, 2003 and 2002, respectively. All
intercompany profits are eliminated in consolidation. Other income (loss)
includes unallocated corporate general and administrative expenses. Other assets
are comprised primarily of corporate accounts. Although certain research
activities are conducted by the Acuity CiMatrix division for the Semiconductor
Equipment Group, research and development expenses are reported in the segment
where the costs are incurred. The following table presents information about the
Company's reportable segments. All intercompany transactions have been
eliminated.
11
THREE MONTHS ENDED
DECEMBER 31,
------------------------
2003 2002
--------- ---------
REVENUES:
Semiconductor Equipment................................................. $ 4,613 $ 5,334
Acuity CiMatrix......................................................... 5,724 5,054
--------- ---------
Total Revenues................................................ $ 10,337 $ 10,388
========= =========
LOSS FROM OPERATIONS:
Semiconductor Equipment................................................. $ (1,532) $ (4,733)
Acuity CiMatrix......................................................... 48 (1,530)
Other................................................................... (2,487) (2,147)
--------- ---------
Total loss from operations.................................... $ (3,971) $ (8,410)
========= =========
DEPRECIATION AND AMORTIZATION:
Semiconductor Equipment................................................. $ 469 $ 1,080
Acuity CiMatrix......................................................... 475 657
Other................................................................... 349 51
--------- ---------
Total depreciation and amortization........................... $ 1,293 $ 1,788
========= =========
TOTAL ASSETS
Semiconductor Equipment................................................. $ 21,424 $ 32,006
Acuity CiMatrix......................................................... 13,413 16,957
Other................................................................... 8,960 1,230
--------- ---------
Total assets.................................................. $ 43,797 $ 50,193
========= =========
EXPENDITURES FOR PLANT AND EQUIPMENT, NET
Semiconductor Equipment................................................. $ -- $ 286
Acuity CiMatrix......................................................... 19 16
Other................................................................... -- 0
--------- ---------
Total expenditures for plant and equipment, net............... $ 19 $ 302
========= =========
CAPITALIZED AMOUNTS OF SOFTWARE DEVELOPMENT COSTS
Semiconductor Equipment................................................. $ -- $ 210
Acuity CiMatrix......................................................... 177 167
--------- ---------
Total capitalized amounts of software development costs....... $ 177 $ 377
========= =========
10. GOODWILL
In June 2001, the FASB issued SFAS No. 141, Business Combinations, and
SFAS No. 142, Goodwill and Other Intangible Assets, effective for fiscal years
beginning after December 15, 2001 with early adoption permitted for companies
with fiscal years beginning after March 15, 2001. The Company adopted the new
rules on accounting for goodwill and other intangible assets beginning in the
first quarter of fiscal 2003. Under the new rules, goodwill and intangible
assets deemed to have indefinite lives will no longer be amortized but will be
subject to annual impairment tests in accordance with the statements. Other
intangible assets will continue to be amortized over their useful lives. The
Company conducts a periodic assessment, annually or more frequently, if
impairment indicators exist on the carrying value of our goodwill.
In accordance with SFAS No. 142, The Company initiated a goodwill
impairment assessment during the first quarter of fiscal 2003. The results of
this analysis concluded that there was no impairment charge.
11. STOCK-BASED COMPENSATION
The Company accounts for equity-based compensation arrangements in
accordance with the provisions of APB No. 25 and complies with the disclosure
provisions of SFAS No. 123, as amended by SFAS 148. All equity-based awards to
non-employees are accounted for at their fair value in accordance with SFAS No.
123 and EITF Abstract No. 96-18, Accounting for Equity Instruments that are
Issued to Other Than Employees for Acquiring, or in conjunction with Selling
Goods or Services. Under APB No. 25, compensation expense is based upon the
difference, if any, on the date of grant, between the fair value of our stock
and the exercise price.
12
Had compensation cost for our stock based compensation plans and
employee stock purchase plan been determined on the fair value at the grant
dates for awards under those plans, consistent with SFAS No. 123, the Company's
net loss and net loss per share would have been reported at the pro-forma
amounts indicated below.
THREE MONTHS ENDED
DECEMBER 31,
----------------------
2003 2002
-------- --------
Net loss ............................................................ $(4,637) $(8,534)
------- -------
Deduct: Total stock-based compensation expense determined under
the fair value based method for all stock option awards (net of
related tax effects) ................................................ (436) (569)
------- -------
Net loss -- pro forma ............................................. $(5,073) $(9,103)
======= =======
Loss per share:
Basic and diluted -- as reported .................................. $ (0.31) $ (0.70)
======= =======
Basic and diluted -- pro forma .................................... $ (0.34) $ (0.75)
======= =======
12. RECENT ACCOUNTING PRONOUNCEMENTS
In December 2003, the Financial Accounting Standards Board (FASB)
issued SFAS 132R. This Statement revises employers' disclosures about pension
plans and other postretirement benefit plans. It does not change the measurement
or recognition of those plans required by FASB Statements No. 87, Employers'
Accounting for Pensions No. 88, Employers' Accounting for Settlements and
Curtailments of Defined Benefit Pension Plans and for Termination Benefits, and
No. 106, Employers' Accounting for Postretirement Benefits Other Than Pensions.
This Statement retains the disclosure requirements contained in FASB Statement
No. 132, Employers' Disclosures about Pensions and Other Postretirement
Benefits, which it replaces. It requires additional disclosures to those in the
original Statement 132 about the assets, obligations, cash flows, and net
periodic benefit cost of defined benefit pension plans and other defined benefit
postretirement plans. The Company will adopt the provisions of SFAS 132R on
January 1, 2004. The adoption of this pronouncement is not expected to have a
material effect on the Company's financial position, results from operations or
cash flows.
In December 2003, the SEC issued Staff Accounting Bulletin (SAB) No.
104, Revenue Recognition, which codifies, revises and rescinds certain
sections of SAB No. 101, Revenue Recognition, in order to make this interpretive
guidance consistent with current authoritative accounting and auditing guidance
and SEC rules and regulations. The changes noted in SAB 104 did not have a
material effect on the Company's financial position, results of operations and
cash flows.
13
ROBOTIC VISION SYSTEMS, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Our business activity involves the development, manufacture, marketing
and servicing of machine vision equipment for a variety of industries, including
the global semiconductor industry. Demand for products can change significantly
from period to period as a result of numerous factors including, but not limited
to, changes in global economic conditions, supply and demand for semiconductors,
changes in semiconductor manufacturing capacity and processes and competitive
product offerings. Due to these and other factors, our historical results of
operations including the periods described herein may not be indicative of
future operating results.
Our consolidated financial statements have been prepared assuming that
we will continue as a going concern. We have incurred net losses in the three
months ended December 31, 2003 and the twelve months ended September 30, 2003,
2002 and 2001 amounting to $4.6 million, $30.1 million, $41.8 million, and
$104.4 million, respectively. Net cash used in operating activities amounted to
$6.3 million, $2.9 million, $25.9 million and $12.6 million in the three months
ended December 31, 2003 and the twelve months ended September 30, 2003, 2002
and 2001, respectively. Further, we have debt payments past due which relate to
prior years' acquisitions. We continue to implement plans to control operating
expenses, inventory levels, and capital expenditures as well as plans to manage
accounts payable and accounts receivable to enhance cash flows.
In November 2002, we adopted a formal plan to sell the SEG business. In
the period since the formal plan was adopted, the semiconductor equipment
industry has entered the early stages of a growth cycle driven by rising
semiconductor industry sales. Also, during this period the SEG business has (a)
lowered its fixed costs and breakeven level of revenues, (b) reduced its
liabilities through a series of debt-for-equity exchanges, and (c) recruited an
experienced high technology executive to run the operations and oversee its
eventual sale. While there can be no assurance of a successful outcome, we
believe that given these changes in the business and the concurrent improvement
in the semiconductor capital spending environment, the SEG business has the
potential to generate positive cash flow from operations and return to
profitability. Accordingly, we believe the timing of the SEG business' sale
should be lengthened to allow for the realization of a sale price that more
closely reflects what we believe is the business' inherent value. We have not
changed our belief that the sale of the SEG business is in the best interests of
shareholders, nor have we changed our desire to consummate a sale of the SEG
business at the earliest date. We are in continuing discussions with interested
buyers.
The sale of SEG, if completed, is expected to result in sufficient
proceeds to pay down a significant portion of our debt, reduce accounts payable,
and provide working capital for our remaining business, however, no assurance
can be given that SEG will be sold at a price, or on sufficient terms, to allow
for such a result. Because the timing and proceeds of a prospective sale of SEG
is uncertain, we took steps during fiscal 2003 and the first quarter of fiscal
2004 to improve our long-term self-sufficiency of working capital. On December
4, 2002, Pat V. Costa, our Chairman, President and CEO, loaned us $0.5 million
and we issued a 9% Convertible Senior Note.
On September 26, 2003, we raised $5.0 million in gross proceeds ($4.6
million, net of offering expenses) in a private placement of our shares and
warrants to accredited investors. In December 2003 the lead investor in the
September 26, 2003 private placement exercised an option to invest an additional
$1.0 million.
On November 26, 2003, we completed a new revolving credit line with an
aggregate $13.0 million of availability, a $3.0 million increase from our
previous facility. The net proceeds of these financing activities will be used
for general corporate purposes, including working capital to support growth. Our
plans also call for continued actions to control operating expenses, inventory
levels, and capital expenses, as well as to manage accounts payable and accounts
receivable to enhance cash flow.
Critical Accounting Policies and Estimates
Management's Discussion and Analysis of Financial Condition and Results
of Operations discusses our consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States of America. The preparation of these financial statements requires
management to make estimates and assumptions that affect the reported
14
amounts of assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period.
Management believes the following critical accounting policies affect
the more significant judgments and estimates used in the preparation of the
consolidated financial statements. On an on-going basis, management evaluates
its estimates and judgments, including those related to going concern
considerations, the allowance for doubtful accounts, inventories, intangible
assets, income taxes, warranty obligations, restructuring costs, and
contingencies and litigation. Management bases its estimates and judgments on
historical experience and on various other factors that are believed to be
reasonable under the circumstances. These estimates form the basis for making
judgments about the carrying values of assets and liabilities. Actual results
may differ from these estimates. We have identified certain critical accounting
policies, which are described below:
REVENUE RECOGNITION
In fiscal 2001, we changed our method of accounting for revenue on
certain semiconductor equipment sales to comply with SEC Staff Accounting
Bulletin (SAB) No. 101, "Revenue Recognition in Financial Statements."
Previously, we generally recognized revenue upon shipment to the customer, and
accrued the cost of providing any undelivered services associated with the
equipment at the time of revenue recognition. Under the new accounting method,
adopted as of October 1, 2000, we now recognize revenue based on the type of
equipment that is sold and the terms and conditions of the underlying sales
contracts including acceptance provisions.
We defer all or a portion of the gross profit on revenue transactions
that include acceptance provisions. If the amount due upon acceptance is 20% or
less of the total sales amount, we recognize as revenue the amount due upon
shipment. We record a receivable for 100% of the sales amount and the entire
cost of the product upon shipment. The portion of the receivable that is due
upon acceptance is recorded as deferred gross profit until such time as final
acceptance is received. When client acceptance is received, the deferred gross
profit is recognized in the statement of operations.
If the amount due upon acceptance is more than 20% of the total sales
amount, we recognize no revenue on the transaction. We record a receivable for
100% of the sales amount and remove 100% of the cost from inventory. The entire
receivable and entire inventory balance is then recorded with an offsetting
adjustment to deferred gross profit. When client acceptance is received,
deferred gross profit is relieved and total sales and cost of sales are
recognized in the statement of operations.
PROVIDING FOR BAD DEBTS
We maintain an allowance for doubtful accounts for estimated losses
resulting from the inability of our customers to make required payments. These
estimated allowances are periodically reviewed, on a case-by-case basis,
analyzing the customer's payment history and information regarding customers'
creditworthiness known to us. In addition, we record a reserve based on the size
and age of all receivable balances against which we do not have specific
reserves. If the financial condition of our customers was to deteriorate,
resulting in their inability to make payments, additional allowances may be
required.
INVENTORY VALUATION
We reduce the carrying value of our inventory for estimated
obsolescence or excess inventory by the difference between the cost of inventory
and its estimated net realizable value based upon assumptions about future
demand and market conditions. There can be no assurance that we will not have to
take additional inventory provisions in the future, based upon a number of
factors including: changing business conditions; shortened product life cycles;
the introduction of new products and the effect of new technology.
GOODWILL AND OTHER LONG-LIVED ASSET VALUATIONS
In June 2001, the FASB issued SFAS 141, "Business Combinations", and
SFAS 142, "Goodwill and Other Intangible Assets", effective for fiscal years
beginning after December 15, 2001 with early adoption permitted for companies
with fiscal years beginning after March 15, 2001. We adopted the new rules on
accounting for goodwill and other intangible assets beginning in the first
quarter of fiscal 2003. Under the new rules, goodwill and intangible assets
deemed to have indefinite lives will no longer be amortized but will be subject
to annual impairment tests in accordance with the statements. Other intangible
assets will continue to be amortized over their useful lives.
15
In accordance with SFAS 142, we initiated a goodwill impairment
assessment during the first quarter of fiscal 2003. The results of this analysis
concluded that there was no impairment charge. We conduct a periodic assessment,
annually or more frequently, if impairment indicators exist on the carrying
value of our goodwill.
INCOME TAX PROVISION
We record a valuation allowance against deferred tax assets when we
believe that it is more likely than not that these assets will not be realized.
Because of our recurring losses and negative cash flows, we have provided a
valuation allowance against all deferred taxes as of December 31, 2003 and
September 30, 2003.
PROVIDING FOR WARRANTIES
We estimate the cost of product warranties at the time revenue is
recognized. While we engage in extensive product quality programs and processes,
including actively monitoring and evaluating the quality of our component
suppliers, our warranty obligation is affected by product failure rates,
material usage and service delivery costs incurred in correcting a product
failure. Should actual product failure rates, material usage or service delivery
costs differ from our estimates, and revisions to the estimated warranty
liability may be required. We recorded warranty provisions totaling $6 thousand
and $80 thousand during the three month periods ended December 31, 2003 and
December 31, 2002, respectively.
RESTRUCTURING PROVISIONS
In July 2002, the FASB issued SFAS 146, "Accounting for Costs
Associated with Exit or Disposal Activities", which nullifies EITF Issue No.
94-3. SFAS 146 requires that a liability for a cost associated with an exit or
disposal activity be recognized when the liability is incurred, whereas EITF No.
94-3 had recognized the liability at the commitment date to an exit plan. We
adopted the provisions of SFAS 146 effective for exit or disposal activities
initiated after December 31, 2002. The effect of adopting SFAS 146 is recognized
in the consolidated financial statements.
STOCK-BASED COMPENSATION
In December 2002, the FASB issued SFAS 148, "Accounting for Stock-Based
Compensation" -- Transition and Disclosure, which amends SFAS 123. SFAS 148
provides alternative methods of transition for a voluntary change to the fair
value based method of accounting for stock-based employee compensation. SFAS 148
also requires prominent disclosures in both annual and interim financial
statements about the method of accounting for stock-based employee compensation
and the effect of the method used on reported results. As permitted by SFAS 123,
we have elected to account for stock-based compensation using the intrinsic
value method prescribed in Accounting Principles Board ("APB") Opinion No. 25,
"Accounting for Stock Issued to Employees," and related interpretations
including FASB Interpretation No. 44, "Accounting for Certain Transactions
Involving Stock Compensation -- an Interpretation of APB Opinion No. 25," and
have adopted the disclosure-only provisions of SFAS 123. Accordingly, for
financial reporting purposes, compensation cost for stock options granted to
employees is measured as the excess, if any, of the estimated fair market value
of our stock at the date of the grant over the amount an employee must pay to
acquire the stock. Equity instruments issued to nonemployees are accounted for
in accordance with FAS 123 and Emerging Issues Task Force ("EITF") Abstract No.
96-18, "Accounting for Equity Instruments That Are Issued to Other Than
Employees for Acquiring, or in Conjunction with Selling Goods or Services."
We account for equity-based compensation arrangements in accordance
with the provisions of APB No. 25 and comply with the disclosure provisions of
SFAS No. 123, as amended by SFAS 148. All equity-based awards to non-employees
are accounted for at their fair value in accordance with SFAS No. 123 and EITF
Abstract No. 96-18, Accounting for Equity Instruments that are Issued to Other
Than Employees for Acquiring, or in Conjunction with Selling Goods or Services.
Under APB No. 25, compensation expense is based upon the difference, if any, on
the date of grant, between the fair value of our stock and the exercise price.
Had compensation cost for our stock based compensation plans and
employee stock purchase plan been determined on the fair value at the grant
dates for awards under those plans, consistent with SFAS No. 123, our net loss
and net loss per share would have been reported at the pro-forma amounts
indicated below.
16
THREE MONTHS ENDED
DECEMBER 31,
-------------------------------
(IN THOUSANDS, EXCEPT PER SHARE)
-------------------------------
2003 2002
---- ----
Net loss....................................................... $ (4,637) $ (8,534)
---------- --------
Deduct: Total stock-based compensation expense determined under
the fair value based method for all stock option awards (net of
related tax effects)........................................... (436) (569)
---------- --------
Net loss -- pro forma......................................... $ (5,073) $ (9,103)
========== ========
Loss per share:
Basic and diluted -- as reported.............................. $ (0.31) $ (0.70)
========== ========
Basic and diluted -- pro forma................................ $ (0.34) $ (0.75)
========== ========
LITIGATION RESERVES
We periodically assess our exposure to pending litigation and possible
unasserted claims against us in order to establish appropriate litigation
reserves. In establishing such reserves, we work with our counsel to consider
the availability of insurance coverage, the likelihood of prevailing on a claim,
the probable costs of defending the claim, and the prospects for, and costs of,
resolution of the matter. It is possible that the litigation reserves
established by us will not be sufficient to cover our actual liability and
future results of operations for any particular quarterly or annual period could
be materially adversely affected by the outcome of certain litigation or claims.
Results of Operations
Bookings and revenues in the three month period ended December 31, 2003
were $12.5 million and $10.3 million, respectively, as compared to $9.0 million
and $10.4 million in the three month period ended December 31, 2002. The
increase in bookings reflects growth in our markets and increasing demand for
our products. The modest decrease in revenues reflects lingering concern about
our financial condition coupled with the financial constraints experienced in
the months prior to the period ended December 31, 2003, impacting our ability to
procure inventory necessary to satisfy customer orders.
Revenues for our Semiconductor Equipment Group were $4.6 million for
the three month period ended December 31, 2003, which represented 44.6% of our
total revenues, compared to $5.3 million or 51.3% of revenues in three month
period ended December 31, 2002. This decline in revenues of 13.5% versus the
same period of the prior year is a result of the financial constraints prior to
the equity and debt financing activities combined with the lengthening lead
times to procure inventory necessary to satisfy customer orders.
Revenues for our Acuity CiMatrix division were $5.7 million for the
three month period ended December 31, 2003, which represented 55.4% of our total
revenues, compared to $5.1 million or 48.7% of total revenues in the three month
period ended December 31, 2002. This increase in revenues of 13.3% versus the
same period of the prior year is a result of increased demand for our products
offset by the combination of lengthening material procurement lead times
combined with the financial constraints we experienced prior to the equity and
debt financings.
Our gross profits in the three month period ended December 31, 2003
increased by approximately $1.9 million in comparison to the same period of the
prior year. The profit improvement is due to higher gross margins, as a
percentage of revenues, in the latest period in comparison to the prior year
period and is offset slightly by a lower level of revenues in the latest period.
Our gross margins in the latest period were 48.9% compared to 29.9% in the prior
year period. The increase is largely attributable to a lower level of
manufacturing overhead expenses in the latest period as a result of cost
reduction measures initiated during fiscal 2003, product mix and the reduction
of excess and obsolescence inventory reserves of $0.3 million recorded in the
prior year period.
Research and development expenses were $2.6 million, or 25.6% of
revenues, in the three month period ended December 31, 2003 compared to $3.2
million, or 30.5% of revenues, in the three month period ended December 31,
2002. The lower level of expenses reflects lower fixed costs as a result of cost
reductions taken in fiscal years 2002 and 2003 offset by increased spending in
new product
17
development during the latest period. We intend to continue to invest in new
wafer scanning systems and enhanced capabilities for our lead scanning systems
in our Semiconductor Equipment Group and to enhance our machine vision and
two-dimensional barcode reading products in our Acuity CiMatrix division.
In the three month period ended December 31, 2003, we capitalized
approximately $0.2 million in software development costs under SFAS 86,
"Accounting for the Costs of Software to be Sold, Leased, or Otherwise
Marketed," as compared with $0.4 million in the three month period ended
December 31, 2002. The related amortization expense was $0.5 million during the
three month period ended December 31, 2003 compared to $0.7 million during the
three month period ended December 31, 2002. The amortization expense is included
in cost of sales.
Selling, general and administrative expenses were $6.4 million, or
61.7% of revenues, in the three month period ended December 31, 2003, compared
to $8.1 million, or 78.4% of revenues, in the three month period ended December
31, 2002. The lower level of expenses in the latest period reflects lower fixed
costs as a result of cost reductions undertaken during fiscal 2003.
During the three month periods ended December 31, 2003 and 2002, we
recorded restructuring charges of $0 and $0.2 million, respectively. During the
three month period ended December 31, 2002, certain SEG senior management and
technical employees were granted retention agreements. These agreements allow
for employees to receive cash and stock benefits for remaining with the Company
and continuing through the sale of SEG. The current cash value of the award is
approximately $0.7 million. The Company is accruing these agreements over the
expected service period, which has been based upon the estimated timing of the
sale of SEG. The Company accrued approximately $0.2 million as of December 31,
2002.
A summary of the remaining restructuring costs as of December 31, 2003
is as follows (in thousands):
Q1
LIABILITY AT FISCAL 2004 CASH NON-CASH LIABILITY AT
SEPT. 30, AMOUNTS AMOUNTS AMOUNTS DECEMBER 31,
2003 ACCRUED INCURRED INCURRED 2003
------------ ----------- -------- -------- ------------
Severance payments to employees $ 46 $ -- $ 29 $ -- $ 17
Exit costs from facilities 1,316 -- 10 1,000 306
Retention agreements 600 -- -- -- 600
------- ------ ------ ------ -------
Total $ 1,962 $ -- $ 39 $1,000 $ 923
======= ====== ====== ====== =======
During the three month period ended December 31, 2003, we issued 25,000
shares of our common stock to a supplier in exchange for the cancellation of
approximately $19,000 of trade indebtedness owed to a supplier and outstanding
purchase commitments totaling approximately $355,000. We reported a loss from
debt restructuring of approximately $77,000 for the three months ended December
31, 2003.
On October 20, 2003 we entered into an agreement to sell certain assets
of our Systemation Business consisting primarily of inventory and intellectual
property. Under the terms of the sale agreement, we received $40,000 in cash and
a promissory note for the nominal amount of approximately $3.6 million. The note
is repayable in increasing periodic payments through November 15, 2008. We have
reflected the note at its estimated fair value of approximately $2.6 million at
an estimated effective interest rate of 18%. We made certain assumptions in
valuing the promissory note, including existing market conditions, marketability
of the note, and other market variables affecting the realization of the note
during the long period involved. We have concluded that collection of the note
cannot be reasonably assured, on the basis that the buyer is a new entity with
limited financial history upon which to make a determination. Henceforth, we
have also deferred the gain on this sale of approximately $2.2 million, which
will be recognized as payments are received on the note.
Net interest expense was $0.6 million and $0.3 million in the three
month periods ended December 31, 2003 and December 31, 2002, respectively. The
greater interest expense in the latest period reflects the larger outstanding
balance and the higher interest rate of the new facility entered into on
November 26, 2003. The expense in the current period also includes the
amortization of the financing costs associated with the new facility and the
amortization of the cost of the warrant issued to the lender.
There were no tax provisions in the three months ended December 31,
2003 and 2002, due to the losses incurred and full valuation allowance provided
against net operating loss carryforwards.
18
Liquidity And Capital Resources
Our cash balance decreased $314 thousand, to $53 thousand, in the three
months ended December 31, 2003, primarily as a result of $6.3 million of net
cash used in operating activities and $0.1 million of net cash used by investing
activities offset by $6.1 million of net cash provided by financing activities.
The $6.3 million of net cash used in operating activities was primarily
a result of the $4.6 million loss in the three month period ended December 31,
2003, a decrease in accounts payable of $1.3 million, an increase in accounts
receivable of $1.2 million, a decrease in accrued expenses of $1.1 million,
offset in part by depreciation and amortization of $1.3 million, and a decrease
in inventory of $0.9 million.
Additions to plant and equipment were $19 thousand in the three months
ended December 31, 2003, as compared to $0.3 million in the three months ended
December 31, 2002. Capitalized software development costs in the three months
ended December 31, 2003, were $0.2 million as compared with $0.4 million in the
three months ended December 31, 2002.
Funds from financing activities were $6.1 million in the three months
ended December 31, 2003, as compared to $1.4 million in the three months ended
December 31, 2002. During the three months ended December 31, 2003, we received
net proceeds from various financing activities of $0.4 million, our revolving
line of credit borrowings increased by $5.9 million and repayment of long-term
borrowings totaled approximately $0.2 million.
Our consolidated financial statements have been prepared assuming that
we will continue as a going concern. However, because of continuing negative
cash flow, limited credit facilities, and the uncertainty of the sale of SEG,
there is no certainty that we will have the financial resources to continue in
business. We have incurred net losses in the three months ended December 31,
2003 and the twelve months ended September 30, 2003, 2002 and 2001 amounting to
$4.6 million, $30.1 million, $41.8 million, and $104.4 million, respectively.
Net cash used in operating activities amounted to $6.3 million, $2.9 million,
$25.9 million and $12.6 million in the three months ended December 31, 2003 and
the twelve months ended September 30, 2003, 2002 and 2001, respectively.
In November 2002, we adopted a formal plan to sell the SEG business. In
the period since the formal plan was adopted, the semiconductor equipment
industry has entered the early stages of a growth cycle driven by rising
semiconductor industry sales. Also, during this period the SEG business has a)
lowered its fixed costs and breakeven level of revenues, b) reduced its
liabilities through a series of debt-for-equity exchanges, and c) recruited an
experienced high technology executive to run the operations and oversee its
eventual sale. While there can be no assurance of a successful outcome, we
believe that given these changes in the business and the concurrent improvement
in the semiconductor capital spending environment, the SEG business has the
potential to generate positive cash flow from operations and return to
profitability. Accordingly, we believe the timing of the SEG business' sale
should be lengthened to allow for the realization of a sale price that more
closely reflects what we believe is the business' inherent value.
We have not changed our belief that the sale of the SEG business is in
the best interests of shareholders, nor have we changed our desire to consummate
a sale of the SEG business at the earliest date. We are in continuing
discussions with interested buyers.
On April 11, 2003, we entered into a settlement and release agreement
with a major customer, which provided for the release of certain claims among
the parties and the payment of $1.0 million to us. On the same date, we entered
into a loan agreement with this customer, which afforded us the right to borrow
an aggregate of $4.0 million, in two equal tranches, subject to the conditions
of each closing. The first closing occurred on April 11, 2003, at which time we
delivered to the major customer a secured promissory note in the amount of $2.0
million with a maturity date of April 11, 2004, bearing an interest rate of 10%.
The second closing for the delivery of a separate promissory note is subject to
additional terms and conditions. In December 2003, we informed the major
customer of our desire to draw down the second tranche of the loan. In response,
the major customer stated that it will advance the second tranche loan only if
we agree to substantial modifications to the settlement and release agreement.
We have not as yet determined whether we are prepared to accept such
modifications.
As of September 26, 2003, we closed a private placement of our
securities raising $5.0 million in gross proceeds, $4.6 million of which was
received by September 30, 2003 and the balance in early October 2003. In
December 2003, the lead investor exercised an option to invest an additional
$1.0 million on the same terms and conditions as the original funding, including
warrants to purchase up to 0.2 million shares, increasing the total gross
proceeds to $6 million. The net proceeds of the financing will be used for
general corporate purposes, including working capital to support growth. A total
of 2.4 million shares of common stock were sold in the private placement at
$2.50 per share. The private placement also included warrants to purchase up to
1.2 million shares at $3.05 per share on or before September 26, 2008. Warrants
were also issued to the placement agent to purchase up to 40,000 shares of
common stock at $2.50 per share on or before September 26, 2007. All of such
warrants may be exercised six months after September 26, 2003.
19
Additionally, we are required to file a registration statement by November 26,
2003, and to cause such registration statement to become effective by January
25, 2004, or, in each case, to pay each investor 1% of the purchase price paid
by such investor, as liquidated damages for each of the next two months and 2%
per month thereafter. As of December 31, 2003, we had incurred and accrued
liquidated damages of approximately $69,000 in connection with this obligation.
We had a $10.0 million revolving credit facility, which was due to
expire on April 28, 2003. The termination date had been extended eight times by
the lender. This credit facility allowed for borrowings of up to 90% of eligible
foreign receivables up to $10.0 million of availability provided under the
Export-Import Bank of the United States guarantee of certain foreign receivables
and inventories, less the aggregate amount of drawings under letters of credit
and any bank reserves.
On November 26, 2003, we replaced a $10.0 million revolving credit line
with a $13.0 million facility. The new facility has two revolving credit lines.
The first of which accords us a maximum of $10.0 million and is collateralized
by certain foreign receivables and inventory with availability subject to a
borrowing base formula. This line, which is guaranteed by the Export-Import Bank
of the United States expires on November 30, 2005 and has a 7% interest rate.
The second line is for a maximum of $3.0 million and is collateralized by
certain domestic receivables. Availability under this line is subject to a
borrowing base formula, which, as defined in the credit agreement, includes a
$1.5 million overadvance feature. It expires on November 25, 2006 and has a 17%
interest rate of which 5% can be capitalized at our option (as defined in the
agreement). The facility contains covenants pertaining to our net worth and to
fixed charge coverage (as defined). We can prepay the facility at its
discretion. In the event of the sale of SEG, we are required to repay in full
the $10.0 million credit line. The $3.0 million credit line continues subject to
our meeting certain financial conditions. The facility also includes an annual
commitment fee of 0.5% based on the unused portion of the facility. At December
31, 2003, the aggregate amount available under the lines was approximately $11.6
million, against which we had $10.6 million of borrowings.
In connection with the facility, we issued a warrant to purchase 2.2
million shares of our common stock at an exercise price of $0.01 per share to
the lender and a warrant to purchase 60,000 shares of our common stock at an
exercise price of $0.01 per share to the placement agent. We recorded a deferred
financing cost asset for the fair value of the warrants (determined using
Black-Scholes pricing model), of approximately $7.4 million, which is being
amortized and charged to interest expense over the life of the facility. The
lender exercised its warrant on December 18, 2003.
During the three month period ended December 31, 2003, we issued 25,000
shares of our common stock to a supplier in exchange for the cancellation of
approximately $19 thousand of trade indebtedness owed to a supplier and
outstanding purchase commitments totaling approximately $355 thousand. We are in
continued discussions with other suppliers regarding the exchange of debt for
common stock. We believe that these steps will enhance the prospects for an
eventual sale of SEG at a higher price than would otherwise be obtained.
As of December 31, 2003, we were in default of an aggregate of $4.3
million of our borrowings.
On November 21, 2001, the $1.5 million note payable issued to the
former principals of Abante Automation Inc. ("Abante") came due, together with
8% interest thereon from November 29, 2000. In connection with the acquisition
of Abante, we agreed to make post-closing installment payments to the selling
shareholders of Abante. These non-interest bearing payments were payable in
annual installments of not less than $0.5 million through November 2005. On
November 21, 2001, the first of five annual installments on the Abante payable
also became due, in the amount of $0.5 million. Pursuant to an oral agreement
with the former principals of Abante, we paid on November 21, 2001 the interest,
$250 thousand of note principal and approximately $112 thousand of the first
annual installment. The balance of the sums originally due on November 21, 2001
were rescheduled for payment in installments through the first quarter of fiscal
2003. We continued to make certain payments in accordance with the terms of that
agreement, paying the interest, $250 thousand of note principal and
approximately $150 thousand of the first annual installment on February 21,
2002, and paying approximately $238 thousand of the first annual installment on
May 21, 2002. We did not make either the November 2002 note principal payment of
$1.0 million or a significant portion of the November 2002 annual installment
payment of $0.5 million . In addition, we did not make a significant portion of
the November 2003 annual installment payment of $0.5 million. On December 19,
2003, we entered into a settlement agreement with the former principals of
Abante, who agreed to forbear from taking action against us for fifteen months.
Pursuant to this agreement, we paid $0.3 million in January 2004, agreed
to make additional monthly payments of at least $35,000, and agreed to pay the
remaining balance due upon the sale of SEG, subject to certain conditions.
During the three months ended December 31, 2003, we also made two principal
payments of $50,000 each. As of December 31, 2003, the remaining outstanding
balances on the note payable and post-closing installment payments were $0.9
million and $1.8 million, respectively.
20
On January 3, 2002, a payment of $1.85 million under notes issued to
the former shareholders of Auto Image ID, Inc. ("AIID") came due together with
interest at prime rate. On the due date, we paid the interest and approximately
$240 thousand of note principal to certain of these shareholders. We reached an
agreement with the other former shareholders to pay the sums originally due on
January 3, 2002 in three approximately equal principal installments in April
2002, August 2002 and December 2002. In exchange for the deferral, we issued
warrants to purchase 183,188 shares of our common stock at an exercise price of
$5.70 per share. The fair value of these warrants (determined using
Black-Scholes pricing model), totaling approximately $0.1 million, was charged
to operations through January 2003. In accordance with the agreement with the
other former stockholders, we made note principal and interest payments on April
1, 2002 of approximately $0.5 million and $31 thousand, respectively, and note
principal and interest payments on August 1, 2002 of $0.5 million and $29
thousand, respectively. We did not make the December 2002 and January 2003
installment payments due of $0.5 million and $1.9 million, respectively, and are
therefore in default. Seven of the former shareholders filed lawsuits against us
seeking payment of all amounts currently past due. In July 2003, we reached a
settlement with certain of these noteholders. These noteholders agreed to
forbear from taking action to enforce their notes until May 1, 2004 or the
earlier occurrence of certain events. On October 29, 2003, additional
noteholders agreed to forbear from taking action until May 1, 2004. We agreed to
issue these noteholders warrants to purchase 59,031 shares of our common stock
at exercise prices ranging from $2.50 per share to $3.60 per share and paid
these noteholders the outstanding interest that had accrued through June 1,
2003. The balance of the notes of $1.9 million became due on January 3,2004 and
was not paid by us.
We have operating lease agreements for equipment, and manufacturing and
office facilities. The minimum noncancelable lease payments under these
agreements are as follows (in thousands):
TWELVE MONTH PERIOD ENDING DECEMBER 31: FACILITIES EQUIPMENT TOTAL
- --------------------------------------- ---------- --------- -----
2004 $ 1,532 $ 39 $ 1,571
2005 1,348 14 1,362
2006 920 2 922
2007 927 -- 927
------- ----- ---------
Total $ 4,727 $ 55 $ 4,782
======= ===== =========
Purchase Commitments -- As of December 31, 2003, we had approximately
$15.3 million of purchase commitments with vendors. Approximately $11.9 million
were for the Semiconductor Equipment Group, and included computers and
manufactures components for the division's lead and wafer scanning product
lines. Approximately $3.4 million were for the Acuity CiMatrix division and
included computers, PC boards, cameras, and manufactured components for the
division's machine vision and two-dimensional inspection product lines. We are
required to take delivery of this inventory over the next three years.
Substantially all deliveries are expected to be taken in the next eighteen
months.
Effect of Inflation
Management believes that during the three months ended December 31,
2003 the effect of inflation was not material.
Recent Accounting Pronouncements
In December 2003, the Financial Accounting Standards Board (FASB)
issued SFAS 132R. This Statement revises employers' disclosures about pension
plans and other postretirement benefit plans. It does not change the measurement
or recognition of those plans required by FASB Statements No. 87,
Employers' Accounting for Pensions, No. 88, Employers' Accounting for
Settlements and Curtailments of Defined Benefit Pension Plans and for
Termination Benefits, and No. 106, Employers' Accounting for Postretirement
Benefits Other Than Pensions. This Statement retains the disclosure requirements
contained in FASB Statement No. 132, Employers' Disclosures about Pensions and
Other Postretirement Benefits, which it replaces. It requires additional
disclosures to those in the original Statement 132 about the assets,
obligations, cash flows, and net periodic benefit cost of defined benefit
pension plans and other defined benefit postretirement plans. We will adopt the
provisions of SFAS 132R on January 1, 2004. The adoption of this pronouncement
is not expected to have a material effect on our financial position, results
from operations or cash flows.
21
In December 2003, the SEC issued Staff Accounting Bulletin (SAB) No.
104, Revenue Recognition, which codifies, revises and rescinds certain sections
of SAB No. 101, Revenue Recognition, in order to make this interpretive guidance
consistent with current authoritative accounting and auditing guidance and SEC
rules and regulations. The changes noted in SAB 104 did not have a material
effect on our financial position, results of operations and cash flows.
Forward-Looking Statements And Associated Risks
This report contains forward-looking statements including statements
regarding, among other items, financing activities and anticipated trends in our
business, which are made pursuant to the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995. These statements are based largely on
our expectations and are subject to a number of risks and uncertainties, some of
which cannot be predicted or quantified and are beyond our control, including
the following: we may not have sufficient resources to continue as a going
concern; any significant downturn in the highly cyclical semiconductor industry
or in general economic conditions would likely result in a reduction of demand
for our products and would be detrimental to our business; our Acuity CiMatrix
business faces significant competition; we will be unable to achieve profitable
operations unless we increase quarterly revenues or make further reductions in
our costs; a loss of or decrease in purchases by one of our significant
customers could materially and adversely affect our revenues and profitability;
economic difficulties encountered by certain of our foreign customers may result
in order cancellations and reduced collections of outstanding receivables;
development of our products requires significant lead time and we may fail to
correctly anticipate the technical needs of our markets; inadequate cash flows
and restrictions in our banking arrangements may impede production and prevent
us from investing sufficient funds in research and development; the loss of key
personnel could have a material adverse effect on our business; our common stock
is quoted on the National Quotation Service; the large number of shares
available for future sale could adversely affect the price of our common stock;
and the volatility of our stock price could adversely affect the value of an
investment in our common stock.
Future events and actual results could differ materially from those set
forth in, contemplated by, or underlying the forward-looking statements.
Statements in this report, including those set forth above, describe factors,
among others, that could contribute to or cause such differences.
This 10-Q should be read in conjunction with detailed risk factors in
our annual report on Form 10-K, and other filings with the Securities and
Exchange Commission.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Financial instruments that potentially subject us to concentrations of
credit-risk consist principally of cash equivalents and trade receivables. We
place our cash equivalents with high-quality financial institutions, limit the
amount of credit exposure to any one institution and have established investment
guidelines relative to diversification and maturities designed to maintain
safety and liquidity. Our trade receivables result primarily from sales to
semiconductor manufacturers located in North America, Japan, the Pacific Rim and
Europe. Receivables are denominated in U.S. dollars, mostly from major
corporations or distributors or are supported by letters of credit. We maintain
reserves for potential credit losses and such losses have been immaterial.
We have minimum exposure to the impact of fluctuation on interest
rates, primarily because our new revolving credit lines are based on fixed
interest rates.
We believe that our exposure to currency exchange fluctuation risk is
insignificant because the operations of our international subsidiaries are
immaterial. Sales of our U.S. divisions to foreign customers are primarily U.S.
dollar denominated. During fiscal 2002 and 2003, we did not engage in foreign
currency hedging activities. Based on a hypothetical ten percent adverse
movement in foreign currency exchange rates, the potential losses in future
earnings, fair value of foreign currency sensitive instruments, and cash flows
are immaterial, although the actual effects may differ materially from the
hypothetical analysis.
We estimate the fair value of our notes payable and long-term
liabilities based on quoted market prices for the same or similar issues or on
current rates offered to us for debt of the same remaining maturities. For all
other balance sheet financial instruments, the carrying amount approximates fair
value.
22
ITEM 4. CONTROLS AND PROCEDURES
Our management carried out an evaluation, with the participation of our
Chief Executive Officer and Chief Financial Officer, of the effectiveness of our
disclosure controls and procedures as of December 31, 2003. Based upon that
evaluation and after consultation with our audit committee, our Chief Executive
Officer and our Chief Financial Officer concluded that our disclosure controls
and procedures were effective to ensure that information required to be
disclosed by us in reports that we file or submit under the Securities Exchange
Act of 1934 is recorded, processed, summarized and reported, within the time
periods specified in the rules and forms of the Securities and Exchange
Commission.
There has not been any change in our internal control over financial
reporting in connection with the evaluation required by Rule 13a-15(d) under the
Exchange Act that occurred during the three months ended December 31, 2003, that
has materially affected, or is reasonably likely to materially affect, our
internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In addition to legal proceedings discussed in our annual report on Form
10-K for the year ended September 30, 2003, we are presently involved in other
litigation matters in the normal course of business. Based upon discussion with
our legal counsel, management does not expect that these matters will have a
material adverse impact on our consolidated financial statements.
ITEM 2. CHANGE IN SECURITIES AND USE OF PROCEEDS
In October 2003, we entered into agreements with certain holders of our
notes issued in connection with the acquisition of Auto Image ID, Inc. in
January 2001. As partial consideration for their agreement to forbear from
exercising their rights with respect to these notes, we issued to these
noteholders warrants to purchase an aggregate of 7,047 shares of common stock.
The warrants are exercisable at $2.50 per share through September 2, 2006.
On September 26, 2003, we completed a private placement of our
securities raising $5.0 million in gross proceeds. On December 1, 2003, one of
the investors exercised its option to invest an additional $1.0 million in such
private placement. A total of 2,400,000 shares of common stock were sold to
accredited investors at $2.50 per share. We also issued to these accredited
investors warrants to purchase up to 1,000,000 shares at $3.05 per share
beginning March 26, 2004 through September 26, 2008, and warrants to purchase up
to 200,000 shares at $3.05 per share beginning May 1, 2004 through September 26,
2008. The placement agent, Barrington Research Associates, Inc., received fees
of $250,000 and warrants to purchase 40,000 shares of common stock at an
exercise price of $2.50 per share.
On October 31, 2003, we issued to Philip Koerper, the landlord of the
New Berlin facility, warrants to purchase 20,000 shares of our common stock as
partial consideration for settlement of a dispute arising from an agreement
between the parties. The warrants are exercisable at $0.05 per share through
October 31, 2006.
On November 26, 2003, we replaced our $10.0 million revolving credit
line with a $13.0 million facility. In connection therewith, we issued a warrant
to purchase 2,200,000 shares of our common stock to the lender and a warrant to
purchase 60,000 shares of our common stock to the placement agent. The warrants
are exercisable at $0.01 per share commencing November 26, 2003 and ending
November 26, 2006. The lender exercised its warrant on December 18, 2003.
During the three months ended December 31, 2003, we issued 25,000
shares of our common stock to a supplier in exchange for the cancellation
of approximately $19 thousand of trade indebtedness owed to such supplier and
forgiveness of $355 thousand of purchase order commitments.
During the three months ended December 31, 2003, we issued 3,479 shares
of our common stock and options to purchase 8,000 shares of our common stock to
non-employee members of its Board of Directors as compensation for their
attendance at board and committee meetings held during that period.
23
The securities that were issued in the foregoing transaction were not
registered under the Securities Act of 1933 because such securities were offered
and sold in transactions not involving a public offering, and as such, exempt
from such registration.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
A special meeting of stockholders was held on November 11, 2003.
At that meeting, our stockholders approved a proposal to grant
discretionary authority to our board of directors to amend our restated
certificate of incorporation to effect a reverse split of our common stock
within a band ranging from one-for-three to one-for-seven.
For 11,073,943
Against 1,090,766
Abstain 30,169
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
Exhibit
No Description
31.1 Rule 13a-14(a) Certification of Chief Executive Officer
31.2 Rule 13a-14(a) Certification of Chief Financial Officer
32.1 Section 1350 Certifications
(b) Reports on Form 8-K for the quarter ended December 31, 2003.
During the quarter ended December 31, 2003, we filed or submitted the
following current reports on Form 8-K
Current report on Form 8-K, dated December 1, 2003, was filed with the SEC on
December 1, 2003. The items reported were:
Item 5 -- Other Events and Regulation FD Disclosure, which reported the
issuance of a press release announcing that (a) we had closed on a
refinancing of our principal credit line and (b) we had completed a one
for five reverse split of our common stock.
Item 7 --Financial Statements and Exhibits, which identified the
exhibit filed with the Form 8-K.
Current report on Form 8-K, dated November 26, 2003, was filed with the SEC on
December 8, 2003. The items reported were:
Item 5 - Other Events and Regulation FD Disclosure, which reported (a)
a refinancing of our principal credit line and (b) a one for five
reverse split of our common stock.
Item 7 - Financial Statements and Exhibits, which identified the
exhibits filed with the Form 8-K.
Current report on Form 8-K, dated December 22, 2003, was filed with the SEC on
December 22, 2003. The item reported was:
24
Item 12 - Results of Operations and Financial Condition, which
reported the issuance of a press release announcing our financial
results for the year ended September 30, 2003.
25
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ROBOTIC VISION SYSTEMS, INC.
Registrant
Dated: February 17, 2003 /s/ PAT V. COSTA
-------------------------------------
PAT V. COSTA
President and CEO
(Principal Executive Officer)
/s/ JEFFREY P. LUCAS
-------------------------------------
Jeffrey P. Lucas
Chief Financial Officer and Treasurer
(Principal Financial Officer)
26