1
================================================================================
U.S. Securities And Exchange Commission
Washington, D.C. 20549
---------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
COMMISSION FILE NUMBER 0-15963
INVIVO CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 77-0115161
(State or other jurisdiction (IRS Employer Identification No.)
Of incorporation)
4900 HOPYARD RD. SUITE 210, PLEASANTON, CALIFORNIA 94588
(Address of principal executive offices) (Zip Code)
TELEPHONE: (925) 468-7600
(Registrant's telephone number)
---------------
Indicate by check whether the registrant (1) filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes [X] No [ ]
The number of shares outstanding of the issuer's Common Stock, par value $.01
per share, at December 31, 2000 was 4,393,249 shares.
================================================================================
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INVIVO CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
DECEMBER 31, JUNE 30,
2000 2000
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ 460,300 969,800
Short term investments 7,369,100 6,817,600
Trade receivables, net 14,527,100 14,656,600
Inventories 10,443,900 10,132,000
Deferred income taxes 1,081,000 1,343,000
Prepaid expenses and other current assets 637,500 407,200
------------ ------------
Total current assets 34,518,900 34,326,200
Property and equipment, net 6,087,200 6,139,600
Intangible assets 8,301,500 8,439,700
Other assets 553,900 570,500
------------ ------------
$ 49,461,500 49,476,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,954,000 2,725,600
Accrued expenses 2,540,200 3,381,100
Current portion of long-term debt and
bank borrowings 142,700 142,700
Income taxes payable 1,192,200 1,347,200
------------ ------------
Total current liabilities 5,829,100 7,596,600
Long-term debt, excluding current portion 1,315,700 1,392,900
Deferred income taxes 123,000 118,000
Other liabilities 52,000 52,000
------------ ------------
Total liabilities 7,319,800 9,159,500
------------ ------------
Stockholders' equity:
Common stock 43,900 43,600
Additional paid-in capital 26,335,500 26,257,300
Retained earnings 15,767,100 14,041,800
Accumulated other comprehensive loss (4,800) (26,200)
------------ ------------
Total stockholders' equity 42,141,700 40,316,500
------------ ------------
Commitments and contingencies
$ 49,461,500 49,476,000
============ ============
See accompanying notes to consolidated financial statements.
2
3
INVIVO CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31,
------------------------------- -------------------------------
2000 1999 2000 1999
------------ ------------ ------------ ------------
Sales $ 13,034,000 13,027,700 25,707,300 25,891,500
Cost of goods sold 6,702,100 6,851,200 13,123,500 13,256,600
------------ ------------ ------------ ------------
Gross profit 6,331,900 6,176,500 12,583,800 12,634,900
------------ ------------ ------------ ------------
Operating expenses:
Selling, general
and administrative 4,335,800 3,763,700 8,607,600 7,775,100
Research and experimental 719,800 638,700 1,492,500 1,412,200
------------ ------------ ------------ ------------
Total operating expenses 5,055,600 4,402,400 10,100,100 9,187,300
------------ ------------ ------------ ------------
Income from operations 1,276,300 1,774,100 2,483,700 3,447,600
Other income (expense):
Interest income 99,100 95,900 214,500 205,700
Interest expense (31,100) (33,300) (64,200) (64,600)
Other, net - (1,200) - 1,700
------------ ------------ ------------ ------------
Income before income taxes 1,344,300 1,835,500 2,634,000 3,590,400
Income tax expense 463,800 624,200 908,700 1,220,900
------------ ------------ ------------ ------------
Net income $ 880,500 $ 1,211,300 1,725,300 2,369,500
============ ============ ============ ============
Basic net income per common share $ .20 $ .28 .39 .55
============ ============ ============ ============
Weighted average common
Shares outstanding (basic) 4,393,249 4,309,084 4,387,229 4,294,882
============ ============ ============ ============
Diluted net income per common
Share $ .20 $ .27 .38 .53
============ ============ ============ ============
Weighted average common
Shares outstanding (diluted) 4,473,133 4,500,029 4,481,909 4,511,343
============ ============ ============ ============
See accompanying notes to consolidated financial statements.
3
4
INVIVO CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
SIX MONTHS ENDED DECEMBER 31, 2000 AND 1999
2000 1999
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,725,300 2,369,500
Adjustments to reconcile net income to
Cash provided by operating activities:
Depreciation and amortization 781,300 647,100
Deferred Income Taxes 267,000 -
Change in operating assets and liabilities:
Trade receivables 129,500 (2,463,100)
Inventories (141,400) (993,000)
Prepaid expenses and other current assets (230,300) (165,900)
Accrued expenses (840,900) (1,014,900)
Accounts payable (771,600) 692,900
Income taxes payable (155,000) 303,100
----------- -----------
Net cash provided by (used in) operating activities 763,900 (624,300)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
(Purchase) sale of short-term investments (530,100) 1,852,000
Capital expenditures (761,200) (1,281,300)
Other assets 16,600 (11,900)
----------- -----------
Net cash (used in) provided by investing activities (1,274,700) 558,800
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of common stock 78,500 179,700
Bank borrowings, net - 41,500
Principal payments under long-term debt and other liabilities (77,200) (24,900)
----------- -----------
Net cash provided by financing activities 1,300 196,300
----------- -----------
Net (decrease) increase in cash and cash equivalents (509,500) 130,800
Cash and cash equivalents at beginning of period 969,800 207,800
----------- -----------
Cash and cash equivalents at end of period $ 460,300 $ 338,600
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Income taxes $ 793,600 1,035,700
=========== ===========
Interest $ 64,200 64,600
=========== ===========
See accompanying notes to consolidated financial statements.
4
5
INVIVO CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL
The unaudited consolidated financial statements reflect, in the opinion of
management, all adjustments necessary to present fairly the financial position
and results of operations as of the end of and for the periods indicated.
Interim results are not necessarily indicative of results for a full year.
The financial statements and notes are presented as permitted by Form 10-Q,
and do not contain certain information included in the Company's annual
consolidated financial statements and notes.
2. SEGMENT INFORMATION
The method for determining what information to report is based on the way
that management organizes the operating segments within the Company for making
operating decisions and assessing financial performance. The Company's chief
operating decision-maker is considered to be the Chief Executive Officer (CEO).
The CEO reviews financial information presented on a consolidated basis
accompanied by information by business segment. The Company operates in two
business segments: (i) patient safety monitoring, which designs, manufactures,
and markets monitoring systems that measure and display vital signs of patients
in medical settings; and (ii) safety and industrial instrumentation, which is
engaged in the design, manufacture, and marketing of sensor-based instruments
for safety and industrial process control applications. These segments are
managed separately because of different customers and products which require
different business strategies. The Company evaluates the operating performance
of its segments based on net sales and income from operations.
Summarized financial information concerning the Company's business segments
is shown in the following table. The "Corporate" column includes general and
administrative and corporate-related expenses not allocated to reportable
segments (in thousands).
SAFETY AND
PATIENT SAFETY INDUSTRIAL
MONITORING INSTRUMENTATION CORPORATE TOTAL
-------------- --------------- --------- --------
For the three months ended
December 31, 2000
Net sales ......................... $ 8,446 4,588 -- 13,034
Income from operations ............ 1,045 578 (347) 1,276
Depreciation and amortization ..... 275 94 13 382
For the three months ended
December 31, 1999
Net sales ......................... $ 8,097 4,931 -- 13,028
Income from operations ............ 1,241 802 (269) 1,774
Depreciation and amortization ..... 173 75 13 261
For the six months ended
December 31, 2000
Net sales ......................... $ 16,464 9,243 -- 25,707
Income from operations ............ 1,968 1,194 (678) 2,484
Depreciation and amortization ..... 527 228 26 781
Total assets at December 31, 2000 ..... 28,746 11,339 9,377 49,462
5
6
For the six months ended
December 31, 1999
Net sales ......................... $ 16,051 9,840 -- 25,891
Income from operations ............ 2,473 1,665 (690) 3,448
Depreciation and amortization ..... 336 148 22 506
Total assets at December 31, 1999 ..... 28,110 10,542 8,767 47,419
3. DEBT AND BANK BORROWINGS
The Company's bank line of credit of $1,000,000 was renewed at the same
terms on December 1, 2000 and expires on December 1, 2001. The Company's
revolving bank line of credit is collateralized by the Company's accounts
receivable, inventory, and equipment. At December 31, 2000, $1,000,000 was
available under the line of credit.
4. COMPREHENSIVE INCOME
The components of comprehensive income, net of tax, are as follows:
Three Months Ended Six Months Ended
------------------------ ------------------------
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2000 1999 2000 1999
--------- --------- --------- ---------
Net Income 880,500 1,211,300 1,725,300 2,369,500
Change in unrealized
gain (loss) on Short
Term Investments 5,500 232,500 12,500 230,700
--------- --------- --------- ---------
Comprehensive income 886,000 1,443,800 1,737,800 2,600,200
========= ========= ========= =========
5. ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES. In June 1998,
the FASB issued SFAS No. 133, Accounting for Derivative Instruments and Hedging
Activities (as amended by SFAS No. 137), which establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. The Company
adopted SFAS No. 133 on July 1, 2000. As the Company does not currently have any
derivative instruments for hedging activities, SFAS No. 133 does not have an
impact on its current consolidated financial statements.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
THREE AND SIX MONTH PERIODS ENDED DECEMBER 31, 2000 AND 1999
Sales
Sales of $13,034,000 for the second quarter ended December 31, 2000 were
essentially flat as compared to sales of $13,027,700 for the second quarter
ended December 31, 1999. Sales for the six months ended December 31, 2000
decreased 0.7% to $25,707,300 compared with $25,891,500 for the comparable
period last year. Sales at the Company's patient safety monitoring business
increased 4.3% in the second quarter as compared to year earlier sales.
Continued growth in sales of the Company's MRI vital signs monitor offset a
decrease in "Millennia" product sales as the general monitoring market continued
to experience slowing market conditions. The sales increase at the patient
safety monitoring business for the second quarter of fiscal 2001 was offset by a
sales decline at the Company's safety and industrial instrumentation segment as
the Company's non-contact infrared temperature products continued to experience
competitive pricing pressures and difficult market conditions. The Company's
pressure sensing devices and oxygen monitoring products also experienced sales
declines. An increase in sales at the Company's gas detection product line
partially offset the other sales declines. For the six months ended December 31,
2000, the sales increase at the patient safety monitoring business in the second
quarter was not enough to offset the sales decline in the industrial
instrumentation segment.
6
7
Gross Profit
The gross profit margin increased for the three and six month periods ended
December 31, 2000 to 48.6% and 49.0% from 47.4% and 48.8%, respectively, from
the previous fiscal periods. The increase was attributable to an increase in
patient safety monitoring business as a percentage of total revenue, the effect
of which offset the deteriorating gross margins of the non-contact infrared
industrial products due to heavy price discounting and the impact of decreased
sales at the other safety and industrial instrumentation product lines relative
to fixed cost of sale components.
Operating Expenses
Selling, general and administrative expenses for the three and six month
periods ended December 31, 2000 increased 15.2% or $572,100 and 10.7% or
$832,500, respectively, from the previous fiscal periods. Selling, general and
administrative expenses were 33.3% and 33.5% of sales for the three and six
month periods ended December 31, 2000 compared with 28.9% and 30.0%,
respectively, for the comparable periods in fiscal 2000. The increase in these
expenditures in aggregate and as a percentage of sales for the three and six
month periods ended December 31, 2000 was due to higher administrative and
selling expenses at the Company's patient safety monitoring business. The
increase in selling, general and administrative expenses at the patient safety
monitoring business was in anticipation of higher sales volume for the three and
six month periods than was actually achieved. The increase in selling expenses
was also due to higher international selling expenses as the Company established
a U.K. subsidiary in the first quarter of fiscal 2001.
Research and experimental expenses were 5.5% and 5.8% of sales for the three
and six month periods ended December 31, 2000 compared to 4.9% and 5.5% for the
comparable periods in fiscal 2000. The increase in the second quarter as
compared to the prior year period was due to a portion of the expenditures
related to equipment for the production of the Company's proprietary anesthetic
agent module for the "Millennia" being capitalized in the second quarter of
fiscal 2000. The Company plans to continue its efforts in developing new
products and enhancing its existing ones and expects future aggregate research
and experimental expenditures to be consistent with the second quarter of fiscal
2001 levels.
Other Income and Expense
Interest income was $99,100 for the second quarter of fiscal 2001 as compared
to $95,900 for the prior year period. The increase was largely due to the higher
interest rates earned on the Company's short-term investments. Interest expense
remained stable at $31,100 in the second quarter of fiscal 2001.
Provision for Income Taxes
The effective tax rate for the first quarter of fiscal 2001 was 34.5% as
compared to 34.0% for the prior year period.
LIQUIDITY AND CAPITAL RESOURCES
Working capital at December 31, 2000 increased to $28,689,800 from
$26,729,600 at June 30, 2000. Net cash provided by operating activities was
$763,900 for the six months ended December 31, 2000 compared with $624,300 used
by operating activities for the six months ended December 31, 1999. This
increase was largely the result of changes in operating assets and liabilities,
particularly accounts receivable and deferred income taxes.
Capital expenditures were $761,200 for the first six months of fiscal 2001
compared to $1,281,300 for the prior year period. Capital expenditures were
primarily related to information system software enhancements and additional
demonstration equipment for the direct sales force at the Company's patient
safety monitoring business and leasehold improvements and manufacturing
equipment at the Company's new facility for the oxygen monitoring business.
The Company believes that its cash resources and cash flow from operations
are adequate to meet its anticipated cash needs for working capital and capital
expenditures throughout fiscal 2001. As the Company did not foresee any near
term borrowing requirements coupled with the fees associated with maintaining a
bank line of credit, the Company elected to decrease its bank line of credit
from $7,500,000 to $1,000,000 in May of 2000. The line of credit was renewed at
the same terms for one year on December 1, 2000. The
7
8
Company's revolving bank line of credit is collateralized by the Company's
accounts receivable, inventory, and equipment. At December 31, 2000, $1,000,000
was available under the line of credit.
The Company will continue to explore opportunities for the possible
acquisitions of technologies or businesses, which may require the Company to
seek additional financing.
RECENT ACCOUNTING PRONOUNCEMENTS
SAB 101 In December 1999, the Securities and Exchange Commission (SEC) issued
Staff Accounting Bulletin NO. 101 (SAB 101), Revenue Recognition in Financial
Statements as amended by SAB 101A, which provides guidance on the recognition,
presentation, and disclosure of revenue in financial statements filed with the
SEC. SAB 101 outlines the basic criteria that must be met to recognize revenue
and provides guidance for disclosures related to revenue recognition policies.
In June 2000, the SEC issued SAB 101B which deferred the effective date of SAB
101 until the last quarter of fiscal years beginning after December 15, 1999.
The Company does not expect the adoption of SAB 101 to have a material effect on
its consolidated financial position or results of operations.
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements regarding
the Company's plans, expectations, estimates and beliefs. Actual results could
differ materially from those discussed in, or implied by, these forward-looking
statements. Forward-looking statements are identified by words such as
"believe," "anticipate," "expect," "intend," "plan," "will," "may" and other
similar expressions. In addition, any statements that refer to expectations,
projections or other characterizations of future events or circumstances are
forward-looking statements. The Company is not obligated to update or revise
these forward-looking statements to reflect new events or circumstances. Factors
that could cause actual results, events or circumstances to differ from
forward-looking statements made in this report include those set forth in the
following "Risk Factors" section.
RISK FACTORS
Risks Relating to the Company's Business:
THE COMPANY IS DEPENDENT ON A CONCENTRATED LINE OF PRODUCTS
The Company's future financial performance will be largely dependent on its
patient monitor product line, which includes a limited number of products. The
Company expects its Omni-Trak 3150 MRI patient monitor and its Millennia
portable patient monitor to have a substantial impact on revenue growth. In the
MRI monitoring market, the success of its Omni-Trak 3150 is heavily dependent on
the continued acceptance of MRI technology as a diagnostic tool. In the general
patient monitoring market, the Company's Millennia monitor is heavily dependent
on its ability to penetrate an already competitive market.
In addition, the recent consolidation in the medical care provider market has
resulted in a number of very large purchasers of medical devices. These large
purchasers typically prefer to establish relationships with medical device
manufacturers that have broad and diverse product lines.
The failure of the Company's products to continue to gain market acceptance
or a continued consolidation of the medical care provider market could have a
material adverse effect on its business and results of operations.
8
9
THE COMPANY FACES INCREASED LEVELS OF COMPETITION
The Company has encountered and will continue to encounter significant
competition in the sale of its products. The Company's general patient
monitoring competitors include a number of large multinational corporations.
Some of these competitors may be able to adapt more quickly to new or emerging
technologies and changes in customer requirements, or to devote greater
resources to the development, promotion and sale of their products than the
Company can. In the MRI patient monitoring market, the Company has enjoyed a
significant first-to-market advantage over its competitors. However, competitors
have introduced products designed to compete with its MRI vital signs monitoring
products. In addition, as the market for MRI vital signs monitoring products
expands it may attract competitors with greater resources.
Additionally, competition may increase if new companies enter the Company's
markets or if existing competitors expand their product lines or intensify
efforts within existing product lines. The introduction of competitive products
may result in a decrease in the Company's market share and in a decrease in the
prices at which the Company is able to sell its products. The Company's market
share could also be adversely affected by increasing concentration in the
medical care provider market. Any decrease in the Company's market share or
decrease in the prices at which the Company is able to sell its products could
have a material adverse effect on its business and results of operations.
THE COMPANY'S FINANCIAL RESULTS MAY FLUCTUATE
The Company's financial results may fluctuate significantly from period to
period because of a variety of factors, many of which is beyond its control.
These factors include:
- increased competition
- changes in the Company's pricing policies and those of its competitors
- changes in the Company's operating expenses or capital expenditures
- timing and market acceptance of new and upgraded product introductions by
the Company and its competitors
- seasonal fluctuations in the demand for the Company's products
- introduction of alternative technologies by the Company and its competitors
- effect of potential acquisitions
- other general economic factors
Fluctuations caused by these and other factors could have a material adverse
effect on the Company's business and results of operations.
THE COMPANY IS SUBJECT TO A SIGNIFICANT RISK OF NEW LAWS RELATED TO HEALTH CARE
Changes in the law or new interpretations of existing laws may have a
significant effect on the Company's costs of doing business and the amount of
reimbursement the Company receives from both government and third-party payors.
In addition, economic forces, regulatory influences and political initiatives
are subjecting the health care industry to fundamental changes. Health care
reform proposals have been formulated by the current administration and by
members of Congress. Federal, state and local government representatives are
likely to continue to review and assess alternative health care delivery systems
and payment methods. The Company expects ongoing public debate on these issues.
Any of these efforts or reforms could have a material adverse affect on the
Company's business and results of operations.
9
10
THE COMPANY'S BUSINESS IS SUBJECT TO TECHNOLOGICAL CHANGE AND INTRODUCTION OF
NEW PRODUCTS
Technological change, evolving industry standards and new product
introductions and enhancements characterize the markets for the Company's
products. Many of the Company's products and products under development are
technologically innovative, and therefore require significant planning, design,
development and testing. These activities require the Company to make
significant capital commitments and investments. In addition, industry standards
may change on short notice and new products and technologies may render existing
products and technologies uncompetitive. Additionally, the products that the
Company is currently developing, and those that the Company develops in the
future, may not be technologically feasible or accepted by the marketplace or
they may not be completed in an acceptable time frame. Any increased capital
investments or loss in sales due to technological change could have a material
adverse effect on the Company's business and results of operations.
THE COMPANY CURRENTLY IS INVOLVED IN A LEGAL PROCEEDING
The Company's medical device subsidiary, Invivo Research, was one of two
third-party defendants named in a lawsuit in June of 1994 by Southern Nevada
Surgical Center and Surgex Southern Nevada, Inc. in Nevada State District Court.
The underlying action in this matter stemmed from an incident involving a
surgical patient undergoing a procedure at the Southern Nevada Surgical Center.
The patient suffered a serious permanent brain injury. A lawsuit was filed on
behalf of the patient against the surgical center and the anesthesiologist who
monitored the patient. The defendants in that action made a substantial
settlement to the patient. Southern Nevada Surgical Center ("SNSC") and Surgex
were seeking indemnity and contribution of approximately $14 million from the
manufacturer of the anesthetic gas machine and Invivo Research, which
manufactured the vital signs monitor used in this procedure. SNSC and Surgex
alleged that both the anesthetic gas machine and the vital signs monitor were
defective. The Company believes that the vital signs monitor operated properly
and was properly designed for its intended function.
On August 18, 1999, the Nevada District Court granted the Company's Motion to
Dismiss for Failure to Prosecute. The Order granted dismissal of the SNSC and
Surgex contribution claims, without prejudice, based upon Nevada law that
provides that an action must be brought to trial within five years of the date
of the filing of the original action. The dismissal is being appealed.
In April of 1997, the plaintiff's insurer, CNA, filed an action with
identical causes in the same Nevada State Court. This second action was removed
by the Company to U.S. District Court. The action by CNA was dismissed by the
District Court on January 19, 2000. The dismissal is being appealed.
Any judgment against the Company that exceeds the amount that its insurer is
required to pay could have a material adverse effect on its business and results
of operations.
THE COMPANY FACES PRODUCT LIABILITY AND PRODUCT RECALL RISKS
With respect to all of its products, and particularly its medical devices,
the Company faces the risk of potentially large product liability claims. The
malfunction or misuse of its products could potentially result in serious harm
to a patient. In addition, the Company may be required to indemnify its
distributors and customers for similar claims made against them.
Claims could be made against the Company even if its products did not
contribute to the injury that was sustained. Frequently, the Company's products
are used with products developed by other manufacturers. Even if its products
are not the cause of the injury, the Company may not be able to prove that some
other product malfunction or human error caused a claimant's injury.
The Company has had product liability claims made against it in the past and
may have further claims made against it in the future. While the Company is
insured for certain product liability claims, not all claims will be covered and
the level of its insurance may not be sufficient to protect us from the full
amount of a successful claim. In addition, the Company may not be able to obtain
adequate amounts of insurance at an acceptable cost. Claims made against the
Company that are not insured, or that exceed the amount of the Company's
coverage, could have a material adverse effect on its business and results of
operations.
10
11
Similarly, the Company's products are subject to the potential of being
recalled by government agencies for actual or potential deficiencies or
problems. Any such recall would likely be expensive and would have a material
adverse effect on the Company's business and results of operations.
THE COMPANY FACES INCREASED RISKS OF INTERNATIONAL OPERATIONS
International sales have accounted for over 20% of the Company's sales for
each of the past three years and may increase over time. International sales are
subject to a number of risks, including the following:
- fluctuations in exchange rates may affect the demand for products and
services the Company provides in foreign markets
- adverse changes in local economic conditions, such as those recently
occurring in Asian and South American countries, could depress the demand
for the Company's products
- agreements may be difficult to enforce and receivables difficult to collect
through a foreign country's legal system
- foreign customers may have longer payment cycles
- foreign countries may impose additional withholding taxes or otherwise tax
the Company's foreign income, impose tariffs, or adopt other restrictions on
foreign trade
- U.S. export licenses may be difficult to obtain
- the protection of intellectual property in foreign countries may be more
difficult to enforce
Any of these factors could have a material adverse impact on the Company's
business and results of operations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's primary market risk exposure is that of currency risk.
During the six months ended December 31, 2000, 20% of the Company's total sales
came from non-United States domiciled customers. The Company requires payment in
United States (U.S.) currency. If these customers currency devalues against the
U.S. dollar, the customers could potentially encounter difficulty in making the
U.S. dollar denominated payments.
PART II - OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS:
Not Applicable.
ITEM 2: CHANGES IN SECURITIES:
Not Applicable.
ITEM 3: DEFAULTS UPON SENIOR SECURITIES:
Not Applicable.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS:
At the Annual Meeting of Stockholders of the Company held on December
7, 2000 the Stockholders:
11
12
1. Elected all of the nominees for Director for the ensuing year as
follows:
NAME FOR AGAINST ABSTAIN
---- --- ------- -------
Ernest Goggio 3,351,183 0 3,100
James Hawkins 3,351,183 0 3,100
George Sarlo 3,351,183 0 3,100
Laureen DeBuono 3,351,183 0 3,100
2. Ratified the selection of KPMG LLP as independent auditors for the
Company. The number of shares voted in favor of the ratification was
3,350,283.
ITEM 5: OTHER INFORMATION:
Not Applicable.
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a)
Exhibit No. Description of Exhibit
----------- ----------------------
Exhibit 10.17 Fourth Amendment to Credit Agreement between
Wells Fargo Bank and Invivo Corporation dated
December 1, 2000
Exhibit 11.1 Statement of Computation of Net Income Per
Share
(b) Reports on Form 8-K:
None.
12
13
SIGNATURES
In accordance with requirements of the Exchange Act, the Registrant caused
this report to be signed on its behalf by the undersigned thereunto duly
authorized.
INVIVO CORPORATION
Date: February 14, 2000 By: /s/ JOHN F. GLENN
-------------------------------
Vice President-Finance
and Chief Financial Officer
(Principal Financial and
Accounting Officer)
13