-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, NbeoCykQ33BewgfiYccgSe4WgwLX93mY4v1jUX032ROunGpbPtNCxrC0k3YTt4QY 5439F5AfW8qda5i0hO825A== 0000950109-95-001404.txt : 19950427 0000950109-95-001404.hdr.sgml : 19950427 ACCESSION NUMBER: 0000950109-95-001404 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 19950425 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: VITRONICS CORP CENTRAL INDEX KEY: 0000712036 STANDARD INDUSTRIAL CLASSIFICATION: INDUSTRIAL PROCESS FURNACES & OVENS [3567] IRS NUMBER: 042726873 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3 SEC ACT: 1933 Act SEC FILE NUMBER: 033-58811 FILM NUMBER: 95531116 BUSINESS ADDRESS: STREET 1: 1 FORBES RD STREET 2: NEWMARKET INDUSTRIAL PARK CITY: NEWMARKET STATE: NH ZIP: 03857 BUSINESS PHONE: 6036596550 MAIL ADDRESS: STREET 1: 4 FORBES ROAD STREET 2: 4 FORBES ROAD CITY: NEWMARKET STATE: NH ZIP: 03857 S-3 1 FORM S-3 REGISTRATION STATEMENT NO. __________ ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 __________________________ FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 __________________________ VITRONICS CORPORATION ------------------------------------------------ (Exact name of issuer as specified in its charter) Commonwealth of Massachusetts 042726873 ----------------------------- ------------------ (State or other jurisdiction (I.R.S. Employer of incorporation) Identification No.) 1 Forbes Road Newmarket, New Hampshire 03857 (603) 659-6550 ------------------------------ (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) James J. Manfield, Jr., Chairman Vitronics Corporation 1 Forbes Road Newmarket, New Hampshire 03857 (603) 659-6550 ------------------------------- (Name, address, including zip code, and telephone number, including area code, of agent for service of process) Copy to: Michael F. Sweeney, Esq. Hinckley, Allen & Snyder 1500 Fleet Center Providence, Rhode Island 02903 (401) 274-2000 ____________________ Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of the Registration Statement. If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box. [X] If the registrant elects to deliver its latest annual report to security holders, or a complete and legible facsimile thereof, pursuant to Item 11(a)(1) of this form, check the following box. [_] Exhibit Index appears on page 16
================================================================================================================ CALCULATION OF REGISTRATION FEE ================================================================================================================ Title of Each Class of Proposed Proposed Securities Amount Maximum Maximum Amount of to be to be Offering Aggregate Registration Registered Registered Price Per Share* Offering Price* Fee - ---------------------------------------------------------------------------------------------------------------- Shares of Common Stock, $.01 par value, acquirable by New England Growth Fund, L.P. upon conversion of a 10% Convertible Subordinated Debenture dated 10/1/93 2,400,000 $1.47 $3,528,000 $1,216.55 Shares of Common Stock, $.01 par value, acquirable by Barclay Investments, Inc. upon exercise of Common Stock Purchase Warrants dated 12/15/92 (221,225 shares) and 10/1/93 (125,000 shares) 346,225 $1.47 $ 508,951 $ 175.50 Shares of Common Stock, $.01 par value, issued to A.W. Airflo Company 142,000 $1.47 $ 208,740 $ 71.98 TOTAL REGISTRATION FEE $1,464.03 - ----------------------------------------------------------------------------------------------------------------
(*) Estimated solely for the purpose of calculating the registration fee based on prices quoted on the American Stock Exchange on April 19, 1995. THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY DETERMINE. ii PROSPECTUS - ---------- VITRONICS CORPORATION 2,888,225 Shares of Common Stock (par value $.01 per share) The Selling Stockholders are offering for sale (the "Offering") a total of 2,888,225 shares (the "Shares") of Common Stock, $.01 par value per share (the "Common Stock"), of Vitronics Corporation (the "Company"). The Shares are being registered pursuant to the Registration Statement of which this Prospectus is a part and the Selling Stockholders are identified in the table captioned "Selling Stockholders" herein. The Shares are listed on the American Stock Exchange (the "AMEX") where they trade under the symbol "VTC." The average of the high and low prices for the Common Stock on April 19, 1995 was $1.47 per share. See "Risk Factors -- Volatility of Stock Price." The Selling Stockholders intend to sell the Shares in market transactions on a continuous or delayed basis, subject to certain limitations imposed by Federal and state securities laws, at then current market prices at any time, and from time to time, over the next two years. In connection with sales, it is expected that the Selling Stockholders will incur a standard commission charge. See "Plan of Distribution". The selling price of the Shares cannot be determined at this time. SEE "RISK FACTORS" FOR A DISCUSSION OF CERTAIN FACTORS WHICH SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE SECURITIES OFFERED HEREBY. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. The date of this Prospectus is ___________, 1995. AVAILABLE INFORMATION The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and in accordance therewith files reports and other information with the Securities and Exchange Commission (the "Commission"). Reports, proxy statements and other information filed with the Commission can be inspected and copied at the public reference facilities maintained by the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549; Seven World Trade Center, 13th Floor, New York, New York 10048 and Room 1204, Everett McKinley Dirksen Building, 219 South Dearborn Street, Chicago, Illinois 60604. Copies of such materials can be obtained by mail from the Public Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. Such reports and other information concerning the Company can also be inspected at the offices of the AMEX at 86 Trinity Place, New York, New York 10006. This Prospectus constitutes a part of a Registration Statement filed by the Company with the Commission under the Securities Act of 1933, as amended (the "Securities Act"). This Prospectus omits certain of the information contained in the Registration Statement, and reference is hereby made to the Registration Statement and to the exhibits relating thereto for further information with respect to the Company and the Offering. Any statements contained herein concerning the provisions of any document are not necessarily complete, and, in each instance, reference is made to the copy of such document filed as an exhibit to the Registration Statement or otherwise filed with the Commission. Each such statement is qualified in its entirety by such reference. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents heretofore filed by the Company under the Exchange Act with the Commission are incorporated herein by reference: (1) The Company's Annual Report on Form 10-K for the year ended December 31, 1994 (the "10K"). All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to the termination of the Offering shall be deemed to be incorporated by reference herein and to be a part hereof from the date of filing of such documents. Any statement contained in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein or in any other subsequently filed documents which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. The Company will provide, without charge, to each person to whom a copy of this Prospectus has been delivered, on the written or oral request of such person, a copy of any or all of the documents referred to above which have been or may be incorporated by reference herein other than exhibits to such documents (unless such exhibits are specifically incorporated by reference herein). Requests for such copies should be directed to: Lorraine Giordano, Clerk, Vitronics Corporation, 1 Forbes Road, Newmarket, New Hampshire 03857; 6036596550. -2- PROSPECTUS SUMMARY The following information is qualified in its entirety by the more detailed information included elsewhere or incorporated by reference in this Prospectus. Each prospective investor is urged to read this Prospectus, and any document incorporated by reference, in its entirety. THE COMPANY Vitronics Corporation (the "Company") designs, manufactures and markets highvolume systems for the soldering of surface mounted devices to, and the cleaning of, printed circuit boards ("PCBs"). The Company's solder reflow systems generally sell for between $20,000 and $150,000, and its semi-aqueous cleaning systems generally sell for between $110,000 and $160,000. Management believes that the Company's systems have the largest market share of their respective high end reflow markets (excluding Japan), with approximately 30% of the domestic and one-quarter of the worldwide solder reflow market, and in excess of 50% of the installed base of in-line, semi-aqueous cleaning systems. Although none of the Company's customers named below have any ongoing contractual obligation to purchase the Company's products, all have made repeated purchases of the Company's products in the past and approximately 40% of such customers currently have purchase orders pending in the Company's backlog. United States customers during the past eighteen months have included Allied Signal, AT&T, AVEX Electronics, Chrysler, GE, GM, GTE, Hughes Aircraft, IBM, Intel, McDonnell Douglas, Motorola, Northern Telecom, Raytheon, SCI and Xerox. International customers during such period have included Ericsson, Fujitsu, Hitachi, Mitsubishi, NEC, Olympus, Phillips, Siemens and Toshiba. During 1994, the Company successfully introduced two new solder reflow ovens into the marketplace, and recorded total sales in excess of $17 million and net income of $602,000, as compared with a net loss of $1,357,000 in 1993 on sales of $12.7 million in 1993. During the last quarter of 1994, the Company had record bookings of $5.5 million. THE OFFERING Shares Offered.................... 2,888,225 shares of Common Stock (the "Shares"). Common Stock Outstanding/1/....... 7,553,638 shares American Stock Exchange Symbol.... VTC Use of Proceeds................... The Company will not receive any proceeds from the sale of Shares. Risk Factors...................... The Shares offered hereby are speculative in nature, involve a high degree of risk and should not be purchased by anyone who cannot afford the loss of his entire investment. See "Risk Factors."
________________________________________ (1) As of March 31, 1995. Does not include the 976,200 shares reserved for issuance pursuant to options presently outstanding under the Company's stock option plans. -3- RISK FACTORS INVESTMENT IN THE SECURITIES OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK AND IS SUITABLE ONLY FOR PERSONS OF SUBSTANTIAL RESOURCES WHO CAN AFFORD THE LOSS OF ALL OR A PART OF THEIR INVESTMENT. PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER, AMONG OTHER FACTORS, THE FOLLOWING MATTERS BEFORE INVESTING: Recent History of Losses. As reflected in the Company's financial ------------------------ statements, the Company recorded net income of $602,000 in fiscal 1994, after net losses of over $6 million in the aggregate for the preceding three fiscal years. The Company attributes this turnaround to an aggressive cost control program implemented in 1993, reduction in material and direct labor costs, general improvement in the economy and the marketing of innovative new products such as UNITHERM(R) II and ISOTHERM(TM). WHILE THE COMPANY WILL CONTINUE TO BUILD ON THIS STRATEGY, THERE CAN BE NO ASSURANCE OF CONTINUED PROFITABILITY. Bank Financing. The Company has obtained a $500,000 line of credit with the -------------- First National Bank of Portsmouth. This line of credit is secured by substantially all of the assets of the Company. Management believes this line of credit, in addition to internally generated funds and capital equipment lease financing expected to be available, will be sufficient to meet the Company's working capital requirements in 1995. There can be no assurance, however, that additional debt or equity financing will not be needed or that such financing, if available, will be adequate to meet the Company's requirements on terms satisfactory to the Company. Business Cycles; Dependence of Company on Electronics-Related Industries. ------------------------------------------------------------------------ Most of the Company's customers operate in electronicsrelated industries that are subject to a decline in activity during recessions in the general economy. During the recent recession, the Company experienced a steady decline in net sales from $20.5 million in fiscal 1989 to a low of $12.3 million in fiscal 1992. Although the Company in 1994 experienced a significant increase in sales and orders for its products, there can be no assurance that the negative impact of the recent recession in the general economy, and in the electronicsrelated industries in particular, is over. Moreover, the currently forecasted slowdown in the economy, should it occur, could have a material adverse impact on the Company's operations. In the future, it should be expected that the Company's business will continue to be affected by general business cycles and that such cycles will have a material impact upon the Company's business from year to year. Competition. The printed circuit board ("PCB") reflow soldering and ----------- cleaning markets are highly competitive. Although the Company believes that its UNITHERM and ENVIROCLEAN(R) product lines are among the most advanced systems available, management expects both lines to experience strong competition. Competition, and particularly price competition, could adversely affect the Company's ability to maintain and/or increase its sales and profitability. Although the Company has been a leader in its markets, many of the Company's current and potential competitors have substantial financial, marketing and technical resources, manufacturing capability, customer support organizations and name recognition. There can be no assurance that the Company will be able to compete successfully in the future. Component Supply. The microprocessor used in the Company's UNITHERM solder ---------------- reflow systems is presently being purchased from only one source. There can be no assurance that this source will continue in business or continue to manufacture the component upon which the Company's products currently depend. The Company has not entered into a supply agreement with this vendor and is dependent on the availability of its components on an as-needed basis. Although management believes it can obtain the microprocessor component from other sources on competitive terms, the inability to obtain the number of these components required could result in delays or reductions in product shipments which would adversely affect the Company's operating results. Potential Increased Costs. Although management believes that it has defined ------------------------- the production costs of its new product lines within fairly narrow ranges, these costs may vary depending on the Company's ability to take advantage (or not) of quantity discounts, etc. If the Company experiences working capital shortages in 1995, its costs may increase and gross margins decrease, which could have a material adverse impact on the Company and its prospects for growth. -4- Technological Change and Dependence on New Products. The Company's product --------------------------------------------------- markets are characterized by changing technology, evolving industry standards and frequent new product introductions. The Company's success will depend upon its ability to market its existing products (including its UNITHERM, UNITHERM(R) II, ISOTHERM(TM) and ENVIROCLEAN(R) product lines) and to introduce future products on a timely basis. There can be no assurance that the Company will be successful in selecting, developing, manufacturing, and marketing new products or in continuing to market its existing products. In 1994, the Company commenced the manufacture and marketing of its UNITHERM II(R) and ISOTHERM(TM) reflow soldering systems. Management expects the sale of the Company's older products to diminish over time. Management believes that the success of the UNITHERM(R) II and ISOTHERM(TM) product lines is, therefore, crucial to the future of the Company. Although sales of these products to date have been encouraging, there can be no assurance that these product lines will maintain profitable sales levels in 1995. The lack of sales or profitability of these products could have a substantial and adverse impact on the Company. Narrow Product Line and Customer Base. The bulk of the Company's revenues ------------------------------------- (92% in 1994) are derived from sales of its solder reflow systems. As a result, the Company's revenues are subject to greater variability than would be true if the Company had a broader product line. In addition, although the Company may have as many as 160 customers in any given year, approximately 15% of its net sales in fiscal 1994, 8% in fiscal 1993 and 11% in fiscal 1992 were derived from the same customer. This concentration of business could subject the Company's revenues to greater variability than would be true if the Company's sales were distributed over a broader customer base, even though no other single customer accounted for more than 10% of sales in any of the three fiscal years preceding the date of this prospectus. Current Patent Litigation. On November 26, 1991, the Company filed suit ------------------------- against a competitor ("Conceptronic") in the United States District Court for the District of New Hampshire seeking an injunction and damages against Conceptronic for infringement of two patents owned by the Company covering the apparatus and operating methodology of its solder reflow systems. Conceptronic filed a counterclaim against the Company alleging that the patent suit was brought in bad faith to maliciously interfere with Conceptronic's business relations. Conceptronic's counterclaims were dismissed in December, 1993. There has been a series of rulings on technical motions by each side since the initiation of the suit which are described in detail under the heading "Legal Proceedings" in the Company's 10-K for fiscal 1994. In short, the Court at present has determined as a matter of law that the Company has produced sufficient facts which, if proved at trial, will establish Conceptronic's infringement of certain Company patents. A trial date has been set for June 20, 1995. Trial by jury of any patent litigation can be both expensive and time consuming, and there can be no assurance that the Company will ultimately prevail. Although the Company intends to vigorously pursue this litigation, continued litigation costs may be substantial and will reduce the Company's resources available to fund working capital requirements. A detailed procedural history of the patent litigation is set forth in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994, which is incorporated herein by reference. Dependence on Key Employees. The Company's success will depend in part on --------------------------- key management and technical employees and on the Company's ability to continue to attract, retain and motivate highly talented personnel. With the exceptions of Messrs. Manfield, Lawler, Chanasyk and Spilling, the Company does not have written employment agreements with its personnel, although the Company's technical employees are required to enter into noncompetition agreements. The loss of one or more of the Company's key employees could have an adverse impact on the Company. There can be no assurance that the Company can retain its key employees or that it can attract, assimilate, or retrain other skilled personnel. Limits of Current Plant and Equipment; Possible Need for Additional Capital. --------------------------------------------------------------------------- The current plant and equipment of the Company is not fully utilized. The Company estimates that its sales could increase to approximately $30,000,000 per year before full utilization of its capacity would occur, although there can be no assurance that such growth in sales will occur. Should sales reach the Company's maximum capacity level, -5- however, further growth may be limited without the acquisition of additional plant space and equipment. Uncertainty of Forward-Looking Statements. Although no projections are ----------------------------------------- included in this Prospectus, in certain instances management has made forward- looking statements regarding the Company's future prospects where it felt such information was important to an investor's understanding of the Company. These forward-looking statements are based on management's best estimates and present intentions and on assumptions that may or may not prove true. No assurance can be provided that the actual results achieved will conform with management's present beliefs, and variances, if they occur, may be material and adverse. Volatility of Stock Price. The trading price of the Company's Common Stock ------------------------- has been subject to substantial fluctuations in response to quarter to quarter variations in operating results, announcements of technological innovations or new products by the Company or its competitors, and other events or factors. In addition, the stock market has, from time to time, experienced significant price and volume fluctuations which have particularly affected the market price for many high technology companies and which often have been unrelated to the operating performance of these companies. These broad market fluctuations may adversely affect the market price of the Company's Common Stock. Shares Eligible for Future Sale. There are 976,200 shares reserved for ------------------------------- issuance upon exercise of outstanding options granted under the Company's stock option plan, which shares will become available for future sale in the public market at prescribed times. Sales of substantial amounts of such shares in the public market could exert downward pressure on the trading price of the Common Stock. Lack of Dividends. The Company has not paid any dividends on its Common ----------------- Stock since its inception and currently intends to retain any future earnings for use in its business. -6- SELLING STOCKHOLDERS -------------------- The following table sets forth the name, amount of Common Stock owned by the Selling Stockholders prior to the Offering, the amount to be offered for the holder's account and the amount and percentage, if required, of Common Stock to be owned by the holder after the Offering. Unless indicated in a footnote, none of the Selling Stockholders has held any position, office or material relationship with the Company within three years of the date of this Prospectus.
Shares acquirable (and offered hereby) Shares acquirable Shares Remaining upon conversion (and offered hereby) if all shares 10% Convertible upon exercise of offered hereby Shares Currently Subordinated Common Stock are sold Name Owned Debenture Purchase Warrants (% if > 1% ---- ---------------- ----------------- -------------------- ----------------- New England Growth Fund I, L.P./1/ 0 2,400,000 0 0 Barclay Investments, Inc./2/ 0 0 346,225/3/ 0 A.W. Airflo Company/4/ 142,000 0 0 0
___________________________________ (1) John F. Rousseau, Jr. and Robert J. Hanks are general partners of the general partner of New England Growth Fund I, L.P. ("NEGF") and have served as directors of the Company since October 1993. (2) Barclay Investments, Inc. served as standby underwriter for the Company's 1992 Rights Offering and as Advisor for the placement of the Company's 10% Convertible Debenture to NEGF in October, 1993. (3) Includes 125,000 shares acquirable upon exercise of a Common Stock Warrant dated October 1, 1993, and 221,225 shares acquirable upon exercise of a Common Stock Warrant dated December 15, 1992. (4) A.W. Airflo Company supplies materials to the Company from time to time which are used in the Company's manufacturing processes. -7- PLAN OF DISTRIBUTION The Shares are listed on the American Stock Exchange. The distribution of the Shares by the Selling Stockholders may be effected from time to time in one or more transactions (which may involve block transactions) on the American Stock Exchange, in negotiated transactions, through the writing of options or shares (whether such options are listed on an options exchange or otherwise), or a combination of such methods of sale, at market prices prevailing at the time of sale, at prices related to such prevailing market prices, or at negotiated prices. The Selling Stockholders may effect such transactions by selling Shares to or through broker-dealers, and such broker-dealers may receive compensation in the form of discounts, concessions or commissions from the Selling Stockholders and/or purchasers of shares for whom they may act as agent (which compensation may be in excess of customary commissions). DESCRIPTION OF THE COMMON STOCK Common Stock. The Company's Articles of Organization authorizes the ------------ issuance of 20,000,000 shares of Common Stock, par value $.01 per share. Each record holder of Common Stock is entitled to one vote for each share held on all matters properly submitted to the stockholders for their vote. In accordance with Massachusetts Business Corporation Law, the Company has a classified Board of Directors currently consisting of one director whose term expires in 1995, three directors whose terms expire in 1996 and two directors whose terms expire in 1997. Cumulative voting for the election of directors is not permitted by the Articles of Organization. Holders of the outstanding shares of the Common Stock are entitled to such dividends as may be declared from time to time by the Board of Directors out of legally available funds therefor, although the Company has not declared dividends and does not have a present intention to do so in the foreseeable future. In the event of liquidation, dissolution or winding up of the affairs of the Company, holders of the Common Stock are entitled to receive, ratably, the assets of the Company net of liabilities. Holders of outstanding shares of Common Stock have no preemptive, conversion or redemptive rights. All the issued and outstanding shares of the Common Stock are, and all unissued shares when issued against payment therefor will be, duly authorized, validly issued, fully paid and non-assessable. Transfer Agent. Registrar & Transfer Company, 10 Commerce Drive, Cranford, -------------- New Jersey, acts as the Company's Transfer Agent. INDEMNIFICATION Section 67 of the Massachusetts Business Corporation Law (the "BCL") authorizes and empowers the Company to indemnify the directors, officers, employees and agents of the Company against liabilities incurred in connection with, and related expenses resulting from, any claim, action or suit brought against any such person as a result of his relationship with the Company, provided that such persons acted in accordance with a stated standard of conduct in connection with the acts or events on which such claim, action or suit is based. In addition, Section 13(b)(1 1/2) of the BCL permits the elimination or limiting of the personal liability of a director to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, notwithstanding any provision of law imposing such liability; provided, however, that such provision shall not eliminate or limit the liability of a director (i) for any breach of the director's duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Sections 61 and 62 of the BCL (relating to the payment of unauthorized -8- distributions or the extension of unapproved loans to officers or directors), or (iv) for any transaction from which the director derived an improper personal benefit. Under Article 6A of the Company's Articles of Organization (the "Articles") the Company may indemnify its directors, officers, employees or other agents, present or former, if provided in the Company's by-laws. Under Article 6I of the Articles, as amended, the Company's directors do not have personal liability to the Company or its stockholders for monetary damages for any breach of their fiduciary duty as directors to the extent Section 13(b)(1 1/2) of the BCL permits the limitation of such liability. Article V(9) of the Company's by-laws further provides for the indemnification of officers and directors to the fullest extent authorized by the BCL, and for the prompt advancement of expenses, for costs, expenses (including legal fees) and obligations paid or incurred in connection with or arising out of the defense or disposition of any action, suit or other proceeding whether civil or criminal, in which the director or officer may be a defendant or with which the director or officer may be threatened or otherwise involved, directly or indirectly, by reason of his being or having been a director or officer; provided, however, that the Company shall provide no indemnification with respect to any matter as to which any such indemnitee shall be finally adjudicated in such action, suit or proceeding not to have acted in good faith in the reasonable belief that his action was (i) in the best interest of the Company or (ii) to the extent such matter relates to federal or state securities laws, consonant with such laws. LEGAL MATTERS Certain legal matters in connection with the validity of the Shares offered hereby will be passed upon for the Company by Hinckley, Allen & Snyder, 1500 Fleet Center, Providence, Rhode Island 02903. EXPERTS The consolidated financial statements of the Company appearing in the Company's Annual Report (Form 10-K) for the fiscal year ended December 31, 1994 have been audited by Coopers & Lybrand L.L.P., Independent Auditors, as stated in their report dated February 21, 1995 incorporated herein by reference, and have been so incorporated by reference in reliance upon such report given upon the authority of that firm as experts in accounting and auditing. -9-
===================================================== ====================================== No person has been authorized to give any information or make any representations other than those contained or incorporated by reference in this Prospectus and, if given or made, such information or representations must not be relied upon as having been authorized by the Company. This Prospectus does not constitute an offer to sell any securities: (i) other than those specifically offered hereby, (ii) in any jurisdiction in which such offer or solicitation is not authorized, (iii) in any jurisdiction in which the person making such [VITRONICS LOGO] or solicitation is not qualified to do so, (iv) to any person to whom it is unlawful to make such offer or solicitation in such jurisdiction, or (v) to any person who is not a United States resident or who is outside the jurisdiction of the United States. Neither the delivery of this Prospectus nor any sale hereunder shall under any circumstances create any implication that there has been no change in the affairs of the Company since the date hereof or that the information herein is correct as of any time subsequent to the date as of which such information is provided in 2,888,225 SHARES this Prospectus. _________________ TABLE OF CONTENTS Available Information............................ 2 Incorporation of Certain Documents by Reference.................................. 2 -------------------------- Prospectus Summary............................... 3 PROSPECTUS Risk Factors..................................... 4 -------------------------- Selling Stockholders............................. 7 Plan of Distribution............................. 8 Description of the Common Stock.................. 8 Indemnification.................................. 8 Legal Matters.................................... 9 Experts.......................................... 9 ===================================================== ___________________, 1995 ======================================
PART II INFORMATION NOT REQUIRED IN THE PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. The registrant estimates that expenses in connection with the offering described in this Registration Statement, all of which shall be borne by the Company, will be as follows: Securities and Exchange Commission registration fee...... $ 1,464 Printing expenses*....................................... $ 4,500 Accountant's fees and expenses........................... $ 2,500 Legal fees and expenses.................................. $ 15,000 Blue Sky fees and expenses............................... $ 5,000 Miscellaneous............................................ $ 500 ________ Total................................................ $ 28,964 * Includes Edgar Filing Service Charges.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Section 67 of the Massachusetts Business Corporation Law (the "BCL") authorizes and empowers the Company to indemnify the directors, officers, employees and agents of the Company against liabilities incurred in connection with, and related expenses resulting from, any claim, action or suit brought against any such person as a result of his relationship with the Company, provided that such persons acted in accordance with a stated standard of conduct in connection with the acts or events on which such claim, action or suit is based. In addition, Section 13(b)(1 1/2) of the BCL permits the elimination or limiting of the personal liability of a director to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, notwithstanding any provision of law imposing such liability; provided, however, that such provision shall not eliminate or limit the liability of a director (i) for any breach of the director's duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Sections 61 and 62 of the BCL (relating to the payment of unauthorized distributions or the extension of unapproved loans to officers or directors), or (iv) for any transaction from which the director derived an improper personal benefit. Under Article 6A of the Company's Articles of Organization (the "Articles") the Company may indemnify its directors, officers, employees or other agents, present or former, if provided in the Company's by-laws. Under Article 6I of the Articles, as amended, the Company's directors do not have personal liability to the Company or its stockholders for monetary damages for any breach of their fiduciary duty as directors to the extent Section 13(b)(1 1/2) of the BCL permits the limitation of such liability. Article V(9) of the Company's by-laws further provides for the indemnification of officers and directors to the fullest extent authorized by the BCL, and for the prompt advancement of expenses, for costs, expenses (including legal fees) and obligations paid or incurred in connection with or arising out of the defense or disposition of any action, suit or other proceeding whether civil or criminal, in which the director or officer may be a defendant or with which the director or officer may be threatened or otherwise involved, directly or indirectly, by reason of his being or having been a director or officer; provided, however, that the Company shall provide no indemnification with respect to any matter as to which any such indemnitee shall be finally adjudicated in such action, suit or proceeding not to have acted in good faith in the reasonable belief that his action was (i) in the best interest of the Company or (ii) to the extent such matter relates to federal or state securities laws, consonant with such laws. II-1 ITEM 16. EXHIBITS. A list of the exhibits included as part of this Registration Statement is set forth in the Exhibit Index which immediately precedes such exhibits and is hereby incorporated by reference herein. ITEM 17. UNDERTAKINGS. The undersigned registrant hereby undertakes to file, during any period in which offers or sales are being made, a post-effective Amendment to this Registration Statement to include any material information with respect to the plan of distribution not previously disclosed in this Registration Statement or any material change to such information in this Registration Statement. The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each such post- effective Amendment and each filing of the registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 that is incorporated by reference in this Registration Statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. The undersigned registrant hereby undertakes to remove from registration by means of a posteffective Amendment any of the securities being registered which remain unsold at the termination of the Offering. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. II-2 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized on the 25th day of April, 1995. VITRONICS CORPORATION By: /s/James J. Manfield, Jr. ---------------------------------------- James J. Manfield, Jr., Chairman of the Board, Chief Executive Officer, Chief Financial Officer, Treasurer and Director By: /s/Daniel J. Sullivan ---------------------------------------- Daniel J. Sullivan, Corporate Controller and Principal Accounting Officer By: /s/Ronald W. Lawler ---------------------------------------- Ronald W. Lawler, President, Chief Operating Officer and Director By: /s/David R. A. Steadman ---------------------------------------- David R. A. Steadman, Director By: /s/Allen H. Keough ---------------------------------------- Allen H. Keough, Director By: /s/John F. Rousseau, Jr. ---------------------------------------- John F. Rousseau, Jr., Director By: /s/Robert J. Hanks ---------------------------------------- Robert J. Hanks, Director II-3 EXHIBIT INDEX -------------
No. Item Page - --- ---- ---- 3.1 Articles of Organization, as amended to date (1) 3.2 By-Laws, as amended to date (16) 4.1 Specimen Common Stock Certificate (2) 4.2 Form of Warrant issued to the Underwriter in the Company' 1992 Rights Offering (12) 4.3 Form of 10% Convertible Subordinated Debenture (16) 4.4 Form of Common Stock Purchase Warrant (16) 5.0 Opinion of Messrs. Hinckley, Allen & Snyder regarding the legality of the securities offered (18) *10.1 Incentive Stock Option Plan of 1983 *10.2 Incentive Stock Option Plan of 1983-II (3) *10.3 Form of Incentive Stock Option Agreement for 1983 Plan and the 1983-II Plan (3) 10.4 Lease of Real Property from Susan J. Conway, Trustee of Forbes Realty Trust (2) *10.5 1987 Stock Option Plan (5) 10.6 Form of Non-qualified Stock Option Agreement (5) 10.7 Building Agreement and Lease of Premises at Bush Park, Estover, Plymouth from The Counsel of the City of Plymouth (5) 10.8 Lloyd's Bank Loan Agreement (5) 10.9 Department of Trade and Industry Grant (5) 10.10 Lease of Real Property from Susan J. Conway, Trustee of Afton Realty Trust (6) 10.11 Consulting Agreement with George F. Soderberg (7) 10.12 Non-Compete Agreement with George F. Soderberg (7) 10.13 Stock Repurchase Agreement with George F. Soderberg (7) 10.14 Subordinated Term Note with George F. Soderberg (7) 10.15 Lease Amendments of Real Property from Susan J. Conway, Trustee of Forbes Realty Trust (8) *10.16 Employment Agreement with James J. Manfield, Jr. (8) (10)(14) *10.17 Employment Agreement with Edward A. Richards (8)(10)(14) 10.18 Lease of Real Property from the Corporate Business Service Limited (9) 10.19 Term Note due from Anafaze, Incorporated and Security Agreement (9) *10.20 Employment Agreement with Albert J. Chanasyk (14) 10.21 Employment Agreement with Dennis J. Monroe (14) 10.22 Employment Agreement by and between Peter D. Spilling and Vitronics Europe Ltd. (11) *10.23 Employment Agreement with Ronald W. Lawler (15) *10.24 Severance Agreement with Edward A. Richards (16) 10.25 Convertible Subordinated Debenture Purchase Agreement dated October 1, 1993 between the Company and New England Growth Fund I, LP. (NEGF) (16) 10.26 $1,200,000 10% Convertible Subordinated Debenture dated October 1, 1993 issued to NEGF (16)
Page No. 10.27 Amendment to Lease between Forbes Realty Trust and Vitronics Corporation (16) 10.28 $350,000 Demand Promissory Note of the Company issued to NEGF dated January 13, 1994 (16) 10.29 Loan Agreement between the Company and NEGF dated January 13, 1994 (16) 10.30 Security Agreement between the Company and NEGF dated January 13, 1994 (16) 10.31 Underwriters Common Stock Purchase Warrant issued to Barclay investments Inc. dated December 15, 1992 (16) 10.32 Common Stock Purchase Warrant for 125,000 Shares issued to Barclay Investments Inc. dated October 1, 1993 (16) 10.33 Business Loan Agreement between the Company and First National Bank of Portsmouth dated March 22, 1995 (18) 10.34 Promissory Note of the Company to First National Bank of Portsmouth dated March 22, 1995 (18) 10.35 Commercial Security Agreement between the Company and First National Bank of Portsmouth dated March 22, 1995 (18) 11.1 Calculation of Net Income Per Common Share (17) 13.1 Annual report to securityholders on Form 10-K for the fiscal year ended December 31, 1994 20 16 Letter from Deloitte & Touche regarding change of Accountant (13) 21.1 Subsidiaries of the registrant (17) 23.1 Consent of Coopers & Lybrand L.L.P. 53 23.2 Consent of Hinckley, Allen & Snyder (to be included in Exhibit 5.0 27 Financial Data Schedule 54 99.1 Directors and Officers Liability Policy and Company reimbursement (4) 99.2 Complaint regarding Conceptronic Patent Litigation (14) 99.3 Conceptronic's response to the Complaint (14) 99.4 Conceptronic's Counterclaim (14) 99.5 Vitronics' response to Conceptronic's Counterclaim (14) 99.6 Order of the United States District Court concerning Conceptronic Patent Litigation (11) 99.7 Correspondence concerning the Vitronics Europe Limited lease (11) 99.8 Conceptronic's Counterclaim Summary Judgment (16)
(1) Articles of Amendment filed on August 17, 1987 are hereby incorporated by reference from Exhibits to Annual Report on Form 10-K (File No. 0-13715) filed by the Company with the Securities and Exchange Commission on March 31, 1988. The balance of Exhibit 3.1 is hereby incorporated by reference from Exhibits to Amendment No. 1 to Form S-18 Registration Statement (File No. 2-90042) filed by the Company with the Securities and Exchange Commission on August 1, 1984. (2) Exhibits 4.1 and 10.4 are hereby incorporated by reference from Exhibits to Annual Report on Form 10-K (File No.2-90042) filed by the Company with the Securities and Exchange Commission on April 1, 1985. (3) Exhibits 10.1, 10.2 and 10.3 are hereby incorporated by reference from Exhibits to Form S-18 Registration Statement (File No. 2-90042) filed by the Company with the Securities and Exchange Commission on March 20, 1984. (4) Exhibit 99.1 is hereby incorporated by reference from Exhibits to Post- Effective Amendment No. 1 to Form S-18 Registration Statement (File No. 2- 90042) filed by the Company with the Securities and Exchange Commission on May 10, 1985. (5) Exhibits 10.5, 10.6, 10.7, 10.8 and 10.9 are hereby incorporated by reference from Exhibits to Annual Report on Form 10-K (File No. 0-13715) filed by the Company with Securities and Exchange Commission on March 31, 1988. (6) Exhibit 10.10 is hereby incorporated by reference from exhibits to Annual Report on Form 10-K (File No. 0-13715) filed by the Company with the Securities and Exchange Commission on March 24, 1989. (7) Exhibits 10.11, 10.12, 10.13 and 10.14 are hereby incorporated by reference to Form 8-K (File No. 0-13715) filed by the Company with the Securities and Exchange Commission on February 22, 1990. (8) Exhibits 10.15, 10.16 and 10.17 are hereby incorporated by reference from exhibits to Annual Report on Form 10-K (File No. 0-13715) filed by the Company with the Securities and Exchange Commission on April 2, 1990. (9) Exhibits 10.18 and 10.19 are hereby incorporated by reference from exhibits to Annual Report on Form 10-K (File No. 0-13715) filed by the Company with the Securities and Exchange Commission on April 1, 1991. (10) Exhibits 10.16 and 10.17 were amended. Copies of such agreements as amended are hereby incorporated by reference from exhibits to Annual Report on Form 10-K (File No. 0-13715) filed by the Company with the Securities and Exchange Commission on March 27, 1992. (11) Exhibits 10.22, 99.6 and 99.7 are hereby incorporated by reference to Exhibits to Form S-2 Registration Statement (File No. 33-50928) filed by the Company with the Securities and Exchange Commission on August 17, 1992. (12) Exhibit 4.2 was hereby incorporated by reference to Exhibits to Amendment No. 2 to Form S-2 Registration Statement (File No. 33-50928) filed by the Company with the Securities and Exchange Commission on November 12, 1992. (13) Exhibit 16 is hereby incorporated by reference to the Company's Form 8-K dated December 30, 1992, and to the Amendment thereto on Form 8 dated January 11, 1993. (14) Exhibits 10.16, 10.17, 10.20, 10.21, 99.2, 99.3, 99.4 and 99.5 are hereby incorporated by reference from exhibits to Annual Report on Form 10-K (File No. 0-13715) filed by the Company with the Securities and Exchange Commission on March 27, 1992. (15) Exhibit 10.23 is hereby incorporated by reference from exhibits to Annual Report on Form 10-K (File No. 0-13715) filed by the Company with the Securities and Exchange Commission on March 26, 1993. (16) Exhibits 3.2, 4.3, 4.4, 10.24, 10.25, 10.26, 10.27, 10.28, 10.29, 10.30, 10.31, 10.32, 21.1, and 99.8, are hereby incorporated by reference from Exhibits to Annual Report on Form 10-K (File No. 0-13715) filed by the Company with the Securities & Exchange Commission on April 13, 1994. (17) Exhibits 11.1 and 21.1 are hereby incorporated by reference to exhibits to Annual Report on Form 10-K (File No. 0-13715) filed by the Company with the Securities and Exchange Commission on March 22, 1995. (18) To be Filed by Amendment. * Management compensatory plan or arrangement. EX-13.1 2 ANNUAL REPORT EXHIBIT 13.1 ------------ FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE - --- ACT OF 1934 [FEE REQUIRED] For the fiscal year ended December 31, 1994 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES - --- EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from ______________to_______________ Commission File No. 0-13715 VITRONICS CORPORATION -------------------------------------------------------- (Exact name of registrant as specified in its charter) COMMONWEALTH OF MASSACHUSETTS 04-2726873 --------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1 FORBES ROAD, NEWMARKET, NH 03857 ------------------------------------- ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (603)659-6550 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange Title of each class on which registered ------------------- --------------------- Common Stock, $.01 par value American Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None -------------- (Title of Class) 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 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 ----- ----- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] The aggregate market value of the voting stock held by non-affiliates of the registrant as of March 9, 1995, was $10,856,702.00 Number of shares outstanding of the registrant's Common Stock, $.01 par value as of March 9, 1995: 7,552,488 shares. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Company's definitive proxy statement for the 1995 Annual Meeting of Shareholders are incorporated by reference into Part III. VITRONICS CORPORATION PART I ITEM 1. BUSINESS Vitronics Corporation (the "Company") was incorporated in Massachusetts on April 21, 1981. The Company is engaged in the design, engineering, manufacture and marketing of state-of-the-art thermal processing systems for soldering surface mounted devices to printed circuit boards and cleaning of the finished assembly. The Company's customers are captive and contract manufacturers of medium to high reliability printed circuit boards. CURRENT PRODUCTS: The Company produces several lines of solder reflow ovens used primarily in the final step of attachment of surface mounted devices to printed circuit boards. Using similar technology, the Company has also produced systems for attaching hybrid circuits to ceramic substrates and for curing epoxies and adhesives used in bonding applications by the electronics industry. The products fall into four broad categories, each available in a range of sizes to accommodate the throughput and space requirements of the circuit board manufacturer. - The SMR UNITHERM reflow series - high production rate, fully featured, forced convection reflow ovens. - The SMR ISOTHERM reflow series - low to medium production rate, forced convection reflow ovens with basic features. - The SMD reflow series - high production rate, infrared/natural convection reflow ovens. - The GP/MP series - low volume, benchtop, infrared/natural convection reflow ovens. Soldering remains the preferred method of permanently attaching hybrid and semiconductor packages, microprocessors, resistors, capacitors and other common electronic components to the surface of printed circuit boards. Substrate/component assemblies treated with a coating of solder paste are placed onto the conveyor system, which transports them at a constant rate through a heated tunnel consisting of one or more individually heated and controlled zones. Heat is transferred at a precisely controlled rate to the assemblies by means of convection and radiation until the solder melts and flows between the component leads and the circuit board. Rapid cooling ensures the formation of the desired solder joints. This thermal process is also applicable to the production of a variety of electronic component packages, including ceramic hybrids, semiconductors and glass/epoxy circuits. The Company's SMR series reflow soldering systems incorporate a revolutionary heater and cell design with the benefits of high efficiency, forced convection heat transfer, in addition to a background of infrared radiation. A unique feature of this cell is the individual zone exhaust which removes solder paste fumes as they are generated. Patent applications are pending worldwide covering the unique features of the SMR series reflow soldering systems. The UNITHERM version incorporates multiple heating cells both above and below the conveyor. The economical ISOTHERM version, introduced in 1994, employs heater cells only above the conveyor. In both versions, product heating is accomplished with high velocity heated gas that is distributed with optimal flow uniformity across the entire heating area supported by a background of infrared emission from the heated surfaces. A second generation UNITHERM series introduced in 1994, offers advanced features including controlled exhaust heater, auto chain lubrication, variable tunnel aperture, and fume capture, for full automation. The Company continues to produce its original SMD reflow systems for selected customers and applications. In addition to reflow ovens, the Company markets a line of aqueous and semi- aqueous circuit board cleaners. These cleaners offer the printed circuit board industry environmentally safe, yet cost effective, cleaning methods. The semi- aqueous cleaners are designed to remove both rosin-based and water soluble organic fluxes using non-CFC, biodegradable solvents for environmental safety. The systems will 2 operate both on-line or off-line with a variable speed conveyor system facilitating the interface with any in-line soldering system. The first model introduced by the Company in 1990, is known as the ENVIROCLEAN 3000 semi-aqueous cleaning system. In 1993, the Company introduced the advanced ENVIROCLEAN 3500 semi-aqueous cleaning system, which incorporates an integrated emulsion module with a decanter/separator and enhanced cleaning and drying capabilities. PRODUCT APPLICATIONS: Printed Circuit Board Systems - The trend in the printed circuit board (PCB) ----------------------------- segment of the electronics industry is the attachment of surface-mounted electronic components and devices to PCBs. The Company's solder reflow systems are well suited to this task because of unique forced convection/infrared heating cells and process gas management systems. The wide range of oven sizes and features ensures the satisfaction of virtually all market requirements. The Company's cleaning systems used for the removal of flux residues from finished assemblies are not harmful to the environment due to the use of non-CFC solvents. PRODUCT OPTIONS AND ENHANCEMENTS: Nitrogen Atmosphere - This option gives an inert atmosphere with tight control ------------------- of oxygen levels (below 20 parts per million), which gives the process engineer the ability to accommodate new assembly materials and processes. Controlled Convection/Infrared - This option allows the process engineer ------------------------------ increased thermal stability and uniformity throughout the reflow cycle, thus increasing production yields. 32 Loop Controller - A 32 loop proportional controller with integral and ------------------ differential control has been developed and integrated into the SMD and UNITHERM series ovens. The 32 loop reduces cost on the larger ovens and adds versatility of control. Rail/Chain Conveyor Transport System - This option allows routine double-sided ------------------------------------ surface mount soldering without the necessity of fixturing as is necessary with standard belt conveyors. This is made possible by allowing two edges of a board to rest on pins which protrude from two moving chains that ride through adjustable rails. A key benefit of this edge rail system is the 10 to 30 percent increase in processing speed relative to the belt system. Enhanced Cooling - This option provides additional cooling capacity within the ---------------- process tunnel to reduce both solder liquidous times and finished product temperatures for product handling requirements. PRODUCTS AND PROCESSES UNDER DEVELOPMENT: Thermal Process Management - The Company continues to research methods and -------------------------- products that improve the process integrity, automation and efficiency of its thermal methodology. Product Range - The Company continues to broaden its product range to address ------------- ever larger segments of the printed circuit board market. RESEARCH AND DEVELOPMENT: During the year ended December 31, 1994, the Company expended $1,010,000 or 6% of its net sales on research and development. Such expenditures were $860,000 or 7% of net sales in 1993, and $1,130,000 or 9% of net sales in 1992. All of the Company's existing products have been designed and developed by the Company or its subsidiaries. MARKETS: The primary market for the Company's products is the electronics industry, where the systems are used in the production of printed circuit boards, ceramic hybrids, semiconductor packages, and glass/epoxy circuits. Additional applications of the Company's products within the electronics industry include: circuit board drying, epoxy curing, hybrid solder reflow, polymer curing, and thick film drying. Segments of the electronics industry served by the Company's products are: computers and peripheral office equipment, military electronics, consumer electronic products, automotive electronics, telecommunication equipment, test and measurement equipment, mechanical electronics, and contract assembly. 3 MATERIALS: The Company continues to produce in-house all of its thermal source emitters and cells. The Company currently has one source for its microprocessor which is used to interface the onboard computer with the machine in the Command Control system, and feels that this microprocessor could be produced in-house or obtained from another source. The Company has developed a new microprocessor for its ISOTHERM machines. Work is currently being done to upgrade the microprocessor for use on the UNITHERM product line. This new microprocessor will enable the Company to develop an alternative source for its microprocessor. The other components being used in the assembly of systems produced by the Company are purchased from original equipment manufacturers, electronic supply firms and others. The Company has no reason to believe that it cannot continue to obtain such components, or suitable substitutes as required. PATENTS AND TRADEMARKS: The Company was issued a United States patent in January 1986 covering the multi-zone thermal processing systems produced by the Company. A second patent was issued in July 1986, on the source emitter panel produced by the Company. Other patents cover the process for mounting surface-mount devices to printed circuit boards through the use of solder reflow, and an improved source emitter panel. The Company has also filed foreign patent applications corresponding to the foregoing United States patents where it has been deemed advisable. Several of these foreign applications have been granted. Management believes that the patents strengthen the Company's competitive position. The Company has three issued U.S. Patents and several pending applications worldwide covering various aspects of the semi-aqueous cleaning systems. The Company has an issued U.S. Patent, as well as additional pending patent applications in the U.S. and worldwide, covering its UNITHERM product line. The Company has U.S. and foreign trademark registrations for the trademark VITRONICS, as well as a U.S. trademark registration for the VITRONICS LOGO, UNITHERM and ENVIROCLEAN. The Company also uses unregistered trademarks for ISOTHERM, VITRO-SENSE, Natural Convection/Infrared, Controlled Convection/Infrared, VITRO-FOIL and VITRO-CLEAN. CUSTOMERS AND MARKETING: The Company is involved in surface-mount solder reflow with its patented convection/infrared thermal technology. The Company has systems operating successfully in most of the major contract and captive electronics companies throughout the world. Such customers include: Allied-Signal GTE AT&T Hughes Aircraft SCI Systems Avex Electronics IBM Scientific Atlanta Bose Intergraph TRW Chrysler Intel US Assemblies Cray Research Lockheed Varian DuPont Motorola Xerox General Electric Northern Telecom Zenith GM (Delco Div.) Raytheon
International customers of the Company include: L.M. Ericsson Mitsubishi Rank Xerox Fujitsu Motorola Samsung General Motors NEC Siemens Goldstar Olivetti Texas Instruments Hitachi Olympus Toshiba Lucas Phillips
4 The Company's marketing and sales program includes: paid advertising, new product announcements in industrial and commercial publications, direct mail campaigns, technical articles, trade show exhibits, personal contacts and trained sales representatives in the U.S., Canada, Southeast Asia, Europe, South America, India and Israel. The Company has 10 persons employed in its sales and marketing department, including one person in both the West Coast and Central Regions, and 1 person in its U.K. direct sales organization. The Company also utilizes 20 independent sales representative organizations located in the United States and Canada, and 22 independent distributor organizations overseas. During 1994, one of the Company's customers accounted for 15% of net sales ($2,544,000). None of the Company's customers accounted for 10% or more of its net sales in 1993 and one customer accounted for 11% of total net sales in 1992 ($1,315,000). The Company has no contracts that are subject to renegotiation of profits or termination of contracts or subcontracts at the election of the government. The Company's business is not seasonal in any material respect. OEM Supply Relationships The Company has formed supply relationships with ------------------------ a number of "pick and place" original equipment manufacturers. "Pick and place" is the term used to describe the automated technology used to place components on PCBs prior to attachment and soldering. In each of these relationships, the Company's solder reflow systems are purchased by the OEM and resold as a package with pick and place equipment as part of an in-line assembly system. BACKLOG: On December 31, 1994, the Company had purchase orders reflecting a backlog of $2,589,000 as compared to a December 31, 1993 backlog of $2,133,000. The backlog has increased as a result of the increased bookings activity seen during the year. All of the backlog at December 31, 1994 is expected to be shipped within the next six months. At present, most of its customers pay the Company within 40 to 60 days of billing. COMPETITION: Solder Reflow Systems Both domestically and internationally, the Company --------------------- confronts competition from three primary competitors in the solder reflow systems market. In addition, there are three lesser competitors selling systems primarily in the United States' domestic market. In Europe, the Company competes with companies based in Germany, France and the United Kingdom. The Japanese market is dominated by three Japanese manufacturers that have focused almost exclusively on that market. Asia (excluding Japan) has a mix of competitors, none of which have significant market share on a worldwide basis. Management of the Company believes that product performance, reliability and cost of operation are the chief competitive factors in the market for solder reflow products. The Company believes that its UNITHERM product line permits the Company to retain a substantial market share in the solder reflow market place. The Company's solder reflow systems may also face competition from the development of electrically conductive adhesives designed to eliminate the need to solder components to PCBs. At this point in the development of conductive adhesives we believe that even if the adhesives are technologically sucessful, they will require heat treatment or curing, and therefore they will continue to represent a market for the Company's solder reflow technology. The potential impact on the Company's semi-aqueous system business is uncertain, and this business could be jeopardized. Semi-Aqueous Cleaning Systems The Company is in strong competition with ----------------------------- three primary competitors that manufacture semi-aqueous cleaning systems. Competition is based on both price and performance considerations. Due to the relatively large base of potential customers who have previously purchased the Company's solder reflow systems, and the fact that the Company's semi-aqueous system was the first such system to gain market acceptance, the Company believes it is favorably positioned to take advantage of the expected rise in demand for environmentally friendly semi-aqueous cleaning systems. The Company's semi-aqueous cleaning technology, unlike the technology employed by its three main competitors, utilizes a spray technique as opposed to an immersion process. The Company believes that its spray technique is more advanced and also gives the Company a cost advantage over its competitors. 5 The Company's semi-aqueous cleaning systems, which have been fully developed, also face competition from the growing acceptance and utilization of "no clean" solder pastes which produce minimal flux residue, thus reducing and potentially eliminating the need for post-assembly PCB cleaning and the emergence of electrically-conductive adhesives. There can be no assurance that the technology necessary to make and effectively use "no clean" solder pastes which meet high reliability standards will not be developed. In this event the market for semi-aqueous cleaning systems could be substantially reduced. ENVIRONMENTAL COMPLIANCE: Due to the nature of the Company's products, it has not been materially affected by environmental laws. Management does not expect its capital expenditures, earnings or competitive position to be materially affected in the future. EMPLOYEES: As of December 31, 1994, the Company employed 114 full-time persons. FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES: During the year ended December 31, 1994, approximately $7,912,000 or 46% of the Company's sales were foreign sales, primarily to European and Southeast Asian companies, and $7,436,000 or 58% for the year ended December 31, 1993, were foreign sales. Other information concerning foreign sales for the last three fiscal years is presented in Note K to the Consolidated Financial Statements. ITEM 2. PROPERTIES The executive offices and principal place of business of the Company are located at Forbes Road, Newmarket Industrial Park, Newmarket, New Hampshire. The Company leases two buildings, one 23,990 square foot facility for administration and manufacturing, and one 9,400 square foot facility used exclusively as a stockroom. The 23,990 square foot facility has a lease which expires in February 1999, and the 9,400 square foot facility has a three year lease which expires in January 1997. The Company has the option to purchase the 23,990 property at the end of the lease period for $1,100,000.00. The interior layout and leasehold improvements to the 23,990 square foot facility were constructed to the Company's specifications for its use of the facilities. The Company's wholly-owned subsidiary, Vitronics Europe Limited ("VEL"), leases a 15,000 square foot manufacturing and distribution facility in Plymouth, England. This lease, which expired in June 1992, is continuing on a month-to- month basis. The Company believes that its current facilities are adequate for 1995 operations. ITEM 3. LEGAL PROCEEDINGS On November 26, 1991, the Company commenced an action entitled Vitronics Corporation v. Conceptronic, Inc., Civil Action No. C91-696L in the United States District Court for the District of New Hampshire. The Company brought suit for infringement of its patents covering its method and apparatus for solder reflow of surface-mounted devices to printed circuit boards. The specific patents involved were U.S. Patent 4,833,301 (the "301 Patent") and U.S. Patent 4,654,502 (the "502 Patent"). The Company is seeking an injunction and monetary damages in the form of profits lost because of the defendant's sales of infringing devices. The '301 Patent covers the reflow soldering apparatus used by the Company to attach electronic circuit components to pre-printed infrared heating. The '502 Patent covers the operating procedure associated with this apparatus. Both patents were issued to Edward Furtek, a former employee of the Company, and assigned to the Company. Mr. Furtek subsequently founded Conceptronic, and began selling reflow soldering apparatus which constitutes the subject matter of this litigation. On July 20, 1992, the Court granted the Company's motion for summary judgment of infringement with respect to the '301 patent but denied the Company's motion for summary judgment with respect to the '502 patent, because it found that a factual dispute remained over whether the component temperatures claimed in the '502 patent existed in the Conceptronic system. Further, the Court denied 6 Conceptronic's motion for summary judgment. However, on October 8, 1992, in response to a motion for reconsideration filed by Conceptronic, the Court reconsidered its earlier grant of summary judgment. The Court determined that there was indeed a dispute between the parties as to whether or not the thermocouple used by Conceptronic to measure the temperature of the air passing through its heater panels was substantially equivalent in structure to the means for controlling the heater panel temperature described in the Vitronics patents. In its findings, the Court did, however, determine that the Conceptronic system performs the same function as the apparatus disclosed in the patent. Thus, the only issue relating to infringement to be resolved at trial is whether or not the structure described in the patent is substantially equivalent to the structure used to control the temperature in the Conceptronic system. On October 20, 1992, in response to a second motion by Conceptronic to reconsider its ruling on assignor estoppel, the Court reaffirmed its finding in the original grant of summary judgment that because Edward Furtek was the named inventor on the patents assigned to Vitronics, both he and his company, Conceptronic, were precluded from challenging the validity of these patents in this litigation. In a further order on March 29, 1993, in response to a motion filed by the Company to limit discovery, the Court reaffirmed its view that the only issues to be resolved at trial relate to the foregoing issue of whether or not the structure of the temperature control system in the Conceptronic oven is equivalent to the structure described in the Vitronics patents, and to the defense of Conceptronic that the Conceptronic system is so different from that described in the Vitronics patents, that it cannot be held to infringe, even though the claims of the patent literally read on the Conceptronic system. The Court then went on to rule that discovery which extended beyond these topics and Conceptronic's counterclaims would be prohibited. On December 6, 1993, the Court granted the Company's motion for summary judgment with respect to Conceptronic's counterclaims alleging abuse of process and tortious interference with business relations. These counterclaims were based solely on the Company's filing of its claim for patent infringement. Conceptronic's counterclaims were dismissed in their entirety, thereby relieving Vitronics of any potential liability, and greatly simplifying the remaining discovery. Conceptronic filed a motion to amend the answer and counterclaim to include a defense based on fraud or inequitable conduct in the procurement of the '301 and '502 patents. This motion to amend was denied on March 22, 1994, and on September 29, 1994, the Court denied a subsequent motion filed by Conceptronic for reconsideration of the denial of its motion to amend. Conceptronic also filed a motion for partial summary judgment of non- infringement relating to Conceptronic's HVC Series ovens. This motion for partial summary judgment was denied on October 4, 1994. The foregoing rulings mean that the Court has determined that Conceptronic's inequitable conduct defense has no merit. The rulings also mean that the Court has determined as a matter of law that Vitronics has come forward with sufficient facts, if proved at trial, to establish Conceptronic's infringement of the Vitronics' patents by its manufacture and sale of Conceptronic's HVC Series ovens. Conceptronic has requested re-examination of the '301 patent by the U.S. Patent and Trademark Office. Conceptronic contends that the '301 patent is invalid due to certain prior art which it has uncovered, including Vitronics' own sales literature. Vitronics is confident that Conceptronic's challenge to the validity of the '301 patent will fail. Moreover, Conceptronic's motion requesting the Court to stay the foregoing litigation pending the outcome of this re-examination proceeding was denied by the Court on December 8, 1994. As a result, the trial has been set to begin on June 20, 1995. Based upon the events to date and upon the findings by the Court, the Company is very optimistic that it will ultimately prevail in this litigation. ITEM 4. SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS During the fourth quarter of the fiscal year covered by this report, no matter was submitted to a vote of security holders, through the solicitation of proxies or otherwise. 7 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Company's Common Stock is traded on the American Stock Exchange under the trading symbol VTC. As of December 31, 1994, there were 7,550,538 shares of common stock issued and outstanding held by 682 stockholders of record. The following table presents high and low sales prices for the Common Stock for each fiscal quarter within the fiscal years ended December 31, 1994 and 1993.
Common Stock 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter ------------- ------------- ------------- ------------ High Low High Low High Low High Low 1994 1 3/16 5/8 15/16 5/8 1 5/8 1 13/16 11/16 1993 7/8 9/16 11/16 7/16 13/16 3/8 1 1/8 9/16
As of March 9, 1995, $1 /7//16 was the closing price for the Company's Common Stock. Dividends are payable only when, and if, declared by the Board of Directors from funds legally available and are dependent upon earnings, the general financial status of the Company, and various other factors. The Company has paid no dividends on its Common Stock and has no intention of doing so in the near future. ITEM 6. SELECTED FINANCIAL DATA (Dollars in thousands except share amounts)
1994 1993 1992 1991 1990 ---- ---- ---- ---- ---- OPERATING DATA - YEAR ENDED DECEMBER 31 Net sales $17,346 $12,778 $12,373 $14,312 $18,168 Income (loss) after extraordinary item 602 (1,357) (2,965) (2,252) 702 Income (loss) per common share: Primary .08 (.18) (.70) (.57) .18 Fully Diluted .07 (.18) (.70) (.57) .18 Backlog 2,589 2,133 3,018 1,282 2,874 Weighted average number of common shares outstanding: Primary 7,739 7,379 4,216 3,929 3,936 Fully Diluted 10,190 7,379 4,216 3,929 3,936 BALANCE SHEET DATA AT DECEMBER 31 Working capital $ 2,676 $ 2,096 $ 1,729 $ 2,635 $ 6,698 Total assets 6,052 4,796 6,755 9,620 12,392 Long-term liabilities 1,323 1,605 54 124 2,584 Stockholders' equity 1,728 999 2,382 4,265 6,527
No dividends have been paid or declared by the Company. 8 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS The following table provides percentage comparisons of the components of net income (loss) as presented in the Consolidated Statements of Operations included elsewhere herein for the last three fiscal years.
% Increase (Decrease) -------------------------------- % of Net Sales 1994 1993 ------------------------- Years Ended December 31, Compared to Compared to ------------------------- 1994 1993 1992 1993 1992 ---- ---- ---- ------------ -------------- Net Sales 100% 100% 100% 36% 3% Gross Profit 36 28 16 76 78 Selling, General & Administrative 23 26 31 22 (12) Research & Development 6 7 9 17 (24) Non-Recurring Charges - 3 - - -
Sales were $17,346,000 in 1994, $12,778,000 in 1993, and $12,373,000 in 1992. Bookings for 1994 increased 50% to $17,802,000 from $11,893,000 in 1993. Bookings for 1992 were $14,109,000. The Company's backlog was $2,589,000 at December 31, 1994 versus $2,133,000 at December 31, 1993. The increase was a result of a turnaround in the electronics industry, an increased demand for the Company's new products, ISOTHERM and UNITHERM II, and a recapture of market share lost in 1991 through 1993. During 1994, sales of semi-aqueous cleaners were very slow, while sales of aqueous cleaners had slightly more activity. Despite the total elimination of CFC production in 1995, the expected increased revenue from these products has not yet materialized as expected. The decrease in bookings for 1993 was due to a continued slow-down in capital spending in the U.S. and Europe. In 1994, gross profit percentage increased to 36% from 28% in 1993, primarily due to decreased material costs and increased labor productivity, which was partially offset by increased discounting and unabsorbed manufacturing overhead. Steps were taken in the fourth quarter of 1993 to consolidate manufacturing operations into one building in New Hampshire. This resulted in substantial savings in 1994. In 1992, margins were adversely affected by increased material costs with a premium paid for materials associated with the start-up and enhancement of the UNITHERM reflow system and higher learning costs of direct labor. The Company also adjusted inventory values with the changeover to the new UNITHERM line. Selling, general and administrative expenses increased in 1994 to $4,072,000 from $3,338,000 in 1993. However, as a percentage of sales, selling, general and administrative expenses decreased to 23% in 1994 from 26% in 1993. The increase in actual spending is partially a result of the increased sales volume and the restoration of commission rates to previous levels. In 1992, selling, general and administrative expenses were $3,778,000 or 31% of sales. The Company incurred advertising costs of $176,000 in 1994, $147,000 in 1993, and $143,000 in 1992. Research and development expenses increased 17% to $1,010,000 in 1994 from $860,000 in 1993. The increase was a result of increased headcount as the Company accelerated the introduction of new products and enhanced features during the year. Research and development expenses were $1,130,000 in 1992. In 1993, the Company incurred $420,000 of non-recurring charges. The Company wrote off restructuring charges of $290,000 relating to the consolidation of manufacturing into one building and the payment of severance costs. The Company wrote off $130,000 of goodwill relating to the Gram Corporation acquisition in 1988. 9 The Company had net non-operating expenses of $501,000 in 1994 compared to $232,000 for 1993 and $94,000 for 1992. Costs relating to the Company's patent infringement lawsuit against Conceptronic were $330,000 for 1994, $127,000 for 1993, and $184,000 for 1992. The Company also incurred $72,000 of legal and consulting costs relating to the Company's term loan agreement default in 1992. The Company, as part of a planned program to generate cash, sold a number of its demo machines, in either inventory or fixed assets, and realized a gain of $85,000 in 1994, versus $42,000 in 1993, and $151,000 in 1992. The Company also incurred $61,000 of cash discounts in 1994, versus $86,000 in 1993, and $45,000 in 1992. LIQUIDITY AND CAPITAL RESOURCES During the last three fiscal years, the Company has financed its operations with internally generated funds and equity raised in a Rights Offering completed in December 1992 and a subordinated convertible loan in 1993. In addition, during January 1994, the Company pledged receivables and received a $350,000 loan from New England Growth Fund I, L.P.. This loan was repaid in full on March 31, 1994. In 1994, cash increased by $499,000 as a result of the improved operations of the Company. During 1994, the Company reduced its long-term debt by approximately $447,000. During 1993, cash decreased by $1,084,000 as the Company paid off its bank loan by approximately $684,000 and reduced its accrued liabilities by $600,000. During 1992, the Company's cash decreased by approximately $150,000 and the Company also reduced its bank indebtedness by $1,200,000. During 1993 and 1992, there were no short term borrowings. During 1992, the Company sold its investments in Research, Inc., Anafaze, Inc., and the Surface Mount Center of Canada. The proceeds from Research, Inc., the SMT Center, and a portion of the Anafaze proceeds were applied to the bank loan. The Company has reviewed its capital spending budget for 1995 and expects to finance its 1995 capital equipment acquisitions through lease financing. The Company continues to monitor its operational spending levels very closely in order to conserve cash. In early March 1995, the Company signed a commitment letter for a $500,000 revolving line of credit with First National Bank of Portsmouth which is expected to close in late March 1995. The Company believes that its current cash balances and cash from operations will be adequate to meet the Company's working capital requirements during the next year. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The Company's financial statements, together with the reports of the Company's independent auditors, Coopers & Lybrand L.L.P., are contained on pages 16 through 30 of the 1994 Form 10-K. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The response to this item is incorporated herein by reference to the Company's definitive proxy statement for the Annual Meeting of Shareholders to be held on May 4, 1995. ITEM 11. EXECUTIVE COMPENSATION The response to this item is incorporated herein by reference to the Company's definitive proxy statement for the Annual Meeting of Shareholders to be held on May 4, 1995. 10 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The response to this item is incorporated herein by reference to the Company's definitive proxy statement for the Annual Meeting of Shareholders to be held on May 4, 1995. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The response to this item is incorporated herein by reference to the Company's definitive proxy statement for the Annual Meeting of Shareholders to be held on May 4, 1995. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
Page No. (a) 1. The following consolidated financial statements are filed as part of this report: Report of Coopers & Lybrand L.L.P., Independent Auditors, dated February 21, 1995 16 Consolidated Balance Sheets at December 31, 1994 and 1993 17 Consolidated Statements of Operations for each of the three years in the period ended December 31, 1994 18 Consolidated Statements of Stockholders' Equity for each of the three years in the period ended December 31, 1994 19 Consolidated Statements of Cash Flow for each of the three years in the period ended December 31, 1994 20 Notes to Consolidated Financial Statements for each of the three years in the period ended December 31, 1994 21 2. THE FOLLOWING FINANCIAL STATEMENT SCHEDULE IS FILED WITH THIS REPORT: Schedule II - Valuation and qualifying accounts All other schedules have been omitted because they are not applicable, not required under the instructions, or the information is contained in the financial statements or the notes thereto.
11 3. THE FOLLOWING EXHIBITS REQUIRED BY ITEM 601 OF REGULATION S-K ARE FILED WITH THIS REPORT:
EXHIBIT INDEX PAGE NO. ------------- -------- 3.1 Articles of Organization, as amended to date (1) 3.2 By-Laws, as amended to date (16) 4.1 Specimen Common Stock Certificate (2) 4.2 Form of Warrant issued to the Underwriter in the Company's 1992 Rights Offering (12) 4.3 Form of 10% Convertible Subordinated Debenture (16) 4.4 Form of Common Stock Purchase Warrant (16) * 10.1 Incentive Stock Option Plan of 1983 (3) * 10.2 Incentive Stock Option Plan of 1983-II (3) * 10.3 Form of Incentive Stock Option Agreement for 1983 Plan and the 1983-II Plan (3) 10.4 Lease of Real Property from Susan J. Conway, Trustee of Forbes Realty Trust (2) * 10.5 1987 Stock Option Plan (5) 10.6 Form of Non-qualified Stock Option Agreement (5) 10.7 Building Agreement and Lease of Premises at Bush Park, Estover, Plymouth from The Counsel of the City of Plymouth (5) 10.8 Lloyd's Bank Loan Agreement (5) 10.9 Department of Trade and Industry Grant (5) 10.10 Lease of Real Property from Susan J. Conway, Trustee of Afton Realty Trust (6) 10.11 Consulting Agreement with George F. Soderberg (7) 10.12 Non-Compete Agreement with George F. Soderberg (7) 10.13 Stock Repurchase Agreement with George F. Soderberg (7) 10.14 Subordinated Term Note with George F. Soderberg (7) 10.15 Lease Amendments of Real Property from Susan J. Conway, Trustee of Forbes Realty Trust (8) * 10.16 Employment Agreement with James J. Manfield, Jr. (8)(10)(14) * 10.17 Employment Agreement with Edward A. Richards (8)(10)(14) 10.18 Lease of Real Property from the Corporate Business Service Limited (9) 10.19 Term Note due from Anafaze, Incorporated and Security Agreement (9) * 10.20 Employment Agreement with Albert J. Chanasyk (14) 10.21 Employment Agreement with Dennis J. Monroe (14) 10.22 Employment Agreement by and between Peter D. Spilling and Vitronics Europe Ltd. (11) * 10.23 Employment Agreement with Ronald W. Lawler (15) * 10.24 Severance Agreement with Edward A. Richards (16) 10.25 Convertible Subordinated Debenture Purchase dated October 1, 1993 between the Company and New England Growth Fund I, L.P. (NEGF) (16) 10.26 $1,200,000 10% Convertible Subordinated Debenture dated October 1, 1993 issued to NEGF (16) 10.27 Amendment to Lease between Forbes Realty Trust and Vitronics Corporation (16) 10.28 $350,000 Demand Promissory Note of the Company issued to NEGF dated January 13, 1994 (16)
12
EXHIBIT INDEX PAGE NO. ------------- -------- 10.29 Loan Agreement between the Company and NEGF dated January 13, 1994 (16) 10.30 Security Agreement between the Company and NEGF dated January 13, 1994 (16) 10.31 Underwriters Common Stock Purchase Warrant issued to Barclay Investments Inc. dated December 15, 1992 (16) 10.32 Common Stock Purchase Warrant for 125,000 Shares issued to Barclay Investments Inc. dated October 1, 1993 (16) 11.1 Calculation of Net Income Per Common Share 31 16 Letter from Deloitte & Touche regarding change of Accountant (13) 21.1 Subsidiaries of the registrant 32 99.1 Directors and Officers Liability Policy and Company reimbursement (4) 99.2 Complaint regarding Conceptronic Patent Litigation (14) 99.3 Conceptronic's response to the Complaint (14) 99.4 Conceptronic's Counterclaim (14) 99.5 Vitronics' response to Conceptronic's Counterclaim (14) 99.6 Order of the United States District Court concerning Conceptronic Patent Litigation (11) 99.7 Correspondence concerning the Vitronics Europe Limited lease (11) 99.8 Conceptronic's Counterclaim Summary Judgment (16)
(1) Articles of Amendment filed on August 17, 1987 are hereby incorporated by reference from Exhibits to Annual Report on Form 10-K (File No. 0-13715) filed by the Company with the Securities and Exchange Commission on March 31, 1988. The balance of Exhibit 3.1 is hereby incorporated by reference from Exhibits to Amendment No. 1 to Form S-18 Registration Statement (File No. 2-90042) filed by the Company with the Securities and Exchange Commission on August 1, 1984. (2) Exhibits 4.1 and 10.4 are hereby incorporated by reference from Exhibits to Annual Report on Form 10-K (File No.2-90042) filed by the Company with the Securities and Exchange Commission on April 1, 1985. (3) Exhibits 10.1, 10.2 and 10.3 are hereby incorporated by reference from Exhibits to Form S-18 Registration Statement (File No. 2-90042) filed by the Company with the Securities and Exchange Commission on March 20, 1984. (4) Exhibit 99.1 is hereby incorporated by reference from Exhibits to Post- Effective Amendment No. 1 to Form S-18 Registration Statement (File No. 2- 90042) filed by the Company with the Securities and Exchange Commission on May 10, 1985. (5) Exhibits 10.5, 10.6, 10.7, 10.8 and 10.9 are hereby incorporated by reference from Exhibits to Annual Report on Form 10-K (File No. 0-13715) filed by the Company with Securities and Exchange Commission on March 31, 1988. (6) Exhibit 10.10 is hereby incorporated by reference from exhibits to Annual Report on Form 10-K (File No. 0-13715) filed by the Company with the Securities and Exchange Commission on March 24, 1989. 13 (7) Exhibits 10.11, 10.12, 10.13 and 10.14 are hereby incorporated by reference to Form 8-K (File No. 0-13715) filed by the Company with the Securities and Exchange Commission on February 22, 1990. (8) Exhibits 10.15, 10.16 and 10.17 are hereby incorporated by reference from exhibits to Annual Report on Form 10-K (File No. 0-13715) filed by the Company with the Securities and Exchange Commission on April 2, 1990. (9) Exhibits 10.18 and 10.19 are hereby incorporated by reference from exhibits to Annual Report on Form 10-K (File No. 0-13715) filed by the Company with the Securities and Exchange Commission on April 1, 1991. (10) Exhibits 10.16 and 10.17 were amended. Copies of such agreements as amended are hereby incorporated by reference from exhibits to Annual Report on Form 10-K (File No. 0-13715) filed by the Company with the Securities and Exchange Commission on March 27, 1992. (11) Exhibits 10.22, 99.6 and 99.7 are hereby incorporated by reference to Exhibits to Form S-2 Registration Statement (File No. 33-50928) filed by the Company with the Securities and Exchange Commission on August 17, 1992. (12) Exhibit 4.2 was hereby incorporated by reference to Exhibits to Amendment No. 2 to Form S-2 Registration Statement (File No. 33-50928) filed by the Company with the Securities and Exchange Commission on November 12, 1992. (13) Exhibit 16 is hereby incorporated by reference to the Company's Form 8-K dated December 30, 1992, and to the Amendment thereto on Form 8 dated January 11, 1993. (14) Exhibits 10.16, 10.17, 10.20, 10.21, 99.2, 99.3, 99.4 and 99.5 are hereby incorporated by reference from exhibits to Annual Report on Form 10-K (File No. 0-13715) filed by the Company with the Securities and Exchange Commission on March 27, 1992. (15) Exhibit 10.23 is hereby incorporated by reference from exhibits to Annual Report on Form 10-K (File No. 0-13715) filed by the Company with the Securities and Exchange Commission on March 26, 1993. (16) Exhibits 3.2, 4.3, 4.4, 10.24, 10.25, 10.26, 10.27, 10.28, 10.29, 10.30, 10.31, 10.32, 21.1, 99.8, are hereby incorporated by reference from Exhibits to Annual Report on Form 10-K (File No. 0-13715) filed by the Company with the Securities & Exchange Commission on April 13, 1994. * Management compensatory plan or arrangement. (b) REPORTS ON FORM 8-K No Reports on Form 8-K have been filed during the last quarter of the period covered by this report. 14 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. (Registrant) VITRONICS CORPORATIO --------------------------------------- By: /s/ JAMES J. MANFIELD, JR. Date: March 17, 1995 ------------------------------ James J. Manfield, Jr., Chairman of the Board and Chief Executive Officer By: /s/ RONALD W. LAWLER Date: March 17, 1995 ------------------------- Ronald W. Lawler, President and Chief Operating Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By: /s/JAMES J. MANFIELD, JR. Date: March 17, 1995 ----------------------------- James J. Manfield, Jr., Chairman of the Board, Chief Executive Officer, Chief Financial Officer and Treasurer By: /s/DANIEL J. SULLIVAN Date: March 17, 1995 ----------------------------- Daniel J. Sullivan Corporate Controller and Principal Accounting Officer BOARD OF DIRECTORS ------------------ /s/ JAMES J. MANFIELD,JR. Date: March 17, 1995 ------------------------------ James J. Manfield, Jr. /s/ RONALD W. LAWLER Date: March 17, 1995 ------------------------------ Ronald W. Lawler /s/ DR. ALLEN H. KEOUGH Date: March 17, 1995 ------------------------------ Dr. Allen H. Keough /s/ DAVID R.A. STEADMAN Date: March 17, 1995 ------------------------------- David R.A. Steadman /s/ ROBERT J. HANKS Date: March 17, 1995 ------------------------------- Robert J. Hanks /s/ JOHN F. ROUSSEAU, JR. Date: March 17, 1995 ------------------------------- John F. Rousseau, Jr. 15 INDEPENDENT AUDITORS' REPORT To the Board of Directors and Stockholders Vitronics Corporation Newmarket, New Hampshire We have audited the accompanying consolidated financial statements and the financial statement schedule of Vitronics Corporation and subsidiaries listed in Items 14a (1) and (2) of this Form 10-K. These financial statements and the financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and the financial statement schedule based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above, present fairly, in all material respects, the financial position of Vitronics Corporation and subsidiaries as of December 31, 1994 and 1993, and the results of its operations and its cash flows for the three years in the period ended December 31, 1994 in conformity with generally accepted accounting principles. Also, in our opinion, the consolidated financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein. COOPERS & LYBRAND LLP Manchester, New Hampshire February 21, 1995 16 VITRONICS CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollars in thousands except share amounts)
ASSETS December 31 ----------------- 1994 1993 -------- ------- CURRENT ASSETS: Cash and cash equivalents $ 671 $ 172 Accounts receivable - less allowance for doubtful accounts of $100 and $120 2,723 1,696 Inventories 2,094 2,159 Refundable taxes - 20 Other current assets 189 241 ------- ------- TOTAL CURRENT ASSETS 5,677 4,288 PROPERTY AND EQUIPMENT 223 318 OTHER ASSETS 152 190 ------- ------- $ 6,052 $ 4,796 ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 1,751 $ 1,026 Other current liabilities 945 696 Current maturities of long-term liabilities 305 470 ------- ------- TOTAL CURRENT LIABILITIES 3,001 2,192 ------- ------- LONG-TERM LIABILITIES - net of current maturities 1,323 1,605 ------- ------- COMMITMENTS STOCKHOLDERS' EQUITY: Common stock, $.01 par value: Authorized 20,000,000 shares; issued and outstanding 7,550,538 and 7,378,538 76 74 Additional paid-in capital 5,401 5,311 Foreign currency translation adjustment (184) (219) Accumulated deficit (3,565) (4,167) ------- ------- 1,728 999 ------- ------- $ 6,052 $ 4,796 ======= =======
The accompanying notes are an integral part of the consolidated financial statements. 17 VITRONICS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in thousands except share amounts)
Year Ended December 31 -------------------------------- 1994 1993 1992 ------- ------- ------- Net sales $17,346 $ 12,778 $ 12,373 Costs of goods sold 11,136 9,248 10,385 ------ ------- ------- Gross profit 6,210 3,530 1,988 ------ ------- ------- Selling, general and administrative expenses 4,072 3,338 3,778 Research and development costs 1,010 860 1,130 Non-recurring charges - 420 - ------ ------- ------- 5,082 4,618 4,908 ------ ------- ------- Income (loss) from operations 1,128 (1,088) (2,920) Non-operating expense - net 501 232 94 ------ ------- ------- Income (loss) before taxes 627 (1,320) (3,014) Income taxes (credit) 25 37 (49) ------ ------- ------- Net income (loss) $ 602 $ (1,357) $ (2,965) ====== ======= ======= Income (loss) per common share: Primary $ .08 $ (.18) $ (.70) ====== ======= ======= Fully diluted $ .07 $ (.18) $ (.70) ====== ======= ======= Weighted average number of common and common equivalent shares used in calculation of earnings per common share: Primary 7,739,000 7,379,000 4,216,000 ========== ========= ========= Fully diluted 10,190,000 7,379,000 4,216,000 ========== ========= =========
The accompanying notes are an integral part of the consolidated financial statements. 18 VITRONICS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Dollars in thousands)
Unrealized loss on Foreign non-current Additional currency marketable Common Stock paid-in translation equity Retained ---------------- Shares Amount capital adjustment securities earnings Total ------ ------ ------- ---------- ---------- -------- ----- Balances, December 31, 1991 3,928,538 $ 39 $ 4,043 $ 53 $ (25) $ 155 $ 4,265 Foreign currency translation adjustment - - - (264) - - (264) Exercise of stock rights (Offering) 3,450,000 35 1,286 - - - 1,321 Change in unrealized loss on non-current marketable equity securities - - - - 25 - 25 Net loss - - - - - (2,965) (2,965) ------ --- ---- ---- ---- ------ ------ Balances, December 31, 1992 7,378,538 74 5,329 (211) - (2,810) 2,382 Foreign currency translation adjustment - - - (8) - - (8) Additional cost related to rights offering - - (18) - - - (18) Net loss - - - - - (1,357) (1,357) ------ --- ---- ---- ---- ------ ------ Balances, December 31, 1993 7,378,538 74 5,311 (219) - (4,167) 999 Exercise of stock options 30,000 1 20 - - - 21 Conversion of debt to equity 142,000 1 70 - - - 71 Foreign - currency translation adjustment - - - 35 - - 35 Net income - - - - - 602 602 ------ --- ---- ---- ---- ------ ------ Balances, December 31, 1994 7,550,538 $ 76 $ 5,401 $ (184) - $(3,565) $1,728 ========= ==== ======= ====== ======= ======= ======
The accompanying notes are an integral part of the consolidated financial statements. 19 VITRONICS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands)
Year Ended December 31 ---------------------------- 1994 1993 1992 ---- ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ 602 $(1,357) $(2,965) ---- ----- ------ Adjustments to reconcile net loss to net cash provided by (used for) operating activities: Depreciation and amortization 192 279 404 Gain on sale of assets - (42) (179) Provision for excess and obsolescence 297 48 191 Deferred income taxes - - 360 Writedown of non-current marketable equity securities - 130 - Changes in current assets and liabilities: Accounts receivable (1,027) 294 417 Inventories (232) 49 79 Other current assets 52 96 (24) Accounts payable 725 (90) 53 Income taxes 20 189 649 Other current liabilities 249 (614) 77 ------ ------ ------ Total adjustments 276 339 2,027 ------ ------ ------ Net cash provided by (used for) operating activities 878 (1,018) (938) ------ ------ ------ CASH FLOWS FROM INVESTING ACTIVITIES: Additions to property and equipment (32) (65) (92) Disposals of property and equipment 2 74 332 Additions to other assets (29) (177) (21) Loan to affiliated company - - - Proceeds on sale of investment - - 100 ------ ------ ------ Net cash provided by (used for) investing activities (59) (168) 319 ------ ------ ------ CASH FLOWS FROM FINANCING ACTIVITIES: Long-term borrowing - 1,200 - Issuance of common stock under stock option plans 21 - - Payments of long-term debt (376) (1,072) (1,112) Rights offering - (18) 1,321 ------ ------ ------ Net cash provided by (used for) financing activities (355) 110 209 ------ ------ ------ Foreign currency translation adjustment 35 (8) 264 ------ ------ ------ CASH AND CASH EQUIVALENTS: Net increase (decrease) 499 (1,084) (146) Balance, beginning of year 172 1,256 1,402 ------ ------ ------ Balance, end of year $ 671 $ 172 $ 1,256 ====== ====== ====== SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES: Conversion of debt to equity $ 71 - -
The accompanying notes are an integral part of the consolidated financial statements. 20 VITRONICS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ________________________________________________________________________________ Three Years Ended December 31, 1994 ________________________________________________________________________________ A. Summary of Significant Accounting Policies The Company is engaged in the business of designing, engineering, manufacture and marketing of state-of-the-art thermal processing systems for soldering surface mounted devices to printed circuit boards and cleaning of the finished assembly. The significant accounting policies employed are as follows : OPERATIONS In March 1995, the Company signed a commitment letter for a $500,000 revolving line of credit with First National Bank of Portsmouth. Management believes this possible financing source, combined with its existing cash balances and anticipated cash flow from operations, will be adequate to meet its working capital requirements during 1995. However, there can be no assurances that the Company will be able to access funds under this financing arrangement or that Company operations will generate adequate cash flows. PRINCIPLES OF CONSOLIDATION- The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary. All significant intercompany balances, transactions and profits have been eliminated. CASH EQUIVALENTS- The Company considers all highly-liquid debt instruments with a maturity of three months or less to be cash equivalents. At December 31, 1994 and December 31, 1993, the Company had approximately $623,000 and $172,000, respectively, on deposit at one Bank. INVENTORIES- Inventories are stated at the lower of cost (first-in, first-out method) or market. PROPERTY AND EQUIPMENT- Property and equipment are recorded at cost. Depreciation is provided using the straight-line method over the estimated useful lives of the applicable assets. Expenditures for maintenance and repairs are charged to expense as incurred, whereas expenditures for renewals and betterments are capitalized. Upon sale or other disposition of assets, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is reflected in income. The estimated useful lives used to compute depreciation are as follows:
Description Years ----------- ----- Machinery and equipment 3-8 Furniture and fixtures 5-8
Leasehold improvements are amortized over the life of the lease, including extensions, but not in excess of the maximum useful lives of the improvements. 21 OTHER ASSETS- Included in other assets are patents and debenture costs associated with the issuance of long-term debt. Patents and debenture costs are being amortized on the straight-line method over their estimated useful lives ranging from three to seven years. FOREIGN CURRENCY TRANSLATION- All assets and liabilities of the Company's United Kingdom subsidiary, Vitronics Europe Limited (VEL), are translated at exchange rates in effect at December 31, 1994. Income and expenses are translated at average rates for the year. The resulting differences, due to changing exchange rates, are charged or credited to "Foreign Currency Translation Adjustment" included as part of Stockholders' Equity. Gains and losses from foreign currency transactions are included in earnings. REVENUE RECOGNITION- Revenue is recorded upon shipment to the customer. RESEARCH AND DEVELOPMENTS COSTS- All research and development costs are charged to operations as incurred. WARRANTIES- The Company's products are generally under warranty against defects in material and workmanship for a one year period. Estimated warranty costs are accrued in the same period as products are shipped. INCOME TAXES- The Company has adopted the liability method of accounting for income taxes, as set forth in Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes (SFAS 109), effective January 1, 1993. The --------------------------- cumulative effect of adopting this statement as of January 1, 1993 was immaterial to the results of operations for the year ended December 31, 1993. Previous to January 1, 1993, the Company had appropriately accounted for taxes under APB #11. SFAS 109 is an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company's financial statements or tax returns. In estimating future tax consequences, SFAS 109 generally considers all expected future events other than future enactments of changes in the tax law or rates. Deferred tax assets are recognized, net of any valuation allowance, for deductible temporary differences and operating loss and credit carryforwards. Deferred tax expense represents the change in the deferred tax assets and liabilities. INCOME (LOSS) PER SHARE- The income (loss) per share is based on the weighted average number of common and common equivalent shares (where dilutive) outstanding during the year. RECLASSIFICATION- Certain 1993 and 1992 balances have been reclassified in order to conform to the 1994 presentation. 22 ________________________________________________________________________________ B. INVENTORIES Inventories consisted of (in thousands):
December 31 ----------------- 1994 1993 ----- ----- Finished goods $ 224 $ 308 Work in process 369 473 Raw materials 1,501 1,378 ----- ----- $2,094 $2,159 ===== =====
________________________________________________________________________________ C. PROPERTY AND EQUIPMENT Property and equipment consisted of (in thousands):
December 31 ----------------- 1994 1993 ----- ----- Machinery and equipment $ 958 $1,063 Furniture and fixtures 393 389 Leasehold improvements 428 418 ----- ----- $1,779 1,870 Less accumulated depreciation and amortization 1,556 1,552 ----- ----- $ 223 $ 318 ===== =====
______________________________________________________________________________ D. OTHER ASSETS Other assets consisted of (in thousands):
December 31 ----------------- 1994 1993 ----- ----- Patents $ 229 $ 201 Debenture costs 155 155 ----- ----- 384 356 Less accumulated amortization 232 166 ----- ----- $ 152 $ 190 ===== =====
23 ________________________________________________________________________________ E. OTHER CURRENT LIABILITIES Other current liabilities consisted of (in thousands):
December 31 ---------------- 1994 1993 ----- ----- Accrued sales commissions $ 283 $ 194 Accrued payroll and related taxes 133 80 Accrued warranty costs 155 130 Other 374 292 ----- ----- $ 945 $ 696 ===== =====
________________________________________________________________________________ F. INDEBTEDNESS Long-term liabilities consisted of (in thousands):
December 31 -------------- 1994 1993 ----- ----- U.K. term loan, interest at Bank base rate plus 3% $ 220 $ 261 Notes payable, primarily to vendors, interest ranging from 0% - 12% 204 565 Subordinated Convertible Debenture interest at 10% 1,200 1,200 Unamortized government grants 4 49 ----- ----- 1,628 2,075 Less current maturities 305 470 ----- ----- Total long-term liabilities - net of current maturities $1,323 $1,605 ===== =====
On October 1, 1993, the Company received $1,200,000 from an investment fund. This was a convertible subordinated debenture with an interest rate of 10% convertible into 2,400,000 shares of Vitronics' common stock. Quarterly principal payments of $33,333 are to be made beginning on June 30, 1995 and continuing through December 31, 1997, at which time any unpaid principal will be due. The agreement calls for mandatory prepayment on the occurrence of certain events and contains certain financial covenants, the most restrictive of which is that the Company must maintain a ratio of consolidated net earnings to cover interest charges of not less than 1:1 and that the Company must maintain a debt to equity ratio not greater than 3:1. In addition, the agreement restricts the Company's payment of dividends. The outstanding principal balance of this note is convertible at any time, at the discretion of the holder. The balance is convertible, at the option of the Company, at the conversion price of $.50 per share, if the average of the high and low trading prices of the stock is $2.00 or more for a period of 30 consecutive trading days. In January 1994, the Company pledged receivables and received a $350,000 loan at 12% interest from New England Growth Fund I, L.P.. This loan was repaid in March 1994. 24 Borrowings under the U.K. term loan are collateralized by substantially all of the assets of VEL, the Company's United Kingdom subsidiary and guaranteed by the Company. The interest rate was 9% at December 31, 1994. At December 31, 1994, this has been classified as long-term debt. VEL received government grants in order to subsidize the acquisition of equipment and leasehold improvements and to stimulate employment. To the extent that the grant is capital in nature, it is amortized over 5 years, the equipment's useful life. Because the Company has not met its personnel requirements under the grant, the Company may be obligated to repay the unamortized portion of the grant ($4,000) to the government. In 1993, approximately $365,000 of accounts payable were converted to long-term Notes Payable. As of December 31, 1994, aggregate maturities of long-term liabilities were as follows (in thousands): 1995 $ 305 1996 246 1997 243 1998 834 ----- $1,628 =====
________________________________________________________________________________ G. INCOME TAXES The provision for income taxes consisted of (in thousands):
Year Ended December 31 ------------------------ 1994 1993 1992 ---- ---- ---- Currently payable (refundable): Federal $ - $ (53) $(360) Foreign - - (49) State 25 - - ---- ---- ----- 25 (53) (409) ---- ---- ----- Deferred (prepaid): Federal - - 360 Foreign - 90 - State - - - ---- ---- ----- - 90 360 ---- ---- ----- $ 25 $ 37 $ (49) ==== ==== =====
Reconciliations of income taxes at the statutory rate to the effective rate reflected in the financial statements were as follows:
Year Ended December 31 --------------------------- 1994 1993 1992 ---- ---- ---- Statutory income tax rate 34.0% (34.0%) (34.0%) Net losses without tax benefit - 20.9 28.8 Net operating losses utilized (34.0) - - Goodwill amortization - 3.6 3.6 Foreign taxes - 6.8 - State taxes net of Federal benefit 2.8 - - Other 1.4 5.5 - ----- ----- ----- 4.2% 2.8% (1.6%) ===== ===== =====
25 The 1993 foreign deferred tax provision represents an adjustment of prior year amounts. The components of the net deferred tax assets and liabilities were as follows (in thousands):
December 31, ------------------ 1994 1993 -------- -------- Deferred tax assets: Inventory reserves $ 127 $ 116 Accounts receivable reserves 40 40 Other liabilities and reserves 62 69 Depreciation and amortization 147 155 Capital loss carryforwards 160 160 Net operating loss carryforwards 1,168 1,407 Research and development credits 155 199 ------ ------ Total deferred tax asset 1,859 2,146 Valuation allowance (1,859) (2,146) ------ ------ Net deferred tax assets $ - $ - ====== ======
The Company has placed a full valuation allowance against the deferred tax asset due to the uncertainty regarding the utilization of these benefits in future returns. The Company currently has net operating loss and capital loss carryforwards for Federal and Foreign income tax purposes of approximately $3,116,651 and $468,668, respectively, and R&D credits of approximately $155,000, all expiring in the years 2007 and 2008. The Company had income (loss) before tax in the United Kingdom for the years ended December 31, 1994, 1993 and 1992, of $218,000, $(242,000) and $(519,000), respectively, and in the United States, $409,000, $(1,078,000) and $(2,495,000), respectively. ________________________________________________________________________________ H. COMMITMENTS The Company leases its facilities and certain equipment under operating leases ranging up to 5 years with renewal and purchase options. The leases provide for monthly rental payments, plus, in certain situations, payments for real estate taxes, insurance and maintenance. Rental expense for property, machinery and equipment charged to operations was $372,000, $463,000 and $434,000 for the years ended December 31, 1994, 1993 and 1992, respectively. At December 31, 1994, future minimum payments applicable to non- cancelable operating leases with initial terms of one year or more were as follows (in thousands):
1995 $ 309 1996 313 1997 246 1998 216 1999 11 ----- $1,095 =====
26 The Company, in the normal course of business, is involved in various legal proceedings, that in the opinion of management, will not have a material effect on the Company's financial conditions or results of operations. The Company does not currently offer employment benefits subject to the provisions of Statements of Financial Accounting Standards 106 and 112. ________________________________________________________________________________ I. STOCK OPTIONS Stock Option Plans ------------------ The Company has Stock Option Plans which allow for the granting of options to employees, officers, directors and consultants to purchase an aggregate of 1,000,000 shares of the Company's common stock. The Stock Option Committee may issue options which are exercisable over a period not to exceed 10 years and vest from date of issuance up to five years. The following schedule summarizes the stock option activity during the three years ended December 31, 1994:
Number of Option price shares per share --------- ---------------- Balance, December 31, 1991 326,500 $1.125 to $1.875 Granted in 1992 449,900 $.5625 to $1.25 Expired/Canceled in 1992 (145,950) $1.125 to $1.87 ------- Balance, December 31, 1992 630,450 $.5625 to $1.875 Granted in 1993 200,500 $.84 Expired/Canceled in 1993 (46,350) $.5625 to $1.75 ------ Balance, December 31, 1993 784,600 $.5625 to $1.875 ------- Granted in 1994 324,000 $.01 to $1.3125 Expired/Canceled in 1994 (155,800) $.5625 to $1.875 Exercised (30,000) $.01 ------ Balance, December 31, 1994 922,800 $.5625 to $1.75 =======
Options to purchase 56,500 and 181,500 shares were available to be granted under these plans as of December 31, 1994 and 1993, respectively. When options under these plans are canceled, they may be granted again at a later date. Options to purchase 409,900 shares at prices ranging from $.5625 to $1.75 per share were exercisable as of December 31, 1994, and options to purchase 393,900 shares at prices ranging from $.5625 to $1.875 were exercisable as of December 31, 1993. The Company has reserved 979,300 shares of common stock for these Plans. In addition, the Company has 346,225 outstanding stock warrants to purchase the Common Stock of the Company at an exercise price of $.60 exercisable from November 1993 through September 1998. 27 ___________________________________________________________________ J. NON-OPERATING EXPENSE - NET Non-operating expense - net consisted of (in thousands):
Year Ended December 31 ------------------------- 1994 1993 1992 -------- ------- ------ Loss on investment $ - $ - $ 6 Interest income (10) (6) (17) Interest expense 189 114 160 Gain on sale of assets (85) (42) (179) Patent defense costs 330 127 184 Other, net 77 39 (60) ---- ---- ---- $ 501 $ 232 $ 94 ==== ==== ====
On a cash basis, the actual interest income received and interest expense paid by the Company during 1994, 1993 and 1992 approximated the above amounts. ________________________________________________________________________________ K. FOREIGN OPERATIONS The Company operates in one industry segment. Data by geographic area were as follows (in thousands):
Year Ended December 31 -------------------------- 1994 1993 1992 ---- ---- ---- Foreign revenues: Asia $ 4,974 $ 5,895 $ 3,169 Europe 2,663 1,541 2,217 Other 275 - 126 ------- ------- ------- $ 7,912 $ 7,436 $ 5,512 ======= ======= ======= Revenues by manufacturing operations: United States $13,741 $10,133 $ 9,550 United Kingdom 3,605 2,645 2,823 ------- ------- ------- $17,346 $12,778 $12,373 ======= ======= ======= Income (loss) from operations: United States $ 864 $ (866) $(2,387) United Kingdom 264 (222) (533) ------- ------- ------- $ 1,128 $(1,088) $(2,920) ======= ======= ======= Identifiable assets: United States $ 4,614 $ 3,758 $ 5,293 United Kingdom 1,438 1,038 1,462 ------- ------- ------- $ 6,052 $ 4,796 $ 6,755 ======= ======= =======
28 ______________________________________________________________________________ L. MAJOR CUSTOMER During 1994, one customer accounted for 15% of net sales. Accounts receivable from this customer at December 31, 1994 amounted to $254,934. In 1993, there were no customer accounts over 10% of net sales. During 1992, one customer accounted for 11% of net sales. Accounts receivable from this customer amounted to $245,498 at December 31, 1992. ______________________________________________________________________________ M. EMPLOYEE BENEFIT PLAN The Company maintains a 401(k) Plan and a defined Contribution Plan. The 401(k) Plan covers substantially all full-time U.S. employees who have twelve months of service and have attained the age of 21. Employee contributions may range from 2%-15% of compensation with a discretionary matching Company contribution. The Company is currently matching 25% of the employees contribution, up to 1.5% of total compensation. The Company may also make an optional contribution for any plan year at its discretion. The defined Contribution Plan covers all full-time employees in the United Kingdom. Contributions to the Plan are made only by the Company, and at the Company's discretion. The Company has expensed approximately $41,438, $34,325 and $32,469, relating to contributions to the Plans during 1994, 1993 and 1992, respectively. ________________________________________________________________________________ N. SUPPLEMENTAL SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) (Dollars in thousands except per share amounts)
QUARTER ENDED ------------------------------------ Dec 31 Oct 1 Jul 2 Apr 2 ------ ----- ----- ----- 1994: Net sales $5,360 $4,698 $3,704 $3,584 Gross profit 1,964 1,660 1,360 1,226 Gross profit % 37% 35% 37% 34% Net income 288 243 59 12 Net income per common share - Primary .04 .03 .01 .00 - Fully diluted .03 .03 .01 .00
QUARTER ENDED ------------------------------------ Dec 31 Oct 2 Jul 3 Apr 3 ------ ------ ------ ------ 1993: Net sales $2,724 $3,238 $2,436 $4,380 Gross profit 674 1,096 536 1,224 Gross profit % 25% 34% 22% 28% Net income/(loss) (520) 50 (790) (97) Net income/(loss) per common share (.07) .01 (.11) (.01)
During the fourth quarter of 1993, the Company recorded writedowns of $130,000 relating to unamortized goodwill, and wrote-off $90,000 relating to a prior year foreign tax asset. During the second quarter of 1993, the Company recorded writedowns of $290,000 relating to restructuring costs. 29 VITRONICS CORPORATION AND SUBSIDIARIES SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS (000's omitted) ______________________________________________________________________________
Additions Balance Charged to Balance Beginning Costs and Deductions/(A)// End of of Period Expenses Write-Offs Period --------- -------- ---------- ------ Allowance for doubtful accounts year ended December 31, 1994 $120 $ 1 $ 21 $100 1993 124 12 16 120 1992 110 77 63 124 Inventory reserves year ended December 31 1994 $289 $297 $219 $367 1993 315 48 74 289 1992 455 191 331 315
(A) Deductions represent amounts determined to be uncollectible and charged against the reserve. 30 EX-23.1 3 CONSENT OF INDEPENDENT ACCOUNTANTS Exhibit 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in this registration statement of Vitronics Corporation on Form S-3 (File No._____) of our report dated February 21, 1995, on our audits of the consolidated financial statements and financial statement schedule of Vitronics Corporation, which report is included in this Annual Report on Form 10-K. Coopers & Lybrand L.L.P. /s/ Coopers & Lybrand L.L.P. Manchester, New Hampshire April 24, 1995 EX-27 4 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM DECEMBER 31, 1994 FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 YEAR YEAR DEC-31-1994 DEC-31-1993 JAN-01-1994 JAN-01-1993 DEC-31-1994 DEC-31-1993 671 172 0 0 2,823 1,816 100 120 2,094 2,159 5,677 4,288 1,779 1,870 1,556 1,552 6,052 4,796 3,001 2,192 0 0 76 74 0 0 0 0 1,652 925 6,052 4,796 17,346 12,778 17,346 12,778 11,136 9,248 5,082 4,618 322 124 0 0 179 108 627 (1,320) 25 37 602 (1,357) 0 0 0 0 0 0 602 (1,357) .08 (.18) .07 (.18)
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