FORM 10Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended DECEMBER 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 1-6549
AMERICAN SCIENCE AND ENGINEERING, INC.
(Exact name of Registrant as specified in its charter)
MASSACHUSETTS 04-2240991
- ------------------------------ -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
829 Middlesex Turnpike
BILLERICA, MASSACHUSETTS 01821
- ------------------------------ --------------
(Address of principal executive offices) (Zip Code)
(978) 262-8700
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year, if
changed since last report)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No
---- ------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date
OUTSTANDING AT
CLASS OF COMMON STOCK DEC. 31, 1999
--------------------- -------------
$.66 2/3 par value 4,930,697
Page 1 of 13 Pages
The Exhibit Index is Located at Page 13
AMERICAN SCIENCE AND ENGINEERING, INC.
PART I - FINANCIAL INFORMATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For Three Months Ended For Nine Months Ended
------------------------------- --------------------------------
Dollars and shares in Thousands,
except per share amounts Dec.31, 1999 Dec.31, 1998 Dec. 31, 1999 Dec. 31, 1998
------------ -------------- -------------- --------------
NET SALES AND CONTRACT REVENUE $ 17,217 $ 16,214 $ 46,992 $ 42,267
-------- -------- -------- --------
COSTS AND EXPENSES:
Cost of sales and contracts 12,272 11,247 33,068 28,098
Selling, general and administrative expenses 2,461 2,168 7,834 6,668
Research and development 1,373 1,757 3,976 4,623
-------- -------- -------- --------
Total costs and expenses 16,106 15,172 44,878 39,389
-------- -------- -------- --------
OPERATING INCOME 1,111 1,042 2,114 2,878
-------- -------- -------- --------
OTHER INCOME (EXPENSE):
Interest, net (169) 40 (195) 71
Other expenses, net (15) (54) (54) (122)
-------- -------- -------- --------
Total other expense (184) (14) (249) (51)
-------- -------- -------- --------
INCOME BEFORE PROVISION
FOR INCOME TAXES 927 1,028 1,865 2,827
PROVISION FOR INCOME TAXES 326 411 682 1,130
-------- -------- -------- --------
NET INCOME $ 601 $ 617 $ 1,183 $ 1,697
-------- -------- -------- ---------
-------- -------- -------- ---------
INCOME PER SHARE - BASIC $ .12 $ .13 $ .24 $ .35
-------- -------- -------- ---------
- DILUTED $ .12 $ .12 $ .24 $ .33
-------- -------- -------- ---------
-------- -------- -------- ---------
DIVIDENDS PAID PER SHARE NONE NONE NONE NONE
-------- -------- -------- ---------
-------- -------- -------- ---------
WEIGHTED AVERAGE SHARES - BASIC 4,931 4,824 4,912 4,792
-------- -------- -------- ---------
- DILUTED 5,023 5,051 5,013 5,081
-------- -------- -------- ---------
-------- -------- -------- ---------
The accompanying notes are an integral part of these condensed consolidated
financial statements.
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AMERICAN SCIENCE AND ENGINEERING, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
Dollars in thousands
Dec. 31, 1999 Mar. 31, 1999
----------------- -------------------
(Unaudited)
ASSETS CURRENT ASSETS:
Cash and cash equivalents $ 588 $ 366
Accounts receivable, net of allowances
of $348 at December 31,
and $259 at March 31, 1999 8,502 7,958
Unbilled costs and fees, net of
Allowances of $447 at December 31, and
March 31, 1999 7,821 2,374
Inventories 9,456 11,083
Deferred income taxes 1,370 1,370
Prepaid expenses and other current assets 1,428 1,224
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TOTAL CURRENT ASSETS 29,165 24,375
------- -------
NONCURRENT ASSETS:
Non-current deferred income taxes 254 254
Deposits 44 17
Other assets 115 115
Patents and other intangibles, net of accumulated
amortization of $137 at Dec. 31, 1999 and $55 at
March 31, 1999 328 401
Property and equipment, net of
Accumulated depreciation of
$10,673 at Dec. 31,1999 and
$9,677 at March 31,1999 5,285 5,042
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$35,191 $30,204
------- --------
------- --------
The accompanying notes are an integral part of these condensed consolidated
financial statements.
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AMERICAN SCIENCE AND ENGINEERING, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(CONTINUED)
Dollars in thousands
Dec. 31, 1999 Mar. 31, 1999
------------------ -------------------
(Unaudited)
LIABILITIES & CURRENT LIABILITIES:
STOCKHOLDERS' Line of Credit $ 2,500 $ 1,000
INVESTMENT Current maturities of obligations
under capital leases 20 20
Accounts payable 5,383 4,456
Accrued salaries and benefits 1,250 868
Accrued warranty costs 584 374
Accrued income taxes 392 350
Deferred revenue 940 756
Customer deposits 2,011 1,281
Other current liabilities 569 1,224
-------- --------
TOTAL CURRENT LIABILITIES 13,649 10,329
-------- --------
NONCURRENT LIABILITIES:
Obligations under capital leases, net
of current maturities -- 20
Deferred revenue 178 67
Deferred compensation 139 149
Deferred rent 345 292
-------- --------
TOTAL NONCURRENT LIABILITIES 662 528
-------- --------
STOCKHOLDERS' INVESTMENT:
Common stock, $.66-2/3 par value
Authorized - 20,000,000 shares
Issued 4,930,697 shares at Dec. 31, 1999
and 4,877,767 shares at Mar. 31, 1999 3,287 3,252
Capital in excess of par value 17,709 17,394
Retained Earnings/(Accumulated Deficit) 524 (659)
-------- --------
21,520 19,987
Note receivable-Officer (640) (640)
-------- --------
TOTAL STOCKHOLDERS' INVESTMENT 20,880 19,347
-------- --------
$ 35,191 $30,204
-------- --------
-------- --------
The accompanying notes are an integral part of these condensed consolidated
financial statements.
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AMERICAN SCIENCE AND ENGINEERING, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Dollars in Thousands For the Nine Months Ended
--------------------------------------
Dec. 31, 1999 Dec. 31, 1998
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,183 $ 1,697
Adjustments to reconcile net income to net cash (used for)
operating activities:
Depreciation and amortization 1,078 585
Provisions for contract, inventory, accounts
receivable and warranty reserves 454 827
Changes in assets and liabilities:
Accounts receivable (694) (1,063)
Unbilled costs and fees (5,447) 155
Inventories 1,627 (845)
Prepaid expenses and other assets (231) 590
Accounts payable 927 542
Accrued income taxes 42 (384)
Customer deposits 730 889
Deferred revenue 184 --
Accrued expenses and other current liabilities (99) (1,768)
Noncurrent liabilities 154 226
-------- --------
Total adjustments (1,275) (246)
-------- --------
Net cash provided by (used for) operating activities (92) 1,451
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (1,239) (2,788)
Acquisition of business assets -- (1,100)
Purchase of patents and intangibles (9) (40)
-------- --------
Net cash used by investing activities (1,248) (3,928)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from line of credit 1,500 1,000
Proceeds from exercise of stock options 82 717
Principal payments of capital lease obligations (20) (16)
-------- --------
Cash provided by financing activities 1,562 1,701
-------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS 222 (776)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 366 2,290
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD 588 1,514
-------- --------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid $ 270 $ 25
Income taxes paid 1,098 565
NON-CASH TRANSACTIONS:
Issuance of stock in lieu of fees $ 268 $ 16
Capital lease obligations for equipment $ -- $ 24
The accompanying notes are an integral part of these condensed consolidated
financial statements.
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AMERICAN SCIENCE AND ENGINEERING, INC.
PREPARATION OF CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The condensed consolidated financial statements included herein have been
prepared by American Science and Engineering, Inc. (the Company) pursuant to the
rules and regulations of the Securities and Exchange Commission, and the annual
condensed consolidated financial statements are subject to year end audit by
independent public accountants. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations. The Company believes, however, that the disclosures are
adequate to make the information presented not misleading. It is suggested that
these condensed consolidated financial statements be read in conjunction with
the consolidated financial statements and the notes thereto included in the
Company's latest annual report on Form 10-K.
The condensed consolidated financial statements, in the opinion of management,
include all adjustments necessary to present fairly the Company's financial
position and the results of operations. These results are not necessarily to be
considered indicative of the results for the entire year.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
1. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
American Science and Engineering, Inc., is engaged in the development
and manufacture of sophisticated X-ray inspection systems for critical
detection and security screening solutions for sale primarily to U.S.
and foreign government agencies. The Company has only one reporting
segment, x-ray screening products.
The significant accounting policies followed by the Company and its
subsidiary in preparing its consolidated financial statements are set
forth in Note 1 to the consolidated financial statements included in
Form 10-K for the year ended March 31, 1999. The Company has made no
change in these policies during this quarter.
2. INVENTORIES
(Dollars in thousands)
Inventories consisted of:
Dec. 31, 1999 Mar. 31, 1999
---------------- ---------------
Raw materials and completed
sub-assemblies $ 4,933 $ 5,570
Work in process 4,523 5,513
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Total $ 9,456 $11,083
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3. INCOME PER COMMON AND COMMON EQUIVALENT SHARE
In March 1997, the Financial Accounting Standards Board (FASB) issued
statement of Financial Accounting Standards (SFAS) No. 128, "Earnings per
Share", which establishes standards for computing and presenting earnings
per share for entities with publicly held common stock or potential common
stock. The Company adopted SFAS 128 in fiscal 1998 and as required,
restated per share amounts for all prior periods presented to conform to
the new requirements. Basic earnings per common share is computed by
dividing net income by the weighted average number of shares of common
stock outstanding during the year. No dilution for any potentially dilutive
securities is included. Diluted earnings per share includes the dilutive
impact of options and warrants using the average share price of the
Company's common stock for the period.
EARNINGS PER SHARE THREE MONTHS ENDED NINE MONTHS ENDED
- ------------------ ------------------- -------------------
(in thousands except per DEC. 31, 1999 DEC. 31, 1998 DEC. 31, 1999 DEC. 31, 1998
share amounts) ------------- ------------- ------------- -------------
BASIC
Net income $ 601 $ 617 $1,183 $1,697
------ ------- ------- ------
Weighted average shares 4,931 4,824 4,912 4,792
------ ------- ------- ------
Basic earnings per share $ .12 $ .13 $ .24 $ .35
------ ------- ------- ------
DILUTED
Net income $ 601 $ 617 $1,183 $1,697
------ ------- ------- ------
Weighted average shares 4,931 4,824 4,912 4,792
------ ------- ------- ------
Effect of stock options 92 227 101 289
------ ------- ------- ------
Weighted average shares, as
adjusted 5,023 5,051 5,013 5,081
------ ------- ------- ------
Diluted earnings per share $ .12 $ .12 $ .24 $ .33
------ ------- ------- ------
------ ------- ------- ------
4. INCOME TAXES
At March 31, 1999, the Company had approximately $67,000 of unused
investment tax and other credits which expire through 2001.
5. ACQUISITION OF BUSINESS
On August 18, 1998, the Company purchased certain assets relating to the
industrial linear accelerator business of Schonberg Research Corporation of
Santa Clara, California for $1,100,000. The components of the purchase
price consisted of the following:
Fixed assets $ 658
Raw material inventory 92
Patents and other intangible assets 350
-------
Total $ 1,100
-------
-------
This acquisition has been accounted for under the purchase method of
accounting, and its results are included with the Company's results from
the date of acquisition.
-7-
6. BORROWINGS
During the quarter the Company announced the signing of expanded credit
facilities with State Street Bank & Trust Company, Bank Boston N.A. and the
Export-Import Bank of the United States ("Ex-Im"). The credit facilities
include (1) a $20,000,000 revolving line of credit to support working
capital and the issuance of standing letters of credit, and (2) a
$15,500,000 Ex-Im guaranteed export credit agreement to support various
current and future eligible foreign export contracts.
-8-
AMERICAN SCIENCE AND ENGINEERING, INC.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
In the third quarter of fiscal 2000 net sales and contract revenues grew
to $17,217,000, a 6% increase from the comparable period a year ago and a
11% increase from the previous quarter. The company earned net profits of
$601,000 in the current quarter, compared to a net profit of $617,000 in
the corresponding period a year ago and a net profit of $390,000 in the
previous quarter.
RESULTS OF OPERATIONS
Net sales and contract revenues in the third quarter increased by
$1,003,000 (6%) in comparison to the corresponding year ago period and
$1,758,000 (11%) compared to the second quarter of fiscal 2000. This
increase is revenues from the previous quarter is due to increased sales
of x-ray equipment.
For the third quarter, costs of sales and contracts increased to
$12,272,000 from $11,247,000 in the corresponding period a year ago due
primarily to increased sales volume. Costs of sales and contracts
represented 71% of revenues versus 69% for the corresponding period last
year and 71% for the second quarter of fiscal year 2000. The costs of
sales percentage of revenues in the current quarter increased from the
corresponding period last year primarily due to investments in operations
infrastructure and sales mix.
Selling, general and administrative expenses of $2,461,000 for the third
quarter were higher by 14% compared to the corresponding year-ago period
and lower by 8% compared to the second quarter of fiscal 2000. As a
percent of sales, selling, general and administrative expenses were 14%
of revenues in the current quarter compared to 13% of revenues for the
corresponding year-ago period and 17% for the second quarter of fiscal
year 2000. The decrease from the previous quarter is due primarily to a
decrease in outside legal expenses.
Company-funded research and development expenses of $1,373,000 for the
third quarter were lower by $384,000 (22%) compared to the year-ago
quarter and higher by $169,000 (14%) compared to the second quarter of
fiscal year 2000. The current quarter's result is essentially on budget.
The Company produced a net profit of $601,000 during the third quarter.
This is a decline of $16,000 (3%) over net profit in the year-ago quarter
and an increase of $211,000 (54%) from the second quarter of fiscal 2000.
The increase in after-tax profits from the previous quarter is primarily
due to an increase in sales revenue.
-9-
AMERICAN SCIENCE AND ENGINEERING, INC.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents increased by $222,000 to $588,000 at Dec. 31, 1999
compared to $366,000 on March 31, 1999. This increase in cash and cash
equivalents was primarily due to a reduction in inventories, increased customer
deposits and additional borrowings against the line of credit partially offset
by the increase in accounts receivables and unbilled costs and fees. Working
capital increased by $1,471,000 (10%) since March 31, 1999, increasing from
$14,046,000 to $15,517,000 at the end of the third quarter.
At December 31, 1999, the Company had external borrowings with a local bank, in
the amount of $2,500,000, representing a decrease of $5,500,000 during the
quarter. This decrease in borrowing during the third quarter was anticipated.
YEAR 2000
- ---------
The Company has experienced no major impact due to Year 2000 issues. The
Company's year 2000 initiatives included (i) testing and upgrading internal
business systems and facilities; (ii) testing and developing necessary
upgrades for the Company's current products and certain discontinued
products; (iii) contacting key suppliers, vendors, and customers to determine
their year 2000 compliance status; and (iv) developing contingency plans.
The Company's State of Readiness
- --------------------------------
The Company has completed the process of upgrading or replacing its
non-compliant systems. In most cases, such upgrades or replacements were made in
the ordinary course of business. The Company's material information technology
systems were year 2000 compliant in time for the Year 2000 transition. All major
information systems were tested before January 1, 2000 on a separate network to
ensure the overall information systems architecture was Year 2000 compliant.
The Company has had no major issues with the products that it currently
manufactures and sells. The Company has had no Year 2000 issues with suppliers,
and vendors significant to the Company's business operations.
Contingency Plans
- -----------------
The Company's contingency plans included standby generators and computer
systems. None of these systems were needed.
Costs to Address the Company's Year 2000 Issues
- -----------------------------------------------
To date, costs incurred in connection with the year 2000 issue have not been
material. The Company does not expect total year 2000 remediation costs to be
material, but there can be no assurance that the Company will not encounter
unexpected costs or delays in achieving year 2000 compliance.
Risks of the Company's Year 2000 Issues
- ---------------------------------------
The company believes it has an effective Year 2000 program and the major risks
have been averted. However, since it is not possible to anticipate all possible
future outcomes there could be "worst case scenarios" in which the company would
be unable to conduct its business. Possible "worst case scenarios" include
problems that do not surface immediately. These problems could cause delays or
disruptions in the company's business. If any of the Company's material
suppliers, vendors or customers experience business disruptions due to similar
latent problems, the Company might also be materially adversely affected.
-10-
There can be no assurance that the Company will not incur material costs in
defending or bringing lawsuits related to the Year 2000 issue. Any unexpected
costs or delays arising from the year 2000 issue could have an adverse impact on
the Company's business, operations, and financial condition.
-11-
AMERICAN SCIENCE AND ENGINEERING, INC.
Part II - Other Information
ITEM 1 - LEGAL PROCEEDINGS
The United States Court of Appeals for the Federal Circuit in
Washington, D.C., in a decision issued December 29, 1999, ruled that
American Science & Engineering, may pursue a patent infringement claim
against Vivid Technologies which produces x-ray detection devices used
in baggage scanning equipment.
The Appeals Court overturned a 1998 decision in Vivid's favor by the
Massachusetts Federal District. The lawsuit filed in May, 1996,
concerns whether Vivid's x-ray detection devices infringed on AS&E's
patent. The District Court had ruled that AS&E could not assert a claim
that Vivid's devices infringed on AS&E's patent. In overturning the
District Court's decision, the Appeals Court stated that the District
Court's refusal to accept AS&E's claim that Vivid was infringing on
AS&E's patent "exceeded the district court's discretionary authority."
Tha Appeals Court also reversed the district court's finding on summary
judgment that Vivid did not infringe on AS&E's patent, as well as the
district courts denial of AS&E's request for discovery to oppose
Vivid's summary judgment motion. The Appeals Court noted that the grant
of summary judgment by the district court in Vivid's favor "cannot
stand" and that "on the showing made [by AS&E], the denial of all
discovery at this stage exceeded the scope of the court's discretion."
In September 1998, the Company filed suit against EG&G Astrophysics
Research Corp. ("EG&G") in U.S. District Court in Boston, Massachusetts
alleging that EG&G is infringing on at least two patents owned by the
Company and that EG&G has misappropriated certain trade secrets of the
Company. In February 1999, the Company filed a related action in the
same court against the U.S. Customs Service ("Customs") alleging that
Customs had either misappropriated the Company's trade secrets or
facilitated their misappropriation by EG&G and that Customs had
improperly entered into a contract with EG&G for the acquisition of a
product functionally equivalent to MobileSearch(TM). In May 1999, the
Court held a hearing on the Company's motion for a preliminary
injunction against both Customs and EG&G prohibiting the further
performance of the contested contract and preventing EG&G from
utilizing the Company's trade secrets. In August 1999, the Court issued
a ruling denying the request for the preliminary injunction. The
Company is continuing to pursue its claims against EG&G, but has filed
a motion to dismiss the suit against U.S. Customs.
In a related matter, EG&G has filed a request with the U.S. Patent and
Trademark Office for reexamination of the two patents that currently
are at issue in the patent infringement action described above. The
Company filed oppositions to the reexamination requests and believes
that its patent claims will be upheld.
-12-
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) No exhibits are included.
(b) REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the quarter.
The information required by Exhibit Item 11 (Statement re: Computation
of Income per Common and Common Equivalent Share) may be found in
Footnote No. 3 on Page 7.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
AMERICAN SCIENCE AND ENGINEERING, INC.
(Registrant)
Date: February 11, 2000
__________________________________
Lee C. Steele
Vice President and Chief Financial Officer
SAFE HARBOR STATEMENT
THE FOREGOING 10-Q CONTAINS STATEMENTS CONCERNING THE COMPANY'S FINANCIAL
PERFORMANCE AND BUSINESS OPERATIONS WHICH MAY BE CONSIDERED "FORWARD-LOOKING"
UNDER APPLICABLE SECURITIES LAWS.
THE COMPANY WISHES TO CAUTION READERS OF THIS FORM 10-Q THAT ACTUAL RESULTS
MIGHT DIFFER MATERIALLY FROM THOSE PROJECTED IN ANY FORWARD-LOOKING STATEMENTS.
FACTORS WHICH MIGHT CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE
PROJECTED IN THE FORWARD-LOOKING STATEMENTS CONTAINED HEREIN INCLUDE THE
FOLLOWING: SIGNIFICANT REDUCTIONS OR DELAYS IN PROCUREMENTS OF THE COMPANY'S
SYSTEMS BY THE UNITED STATES GOVERNMENT; DISRUPTION IN THE SUPPLY OF ANY
SOLE-SOURCE COMPONENT INCORPORATED INTO THE COMPANY'S PRODUCTS (OF WHICH THERE
ARE SEVERAL); LITIGATION SEEKING TO RESTRICT THE USE OF INTELLECTUAL PROPERTY
USED BY THE COMPANY; POTENTIAL PRODUCT LIABILITY CLAIMS AGAINST THE COMPANY;
GLOBAL POLITICAL TRENDS AND EVENTS WHICH AFFECT PUBLIC PERCEPTION OF THE THREAT
PRESENTED BY DRUGS, EXPLOSIVES AND OTHER CONTRABAND; THE ABILITY OF GOVERNMENTS
AND PRIVATE ORGANIZATIONS TO FUND PURCHASES OF THE COMPANY'S PRODUCTS TO ADDRESS
SUCH THREATS; AND THE POTENTIAL INSUFFICIENCY OF COMPANY RESOURCES, INCLUDING
HUMAN RESOURCES, CAPITAL, PLANT AND EQUIPMENT AND MANAGEMENT SYSTEMS, TO
ACCOMMODATE ANY FUTURE GROWTH. THESE AND CERTAIN OTHER FACTORS WHICH MIGHT CAUSE
ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE PROJECTED ARE MORE FULLY SET
FORTH UNDER THE CAPTION "RISK FACTORS" IN THE COMPANY'S REGISTRATION STATEMENT
ON FORM S-3 (SEC FILE NO. 333-9151).
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