-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Nby2iqiumVhHdhE/z1VdWfS4BadEGgBPc0DOqxOhbcwqalAGXsiPM3EYjD0xc/MY xMpFctbvTWMc2w9MaRhBYA== 0000950135-96-003881.txt : 19960903 0000950135-96-003881.hdr.sgml : 19960903 ACCESSION NUMBER: 0000950135-96-003881 CONFORMED SUBMISSION TYPE: 424B3 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 19960830 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN SCIENCE & ENGINEERING INC CENTRAL INDEX KEY: 0000005768 STANDARD INDUSTRIAL CLASSIFICATION: X-RAY APPARATUS & TUBES & RELATED IRRADIATION APPARATUS [3844] IRS NUMBER: 042240991 STATE OF INCORPORATION: MA FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 424B3 SEC ACT: 1933 Act SEC FILE NUMBER: 033-61903 FILM NUMBER: 96624517 BUSINESS ADDRESS: STREET 1: 829 MIDDLESEX TURNPIKE STREET 2: 40 ERIE STREET CITY: BILLERICA STATE: MA ZIP: 01821 BUSINESS PHONE: 5082628700 MAIL ADDRESS: STREET 1: 40 ERIE STREET STREET 2: 829 MIDDLESEX TURNPIKE CITY: BILLERICA STATE: MA ZIP: 01821 424B3 1 AMERICAN SCIENCE AND ENGINEERING, INC. 1 Filed Pursuant to Rule 424(b)(3) Securities and Exchange Commission File No. 33-61903 AMERICAN SCIENCE AND ENGINEERING, INC. SUPPLEMENT NO. 1 TO PROSPECTUS DATED AUGUST 30, 1995 This Supplement No. 1, dated August 30, 1996, supplements the Prospectus of American Science and Engineering, Inc. (the "Company") dated August 30, 1995 (the "Prospectus"), which forms a part of the Company's Registration Statement on Form S-3 (Securities and Exchange Commission File No. 33-61903). In addition to the Risk Factors and other information set forth or incorporated in the Prospectus, Investors should consider carefully the following additional risk factors in connection with an investment in the Common Stock offered by the Prospectus. Cross references contained herein are to the Prospectus, as supplemented hereby. LIMITED SOURCES OF MATERIALS AND SERVICES The Company currently procures certain critical components for its products from single or limited sources. For example, the Company currently procures certain of its X-ray tubes and related control devices from two sources; each such source is the Company's sole supplier of particular tubes. Both of these sources are located outside the United States. The Company has multiple sources, including sources located in the United States, of other types of x-ray tubes. In addition, the Company relies on single suppliers for the assembly of proprietary circuit boards and all of the Company's scintillating material. While long term supply contracts exist with a few single-source vendors, the Company generally purchases these materials on a purchase order basis, and the Company does not carry significant inventories of these materials. The inability of the Company to obtain these materials in reliable, high-quality quantities would result in significant delays or reductions in product shipments. The Company from time to time experiences delays in receiving components from vendors, and no assurance can be given that similar problems will not recur. If the Company were to change certain of its vendors, a qualification process would be required for the potential new suppliers, creating potential delays or reductions in product shipments. Further, single source vendors could impose significant price increases. The Company's reliance on single or limited sources involves several additional risks, including reduced control over the timely delivery, reliability, and quality of critical components. Any inability of the Company to obtain timely deliveries of materials of acceptable quality, or a significant increase in the prices of materials, could materially and adversely affect the Company's operating results. 2 EXPOSURE TO VOLATILE FEDERAL FUNDING PRIORITIES The Company does a significant amount of business with agencies of the United States government. See "RISK FACTORS-Customer Concentration." There can be no assurance that the Company's existing relationships with Federal agencies will continue, nor that the agencies themselves will continue to exist in their present form. Further, national priorities are subject to change and often do change, especially in response to the four-year Presidential election cycle. Such changes could include a shift in the current priorities that have led to demand for the Company's products. Additionally, the Company is exposed to the Federal budget approval and appropriation cycle, which may be subject to significant and unpredictable delays. All of these factors may materially and adversely affect the Company's operating results. COMPETITOR LITIGATION AND INTELLECTUAL PROPERTY CLAIMS The X-ray security industry is characterized by vigorous competition, in part through the pursuit and enforcement of intellectual property rights. Initiating or defending against the enforcement of such rights may result in significant, protracted, and costly litigation. At present, the Company is pursuing an aggressive and complex intellectual property case against its former President and founder. Also, a competitor recently filed a request for a declaratory judgment that its product does not infringe upon certain of the Company's patents. The Company expects intellectual property disputes to be an ordinary part of its business for the foreseeable future. The Company may initiate claims or litigation against third parties for infringement of the Company's intellectual property rights, or to establish the validity of the Company's property rights. There can be no assurance that the Company will prevail in any such action. Litigation by or against the Company could result in significant expense to the Company and divert the efforts of technical and management personnel, whether or not such litigation results in a favorable outcome for the Company. In the event of an adverse result in any such litigation, the Company could be required to pay substantial damages, cease the manufacture, use and sale of infringing products, expend significant resources to develop non-infringing technology, discontinue the use of certain processes, or obtain licenses for the infringing technology. However, there can be no assurance that licenses will be offered or that the terms of any offered license will be acceptable to the Company; that the Company will be successful in developing non-infringing technology; or that the cost or time required to develop such technology will be reasonable. The inability to obtain a license from a third party for technology used by the Company could cause the Company to incur substantial liabilities and to suspend the manufacture of infringing products. In the event that a third party makes a successful claim of intellectual property infringement against the Company or its customers, and a license is not made available to the Company on commercially reasonable terms, or if the Company is unable to protect its intellectual property rights against infringement by a third party, the Company's business, financial condition, and operating results may be adversely affected. 3 PRODUCT PERFORMANCE LIABILITY The Company's products are often used to detect the presence of bombs, weapons, or other threats to personal safety in buildings, mail and delivery parcels, aircraft luggage and air cargo, border crossings, public gatherings, and other high-security venues. Operator error, misuse of the Company's equipment or a malfunction of that equipment may lead to personal injury, loss of life, and extensive property damage and resulting claims against the Company. The Company is not aware that any such claims have been filed or are planned. The Company maintains product liability, umbrella liability, and special aircraft products liability insurance to provide a measure of protection against claims alleging product malfunction or inadequate design. However, should any such claim be made, there is no assurance that the Company's insurance protection is adequate to protect against any and all future potential product liability claims. Moreover, there can be no assurance that adequate product liability insurance coverage will continue to be available at a reasonable cost. To the degree liability claims exceed the current or available insurance coverages, there could be a material adverse effect on the Company's business, financial condition, and operating results. Additionally, regardless of the adequacy of the Company's product liability insurance protection, any significant claim may have a severely negative effect on the Company's industry and market reputation, leading to a substantial decrease in demand for the Company's products. Such an occurrence would have a material and adverse effect on the Company's revenues and operating results. RESEARCH AND DEVELOPMENT FUNDING The Company competes in part based on the value of its advanced technology. It is the Company's intention to remain on the leading edge of technology in its fields of interest through research and development. There can be no assurance that the Company will be able to continue to innovate, to bring its innovations to market on a timely or cost effective basis, or that its innovations will not be surpassed by other competitors or new technologies. Furthermore, the Company must either generate its own research and development funding or obtain funds from outside sources, primarily the U.S. Government. The Company competes with many other companies and research institutions for government funding. Additionally, government funding priorities are subject to frequent changes. See "RISK FACTORS-Exposure to Volatile Federal Funding Priorities." There can be no assurance that the Company will be able to generate the funds necessary to support its research and development activities from operations or other potential private sources, or that such funds will be available from the government. The inability of the Company to fund its research and development activities, or the failure of such activities to generate successful technology accepted in the marketplace, may have a material adverse effect on the Company's business and operations. 4 GLOBAL POLITICAL AND ECONOMIC TRENDS The Company's products are used primarily to detect drugs, explosives and other contraband. The willingness of customers to pay for solutions to these problems is subject in part to worldwide political and economic developments. Terrorist incidents and other widely publicized events, the election or replacement of influential politicians, the perceived seriousness of the problems addressed by the Company's products, media coverage of these issues, budgetary and tax concerns, exchange rates, diplomatic relations and the like may materially affect the demand for the Company's products. RAPID GROWTH The Company has been experiencing rapid growth, with sales increasing over 37% from fiscal year 1995 to fiscal year 1996. If achieved, continuing growth at that rate may strain the Company's resources and limit the Company's ability to address market opportunities. Continued growth may require significant additional hiring, with concomitant time and attention paid to recruiting, training, motivating and managing significant numbers of new employees. Continued growth may also require expansion of the Company's physical plant and capital equipment base, require the expansion of the Company's communications and financial control systems, and other overhead support, and require additional capital in order to fund such growth and the addition of such resources and systems. There can be no assurance that such additional human, financial and material resources will be available to the Company on reasonable terms or that such resources can be integrated into the Company's operations quickly and economically enough to allow the Company to continue to respond profitably to expanding opportunities. -----END PRIVACY-ENHANCED MESSAGE-----