ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Wednesday, February 28, 1996 TAG: 9602280066
SECTION: BUSINESS PAGE: B-8 EDITION: METRO
SOURCE: GREG EDWARDS STAFF WRITER
THE LENS-MAKING MACHINE MANUFACTURER needs a healthy dose of capital to stay in operation.
Innotech Inc., a young Roanoke company that manufactures equipment and supplies for making plastic eyeglass lenses, plans to sell its stock to the public in hopes of raising money it needs to stay alive.
The company plans to offer 3 million share of stock at between $9 and $11 per share, raising about $31.4 million in new working capital, according to its preliminary stock prospectus. The stock would be traded on the Nasdaq Stock Market.
Underwriters for the offering listed on the prospectus include major U.S. securities firms: Lehman Brothers and Schroder Wertheim & Co., both of New York, and Hambrecht & Quist of San Francisco.
Innotech vice president Jim Barney declined to comment Tuesday, citing U.S. securities laws that restrict participants' public comments about new stock offerings.
The prospectus suggests reasons for the stock offering and concerns for potential investors.
Since its founding in October 1990, Innotech has accumulated losses of $28.4 million, according to the prospectus. The company attributes those losses to the cost of developing its primary product, the Excalibur lens fabrication system, and to general and administrative costs related to the company's growth and operations.
"The company's losses since inception and accumulated deficit raise substantial doubt about its ability to continue as a going concern," KPMG Peat Marwick, Innotech's independent auditor, said in a letter included in the prospectus.
Management says Innotech's ability to continue "depends upon the successful completion of the public offering of its common stock or the obtaining of other sufficient external financing."
The company plans to use income from the stock offering for working capital and to buy new equipment, expand its sales and marketing efforts, develop new products and increase its inventory of supplies.
It said the stock proceeds should satisfy its capital needs for 18 months but could offer no assurance that more financing would not be needed sooner.
Innotech has 138 full-time employees, including 21 in research and development and 55 in sales and marketing. It leases a 30,400 square-foot building on Airport Road, where its offices, research laboratories, and manufacturing and warehouse operations are located. It plans to set up another manufacturing facility in Petersburg, where it leases a building, with proceeds from the stock sale.
The company took in $4 million in 1993, its first year of sales. Although sales increased in each of the two following years, so did Innotech's losses. Losses last year alone were $10.6 million.
The company makes money from selling its lens fabricating machine and selling supplies used with them. The machine uses single-vision plates and plastic resins to make clear and light-sensitive, single-vision or bifocal lenses.
The system allows an eyewear businesses to make lenses quickly in-house rather than having to send the work to a laboratory. The company claims the cost savings can be as high as 75 percent.
Ronald D. Blum of Roanoke is the founder of Innotech and has been its only chairman. Until December 1992, Blum was chief executive of Drs. Blum, Newman, Blackstock and Associates, a Roanoke-based optical firm. He holds 17.7 percent of Innotech's stock and would hold 11.4 percent after the stock offering, according to the prospectus.
Innotech's largest shareholder is Chemical Venture Capital Associates of New York, a subsidiary of Chemical Bank, which owns 38.9 percent of the stock and would own 25.5 percent after the offering. Chemical has also invested in the company through purchases of its preferred stock and has lent money to the company.
Other venture capital firms that currently own stock in the company and their current share of the stock are: CIBC Wood Gund Ventures Inc. of New York, 16.3 percent; SBIC Partners, L.P. of Fort Worth, Texas, 11.7 percent; Johnson & Johnson Development Corp. of New Brunswick, N.J., 10.9 percent; and H&Q Healthcare Investors and H&Q Life Sciences Investors of Boston, 6.7 percent.
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