UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC  20549  FORM 10–Q  (Mark One) x
  Quarterly
  Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of
  1934For the quarterly period
  ended April
  1, 2001 or
  o
  Transition Report
  Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934For the transition period
  from ________ to ________ Commission File Number: 0–28236  INVISION
  TECHNOLOGIES, INC.(Exact
  name of registrant as specified in its charter)Delaware(State or other
  jurisdiction of incorporation or organization)94-3123544(I.R.S. Employer
  Identification No.)7151 Gateway Boulevard, Newark, CA
  94560(Address
  of principal executive offices, including zip code)(510) 739-2400(Registrant's
  telephone number, including area code)
  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 (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.  YesxNoo  On April 1, 2001, there were 12,650,281 shares of the
Registrant's Common Stock outstanding.   InVision Technologies, Inc.Form 10-Q
INDEX

Part 
  I:  FINANCIAL INFORMATIONItem1.
  Consolidated Financial
  Statements (unaudited)a.          Consolidated Balance Sheets
   April 1, 2001 and December 31, 2000 *b.          Consolidated
  Statements of Operations  Three months ended April 1, 2001 and April 2, 2000c.          Condensed
  Consolidated Statements of Cash Flows  Three months ended April 1, 2001 and
  April 2, 2000d.          Notes to
  Consolidated Financial Statements2.
  Managements  Discussion  and Analysis of Financial Condition and Results of
Operations3.
  Quantitative
  and Qualitative Disclosures about Market RiskPart 
  II.  OTHER INFORMATIONItem1.
  Legal
  Proceedings2.
  Changes in
  Securities and Use of Proceeds3.
  Defaults Upon Senior
  Securities4.
  Submission
  of Matters to a Vote of Securities Holders5.
  Other
  Information6.
  Exhibits and Reports
  on Form 8-KSignature Page

*December 31, 2000 consolidated
balance sheet is derived from the audited financial statements included within
the Companys Form 10-K filed on   March
29, 2001.

InVision Technologies, Inc.Consolidated Balance Sheets(In thousands, except share data)(Unaudited)
  April 1,
  2001
  December 31,
  2000AssetsCurrent
  assets:Cash and cash equivalents
  $10,242
  $11,908Accounts receivable, net
  25,785
  22,547Inventories
  21,633
  20,207Other current assets
  3,337
  2,977Total current assets
  60,997
  57,639Property
  and equipment, net
  6,562
  6,741Intangible
  assets, net
  4,217
  4,412Other
  assets
  490
  540Total assets
  $72,266
  $69,332Liabilities and stockholders' equityCurrent
  liabilities:Accounts payable
  $5,639
  $5,353Accrued liabilities
  9,980
  11,213Deferred revenue
  2,226
  2,107Short-term debt
  4,605
  890Current maturities of long-term obligations
  342
  404Total current liabilities
  22,792
  19,967Long-term
  obligations
  1,804
  1,861Commitments
  and contingenciesStockholders'
  equity:Preferred stock, no par value, 5,000,000
  shares authorized; no shares issued and outstanding
  -
  -Common stock, $0.001 par value,
  20,000,000 shares authorized; 12,650,000 and 12,613,000     shares issued and outstanding
  13
  13Additional paid-in capital
  59,748
  59,671Accumulated deficit
  (10,892)
  (10,981)Treasury stock, at cost (201,000  shares)
  (1,199)
  (1,199)Total stockholders' equity
  47,670
  47,504Total liabilities and
  stockholders' equity
  $72,266
  $69,332The accompanying notes are an integral part of these
  consolidated financial statements.InVision Technologies, Inc.Consolidated Statements of Operations(In thousands, except per share data)(Unaudited)Three Months EndedApril 1,
  2001
  April 2,
  2000Revenues:Product revenues
  $11,221
  $14,114Service revenues
  2,557
  2,400Government contract revenue
  3,719
  2,165Total revenues
  17,497
  18,679Cost of
  revenues:Product costs
  6,415
  9,672Service costs
  1,833
  1,677Government contract costs
  2,821
  1,571Total cost of revenues
  11,069
  12,920Gross profit
  6,428
  5,759Operating
  expenses:Research and development
  2,850
  2,382Selling, general and administrative
  3,470
  4,372Total operating expenses
  6,320
  6,754Income
  (loss) from operations
  108
  (995)Interest
  expense
  (65)
  (49)Interest
  and other income, net
  105
  384Income
  (loss) before provision for income taxes
  148
  (660)Provision
  for income taxes
  59
  -Net income
  (loss)
  $89
  $(660)Net income
  (loss) per share:Basic
  $0.01
  $(0.05)Diluted
  $0.01
  $(0.05)Weighted
  average shares outstanding:Basic
  12,635
  12,208Diluted
  13,742
  12,208The accompanying notes are an integral part of these
  consolidated financial statements.

InVision Technologies, Inc.Condensed Consolidated Statements of Cash Flow(In thousands)(Unaudited)Three Months EndedApril 1, 2001
  April 2, 2000Net cash used in operating activities
  $(4,807)
  $(7,027)Cash flow from investing activities:Purchases of property and equipment
  (540)
  (409)Proceeds from (purchases of)
  short-term investments, net
  -
  4,887Purchase of subsidiary, net of cash
  acquired
  -
  (1,527)Net cash provided by (used in)
  investing activities
  (540)
  2,951Cash flow from financing activities:Proceeds from (repayments of)
  short-term debt, net
  3,715
  -Repayments of long-term debt
  (111)
  (90)Proceeds from issuance of common stock
  77
  77Net cash provided by (used in)
  financing activities
  3,681
  (13)Net change
  in cash and cash equivalents for the period
  (1,666)
  (4,089)Cash and
  cash equivalents at beginning of period
  11,908
  18,282Cash and cash equivalents at end of period
  $10,242
  $14,193Supplemental disclosures of cash flow information:Interest paid
  $34
  $30Income taxes paid
  $394
  $164Supplemental disclosures of noncash financing activities:Liabilities assumed in acquisition of
  subsidiary
  $-
  $2,881Stock payable in connection with
  acquisition of subsidiary
  $-
  $2,777The accompanying notes are an integral part of these
  consolidated financial statements.


InVision Technologies, Inc.Notes to Consolidated
Financial Statements
(Unaudited)  1.          Summary of
Significant Accounting Policies Interim
Unaudited Financial Information The
accompanying interim unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles and with
the instructions to Form 10-Q and Rule 10-01 of Regulation S-X.  Accordingly, they do not contain all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements.  In
the opinion of management, the accompanying unaudited consolidated financial
statements reflect all adjustments (consisting only of normal recurring
adjustments) considered necessary for a fair presentation.  These financial statements should be read in
conjunction with the audited consolidated financial statements of InVision
Technologies, Inc. and its subsidiaries (the Company) as of December 31, 2000
and 1999 and for each of the three years in the period ended December 31, 2000,
including the notes thereto, included in the Companys Annual Report on Form
10-K.  Operating
results for the three month period ended April 1, 2001 may not necessarily be
indicative of the results that may be expected for the year ended December 31,
2001 or any other future period. Certain
prior period amounts have been reclassified to conform to the current period
presentation. Net Income
(Loss) Per Share Basic
earnings per share is computed by dividing income available to common
stockholders by the weighted-average common shares outstanding for the
period.  Diluted earnings per share
reflects the weighted-average common shares outstanding plus the potential
effect of dilutive securities or contracts which are convertible to common
shares such as options, warrants, convertible debt and preferred stock (using
the treasury stock method). The
following is a reconciliation between the components of the basic and diluted
net income (loss) per share calculations for the periods presented below (in
thousands, except per share data):  Three Months
  EndedApril 1, 2001
  April 2, 2000Income
  (Loss)
  Shares
  Per
  Share
  Amount
  Income
  (Loss)
  Shares
  Per
  Share
  AmountBasic net income (loss) per share:Income (loss) available
  to common stockholders
  $89
  12,635
  $0.01
  $(660)
  12,208
  $(0.05)Effect of dilutive
  securities:Options
  -
  457
  -
  -
  -
  -Stock payable in
  connection with acquisition of    subsidiary
  -
  650
  -
  -
  -
  -Diluted net income (loss) per share:Income (loss)
  available to common stockholders plus assumed conversions
  $89
  13,742
  $0.01
  $(660)
  12,208
  $(0.05)  The
computation of diluted net loss per share for the three months ended April 2,
2000 does not include shares issuable upon exercise of options of 593,825 and
issuance of common stock related to the acquisition of Inovec payable April
2001 and 2002 based on average share prices prior to the scheduled payment
dates, because their effect would have been anti-dilutive. Derivative
Instruments and Hedging Activities

On
January 1, 2001, the Company adopted Statement of Financial Accounting Standards
(SFAS) No. 133, Accounting for Derivative Instruments and Hedging
Activities.  SFAS 133 was amended by
SFAS 137, which modified the effective date of SFAS 133 to all fiscal quarters
of all fiscal years beginning after June 15, 2000.  In June 2000, SFAS 138, Accounting for Certain Derivative
Instruments and Certain Hedging Activities, further amended SFAS 133.  SFAS 133, as amended, requires that every
derivative instrument, including certain derivative instruments embedded in
other contracts, be recorded on the balance sheet at its fair value.  Changes in the fair value of derivatives are
recorded each period in current earnings or other comprehensive income,
depending on whether a derivative is designated as part of a hedge transaction
and, if it is, the type of hedge transaction. 
SFAS 133, as amended, requires that the Company formally document,
designate, and assess the effectiveness of transactions that receive hedge
accounting.  The Company adopted SFAS
133, as amended, on January 1, 2001 and did not elect hedge accounting.  The adoption of this statement did not have
a material impact on the financial position or results of operations of the
Company.

During
the quarter ended April 1, 2001 the Companys derivative contracts consisted
only of foreign exchange forward contracts to hedge certain exposures to future
foreign currency rate movements on receivables from international sales
contracts.  Such derivative contracts
did not have a material impact on the financial position at April 1, 2001 or
results of operations for the quarter then ended.

2.          Inventories

The
components of inventory consist of the following (in thousands):

April 1,
  2001
  December 31,
  2000Inventories:Raw material and purchased components
  $7,144
  $9,270Field service spare parts
  7,890
  6,240Work-in-process
  5,667
  4,162Finished goods
  932
  535Total
  $21,633
  $20,207

3.          Accrued
Liabilities

The
components of accrued liabilities consist of the following (in thousands):

April 1,
  2001
  December 31,
  2000Accrued
  liabilities:Warranty and other reserves
  $4,394
  $4,352Accrued employee compensation
  2,564
  3,172Income taxes
  943
  1,302Other
  2,079
  2,387Total
  $9,980
  $11,213

4.          Acquisition
of Inovec, Inc.

Effective
January 1, 2000, the Company acquired Inovec, Inc. (Inovec), a manufacturer
of advanced optimization equipment for increasing the yield of the forest
products industry, for $5.2 million in cash stock payable over the next two
years.  The Company paid $2.4 million in
cash and issued 249,000 shares of common stock to former shareholders of Inovec
in 2000 as the first two installments of the purchase price and issued 229,000
shares of common stock in April 2001 for the third installment. The remaining
obligation payable of $1.1 million is payable in stock in April 2002 and is
based on average share prices prior to the scheduled payment dates.   In addition, the Company is contingently
liable under the purchase agreement in the event Inovec achieves certain
operating milestones during the years ended December 31, 2000 and 2001.  At December 31, 2000, Inovec had achieved
certain of these milestones and an additional $0.5 million was recorded as
additional purchase price and was paid in cash and issuance of 91,000 shares of
common stock in April 2001.  An
additional $0.7 million would be payable upon the achievement of certain
performance milestones at the end of 2001.  
The transaction was accounted for as a purchase.

5.          Segment
Information

Under
the provisions of Statement of Financial Accounting Standards No. 131 ( SFAS
131), Disclosures about Segments of an Enterprise and Related Information,
the Company is reporting segment information in the same format regularly
reviewed by the Companys management in deciding how to allocate resources and
assess performance.   The Company has
three reportable segments based on types of technology and applications.   The EDS segment is comprised of the
business unit that is engaged in the development, manufacturing, marketing and
support of explosive detection systems based on advanced CT technology.  The Quantum segment is comprised of the
business unit that is engaged in the development of technology for inspection,
detection and analysis of explosives, primarily landmine detection, and other
materials based on quadrupole resonance technology and passive magnetic
sensing.   The Wood segment is
comprised of those business units that are engaged in the development of
technology to optimize the value and yield of harvested timber based on
different types of scanning technologies, including CT technology.  Prior years segment information has been
presented to reflect the above structure of the Companys organization.

Financial
information by business segment is as follows (in thousands):

EDS
  Quantum
  Wood
  TotalFirst quarter 2001Revenues:Product revenues
  $9,394
  $-
  $1,827
  $11,221Service revenues
  2,150
  -
  407
  2,557Government contract revenues
  -
  3,719
  -
  3,719Total
  revenues
  $11,544
  $3,719
  $2,234
  $17,497Net income
  (loss)
  $795
  $78
  $(784)
  $89Total
  assets
  $60,418
  $4,590
  $7,258
  $72,266First quarter 2000Revenues:Product revenues
  $11,767
  $-
  $2,347
  $14,114Service revenues
  2,055
  -
  345
  2,400Government contract revenues
  -
  2,165
  -
  2,165Total
  revenues
  $13,822
  $2,165
  $2,692
  $18,679Net income
  (loss)
  $(217)
  $(177)
  $(266)
  $(660)December 31, 2000Total
  assets
  $57,261
  $4,056
  $8,015
  $69,332Substantially
all of the Companys long-lived assets are located in the United States.

6.          Litigation

The
Company is involved in routine administrative proceedings arising in the
ordinary course of business.  Management
believes that collectively these proceedings will not have a material effect on
the Companys business, financial condition or results of operations.


Item 2.Management's Discussion and Analysis of Financial Condition
and Results of Operations

The discussion below contains
forward-looking statements which involve risks and uncertainties. When used in
this discussion, the words anticipate, believe, estimate, and expect
and similar expressions identify such forward-looking statements. The Companys
actual results, performance, or achievements could differ materially from the
results expressed in, or implied by, these forward-looking statements. Factors
that could cause or contribute to such differences include:


  risks related to market acceptance of the Company's
  products;
  fluctuations in the Company's quarterly and annual
  operating results;
  the loss of orders for the Company's products or the
  failure to obtain additional orders;
  loss of any of the Company's major suppliers;
  intense competition;
  reliance on few customers and large orders;
  risks related to the lengthy sales cycles for the
  Companys products;
  budgeting limitations of the Companys customers and
  prospective customers;
  risks inherent to the development and production of new
  products and new applications and the certification of certain of these
  products;
  risk of certification of competitors products;
  risk of orders in backlog being canceled; and
  those factors discussed in Business Risks below.Overview

InVision Technologies, Inc. (the
Company) brings to market advanced detection and inspection products by
adapting various medical and laboratory technologies for government and
commercial uses, such as security, defense and process control.   The Company reports its financial
information in three segments, Explosive Detection Systems (EDS), Quantum and
Wood, based on types of technology and applications.

EDS. 
The Company develops, manufactures, markets and supports explosive
detection systems for civil aviation security based on advanced computed
tomography (CT) technology.  The
Companys products were the first automated explosive detection systems to be
certified by the Federal Aviation Administration (FAA) as meeting its
stringent requirements.  The Company has
sold 240 systems to the FAA, foreign aviation security agencies and domestic and
foreign airports and airlines through April 1, 2001.

Quantum. 
The Company, through its wholly-owned subsidiary Quantum Magnetics,
Inc., (Quantum) develops for commercialization patented and proprietary
technology for inspection, detection and analysis of explosives and other
materials.  Quantums products are based
on passive magnetic sensing technology and quadrupole resonance (QR)
technology, a form of magnetic resonance. 
Quantum receives grants from a variety of US government agencies for
research and development of landmine detection, carry-on luggage screening,
concealed weapon detection, drug detection, and in-process materials
inspection.

Wood. 
In February 2000, the Company announced the formation of its WoodVision
division (WoodVision) to develop the Companys CT technology to optimize the
value and yield of harvested timber. 
Previous studies indicated that CT technology can be applied to see
inside a log before it is sawn.  The
Company believes that a market for a product that does this exists.  In connection with the formation of
WoodVision, the Company acquired, as a wholly-owned subsidiary, Inovec, Inc.
(Inovec), effective as of January 1, 2000. 
Inovec manufactures, markets and supports advanced optimization
equipment for sawmills based on laser scanning and other optimization
technologies.  Since inception, Inovec
has installed over 600 laser scanners and other optimization systems in over
300 sawmills worldwide.  The transaction
has been accounted for as a purchase.

Research and development.The Company considers research
and development to be a vital part of its operating discipline and continues to
dedicate substantial resources to research and development.  At April 1, 2001 the Company had 142 full-time
employees engaged in research and development, and product development
activities, 53 for EDS, 55 for Quantum and 34 for Wood.  The Company was also using the services of
15 specialized contract employees and consultants in this area.  During the three month periods ended April
1, 2001 and April 2, 2000, the Company spent $3.5 million and $2.5 million,
respectively, on research and development activities, of which $0.6 million and
$0.2 million, respectively, were funded by the FAA and other agencies under
development contracts and grants.  At
April 1, 2001, the Company had in backlog grants of $5.5 million for EDS
research and development, primarily for the development of ARGUS, an
FAA-sponsored program designed to develop a low-cost, automated explosive
detection system to scan checked baggage in small airports and low-traffic
stations within larger airports.  The
Company has also expended significant efforts in the development of new wood
scanning products and expects to continue investing heavily in the development
of these products in the future.

Revenues.The Company's EDS product revenues have
principally consisted, and the Company believes will continue to consist, of
orders of multiple units from a limited number of customers. While the number
of individual customers may vary from period to period, the Company is
nevertheless dependent upon these multiple orders for a substantial portion of
its revenues. The Company cannot assure that it will obtain such multiple
orders on a consistent basis.   For the
three month periods ended April 1, 2001 and April 2, 2000, $8.3 million and
$5.6 million, respectively, were generated from EDS sales to the Company's
largest customer, the FAA, representing 47.2% and 29.8%, respectively, of the
Company's total revenues.  There were no
other significant customers who accounted for more than 10% of the Companys
total revenues in the first three months of 2001 and 2000.

The Company markets its products
and services both directly through internal sales personnel and indirectly
through authorized agents, distributors and systems integrators.  In the United States, the Company markets
its products and services primarily through direct sales personnel.  Internationally, the Company utilizes both a
direct sales force and authorized agents to sell its products. For the three
month periods ended April 1, 2001 and April 2, 2000, international sales
represented 18.7% and 31.1%, respectively, of the Company's total revenues.

Results of Operations

The following table sets forth
certain income and expenditure items from the Companys consolidated statements
of operations expressed as a percentage of total revenues for the periods
indicated.

Three Months EndedApril 1,
  2001
  April 2,
  2000Revenues:Product revenues
  64.1%
  75.6%Service revenues
  14.6
  12.8Government contract revenue
  21.3
  11.6Total revenues
  100.0
  100.0Cost of revenues:Product costs
  36.7
  51.8Service costs
  10.5
  9.0Government contract costs
  16.1
  8.4Total cost of revenues
  63.3
  69.2Gross profit
  36.7
  30.8Operating expenses:Research and development
  16.3
  12.8Selling, general and administrative
  19.8
  23.4Total operating expenses
  36.1
  36.2Income (loss) from
  operations
  0.6
  (5.4)Interest expense
  (0.4)
  (0.3)Interest and other
  income, net
  0.6
  2.1Income (loss) before
  provision for income taxes
  0.8
  (3.6)Provision for income
  taxes
  0.3
  -Net income (loss)
  0.5%
  (3.6)%

Comparison of the Three Months Ended April 1, 2001 to April
2, 2000

Revenues.   The Company's revenues are primarily comprised of: (i) EDS
product revenues, which include revenues from sales of CTX systems and related
accessories, and installation and configuration, and EDS service revenues,
which include revenues from maintenance contracts related to product support,
integration and other services; (ii) Quantum government contract revenues,
which include revenues primarily from research and development contracts
utilizing QR and passive magnetic technologies with government agencies and
private entities and; (iii) Wood product revenues from the sales of control and
automation systems for material processing equipment, primarily in the wood
products industry and related accessories, installation and configuration, and
Wood service revenues from maintenance contracts related to product support,
integration and other services.

EDS product revenues were $9.4
million for the first quarter of 2001, a decrease of 20.2% from the $11.8
million in the first quarter of 2000. 
This decrease was primarily attributable to fewer system sales and
variations in product mix in the first quarter of 2001 compared to the same
period a year ago.  EDS service revenues
were $2.2 million for the first quarter of 2001, an increase of 4.6% from the
$2.1 million in the first quarter of 2000. 
The increase in service revenues is primarily due to increased service
contract revenue for new support and maintenance agreements for CTX systems for
which warranty periods expired during the past twelve months, primarily in
international locations.  The Company
typically ships against a backlog of orders for its products.  As of April 1, 2001, the Company had in
backlog EDS equipment orders and service agreements of $9.6 million, primarily
consisting of service agreements. 
Additionally, subsequent to April 1, 2001, the Company received orders
valued at approximately $5.3 million from international customers for multiple
explosive detection systems, accessories and service.

Quantums government contract
revenues were $3.7 million for the first quarter of 2001, an increase of 71.8%
from the $2.2 million in the first quarter of 2000.  The increase in government contract revenues is primarily due to
an increase in efforts in the development of landmine technologies, partially
offset by decreases in other types of development efforts as government
contracts and grants are completed.  As
of April 1, 2001, the Company had Quantum government contract backlog of
approximately $21.7 million, primarily for development of landmine detection
technologies.

Wood product and service revenues
were $2.2 million in the first quarter of 2001, a decrease of 17.0% from the
$2.7 million in the first quarter of 2000.  
The decrease in wood revenues is primarily due to fewer system sales in the
first quarter of 2001 compared to the same period a year ago, partially offset
by a slight increase in service revenues. 
As of April 1, 2001, the Company had in backlog Inovec equipment orders
and service agreements of $2.7 million. 
The Company is still developing the CT based log scanner and had no
related revenues or backlog as of April 1, 2001.

Gross Profit.  Cost of EDS product revenues primarily consists of purchased
materials procured for use in the assembly of the Company's products, as well as
manufacturing labor and overhead, and warranty.  Cost of EDS service revenues primarily consists of direct labor
and materials and customer support overhead. 
In any given period the Company's gross profit for products and services
may be affected by several factors, including revenue mix, volume of systems
manufactured in a given period, product configuration, location of the
installation and complexity of integration into various environments.

Gross profit for EDS products was
$4.1 million in the first quarter of 2001, an increase of 15.0% from the $3.6
million in the first quarter of 2000. 
Gross margins for EDS products in the first quarter of 2001 and 2000
were 44.1% and 30.6%, respectively.  
The increase in gross margins is primarily due to improvements in the
costs of the CTX 9000 system, which was first introduced in late 1999, and
variations in product types sold in the first quarter of 2001 compared to the
same period a year ago. The increase is also due to lower margins in the first
quarter of 2000 as a result of competitive pricing factors with an
international customer.  Gross profit
for EDS services remained constant at $0.5 million in the first quarter of 2001
and 2000.  Gross margins for EDS
services also remained relatively constant at 24.7% and 24.8% in the first
quarter of 2001 and 2000, respectively.

Cost of Quantum government contract
revenues primarily consists of direct labor, purchased materials, subcontract
labor and the applicable overhead required to support government funded activities.   Gross profit for government contracts was
$0.9 million in the first quarter of 2001, a 51.2% increase from the $0.6
million in the first quarter of 2000. 
Gross margins were 24.1% and 27.4%, respectively.   The increase in gross profit is primarily
due to higher revenues in the first quarter of 2001 compared to the same period
a year ago.  The decrease in gross
margins is primarily due to more outside engineering services incurred on the
landmines contract, which services typically carry a slightly lower margin, in
the first quarter of 2001 compared to the same quarter a year ago.

Gross profit for Wood products and
services were $0.9 million in the first quarter of 2001, a decrease of 18.5%
from the $1.1 million in the first quarter of 2000.  Gross margins were 38.5% and 39.2% in the first quarter of 2001
and 2000, respectively.  The decrease in
gross profit is primarily due to a higher portion of revenues attributable to
service, which typically carry a lower margin than system revenues, in the first
quarter of 2001 compared to the same period a year ago.

Research
and Development.Research and development expenses consist
primarily of compensation paid to personnel engaged in research and development
activities, amounts paid for outside services, and costs of materials utilized
in the development of hardware products, including prototype units.  Research and development expenditures by the
Company are partially offset by amounts reimbursed by the FAA and other
government agencies and private entities under research and development
contracts and grants.  These services
are provided on a cost basis.

Gross research and development
expenses were $3.5 million in the first quarter of  2001, an increase of 37.8% from the $2.5 million in the first
quarter of 2000.  Of these amounts, in
the first quarter of 2001 and 2000, $0.6 million and $0.2 million,
respectively, were funded by research and development contracts and grants from
the FAA and other government agencies and private entities.  Net research and development expenses were
$2.9 million in the first quarter of 2001, an increase of 19.6% compared to the
$2.4 million in the first quarter of 2000. 
As a percentage of revenues, net research and development expenses were
16.3% and 12.8% in the first quarter of 2001 and 2000, respectively.   The increase in gross research and
development expenses is primarily due costs incurred for the development of
ARGUS and also due to engineering services, materials and labor costs incurred
for the development of WoodVision products.  
The increase of net research and development expenses as a percent of
revenues is primarily due to increased efforts for the development of
WoodVision products and also due to lower revenues in the first quarter of 2001
compared to the same period a year ago. 
As of April 1, 2001, the Company had in backlog research and development
contracts and grants of $5.5 million.

Selling, general and administrative.  Selling, general and administrative expenses
consist primarily of compensation paid to direct and indirect sales and
marketing personnel, administrative personnel, including directors, consultant
fees, professional service fees, insurance, travel, selling and distribution
costs, and other general expenses.

Selling, general and administrative
expenses were $3.5 million in the first quarter of 2001, a decrease of 20.6%
from the $4.4 million in the first quarter of 2000.  As a percentage of total revenues, selling, general and
administrative expenses were 19.8% and 23.4% in the first quarter of 2001 and
2000, respectively.  The decrease in
selling, general and administrative expenses is primarily due to lower
commissions, a result of lower revenues in the current quarter, and also due to
higher  commissions paid to an outside
sales agent in the first quarter of 2000. 
There were no commissions paid to outside sales agents in the first
quarter of 2001.  The decrease in
selling, general and administrative expenses is also due to higher costs
incurred in the first quarter of 2000 relating to the start-up and business
development costs of the newly formed WoodVision division and also due to the
Companys efforts to reduce selling, general and administrative spending levels
in 2001.

Interest Expense.  Interest expense increased to $65,000 in the
first quarter of 2001 from $49,000 in the first quarter of 2000. Interest
expense resulted primarily from debt financing associated with the Companys
working capital lines of credit, equipment term loans and capital leases.  The increase is primarily due to higher
average debt balances in the first quarter of 
2001 compared to the same period a year ago.

Interest and Other Income, Net.  Interest and other income, net, decreased to
$105,000 in the first quarter of 2001 from $384,000 in the first quarter of
2000.  The 2001 amount consists
primarily of interest income on cash equivalents and short-term investments of
$114,000, partially offset by other expense (net) of $9,000.  The 2000 amount consists primarily of
interest income on cash equivalents and short-term investments of $406,000,
partially offset by other expense (net) of $22,000.  The decrease in interest income is primarily due to lower average
cash balances in the first quarter of 2001 compared to the first quarter of
2000.

Provision for Income Taxes.  The Company recorded a provision for income
taxes of $59,000 in the first quarter of 2001. 
At December 31, 2000, the Company had federal net operating loss
carryforwards of approximately $4.6 million available to reduce future federal
taxable income.  The Companys net
operating loss carryforwards expire from 2010 to 2012 and tax credit
carryforwards expire from 2005 to 2018.

Liquidity and Capital Resources

At April 1, 2001, the Company had
$10.2 million in cash, cash equivalents and short-term investments, compared to
$11.9 million at December 31, 2000. 
Working capital was $38.2 million at April 1, 2001 compared to $37.7
million at December 31, 2000.

Net cash used in operating
activities was $4.8 million in the first quarter of 2001, compared to $7.0
million in the first quarter of 2000. 
Cash used in operating activities in the first quarter of 2001 primarily
resulted from a $3.2 million increase in accounts receivable, a $1.4 million
increase in inventories and a $1.2 million decrease in accrued liabilities,
partially offset by net income of $89,000 and the $1.0 million non-cash effect
of depreciation and amortization.  Cash
used in operating activities in the first quarter of 2000 primarily resulted
from a net loss of $0.7 million, a $7.1 million increase in accounts
receivable, a $1.5 million increase in inventories and a $0.8 million increase
in other assets, partially offset by a $2.1 million increase in accounts
payable and accrued liabilities and the $0.9 million noncash effect of depreciation
and amortization.

Net
cash used in investing activities was $0.5 million in the first quarter of
2001, compared to $3.0 million provided by investing activities in the first
quarter of 2000.  Net cash used in
investing activities in the first quarter of 2001 resulted from $0.5 million in
acquisitions of capital equipment.  Net
cash provided by investing activities in the first quarter of 2000 primarily
resulted from $4.9 million in sales of short-term investments (net of
purchases), partially offset by the cash payment of $1.5 million for the
purchase of Inovec, net of cash acquired, and $0.4 million in acquisitions of
capital equipment.

Net cash provided by financing
activities was $3.7 million in the first quarter of 2001, compared to $13,000
used in financing activities in the first quarter of 2000. Net cash provided by
financing activities in the first quarter of 
2001 was primarily due to $3.7 million in net proceeds from borrowings
of short-term debt and $77,000 in proceeds from sales under the employee stock
purchase plan, partially offset by $111,000 in repayments of long-term
debt.  Net cash used in financing
activities in the first quarter of 2000 was primarily due to $90,000 in
repayments of long-term debt, partially offset by $77,000 in proceeds from
sales under the employee stock purchase plan and exercises of incentive stock
options.

In November 2000, the Company
renewed its two line of credit agreements with a bank.  The first agreement provides for maximum
borrowings in an amount up to the lower of 80% of eligible domestic EDS
receivables or $5.0 million.  The second
agreement is partially guaranteed by the Export-Import Bank (EXIM) of the
United States and provides for maximum borrowings in an amount up to the lower
of:  (a) the sum of 80% of eligible EDS
export accounts receivable plus the lower of: (i) 70% of eligible raw materials
and work-in-process inventory designated for export customers; (ii) 60% of
outstanding loans under this agreement, or; (iii) $2.0 million, or; (b) $5.0 million.  Borrowings under both agreements bear
interest at the banks prime rate plus 1.5% (9.5% at April 1, 2001) and are
secured by EDS assets. The agreements expire in November 2001 and require that
the EDS segment maintain certain levels of tangible net worth and intercompany
balances from its wholly-owned subsidiaries, and also prohibit the Company from
paying cash dividends.  Proceeds of
loans under both lines of credit may be used for general corporate purposes.  At April 1, 2001, the Company had borrowings
outstanding of $2.4 million under the domestic EDS agreement and $2.0 million
under the EXIM agreement.  Additionally,
the Company had outstanding guarantees to customers through issuance of letters
of credit secured by the lines of credit totaling $1.2 million and foreign
exchange contracts for which a 10% reserve of $155,000 is secured by the lines
of credit.   The remaining available
borrowing capacity under the lines of credit was $1.2 million at April 1, 2001
based on eligible EDS accounts receivable and inventories as of that date.

The Company previously borrowed
against a committed equipment line of credit agreement with a bank, which
converted into a term loan after draw down. 
Borrowings are secured by the assets purchased or financed.  At April 1, 2001, the Company had an
outstanding $298,000 term loan due June 2003 and a $143,000 term loan due
November 2001.  The term loans bear
interest at the banks prime rate plus 1.5% (9.5% at April 1, 2001).

The Company believes that existing
cash, cash equivalents and short-term investments together with available
borrowings under its lines of credits and funds expected to be generated from
operations will be sufficient to finance its working capital and capital
expenditure requirements for at least the next 12 months.

Business Risks

History of
Losses; No Assurance of Continued Profitability.The Company commenced operations in
September 1990, remained in the development stage through 1994 and received its
first revenues from product sales in the first nine months of 1995.  The Company experienced net losses for each
year from inception through December 31, 1996. The year ended December 31, 1997
was the Companys first year of profitability. 
As of April 1, 2001, the Company had an accumulated deficit of
approximately $10.9 million.  Although
the Company was profitable on an annual basis for the years 1997, 1998 and
1999, profitability in 1999 was below that of the prior two years and the
Company was not profitable in 2000. There can be no assurance that the Company
will attain annual profitability for 2001 or in the future. See
"Management's Discussion and Analysis of Financial Condition and Results
of Operations - Liquidity and Capital Resources."



Fluctuations
in Operating Results.The
Company's past operating results have been, and its future operating results
will be, subject to fluctuations resulting from a number of factors, including:
the timing and size of orders from, and shipments to, major customers;
budgeting and purchasing cycles of its customers; delays in product shipments
caused by manufacturing delays related to introduction of new products, custom
requirements of customers or ability of the customer to accept shipment; the
timing of enhancements to the CTX Series by InVision or introduction of new
products by it or its competitors and the market acceptance thereof; changes in
pricing policies by InVision, its competitors or suppliers, including decreases
in average selling prices of the CTX Series in response to competitive
pressures; the proportion of revenues derived from competitive bid processes;
the mix between sales to domestic and international customers and the mix
between sales of various CTX products; the availability and cost of key
components; and fluctuations in general economic conditions. InVision also may
experience decreases in spending reimbursed by government or third party
contracts or choose to increase spending which is not  reimbursed by government or other third party contracts in
response to competition or as it pursues new market opportunities in the areas
of wood scanning, landmine detection and others, all of which may have a
material adverse effect on InVision's business, financial condition or results
of operations. InVision's EDS systems revenues in any period are derived from
sales of multiple CTX Series systems to a limited number of customers and are
recognized upon shipment which, in view of the high sales price of units in the
CTX Series, causes minor variations in the number of orders, or the timing of shipments,
to substantially affect the Company's quarterly revenues. Because a significant
portion of the Company's quarterly operating expenses are, and will continue to
be, relatively fixed in nature, such revenue fluctuations will cause the
Company's quarterly and annual operating results to vary substantially.
Accordingly, the Company believes that period-to-period comparisons of its
results of operations are not meaningful and cannot be relied upon as
indicators of future performance. Because of all of the foregoing factors, the
Company's operating results have from time to time in the past been and may
again in the future be below the expectations of public market analysts and
investors.  This failure to meet market
expectations has in the past and may again in the future result in a decline in
the trading price of the common stock.

Dependence
on Large Orders; Customer Concentrations;Lengthy Sales Cycle.  In any given fiscal year, the Company's product and service
revenues have principally consisted, and the Company believes will continue to
consist, of orders of multiple units from a limited number of customers. While
the number of individual customers may vary from period to period, the Company
is nevertheless dependent upon these multiple orders for a substantial portion
of its revenues. There can be no assurance that the Company will obtain such
multiple orders on a consistent basis. To date, all orders for CTX Series
systems from United States customers have been entirely funded by the FAA, and
the Company's largest sales contract to date, for 105 CTX Series systems, all
of which have been shipped, was with the FAA. 
In 2000, the Company entered into several contracts with customers to
purchase CTX Series systems over a period of several years.  These contracts have a minimum and maximum
number of units the customer can order, however, there can be no assurance that
the customer will order more than the minimum number of units in accordance
with the terms in the contract.   The
Company's inability to obtain sufficient multiple orders or the failure of the
FAA to continue such purchases or funding would have a material adverse effect
on the Company's business, financial condition or results of operations.
Moreover, the timing and shipment of such orders could cause the operating
results in any quarter to differ from the projections of securities analysts,
which could adversely affect the trading price of the common stock.



Public
Agency Contract and Budget Considerations.Substantially all of InVision's EDS customers and a high
percentage of Quantums research and development customers to date have been
public agencies or quasi-public agencies. 
In contracting with public agencies, the Company is subject to public
agency contract requirements which vary from jurisdiction to jurisdiction and
which are subject to budgetary processes and expenditure constraints.  Budgetary allocations for explosive
detection systems are dependent, in part, upon governmental policies which
fluctuate from time to time in response to political and other factors,
including the public's perception of the threat of commercial airline
bombings.  Many domestic and foreign
government agencies have experienced budget deficits that have led to decreased
capital expenditures in certain areas. 
The Company's results of operations may be subject to substantial
period-to-period fluctuations as a result of these and other factors affecting
capital spending.  A reduction of
funding for explosive detection technology deployment could materially and
adversely affect the Company's business, financial condition or results of
operations. Future sales to public agencies will depend, in part, on the
Company's ability to meet public agency contract requirements, certain of which
may be onerous or even impossible for the Company to satisfy. In addition,
public agency contracts are frequently awarded only after formal competitive
bidding processes, which have been and may continue to be protracted, and
typically contain provisions that permit cancellation in the event that funds
are unavailable to the public agency. There can be no assurance that the
Company will be awarded any of the contracts for which its products are bid or,
if awarded, that substantial delays or cancellations of purchases will not result
from protests initiated by losing bidders.  
In addition, the Companys landmine detection equipment currently in the
prototype stage is deemed a regulated military device subject to export
restrictions under the U.S. Department of State regulations. Export of landmine
detection equipment may be difficult or limited to a small number of countries,
even for purposes of demonstration and further data collection and development.

Wood
Industry Purchasing Cycle; Acceptance of New Products.The
Companys revenues related to the wood segment, including optimization systems
manufactured by Inovec, will be subject to the ability and willingness of
customers in the wood industry to purchase capital equipment to improve
productivity, yield and finished product value.  The factors that affect the decision to purchase such capital
equipment include the demand for wood products, market prices for logs and
finished wood products, labor costs, interest rates and other general economic
factors.  In addition, the revenues
related to the Companys CT scanners for the wood industry will be subject to
the acceptance of new technology by customers in the wood industry.  There are no assurances that market
conditions in the wood industry will be favorable for the sale of capital
equipment, or that the Companys new products will be accepted by the industry
in any particular time, or at all.

Item
3.Quantitative
and Qualitative Disclosures About Market Risk

Foreign Exchange Risk and Impact of Inflation

The Company's international system
sales and maintenance contracts are generally denominated in U.S. dollars.   In instances where there are significant
international system sales contracts denominated in a foreign currency, the
Company enters into forward exchange contracts to mitigate foreign exchange
risk.   In the first quarter of 2001,
the Company entered into forward exchange contracts of approximately $1.4
million to hedge against foreign exchange risk for contracts with international
customers, and at April 1, 2001, had outstanding contracts totaling $1.6
million with a fair value of approximately $73,000.   Purchases of raw materials and other inventory components are
primarily denominated in U.S dollars and when purchased in foreign currencies,
are generally made on an as needed basis. 
The Company has some advance purchase commitments in foreign currencies
with a few European suppliers.   The
Company currently does not hedge against these purchase commitments, as the
foreign exchange rate fluctuations have not had a material adverse impact on
these purchases; however, the Company will continue to monitor the foreign
exchange rates and enter into forward exchange contracts to mitigate foreign
exchange risk as appropriate.

On
January 1, 2001, the Company adopted SFAS 133, as amended.  This statement requires that every
derivative instrument, including certain derivative instruments embedded in
other contracts, be recorded on the balance sheet at its fair value.  Changes in the fair value of derivatives are
recorded each period in current earnings or other comprehensive income,
depending on whether a derivative is designated as part of a hedge transaction
and, if it is, the type of hedge transaction. 
SFAS 133, as amended, requires that the Company formally document,
designate, and assess the effectiveness of transactions that receive hedge
accounting.  The Company adopted SFAS
133, as amended, on January 1, 2001 and did not elect hedge accounting.  The adoption of this statement did not have
a material impact on the financial position or results of operations of the
Company.

During
the quarter ended April 1, 2001 the Company's derivative contracts consisted
only of foreign exchange forward contracts to hedge certain exposures to future
foreign currency rate movements on receivables from international sales
contracts.  Such derivative contracts
did not have a material impact on the financial position at April 1, 2001 or
results of operations for the quarter then ended.

Certain costs of providing warranty
and maintenance services for systems sold to foreign countries are denominated
in local currencies. To the extent exchange rates fluctuate, it could become
more expensive to provide these services. To date, these costs have not been
significant, however, the Company expects they will increase as the Company's
installed base increases.

The impact of inflation has not
been material on the Companys operations or liquidity to date.


Part II.  OTHER INFORMATION



Item 1.
  Legal ProceedingsThe Company is involved in
  routinely administrative proceedings arising in the ordinary course of
  business.  Management believes that
  collectively these proceedings will not have a material adverse effect on the
  Companys business, financial condition or results of operations.Item
  2.
  Changes in Securities and Use
  of ProceedsNot applicable.Item 3.
  Defaults Upon Senior SecuritiesNot
  applicable.Item
  4.
  Submission of Matters to a
  Vote of Securities HoldersNot
  applicable.Item
  5.
  Other InformationNot
  applicable.Item 6.
Exhibits and Reports on Form 8-K

(a)         Exhibits

2.1
  Agreement
  and Plan of Merger and Reorganization dated as of February 23, 2000, among
  InVision Technologies, Inc., a Delaware corporation, InVision Acquisition
  Corporation, a Delaware corporation, and Inovec, Inc., an Oregon Corporation
  (1)2.2
  Form
  of Escrow Agreement between InVision, Merger Sub, the Shareholders and
  Greater Bay Trust Company, dated February 23, 2000 (1)3.1
  Amended
  and Restated Certificate of Incorporation of the Registrant. (2)3.2
  Bylaws
  of Registrant, as amended. (3)4.1
  Reference
  is made to Exhibits 3.1 and 3.2.10.42
  Key
  Employment Agreement dated March 6, 2001, between the Registrant and Ross
  Mulholland.10.43
  Form
  of Indemnity Agreement between the Registrant and each of Donald E. Mattson
  and Ross Mulholland.(1)
  Filed
  as the like - numbered exhibit to Registrant's Current Report on Form 8-K
  filed May 18, 2000.(2)
  Filed
  as an exhibit to Registrant's Registration Statement on Form S-1 (No. 333-380)
  or amendments thereto and incorporated herein by reference.(3)
  Filed
  as an exhibit to Registrant's Quarterly Report on Form 10-Q for the quarterly
  period ended June 30, 1998 and incorporated herein by reference.(b)        The
Registrant filed no Reports on Form 8-K during the quarter ended April 1, 2001.

SIGNATURESPursuant
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 thereunto
duly authorized.



INVISION
  TECHNOLOGIES, INC.Date:
  May 15, 2001
  
  /s/
  Sergio
  MagistriDr.
  Sergio MagistriPresident
  and Chief Executive Officer(Principal
  Executive Officer)Date:
  May 15, 2001
  
  /s/
  Ross MulhollandRoss
  MulhollandSenior
  Vice President and Chief Financial Officer(Principal
  Financial and Accounting Officer)