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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
|X| Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the fiscal year ended December 30, 1995
OR
| | Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from _____ to _____.
0-17541
(Commission File No.)
PRESSTEK, INC.
(Exact name of registrant as specified in its charter)
Delaware 02-0415170
(State or other juris- (I.R.S. Employer
diction of incorporation or Identification No.)
organization)
8 Commercial Street, Hudson, New Hampshire 03051
(Address of principal executive offices including zip code)
Registrant's telephone number, including area code: (603) 595-7000
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
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. Yes _ X_ No ____
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. |X|
The aggregate market value of the registrant's Common Stock held by
non-affiliates as of March 12, 1996 was approximately $1,279,000,000.
As of March 12, 1996 there were 15,074,246 shares of the registrant's Common
Stock outstanding.
Documents Incorporated by Reference: None
PART I
Item 1. Business.
General
Presstek, Inc. (the "Company"), which was incorporated in the State of
Delaware in September 1987, continues to further develop and market its
proprietary, digital imaging technologies and system architectures (the "Direct
Imaging" technologies), and non-photographic consumables primarily to the
graphic arts and related imaging industries. The Company's current Direct
Imaging technologies, referred to as PEARL(R) permit the direct digital imaging
of printing plates and films which eliminates the need for photosensitive
materials and the hazardous waste by-products usually associated with these
processes. The Company's system accepts digital PostScript(R)* compatible files
from digitally based electronic prepress systems and images the color separated
pages directly on to the Company's proprietary non-photographic based
consumables.
PEARL, is a high resolution, high powered semiconductor laser diode imaging
technology and is the result of significant past development efforts by the
Company. The Company believes that PEARL represents a technological breakthrough
for the worldwide printing and publishing industry and has several applications
for it and its consumables in the graphic arts industry: a printing press (the
"Direct Imaging Printing Press") and a stand-alone computer-to-plate imaging
device (the "PEARLsetterTM"), both of which incorporate the Company's PEARL
Direct Imaging technology. PEARL uses its precision, high powered semiconductor
laser diode to ablate, or remove the materials from the surface of the Company's
plates to produce precisely positioned and formed laser dots at resolutions up
to 2540 dots per inch. When these laser dots are combined by the Company's
proprietary system (software, firmware and hardware) they form printers' dots
from which high quality, lithographic color print images are printed. The
graphic arts industry recognizes that the automation and simplification of the
color printing process resulting from the use of these types of computer
direct-to-plate and direct-to-press devices, will provide significant reductions
in the time and cost of multi-color lithographic printing. Therefore, the
Company believes the graphic arts industry will move with ever increasing speed
towards computer-to-plate imaging devices and computer-to-press printing
systems. The Company also believes that its PEARL laser ablation imaging
technology's ability to produce high quality
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* PostScript is a registered trademark of Adobe Systems, Inc.
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printed materials, with freedom from environmental concerns, represents a
breakthrough in the expanding market for computer-to-plate/press products. As a
result, the Company believes its past investments in its proprietary PEARL
Direct Imaging technology and its years of experience in developing digital
imaging systems (software, firmware and hardware) places the Company in a
significant position in the markets it has chosen to serve.
Strategic Alliances/Proposed New Products
The Company continues to pursue a strategy based on alliances and
relationships with major corporations in the graphic arts and other industries
encompassing licensing, product development and commercialization,
manufacturing, marketing, distribution, sales and services. The Company and
Heidelberger Druckmaschinen AG ("Heidelberg"), the world's largest manufacturer
of printing presses and printing equipment, based in Germany, have jointly
developed the first Heidelberg Direct Imaging Printing Press (the "GTO-DI"). The
Company and Heidelberg experienced a wider range of market applications, and
greater market acceptance due to the improved image quality of a PEARL equipped
GTO-DI press. As a result, the Company's relationship with Heidelberg has been
expanded to include a new, four color, fully automated lithographic press, the
Quickmaster DI 46-4 ("Quickmaster DI") which was jointly designed by the Company
and Heidelberg to take full advantage of the Company's improved implementation
of its Direct Imaging Technology. The press, which was introduced by Heidelberg
in May 1995, has a smaller "footprint" than existing four color presses and
employs the Company's recently developed automatic plate changing cylinder which
eliminates the need for manually changing plates between jobs. This press also
employs many other innovations which will result in reduced costs per printed
page and contains or employs nine of the Company's patented technologies, some
of which have been licensed to Heidelberg. The Company believes that the
Quickmaster-DI will be able to compete on jobs requiring as few as 200 sheets
per job, while also being able to produce runs in excess of 20,000 sheets at a
cost that cannot be equalled by any existing "on demand" four color printing
system. Both Heidelberg and the Company believe the Quickmaster-DI will greatly
expand the use of the Company's Direct Imaging technology and allow a much
broader cross section of the graphic arts market to experience the productivity
and lower cost benefits of direct-to-press digital, high quality lithographic
printing. The Company also has an agreement with the Adast-Adamov Company, a
manufacturer of offset lithographic presses. This agreement will result in the
use of Company's direct imaging technologies on a larger format (19" x 26")
multicolor press. This new, large format direct imaging press is being publicly
displayed for the first time at the Graphic Communications Tradeshow in
Philadelphia on March 28-30, 1996. The Company believes the availability of a
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larger format direct imaging press will provide a greater number of market
applications and will strengthen the Company's position in the direct-to-press
market. Currently, the Company is engaged in discussions relating to additional
strategic relationships and/or arrangements focused principally on the
PEARLsetter, other Direct Imaging Printing Presses and the manufacture and
distribution of the Company's consumables, for these and other applications.
Background
The Company believes that thermally based computer-to-press imaging devices
and computer-to-plate printing systems, free of environmental concerns, will
eventually replace photo chemically based imaging systems as the preferred
method for providing printing plates in the graphic arts industry. The most
current and widely used method for producing color printing plates for the
full-color printing process employs desktop computers, which outputs PostScript
compatible digital data to a film imaging device, known as a film recorder, or
imagesetter. The film recorder is used to expose four pieces of film, each
representing a corresponding color separation for yellow, cyan, magenta and
black, the subtractive primary colors used in combination to produce process
color printing. Each of these unprocessed films must then be developed utilizing
photographic chemical developing systems which generate waste effluents that are
difficult to dispose of in an environmentally sound manner. The four processed
films are then delivered to the printer for imposition, platemaking, and
printing. Imposition is a costly, time and labor intensive process preceding
platemaking, in which all of the image elements required to maximize the
available imaging area of the plate are manually assembled to make the most
efficient use of the plate material. Once the components of the press sheet are
imposed for each of the four separations, each is then exposed onto separate
plates, typically using ultra-violet light sources and vacuum frames to hold the
imposed image tightly against the plate material during its exposure cycle. To
produce the final printing plates, the exposed plates must then go through a
chemical development process similar to that which is used to develop the
separation films. This process also produces chemical wastes which must be
disposed of in an environmentally sound manner at an ever increasing cost to the
printer. The printer then brings the plates to the press, mounts the plates on
the press, registers or precisely aligns all four plates one to another, adjusts
the ink density and settings, and then, begins the actual printing process on
the press. The complex nature of color printing utilizing a conventional press
is such that the quality of the printed materials are very dependent on the
press operators performing these highly skilled functions.
In response to perceived market opportunities for more time and
cost-effective color printing; (an opportunity that would encompass taking
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better advantage of the growing use of PostScript based digital prepress
systems; one that would be less reliant on operator skills and that would be
free from chemical processes and environmental concerns,) the Company undertook
development of its proprietary Direct Imaging technologies.
The original implementation of the Company's Direct Imaging technology
employed a complex system of software and hardware. This first generation
process imaged or etched the Company's proprietary printing plates by means of
discharging an electrical spark (the "spark discharge" technology). The spark
discharge technology, while lacking in some aspects, was viable enough to allow
the Company to develop a business relationship with Heidelberg and apply the
spark discharge technology on an initial product offering introduced in
September 1991, the Heidelberg GTO-DI. The GTO-DI was initially introduced by
Heidelberg at Print '91. In 1992, the Company began shipping to Heidelberg spark
discharge based DI Kits for integration into GTO presses. The resultant GTO-DI's
were used by Heidelberg distributors for customer sales as well as for shows and
demonstrations worldwide.
The Company realized that the use of a laser based imaging concept as a
replacement for its spark discharge technology held the promise of significantly
improved image quality. In response to the market's demand for higher quality
printed materials, even in the short-run markets, the Company developed its high
resolution semiconductor laser diode based imaging technology, PEARL. In 1993,
the Company introduced its PEARL Direct Imaging Technology. This second
generation technology is based on the same concept as the spark discharge
technology which, under computer control, burns away the surface of the plate
material except that it employs the use of an infrared semiconductor laser in
place of the spark discharge. This second generation PEARL technology completely
replaced the Company's prior spark discharge technology.
The GTO-DI was reintroduced by Heidelberg with PEARL in September 1993. The
Company began shipping initial kits necessary to install the PEARL Imaging
System on the GTO-DI to Heidelberg in September 1993, with full production
commencing in February 1994. The Company believes that its PEARL Direct Imaging
technologies as implemented on the GTO-DI has been well accepted by the market,
which includes commercial printers, color service bureaus, digital on-demand
print shops and corporate in-house plants.
The Company believes the radically different press design of the
Quickmaster-DI, in concert with the Company's third generation of Direct Imaging
technology targeted towards the growing short run process color print market has
been well received by the print industry. The product won the 1995 Intertech New
Technology award and in February 1996 two Seybold Editors' Awards at Seybolds
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16th Annual Boston Seminars Conference oriented towards the printing and
publishing market. One award was made to the Company for it PEARL Direct Imaging
Technology and one to Heidelberg for the Quickmaster DI. The Company also
received the National Association of Printers and Lithographers Award for the
contribution its Direct Imaging Technology has made to the printing industry.
The Company's PEARL Direct Imaging Technology System and
Consumables
The Company's PEARL Direct Imaging technology is part of the PEARL imaging
system for producing imaged color printing plates and nonphotosensitive films in
a simple one-step process (the "PEARL Imaging System"). The primary elements of
the PEARL Imaging System are:
(i) DI Server Computer - which accepts, stores and allows for
viewing the bitmapped files of the digital page and then transmits that data to
implement the imaging function. The DI Server consists of either a Pentium(R)*
or a DEC Alpha(R)** based computer, image capture software, viewing software and
memory.
(ii) The Imaging Computer - communicates with the DI Server to
receive, store and implement the imaging function.
(iii) Imaging heads - consist of the semi-conductor laser diodes and
drivers, lens assembly, precision carriage assembly and chiller systems.
(iv) Consumables - consist of wet and dry aluminum based printing
plates and wet and dry polyester based printing plates.
The Direct Imaging Press
The Direct Imaging Printing Press automates or eliminates most of the
intermediate processes and steps necessary for full color printing, including
many of the highly skilled functions required to prepare the press. The plates
are imaged in register directly on the press. After the plates are wiped either
automatically or manually, an operator can begin the printing process. The use
of dry offset plates in the printing process eliminates the need for the
chemical dampening solution and its required balancing. Proper ink density is
automatically pre-set by the computer. The Company and its licensees typically
jointly develop and/or work together on the development of the press. The
Company, as more fully described below, supplies hardware components and
subassemblies and software necessary for
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* Pentium is a registered trademark of Intel Corp.
** Alpha is a registered trademark of Digital Equipment Corporation.
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installation of PEARL Imaging Systems (the "PEARL Kits") into two, four and five
color presses. The advantages and features of the direct imaging presses
include:
o the ability to accept and buffer the bitmapped image data of fully
composed pages, particularly those utilizing postscript interpreters;
o imaging on-press of all two, four or five plates simultaneously;
o imaging of the plates directly on the plate cylinders, in register
(i.e., the fitting of two or more printing images in precise alignment
with each other);
o elimination of the need for plate development processes, by-products
of which cause environmental concerns;
o the imaged plates are waterless, therefore eliminating the need of the
chemical dampening solution and its required balancing; and
o automatic pre-setting of the ink keys from the bitmap already resident
in the computer.
As a result, process color offset lithographic printing can be produced
with fewer complex steps and at a lower cost than in the case of other
conventional color printing methods. The time savings in producing four color
work would permit a printer to perform a greater number of printing jobs per day
more cost effectively with less waste.
Further, by accepting the digital data directly from a prepress page layout
system, the user of a press equipped with the Company's direct imaging benefits
from the efficiency and cost advantages of electronic page make up and, by
extending the use of digital data to the printing process, permits a closure of
the digital loop in the production of color printing.
The Company believes that its PEARL based direct imaging computer-to-press
technology with PEARL has been well received by the industry. By the end of 1995
the Company had shipped 211 of its PEARL Imaging Kits.
Presstek Consumables
The Company has and continues to develop its proprietary, thermally based
consumables that are imaged by its PEARL semiconductor laser diode imaging
technology. As part of the PEARL laser diode development process the Company has
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increased the number, types and functional characteristics of its
consumable products. These consumables currently include a polyester based dry
printing plate, a polyester based wet printing plate, an aluminum based dry
printing plate and an aluminum based wet printing plate. There are additional
consumable products in various stages of development including a
non-photosensitive film which may, in the future, provide new sources of
consumable revenues.
The Company has developed and is currently having manufactured by Rexham
Industries Corp ("Rexham"), a custom maker of precision films based in North
Carolina, both the polyester- and aluminum-based dry and wet offset printing
plates. The Company believes that wet offset plates imaged by its PEARL Direct
Imaging technology have applications for use on the large installed base of
existing printing presses. This population of printing presses operates with a
dampening system which requires wet offset printing plates. The Company has also
developed a prototype non-photosensitive film that it believes has market
applications imaged by its PEARL Direct Imaging technology. Although the Company
believes that it can complete the development and commercialization of the
polyester and aluminum based wet offset printing plates and its
non-photosensitive film and other consumable products, there can be no
assurances that it can do so.
The Company, realizing that sources for the Company's requirements for
current and new PEARL consumables, plates and films, would have to be found, in
February 1996 acquired 90% of the outstanding common stock (the "Purchased
Shares") of Catalina Coatings, Inc. ("Catalina"), an Arizona corporation engaged
in the development, manufacture and sale of vacuum deposition coating equipment
and the licensing and sublicensing of patent rights with respect to a vapor
deposition process to coat moving webs of materials at high speeds. The
aggregate consideration paid by the Company pursuant to the Stock Purchase
Agreement was $8,400,000, of which $8,200,000 represented the purchase price of
the Purchased Shares and $200,000 represented consideration for the
non-competition and confidentiality covenants of two of the principal
shareholders of Catalina who sold their shares to the Company. During the fiscal
year ended December 31, 1995, Catalina, a Subchapter S corporation, achieved net
income of approximately $1,542,000 on revenues of approximately $5,400,000.
The Company intends that Catalina, which operates as a subsidiary of the
Company, will develop the equipment the Company needs to manufacture its PEARL
thermal printing plates and films in a more cost effective manner than using
currently available conventional technology. Even if Catalina commences
manufacturing of PEARL thermal printing plates and films the Company may still
need to enter into manufacturing arrangements with third parties. The Company is
currently engaged in discussions with certain other parties relating to entering
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into strategic alliances, arrangements or relationships with respect
to the manufacture and/or the distribution of the Company's PEARL consumables.
There can be no assurance that the Company will be able to enter into any
arrangements for the manufacturing of its consumables, or that such arrangements
will result in successful commercial products. Additionally, there can be no
assurance that the Company through Catalina will be able to successfully
complete the development and undertake the manufacture of the PEARL consumables.
Direct Imaging Printing Press
In January 1991, the Company entered into a master agreement (the "Master
Agreement"), a technology license agreement (the "Technology License") and a
supply agreement (the "Supply Agreement") (the foregoing agreements being
sometimes collectively referred to herein as the "Heidelberg Agreements")with
Heidelberg. Pursuant to this series of related agreements, the Company and
Heidelberg agreed to certain terms relating to the integration of the Direct
Imaging technology into various presses manufactured by Heidelberg and certain
of its related parties (the "Heidelberg Presses") and the manufacture of
components for and the commercialization of such presses. The Master Agreement
supersedes certain prior agreements between the Company and Heidelberg.
Pursuant to the Heidelberg Agreements, the Company granted Heidelberg
certain exclusive rights, relating to the Company's spark discharge technology
subject to the satisfaction of certain conditions, for use of the Direct Imaging
Technology in Heidelberg Presses. In consideration for such rights, Heidelberg
agreed to pay to the Company royalties on the net sales prices of various
specified types of Heidelberg Presses. Heidelberg's exclusive rights with
respect to the different categories of Heidelberg Presses are conditioned upon
Heidelberg undertaking specified development efforts on a timely basis, paying
certain minimum royalties during specified initial periods and satisfying
continuing product sale conditions. These original agreements have been modified
by the parties from time to time.
The Heidelberg Agreements further provided for the Company to supply D.I.
Kits to Heidelberg at specified rates. The terms of the Heidelberg agreements
are for periods ending in December 2011 in the case of each of the Master
Agreement and Technology License and December 1995 in the case of the Supply
Agreement. The Supply Agreement related primarily to the GTO-DI which is no
longer manufactured. The Heidelberg Agreements also contain, among other things,
certain early termination provisions and extension provisions.
On September 3, 1992, the Company and Heidelberg signed a contract
modification agreement that details arrangements with
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respect to the development of additional products planned to be introduced in
the future.
On April 27, 1993, the Company and Heidelberg signed a contract
modification agreement that details the arrangements with respect to
Heidelberg's licensing of the Company's PEARL Direct Imaging technology, which
was not otherwise encompassed within the prior arrangements.
The Company has also subsequently granted Heidelberg a forty-five month
exclusive license for the manufacture and sale of the Quickmaster -DI which uses
PEARL technology. Certain other modifications have been made to the exclusive
arrangements under the previous agreements between Heidelberg and the Company
which provide for a non-exclusive license for the balance of the term of the
original agreement.
On February 4, 1994, the Company announced an agreement with Heidelberg
that provided for the Company to receive $4,180,000 during 1994 for engineering
services performed by the Company for joint development projects during 1994.
This agreement was subsequently modified and resulted in increasing the
engineering services performed by the Company. This change resulted in
Heidelberg agreeing to pay an additional $1,499,400 through June 1995 for these
incremental services related to these joint development projects. PEARL Imaging
Systems manufactured by the Company for Heidelberg, for the GTO-DI and the
Quickmaster DI, represent additional revenue to the Company. Additionally, the
Company receives a royalty payment for certain presses shipped by Heidelberg
which contains Presstek's PEARL imaging technology.
In November 1995 the Company and Heidleberg agreed to certain other
arrangements whereby the Company was provided with incremental engineering
revenue, certain price increases, and modifications of the Quickmaster DI
royalty billing and payment terms by Heidelberg. These arrangements were made as
a result of a schedule change requested by Heidelberg for the PEARL imaging
systems manufactured by the Company for Heidelberg. The Company also provided
Heidelberg with a fixed royalty rate on the Quickmaster DI.
The PEARL Platesetter
The PEARL Platesetter, now referred to as the PEARLsetterTM is an
additional application of the Company's PEARL Direct Imaging technology and
consumables. The PEARLsetter is a computer-to-plate imaging device that will be
able to image both the Company's wet and dry offset plates. The Company also
anticipates that the PEARLsetter will have applications in the larger format
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size markets as well and provides the product in both an A3 (2-up) and A2 (4-up)
format size.
The PEARLsetter directly accepts the digital page layout data from a
prepress system and utilizing its high powered semiconductor laser diodes,
produces a precisely shaped and located laser dot. The imaged plates require no
further processing, other than wiping the ablated debris from the imaging
process off the plates, and accordingly, do not create chemical waste which must
be disposed of. The plates can then be immediately mounted and registered on the
press.
The Company has entered into distribution agreements with the Pitman
Company in the United States, KNP-BT in certain European countries and
Heidelberg Australia in Australia and New Zealand. Those agreements provide for
the exclusive distribution of the Company's PEARLsetter product line and its
PEARL based consumables. The Company has also entered into OEM relationships
with Sakurai Machinery Company and Heath Custom Press for the resale of its
PEARLsetter product under private label by these companies. The Company is also
currently engaged in additional discussions with certain other parties relating
to entering into strategic alliances and OEM arrangements or relationships with
respect to the PEARLsetter product line and its PEARL based consumables. To
maximize the anticipated beneficial effects to it, the Company has continued
independent development and commercialization of one or more PEARLsetter
products. There can be no assurance that the Company will be able to enter into
any additional arrangements with respect to, or that any such arrangements will
result in, the successful commercialization of additional PEARLsetter products.
Additionally, there can be no assurance that the Company will have the resources
or otherwise be able to successfully complete development and undertake the
manufacture of, or successfully commercialize, additional PEARLsetter products.
Manufacturing, Marketing Component Procurement
The Company engages in certain manufacturing, as described below, and also
is engaged in the distribution and sales of PEARL based offset printing plates,
which are manufactured exclusively for the Company by third parties. In
addition, the Company engages in certain marketing activities which include
informing the industry of the Company's products and capabilities; contacting
potential strategic partners; establishing relationships with potential
resellers including both OEM partners and dealers; establishing liaisons with
companies which manufacture and/or market products which may incorporate the
Company's PEARL Direct Imaging Technology, or jointly develop new applications
of the Company's vast intellectual property portfolio. The Company also provides
Heidelberg and its other licensees and distribution partners with worldwide
marketing and sales support.
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The Company's agreements provide, among other things, for it to supply its
PEARL Imaging Systems for integration into certain printing presses. In November
1994, the Company announced the start of operations in a new 36,000 square foot
manufacturing facility located adjacent to its existing headquarters and
engineering offices. These increased facilities, which have now been completed,
were required based on both existing and projected manufacturing requirements
for PEARL Imaging Systems or other similar items which are or may be
manufactured by the Company in the future. Given sufficient time, the Company
believes that it has the available resources and personnel with the knowledge
and experience to further increase its manufacturing capacity to satisfy any
future product demand.
The Company obtains certain components and supplies used in production of
PEARL Imaging Systems from a number of suppliers. Although the Company believes
that there are available various sources for necessary components, parts and
disposable items (including printing plates and inks) for both the Company's
manufacturing activities and to support the market for products incorporating
the Company's PEARL Direct Imaging technology, sources for certain of such items
are limited and there can be no assurance that procurement or supply
arrangements will be available on satisfactory terms; any inability to establish
satisfactory manufacturing or procurement or supply arrangements or significant
delays in establishing such arrangements could have an adverse effect on the
Company and/or cause delays in the Company's ability to deliver products
incorporating its PEARL Imaging Technology.
The PEARL laser diode system includes semiconductor laser diodes. Although
the Company currently uses only one source for the laser diode devices, it
believes that there will be several sources available to manufacture the laser
diodes to the Company's specification, if required, in the future. Additionally,
the Company has "in-house", limited laser diode manufacturing capabilities. The
Company would still require the submounted "diode chips," a component of the
laser diode, to be supplied by a third party. The Company believes that several
sources are available to supply this component, if required. The Company's laser
diode manufacturing capabilities currently function principally for research and
development, quality assurance and manufacturing engineering. However, the
Company believes that, if required, it could expand these facilities in the
future as a primary or secondary source.
The Company has developed and continues to develop proprietary consumables
that are imaged or ablated by its PEARL semiconductor laser diode imaging
technology as well as other thermally based direct-to plate systems. As part of
the PEARL laser diode development process the Company has increased the number,
types and functional characteristics of the consumable products it has under
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development or which are currently being manufactured. These consumables
currently include a polyester based dry printing plate, a polyester based wet
printing plate, an aluminum based dry printing plate, an aluminum based wet
printing plate and a non-photosensitive film. There are additional consumable
products in various stages of development which may, in the future, provide new
sources of consumable revenues. The Company's PEARL offset printing plates, both
aluminum and polyester based are being supplied by Rexham. The Company,
realizing that sources for the Company's requirements for current and new PEARL
consumables, plates and films, would have to be found, in February 1996 acquired
Catalina. The Company anticipates that Catalina, which operates as a subsidiary
of the Company, will develop the equipment the Company needs to manufacture its
PEARL thermal printing plates and films [which are currently manufactured by
third parties] in a more cost effective manner than using currently available
conventional technology. However, even if Catalina commences manufacture of
PEARL thermal printing plates and consummables, additional sources to satisfy
all of the Company's requirements for current and new consumables, printing
plates and films, may have to be found. Therefore, the Company is actively
pursuing these additional sources at this time. However, there can be no
assurance that the Company will be able to enter into any arrangements for the
volume manufacturing of its consumables, or that any such arrangement will
result in successful commercial products.
The Company currently anticipates that the PEARLsetter will continue to be
marketed through traditional graphic arts distribution sales channels and will
be positioned as an alternative to existing imagesetter or platesetter products.
Market acceptance for any products incorporating the Company's technology
will require substantial marketing efforts and expenditure of significant sums,
either by the Company, its strategic partners or both. There can be no assurance
that any existing products will continue to achieve market acceptance or that
any new product that may be introduce will achieve market acceptance or be
commercially viable.
Development Program
During the years ended December 31, 1993, 1994, and December 30, 1995, the
Company expended $5,647,000, $5,123,000 and $6,155,000 respectively, on
engineering and product development. The Company is currently concentrating its
development efforts on refining and improving the performance of its current and
future technologies, and proprietary printing plates and anticipates that it
will continue to do so, both independently and in conjunction with strategic
partners. The Company is also engaged in continuing development efforts with
respect to its PEARLsetter product line. There can be no assurance that the
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Company, in conjunction with a strategic partner or independently, will
successfully complete development of any additional marketable products, or that
technical or other problems will not occur in connection with the Company's
development program, products or technology.
Patents and Proprietary Rights
As of March 1, 1996, the Company has been issued forty-three (43) U.S.
patents, five (5) Canadian patents and one (1) European patent and has received
notice of allowance for three (3) European patents. The Company has applied for
twenty-two (22) additional U.S. patents and seventy-three (73) foreign patents
and anticipates that it will apply for additional patents and for copyrights, as
deemed appropriate. There can be no assurance as to the issuance of any such
patents or the breadth or degree of protection which the Company's patents or
copyrights may afford the Company. There is rapid technological development in
the computer and image reproduction industries, resulting in extensive patent
filings and a rapid rate of issuance of new patents. Although the Company
believes that its technology has been independently developed and that the
products it markets and proposes to market will not infringe the patents or
violate other proprietary rights of others, it is possible that such
infringement of existing or future patents or violation of proprietary rights
may occur. In such event the Company may be required to modify its design or
obtain a license. No assurance can be given that the Company will be able to do
so in a timely manner, upon acceptable terms and conditions, or at all. The
failure to do any of the foregoing could have a material adverse effect on the
Company. Furthermore, there can be no assurance that the Company will have the
financial or other resources necessary to successfully defend a patent
infringement or proprietary rights violation action. Moreover, the Company may
be unable, for financial or other reasons, to enforce its rights under any of
its patents.
The Company also intends to rely on proprietary know-how and to employ
various methods to protect the source codes, concepts, ideas and documentation
of its proprietary software, which methods may include copyrights. However, such
methods may not afford complete protection and there can be no assurance that
others will not independently develop such know-how or obtain access to the
Company's know-how or software codes, concepts, ideas and documentation.
Furthermore, although the Company has and expects to have confidentiality
agreements with its employees and appropriate vendors, there can be no assurance
that such arrangements will adequately protect the Company's trade secrets.
Competition
The Company believes that its developed and proprietary technologies, its
alliance with Heidelberg, the world's largest printing press manufacturer; and
-14-
other press manufacturing companies and graphic arts distribution organizations
and its established presence in the direct imaging market provide the Company
with a competitive advantage.
The Company is aware of several companies employing electrophotography as
their imaging technology. Electrophotography, sometimes referred to as
xerography, is a technology which historically has been used primarily in black
and white copiers. Canon was the first company to successfully employ
electrophotography in a full color copier product, the CLC 500.
Indigo N.V., a company with research and development, and manufacturing
operations in Israel, introduced their digital, sheet-fed offset color press,
the E-Print 1000 in September 1993. The E-Print 1000 utilizes an
electrophotographic imaging technology, with a liquid toner, and prints at 800
dots per inch. The E-Print 1000 sells for approximately $450,000. Xeikon, N.V.
of Belgium also introduced their digital, web-(roll)fed color printing product,
the Xeikon DCP-1 in September, 1993. The Xeikon DCP-1, a version of which is
also being marketed by Agfa Gevaert as the Chromopress, also utilizes an
electrophotographic imaging technology with a dry toner and prints a variable
dot density of 600 dots per inch. The Chromopress is reported to sell for
between $350,000 and $400,000.
Canon and Xerox Corp. are two major corporations which have also developed
and introduced color electrophotographic copier products that could impact the
very short-run digital color printing markets. Canon has at least two color
copier products which it claims provide improved print quality even at their
resolution limitation of 400 dots per inch. They also claim faster speeds. Xerox
also has a color copier which it is currently marketing. Additionally, the
Company is aware of two companies, XMX Corporation and Delphax that have
publicly announced their intentions of developing their own proprietary
technological solutions for digital color printing. Scitex Corp. has also
introduced its Spontane xerographic based color imaging system which uses a
xerographic color copier engine supplied by Fuji Xerox.
The Company is also aware that there is a direction in the graphic arts
industry to create stand-alone computer-to-plate imaging devices for single and
multi-color applications. The Company anticipates that most of the major
corporations in the graphic arts industry have or are considering a
computer-to-plate imaging device. To date, these devices, for the most part,
utilize printing plates that require a post imaging photochemical developing
step, and in some cases, also require a heating process. This is, nonetheless,
an important step in the printing industry, as it eliminates the use of films.
Potential competitors in this area would include, among others, Creo Products,
Gerber Scientific Inc., Misomex, Optronics, a Division of Intergraph
Corporation, Komori, Krause, Scitex Corporation
-15-
Ltd., Linotype-Hell, Kodak, Dai Nippon Screen, Crossfield, a Division of Dupont,
Agfa-Gevaert, Polaroid Corp. and Sony Corp. The Company's stand-alone
computer-to-plate imagesetter is, in the Company's opinion, a further
technological advancement. The Company's computer-to-plate imagesetter
eliminates not only the films, but also the post-imaging photochemical
developing steps. The Company believes that other graphic arts companies, such
as those stated above, are likely to be working on similar plate imaging
processes that would also eliminate the production of the hazardous materials
associated with the photochemical developing process.
The Company also anticipates competition from printing plate manufacturing
companies that either manufacture, or have the potential to manufacture digital
plates. Such companies include Agfa-Gevaert, Polychrome Corp., a Division of Dai
Nippon Ink & Chemicals, Inc., Toray, Howsen, a Division of Dupont,
Horsell/Anitec, a Division of International Paper, Kodak, Polaroid Corp.,
Mitsubishi, Fuji Photo Film Co., Ltd. and Minnesota Mining & Mfg. Co.
Products incorporating Direct Imaging technology can also be expected to
face competition from conventional presses and products utilizing existing
platemaking technology, as well as presses and other products utilizing new
technologies. Leading press manufacturers include Heidelberg, Komori Printing
Machinery Co., Ltd., Mitsubishi, and MAN Roland, and, in the single color and
two color press market, Ryobi Limited, Hamada and AB Dick. Companies marketing
conventional imagesetter equipment include Agfa, Linotype-Hell, ECRM, Optronics,
Crossfield and Scitex Corporation Ltd. Other companies, which may include such
major corporations as International Business Machines Corporation, Xerox
Corporation, Polaroid Corp., Canon and Kodak, are considered by the Company to
have the type of electronic and image reproduction expertise which could
encourage them to attempt to develop and market competitive products.
Most of the companies marketing competitive products or with the potential
to do so are well established, have substantially greater financial and other
resources than the Company and have established records in the development, sale
and service of products. There can be no assurance that the Company, any Company
product or any products incorporating the Company's technology will be able to
compete successfully in the future.
Backlog
As of February 29, 1996 the Company had a backlog of products under
contract aggregating approximately $16,822,000 (including royalties payable to
-16-
the Company) compared to a backlog of $2,800,000 as of February 28, 1995
(including royalties payable to the Company).
Employees
As of February 29, 1996, the Company had one hundred and five (105)
employees, fifty four (54) of whom, including Richard A. Williams and Robert E.
Verrando, the Company's Chief Executive Officer and President, respectively, are
engaged primarily in engineering, service and marketing; forty (40) of whom are
engaged primarily in manufacturing, manufacturing engineering and quality
control; and eleven (11) of whom are engaged primarily in corporate management,
administration and finance. The Company considers its relationship with its
employees to be good.
Item 2. Properties.
The Company leases approximately 24,000 square feet of space at 8
Commercial Street, Hudson, New Hampshire. The lease of these premises, which
expires in March 1996, subject to three one-year renewal options, provides for
rent at the rate of $8,693 per month plus a pro rata share of real estate taxes,
utilities and certain other expenses. During May 1994, the Company entered into
a three year lease agreement (which was amended in December 1994, effective
January 1, 1995) for approximately 36,000 square feet to accommodate its
manufacturing facilities. The lease, as amended, specifies a fixed base monthly
rent of $11,250, plus a pro rata share of real estate taxes, utilities, and
certain other expenses. The lease contains an option to renew for an additional
three years and a right of first refusal to purchase the property.
The Company believes that its existing facilities are adequate for its
existing operations. To the extent that the Company is required to increase its
manufacturing capacity, the Company believes that additional space is readily
available in the vicinity of its existing facilities.
Item 3. Legal Proceedings.
In April 1995 the Company commenced an action against Agfa-Gevaert, N.V.
("Agfa") in the U.S. District Court for the District of New Hampshire alleging
that Agfa violated provisions of a confidentiality agreement and a manufacturing
agreement (the "Manufacturing Agreement") between the parties and
misappropriated certain trade secrets of the Company. In June 1995, Agfa
commenced an arbitration proceeding against the Company in the International
Chamber of Commerce in which it seeks arbitration of the disputes between the
parties arising from the Manufacturing Agreement and also seeks to have the
-17-
trade secret issues determined in arbitration. In its request for arbitration
Agfa has, among other things, charged Presstek with breaches of the
Manufacturing Agreement, good faith and fair dealing, and is seeking damages in
an amount alleged to be $2,000,000. The action commenced by the Company in
District Court has been stayed to allow the arbitrators to determine the issues
in dispute between the parties.
The Company has vigorously pursued its claims against Agfa and intends to
vigorously contest Agfa's assertions of breach of the Manufacturing Agreement
and other claims. Although the Company and its counsel believes that an
unfavorable outcome of the litigation and arbitration is unlikely, there can be
no assurance as to the outcome of the proceedings.
The Company has been advised that the Securities and Exchange Commission
(the "Commission") has entered a formal order of private investigation with
respect to certain activities by certain unnamed persons and entities in
connection with the securities of the Company. In that connection, the Company
has received subpoenas duces tecum requesting it to produce certain documents
and has complied with the requests. The Company has not been advised by the
Staff of the Commission that the Staff intends to recommend to the Commission
that it initiate a proceeding against the Company in connection with the
foregoing investigation.
Item 4. Submission of Matters to a Vote of Security Holders.
Not Applicable.
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters.
The Company's Common Stock has traded in the over-the-counter market on the
NASDAQ National Market System under the symbol PRST since July 18, 1990 and,
prior thereto, from May 11, 1990 to July 17, 1990, traded on the NASDAQ System.
Prior thereto, from the Company's initial public offering until May 11, 1990,
the principal redemption date of the Warrants, the Company's Units, Common Stock
and Warrants were traded on the NASDAQ System. The following table sets forth,
for the periods indicated, the high and low sales prices of the Company's Common
Stock as reported by NASDAQ and retroactively adjusted for the Company's five
for four stock split effected in the form a 25% stock dividend paid in September
1994 and the Company's two for one stock split effected in the form of a 100%
stock divided paid in May 1995.
-18-
Year Ended High Low
December 31, 1994 ---- ---
- -----------------
First Quarter $14 5/8 $10 5/8
Second Quarter 13 7 3/8
Third Quarter 25 12 3/4
Fourth Quarter 25 7/8 16
Year Ended
December 31, 1995
- -----------------
First Quarter $37 1/8 $21 1/2
Second Quarter 62 1/2 23 1/2
Third Quarter 63 49 1/2
Fourth Quarter 100 38 1/2
As of March 13, 1996, there were approximately 1,200 holders of record of
the Company's Common Stock. The Company believes that, in addition, there are in
excess of 500 beneficial owners of its Common Stock whose shares are held in
"street name."
Dividend Policy
To date, the Company has not paid any cash dividends on its Common Stock.
The payment of cash dividends, if any, in the future is within the discretion of
the Company's Board of Directors and will depend upon the Company's earnings,
its capital requirements and financial condition and other relevant factors. The
Board of Directors does not intend to declare any cash dividends in the
foreseeable future, but instead intends to retain all earnings, if any, for use
in the Company's business operations.
-19-
Item 6. Selected Financial Data.
The following selected financial data of the Company has been derived from
the financial statements of the Company appearing elsewhere herein (except for
the statement of operations data for the years ended December 31, 1991 and 1992
and the balance sheet data at December 31, 1991, 1992 and 1993 which is not
included in such financial statements). All references to average number of
shares outstanding and per share data have been restated retroactively to
reflect the five-for-four and two-for-one stock splits effected in the form of
stock dividends.
Statements of
Operations Data:
Year Ended
------------------------------------------------------------------------------------
DEC 31 DEC 31 DEC 31 DEC 31 DEC 30
1991 1992 1993 1994 1995
------------ ------------ ------------ ------------ ------------
Revenues $ 3,619,364 $ 12,558,434 $ 11,682,154 $ 16,517,858 $ 27,611,456
------------ ------------ ------------ ------------ ------------
Costs and Expenses:
Costs of products sold 476,000 1,762,688 754,700 6,944,268 14,923,968
Engineering and product
development 5,898,673 4,695,370 5,647,562 5,123,439 6,155,421
Marketing 1,567,813 1,268,311 1,147,926 1,225,756 1,727,301
General and administrative 1,335,513 1,459,911 1,535,289 1,603,729 2,050,075
Nonrecurring charge -- -- 1,948,878 -- --
------------ ------------ ------------ ------------ ------------
Total costs and expense 9,277,999 9,186,280 11,034,355 14,897,192 24,856,765
------------ ------------ ------------ ------------ ------------
Other Income (Expense):
Dividend and interest income 627,342 359,361 412,025 407,977 327,213
Interest expense -- -- -- -- --
Other 880,988 34,844 -- 166 (2,276)
------------ ------------ ------------ ------------ ------------
Other income (expense) 1,508,330 394,205 412,025 408,143 324,937
------------ ------------ ------------ ------------ ------------
Income (Loss)Before Income Taxes (4,150,305) 3,766,359 1,059,824 2,028,809 3,079,628
Provision for Income Taxes -- (160,000) (100,000) (186,600) (220,000)
------------ ------------ ------------ ------------ ------------
Net Income (Loss) $ (4,150,305) $ 3,606,359 $ 959,824 $ 1,842,209 $ 2,859,628
============ ============ ============ ============ ============
Net Income (Loss) per Common
and Common Equivalent Share $ (.33) $ .25 $ .07 $ .12 $ .18
============ ============ ============ ============ ============
Weighted Average Number of Common
and Common Equivalent Shares 12,716,892 14,216,666 14,222,574 14,865,344 15,855,076
============ ============ ============ ============ ============
-20-
Balance Sheet Data:
DEC 31 DEC 31 DEC 31 DEC 31 DEC 30
1991 1992 1993 1994 1995
------------ ------------ ------------ ------------ ------------
Working Capital $ 3,985,407 $ 7,647,449 $ 9,916,103 $ 7,675,713 $ 16,836,997
Total Assets 9,738,124 13,230,844 13,802,718 18,324,030 26,668,618
Short-Term Debt -- -- -- -- --
Long-Term Debt -- -- -- -- --
Stockholders' Equity 6,453,882 10,627,896 12,145,410 16,472,920 22,726,436
Cash Dividends -- -- -- -- --
-21-
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Results of Operations
The Company was organized as a Delaware corporation on September 3, 1987
and was a development stage company through 1991. In September 1991,
Heidelberger Druckmaschinen A.G. ("Heidelberg"), the world's largest printing
press manufacturer introduced the Company's initial spark discharge based
imaging technology, in a jointly developed product, the Heidelberg GTO-DI. In
1993, after investing substantial effort and resources, the Company completed
the development of PEARL, a patented, proprietary, nonphotographic, toxic-free,
digital imaging and printing plate technology for the printing and graphic arts
industries. PEARL's laser diode technology is capable of imaging various types
of Presstek printing plates either off-press or on-press which may then be used
to produce high-quality, full-color lithographic printed materials at what the
Company believes is a lower cost than competitive processes. PEARL has
completely replaced the Company's spark discharge technology. The GTO-DI was
re-introduced in September 1993, utilizing PEARL as its Direct Imaging
technology and the Company is now building an installed base of customers which
utilizes its proprietary consumable printing plates on PEARL equipped Heidelberg
presses. The Company's relationship with Heidelberg has been expanded to include
the development and manufacture of Direct Imaging Kits to be utilized in
Heidelberg's new four color, fully automated lithographic press, the Quickmaster
DI 46-4. This press was introduced in May of 1995 at DRUPA '95, the industry's
largest trade show, and was well received. Shipments of production kits to
Heidelberg for use in the Quickmaster commenced in the second quarter of 1995.
This new press incorporates certain improvements to the Company's PEARL Direct
Imaging technologies and employs the Company's recently developed automatic
plate changing cylinder which eliminates the need for manually changing plates
between jobs. The Company is also engaged in the development of additional
products and applications that incorporate the use of its proprietary
technologies and consumables, including both computer-to-plate and
computer-to-press applications. Some of these additional activities have
resulted in an agreement with the Adast Adamov Company, another manufacturer of
sheet fed offset presses. This new agreement will result in the availability of
the Company's PEARL Direct Imaging Technology on a larger format Omni-Adast (19"
x 26") multicolor press, the first showing of which will occur at an industry
trade show to be held on March 28, 1996.
On June 19, 1995, the Company's Board of Directors determined to change its
fiscal year from a calendar year ending December 31 to a fiscal year ending on
the Saturday closest to
-22-
December 31; accordingly, the 1995 fiscal year ended on December 30. Fiscal
1993, 1994, and 1995 each reflect 52 week periods.
On August 2, 1994, the Company's Board of Directors authorized a
five-for-four stock split, effected in the form of a 25% stock dividend, during
the third quarter of 1994. The split resulted in the issuance of 1,410,235 new
shares of common stock.
On April 19, 1995, the Company's Board of Directors authorized a
two-for-one stock split, effected in the form of a 100% stock dividend, during
the second quarter of 1995. The split resulted in the issuance of 7,275,972 new
shares of common stock.
Revenues
Revenues for the years ended December 30, 1995, and December 31, 1994 and
1993 of approximately $27,611,000, $16,518,000 and $11,682,000, respectively,
consisted primarily of product sales, royalties, fees and other reimbursements
earned under the Company's agreements with Heidelberg. Revenues increased
$11,093,000 (67%) comparing 1995 with 1994. Product sales increased $10,567,000
over 1994, principally as a result of increased sales of the Company's PEARL
on-press direct imaging technology, used in Heidelberg's GTO-DI and Quickmaster
DI 46-4, and consumable printing plates. Revenues from royalty and fees for the
year ended December 30, 1995 increased $527,000 compared to 1994 as a result of
an increase of $3,595,000 in royalties earned on product sales and a decrease of
$3,068,000 in engineering fees and other revenues. Revenues from royalties and
fees for the year ended December 31, 1994 decreased $3,499,000 compared to 1993,
as a result of modifications to the Company's agreements with Heidelberg and in
part because the majority of the early shipments of PEARL systems were to
retrofit existing spark discharge technology GTO-DI machines which did not
result in additional royalties to the Company. At this time, the Company relies
on Heidelberg to generate substantially all of its revenues.
Costs of Products Sold
Costs of products sold for the years ended December 30, 1995, December 31,
1994 and 1993 of approximately $14,924,000, $6,944,000, $755,000, respectively,
consisted of the material, labor, and overhead costs associated with product
sales, as well as anticipated future warranty costs.
Engineering and Product Development
Engineering and product development expenses were $6,155,000 for the year
ended December 30, 1995, as compared to
-23-
$5,123,000 for the year ended December 31, 1994. The increase in such expenses
of $1,032,000 (20%) resulted principally from increased expenditures for parts,
supplies and labor related to the Company's PEARL technology as well as other
product development efforts and matters relating to the Company's technologies.
Engineering and product development expenses totaled $5,123,000 for the
year ended December 31, 1994, compared to $5,648,000 for 1993. This decrease in
such expenses of $525,000 (9%) resulted principally from the reassignment of
personnel from engineering and development functions to manufacturing functions
in response to the commencement of shipments of the PEARL laser imaging systems.
Marketing
Marketing expenses were $1,727,000 for the year ended December 30, 1995, as
compared to $1,226,000 for the year ended December 31, 1994, an increase of
$501,000 (41%). The increase related principally to increased expenditures for
additional personnel and related costs as well as various promotional activities
which included one time DRUPA '95 trade show expenses incurred principally
during the second quarter of 1995.
Marketing expenses of $1,226,000 for 1994 increased by 7% when compared
with 1993 primarily due to increased travel and related expenses of marketing
personnel.
General and Administrative
For the year ended December 30, 1995, general and administrative expenses
were $2,050,000, an increase of 28% over 1994. For the year ended December 31,
1994, general and administrative expenses increased by 5% over 1993 to
$1,604,000. The increased expenses in 1995 and 1994 related principally to
increased expenditures for salaries and other costs required to conduct various
general and administrative functions for the Company.
Nonrecurring Charge
The 1993 results include a $1,949,000 nonrecurring charge associated with
the Company's fundamental change from spark discharge technology to its newly
developed PEARL technology. The termination of shipments of units incorporating
the spark discharge technology dictated that certain assets associated with the
earlier imaging process be written off, and that reserves be established for the
transition to PEARL technology. The individual elements making up the charge
consisted of write offs of property and equipment, inventory, and
-24-
patent application costs of $613,000, $546,000, and $294,000, respectively, and
a reserve of $496,000 for certain estimated costs required to retrofit existing
customer equipment. The reserve was fully utilized as of December 30, 1995.
Net Income
As a result of the foregoing, the Company had net income of $2,860,000 for
the year ended December 30, 1995 compared to net income of $1,842,000 and
$960,000 for the years ended December 31, 1994 and 1993, respectively.
Liquidity and Capital Resources
At December 30, 1995, the Company had working capital of $16,837,000, an
increase of $9,161,000 as compared to working capital of $7,676,000 at December
31, 1994. This increase was primarily attributable to net income from operations
of $2,860,000; noncash items of depreciation and amortization of $998,000, and
the state tax benefit of disposition of stock options of $176,000; sales,
maturities and reclassifications of noncurrent marketable securities of
$5,004,000 and proceeds from issuances of common stock and sales of equipment of
$3,022,000 and $76,000, respectively, offset by additions to property and
equipment and other assets of $2,387,000 and $561,000, respectively. In February
1996 the Company raised $20,200,000 through the sale of approximately 283,000
shares of common stock, of which approximately $8,200,000 was used to acquire
the Catalina Shares, $200,000 was used to pay for the non-compete and
confidentiality covenants of two of Catalina's selling stockholders.
Net cash used for operating activities of $234,000 for the year ended
December 30, 1995, resulted principally from increases in accounts receivable
and inventory of $3,759,000 and $3,165,000, respectively, offset by net income
from operations of $2,860,000 plus noncash items of depreciation and
amortization, the provision for warranty costs and the tax benefit of
disposition of stock options of $998,000, $916,000, and $176,000, respectively,
a decrease in other current assets of $407,000 and increases in accounts payable
and accrued expenses totaling $1,333,000.
Net cash used for investing activities of $693,000 for the year ended
December 30, 1995, resulted principally from the additions to property and
equipment used in the Company's business of $2,387,000 and increases in other
assets of $561,000, offset by proceeds from the sales and maturities of
marketable securities of $2,180,000 and the proceeds from the sale of equipment
of $76,000.
-25-
Net cash provided by financing activities during the year ended December
30, 1995, consisted of $3,022,000 received from the sale of common stock
incident to the exercise of various stock options and warrants.
The Company's agreements with Heidelberg provide that during 1996 the
Company will receive certain royalty payments and be reimbursed for certain
engineering and development work provided to Heidelberg.
The Company estimates that existing funds and the funds generated under its
agreements with Heidelberg will be sufficient to satisfy its anticipated cash
requirements for the foreseeable future.
Effect of Inflation
Inflation has not had, and is not expected to have, a material impact upon
the Company's operations.
Recently Issued Accounting Standards
The Financial Accounting Standards Accounting Board ("FASB") has issued
Statement of Financial Accounting Standards No. 121: "Accounting for the
Impairment of Long-Lived Assets to be Disposed Of" ("SFAS 121") which is
effective for fiscal years beginning after December 15, 1995. No write down of
assets have been necessary through the fiscal year ended December 30, 1995 as a
result of the Company's adoption of SFAS 121. See Note 2 of Notes to the
Financial Statements.
The FASB has also issued Financial Accounting Standards No. 123 (""SFAS
123"): "Accounting for Stock-Based Compensation" which is effective for
transactions entered into in fiscal years beginning after December 15, 1995. The
Company currently does not intend to adopt the fair value method of accounting
for stock compensation plans as permitted by SFAS 123.
Net Operating Loss Carryforwards
As of December 30, 1995, the Company had net operating loss carryforwards
totaling approximately $16,500,000 resulting from compensation deductions
relative to stock option plans. To the extent net operating losses resulting
from stock option plan compensation deductions become realizable, the benefit
will be credited directly to additional paid in capital. The amount of the net
operating loss carryforwards which may be utilized in any future period may be
subject to certain limitations, based upon changes in the ownership of the
Company's common stock.
-26-
Item 8. Financial Statements and Supplementary Data.
SELECTED QUARTERLY FINANCIAL DATA (unaudited)
(in thousands except share and per share data)
QUARTER ENDED
1994 MARCH 31 JUNE 30 SEPT. 30 DECEMBER 31
---------- ---------- ---------- -----------
Total revenues $ 3,007 $ 3,887 $ 4,440 $ 5,184
Total costs & expenses 2,784 3,707 3,976 4,430
Net income 320 265 511 746
Net income per share $ 0.02 $ 0.02 $ 0.03 $ 0.05
Weighted average number of
common and common equivalent
shares 14,670,986 14,370,622 15,217,694 15,377,404
QUARTER ENDED
1995 MARCH 31 JULY 1 SEPT. 30 DECEMBER 30
---------- ---------- ---------- -----------
Total revenues $ 5,084 $ 5,503 $ 7,629 $ 9,395
Total costs & expenses 4,972 5,435 6,740 7,709
Net income 160 177 872 1,650
Net income per share $ .01 $ .01 $ .05 $ .10
Weighted average number of
common and common equivalent
shares 15,532,688 15,933,563 16,066,947 16,121,561
The per share data has been restated retroactively to reflect
five-for-four and two-for-one stock splits effected in the form of stock
dividends.
The audited financial statements appear in a separate section of this
report following Part IV.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
As previously reported by the Company on Forms 8-K, in January 1996 the
Company engaged BDO Seidman LLP as its principal independent accountants to
audit and report on the financial statements of the Company for the fiscal year
ended December 30, 1995, replacing Deloitte & Touche LLP, the Company's former
independent accountants whose services were terminated on December 28, 1995.
-27-
PART III
Item 10. Directors and Executive Officers of the Registrant.
The current directors and executive officers of the Company and their ages
and positions are as follows:
Name Age Position
---- --- --------
Robert Howard 72 Chairman of the Board
and Director
Dr. Lawrence Howard 43 Director
Richard A. Williams 61 Chief Executive Officer,
Secretary, Vice Chairman of
the Board and Director
Robert E. Verrando 62 President, Chief
Operating Officer and
Director
Frank G. Pensavecchia 61 Senior Vice President -
Engineering
Glenn J. DiBenedetto 46 Chief Financial Officer
Harold N. Sparks(1) 74 Director
Bert DePamphilis(1) 63 Director
John W. Dreyer 58 Director
- ----------
(1) Member of the Company's Audit Committee and 1991 and 1994
Stock Option Plan Committees.
Robert Howard, a founder of the Company, has been Chairman since June 1988
and a director since September 1987. Mr. Howard served as President and
Treasurer of the Company from October 1987 until June 1988. Mr. Howard was the
founder of Howtek, Inc. ("Howtek"), a publicly-held company engaged in the
manufacture of electronic prepress equipment, and has served as Chairman of the
Board of Howtek since August 1984. Mr Howard served as the President of Howtek
from August 1984 through November 1987 and as its Chief Executive Officer from
August 1994 to December 1993. Mr. Howard, the inventor of the first impact dot
matrix printer, was the founder of Centronics Data Computer Corporation
("Centronics"), a manufacturer of printers. From 1969 to April 1980, he served
as President and Chairman of the Board of Directors of Centronics, and he
resigned from Centronics' Board of Directors in 1983. From April 1980 until
1983, Mr. Howard was principally engaged in the management of his personal
investments. Mr. Howard devotes only a limited portion of his
-28-
business time to consulting with management concerning the Company's affairs. In
February 1994, Mr. Howard entered into a settlement agreement in the form of a
consent decree with the Securities and Exchange Commission (the "Commission") in
connection with the Commission's investigation covering trading in the common
stock of Howtek by an acquaintance of Mr. Howard and a business associate of
such acquaintance. Mr. Howard, without admitting or denying the Commission's
allegations of securities laws violations, agreed to pay a fine and to the entry
of a permanent injunction against future violations of Section 10(b) and Rule
10b-5 of the Securities Exchange Act of 1934.
Dr. Lawrence Howard, a founder of the Company, has been a director of the
Company since November 1987 and served as Vice Chairman of the Company from
November 1992 to February 1996. He served as Chief Executive Officer and
Treasurer of the Company from June 1988 to June 1993; served as President from
June 1988 to November 1992; and was Vice President from October 1987 to June
1988. From July 1995 to the present Dr. Howard has been President of Howard
Capital Partners, Inc., an investment and merchant banking firm. From July 1994
to July 1995 Dr. Howard was Senior Managing Director of Whale Securities Co.
L.P., an NASD registered broker-dealer. From October 1992 through June 1994 Dr.
Howard was President and Chief Executive Officer of LH Resources, Inc., a
management and financial consulting firm. From July 1986 until June 1988, Dr.
Howard was primarily engaged in the management of his personal investments. Dr.
Howard was the Assistant Medical Director of the Pride of Judea mental health
clinic in New York City from July 1985 to July 1986. Dr. Howard is a director of
Resurgence Properties, Inc., a public company engaged in investments in and
management of real estate and Cellular Technical Services Company, Inc. a public
company engaged in the design, development marketing, installation and support
of integrated billing and data processing for the cellular telephone industry.
Dr. Howard is the son of Robert Howard.
Richard A. Williams has been Chief Executive Officer and Vice Chairman of
the Board of the Company since February 1996. He has been Secretary of the
Company since June 1988 and a director of the Company since November 1987. From
June 1988 to February 1996 Mr. Williams served as Executive Vice President and
Chief Operating Officer of the Company. From November 1987 to June 1988, Mr.
Williams served as Vice President of the Company. From June 1985 to February
1987, Mr. Williams served as Vice President of Engineering for Centronics, where
he was responsible for line matrix, and laser printer development and
introduction.
-29-
Robert E. Verrando has been President and Chief Operating Officer of the
Company since February 1996 and a director of the Company since November 1994.
From October 1994 to February 1996 he served as Executive Vice President of the
Company. From July 1993 to October 1994 Mr. Verrando was employed as a
consultant to the graphic arts industry. From October 1986 through July 1993 he
was employed in a variety of executive positions with Compugraphic
Corporation/Agfa Compugraphic/Agfa Division, Miles, Inc; most recently as Vice
President, General Manager Business Imaging Systems Group. From April 1981
through September 1986 he was employed as Vice President-Business Development of
A.B. Dick Company.
Frank G. Pensavecchia has served as Senior Vice President Engineering since
October 1991 and was the Company's Vice President - Engineering from August 1988
to October 1991. From September 1987 to August 1988, he served as the Company's
Director of Engineering. From October 1983 to September 1987, Mr. Pensavecchia
served as Director of Laser Printer Engineering for Centronics.
Glenn J. DiBenedetto has served as Chief Financial Officer since November
1990. Mr. DiBenedetto has been a principal with the firm of DiBenedetto &
Company, P.A., certified public accountants, since July 1989. From 1984 to July
1989, Mr. DiBenedetto was a principal with the firm of Newton & DiBenedetto,
P.A., certified public accountants. Under his arrangement with the Company, Mr.
DiBenedetto engages in other activities and is not required to devote his full
business time to the affairs of the Company.
Harold N. Sparks has been a director since February 1989. From 1971 to
September 1995, Mr. Sparks was the President and Chief Executive Officer of
Fashion Neckwear Co., Inc., a manufacturer of men's neckties. Mr. Sparks has
served as a consultant to Fashion Neckwear Co., Inc. since September 1995.
Bert DePamphilis has been a director since June 1990. Mr. DePamphilis has
been an independent consultant to the graphic arts industry since May 1995. From
September 1994 through April 1995 he was a consultant to Applied Graphics
Technology ("AGT"), the world's largest prepress service. Mr. DePamphilis was
the founder, and from 1976 through August 1994, a principal of PDR Royal, Inc.,
a color prepress service for advertising agencies
-30-
and Fortune 100 companies that ceased independent operations when it became a
division of AGT in September 1994.
John Dreyer has been a director since February 1996. Mr. Dreyer has been
employed by Pitman Corporation ("Pitman"), the largest graphic arts and image
supplier in the United States, since 1965. He has served as Pitman's President
since 1977 and has also served as its Chief Executive Officer since 1978.
Directors are elected annually by the stockholders. Officers are elected
annually by the Board of Directors and serve at the discretion of the Board.
Item 11. Executive Compensation.
The following table discloses the compensation for the person who served as
the Company's principal executive officer during the fiscal year ended December
30, 1995 and for the only other executive officers of the Company whose salaries
exceeded $100,000 for the Company's fiscal year ended December 30, 1995. The
number of securities underlying options has been adjusted to give retroactive
effect to the Company's five-for-four common stock split in the form of a 25%
stock dividend effected in September 1994 and a two-for-one split in the form of
a 100% split dividend effected in May 1995.
Summary Compensation Table
Long-Term
Annual Compensation
Compensation Awards
Securities
Name and Principal Salary Underlying
Position Year ($) Options (#)
- ------------------ ---- ------ -----------
Richard A. Williams 1995 134,000 --
Chief Executive Officer 1994 125,000 40,000
1993 115,000 50,000
Robert E. Verrando 1995 179,000 --
President and 1994 28,000 100,000
Chief Operating Officer
Frank G. Pensavecchia 1995 114,000 --
Senior Vice President- 1994 105,000 40,000
Engineering 1993 95,000 37,500
No stock options were granted during fiscal 1995 to any of the named
executive officers indicated in the Summary Compensation Table.
-31-
The following table sets forth information concerning the value of
unexercised stock options held by the named executive officers as of December
30, 1995 and the options exercised during the fiscal year ended December 30,
1995.
Aggregated Option Exercises for Fiscal Year-Ended December 30, 1995
and Fiscal Year-End Option Values
Number of Securities Underlying Value of Unexercised
Unexercised Options In-the-Money Options
at December 30, 1995 at December 30, 1995*
-------------------- ---------------------
Shares Acquired Value
Name on Exercise Realized+ Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- --------- ----------- ------------- ----------- -------------
Richard A. Williams 62,500 $2,331,063 146,250 18,750 $12,585,187 $1,480,313
Robert E. Verrando - - 20,000 80,000 $1,500,000 $6,000,000
Frank G. Pensavecchia 15,000 $747,500 88,750 18,750 $ 8,897,062 $1,480,313
- ------------
+ Value realized represents the positive spread between the exercise price of
such options and the market value of the Common Stock on date of exercise.
* Year-end values for unexercised in-the-money options represent the positive
spread between the exercise price of such options and the year-end market value
of the Common Stock which was $94.50 on December 29, 1995.
Compensation of Directors
Directors received no cash compensation for serving on the Board during
the year ended December 30, 1995. However, during such year, the Company paid
Mr. Robert Howard, the Chairman of the Board, $110,000 for consulting services
rendered to the Company.
Effective December 1993 the Company adopted its Non-Employee Director
Stock Option Plan (the "Director Plan"). Only non-employee directors of the
Company (other than Robert Howard or Dr. Lawrence Howard) are eligible to
receive grants under the Director Plan. The Director Plan provides that eligible
directors automatically receive a grant of options to purchase 5,000 shares of
Common Stock at fair market value upon first becoming a director and,
thereafter, an annual grant, in January of each year, of 2,500 options at fair
market value.
Under each of the Company's 1988 Stock Option Plan ("1988 Plan"), 1991
Stock Option ("1991 Plan") and 1994 Stock Option Plan ("1994 Plan"), directors
who are not employees of the Company (other than directors who are members of
the Stock Option Committee of the particular plan) are eligible to be granted
nonqualified options under such plan. The Board of Directors or the Stock Option
Committee (the "Committee") of each plan, as the case may be, has discretion to
determine the number of shares subject to each nonqualified option (subject to
the number of shares available for grant under the particular plan), the
exercise price thereof (provided such price is not less than the par value of
the underlying shares of Common Stock), the term thereof (but not in excess of
10 years from the date of grant,
-32-
subject to earlier termination in certain circumstances), and the manner in
which the option becomes exercisable (amounts, intervals and other conditions).
Directors who are employees of the Company (but not members of the Committee of
the particular plan) are eligible to be granted incentive stock options or
nonqualified options under such plans. The Board or Committee of each plan, as
the case may be, also has discretion to determine the number of shares subject
to each incentive stock option ("ISO"), the exercise price and other terms and
conditions thereof, but their discretion as to the exercise price, the term of
each ISO and the number of ISOs that may vest may be in any year is limited by
the Internal Revenue Code of 1986, as amended. As of February 29, 1996, there
were 4,382 shares of Common Stock available for grant under the 1988 Plan, 6,016
shares of Common Stock available for grant under the 1991 Plan, 438,126 shares
available for grant under the 1994 Plan and 92,500 shares of Common Stock
available for grant under the Director Plan.
Employment Arrangements
The Company has an employment agreement dated August 23, 1988 with Mr.
Richard A. Williams, which provides for an annual salary which is subject to
periodic review by the Company's Board of Directors. The employment agreement
expires on March 31, 1997 and contains certain non-disclosure provisions. In
February 1996, the Board increased Mr. Williams' annual salary to $155,000.
Compensation Committee Interlocks and Insider Participation in
Compensation Decisions
The Company does not have a Compensation Committee of its Board of
Directors. Decisions as to compensation are made by the Company's Board of
Directors. Mr. Richard A. Williams, and Mr. Robert E. Verrando, in their
capacity as a director, participated in the Board's deliberations concerning
compensation of executive officers for the Company's fiscal year ended December
30, 1995. During the fiscal year ended December 30, 1995, none of the executive
officers of the Company has served on the board of directors or the compensation
committee of any other entity, any of whose officers has served on the Board of
Directors of the Company.
Item 12. Security Ownership of Certain
Beneficial Owners and Management.
The following table sets forth information at February 29, 1996, based on
information obtained from the persons named below, with respect to the
beneficial ownership of shares of Common Stock by (i) each person known by the
Company to be the owner of more than 5% of the outstanding shares of Common
Stock, (ii) each director, (iii) each of the persons named in response to Item
11 (Executive Compensation) that are currently employed by the
-33-
Company, and (iv) all executive officers and directors of the Company as a
group.
Amount and Nature Percentage
Name of of Beneficial of Outstanding
Beneficial Owner (1) Ownership (2) Shares Owned
- -------------------- ----------------- -------------
Robert Howard (3) 1,469,224 9.5
Dr. Lawrence Howard (4) 1,397,736 9.2
Richard A. Williams (5) 321,250 2.1
Robert E. Verrando (6) 20,000 (7)
Harold N. Sparks (8) 48,500 (7)
Bert DePamphilis (9) 15,550 (7)
John W. Dreyer -- --
John T. Oxley (10) 1,070,000 7.1
All executive officers
and directors as a
group (nine persons) (11) 3,371,010 21.2
- ----------
(1) The address of Dr. Lawrence Howard is 120 East End Avenue, New York, New
York 10028. The address of Robert Howard is 303 East 57th Street, New York,
New York 10022.
(2) The Company believes that except as set forth herein, all persons referred
to in the table have sole voting and investment power with respect to all
shares of Common Stock reflected as beneficially owned by them.
(3) Includes options to purchase 352,500 shares of Common Stock held by Mr.
Howard which are currently exercisable. Also includes 12,000 shares owned
by Mr. Howard's wife. Does not include shares owned by the son of Mr.
Howard's wife, with respect to which Mr. Howard disclaims any beneficial
interest.
(4) Includes options to purchase 175,000 shares of Common Stock held by Dr.
Howard which are currently exercisable. Also includes 17,500 shares owned
by Dr. Howard's wife, 26,892 shares owned by Dr. Howard's wife as custodian
for Dr. Howard's children and 22,500 shares owned by Dr. Howard as
custodian for his children.
(5) Includes options to purchase 165,000 shares of Common Stock held by Mr.
Williams which are currently exercisable.
(6) Represents options held by Mr. Verrando which are currently exercisable.
(7) Less than 1%.
-34-
(8) Includes options to purchase 11,250 shares of Common Stock held by Mr.
Sparks which are currently exercisable.
(9) Includes options to purchase 11,250 shares of Common Stock held by Mr.
DePamphilis which are currently exercisable.
(10) The address of Mr. Oxley is One West 3rd Street, William Center Tower,
Suite 1305, Tulsa, Oklahoma 74103. Includes 181,000 shares of Common Stock
owned by the Oxley Foundation for which Mr. Oxley is Co-Trustee. The
information with respect to Mr. Oxley's share ownership were based upon
information contained in Amendment No. 3 to Mr. Oxley's Schedule 13D.
(11) Includes options to purchase 352,500, 175,000, 146,250, 88,750, 11,250,
11,250, and 10,000 shares held by Robert Howard, Dr. Lawrence Howard,
Richard Williams, Frank Pensavecchia, Bert DePamphilis, Harold Sparks and
Glenn J. DiBenedetto, respectively, which are currently exercisable. Does
not include options to purchase 18,750, 80,000, 18,750, 2,500, 2,500 and
10,000 shares of Common Stock held by Richard Williams, Robert E. Verrando,
Frank Pensavecchia, Harold Sparks, Bert Depamphilis and John W. Dreyer,
respectively, none of which are exercisable within 60 days from the date
hereof.
Dr. Lawrence Howard and Robert Howard may be deemed "parents" and
"promoters" of the Company, as such terms are defined under the federal
securities laws.
Item 13. Certain Relationships and Related Transactions.
The Company paid Mr. Howard $110,000 during 1995 for consulting services
rendered to the Company.
-35-
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K.
(a)(1) Financial Statements
Page
Report of Independent Certified Public
Accountants F-2
Independent Auditors' Report F-3
Balance Sheets as of December 31, 1994 and F-4
December 30, 1995
Statements of Operations for the Years Ended
December 31, 1993 and 1994 and December 30, 1995 F-5
Statement of Changes in Stockholders' Equity
for the three years ended December 30, 1995 F-6-7
Statements of Cash Flows for the Years Ended
December 31, 1993 and 1994 and December 30, 1995 F-8
Notes to Financial Statements F-9
(a)(2) Financial Statement Schedules
Schedule II-Valuation and Qualifying Accounts and
Reserves.
All other schedules are omitted because they are not applicable or
the required information is shown in the financial statements or
notes thereto.
(a)(3) Exhibits
Exhibit
Number Description
- ------ -----------
2(a) Stock Purchase Agreement dated and effective as of
January 1, 1996, among the Company and David G.
Shaw, Marc G. Langlois and David G. Shaw and Lynn
R. Shaw, as Trustees of the David and Lynn Shaw
Charitable Remainder Unitrust, dated February 12,
1996 and John E. Madocks and Catalina. **
2(b) Put and Call Option Agreement by and among the
Company, David G. Shaw, Marc G. Langlois and John
E. Madocks. **
-36-
2(c) Confidentiality and Non-Competition Agreement by
and among the Company, David G. Shaw and Catalina.
**
2(d) Confidentiality and Non-Competition Agreement by
and among the Company, Marc G. Langlois and
Catalina. **
2(e) Confidentiality and Non-Competition Agreement by
and among the Company, John E. Madocks and
Catalina. **
2(f) Special Option Agreement, among the Company,
Catalina, David G. Shaw, Marc G. Langlois and John
E. Madocks. **
3(a)(1) Amended and Restated Certificate of Incorporation of the
Company, incorporated by reference to Exhibit 3(a)(1) of
Registration Statement 33-27112, effective March 28, 1989.
3(a)(2) Certificate of Amendment to the Amended and Restated
Certificate of Incorporation of the Company, incorporated by
reference to Exhibit 3(a)(2) of Registration Statement
33-27112, effective March 28, 1989.
3(a)(3) Certificate of Amendment to the Amended and
Restated Certificate of Incorporation of the
Company filed June 3, 1994.+
3(b) By-laws of the Company.
10(a) Employment Agreement dated August 23, 1988, by and
between the Company and Richard Williams, incorpo-
rated by reference to Exhibit 10(b) of Registra-
tion Statement 33-27112, effective March 28, 1989.
10(b) 1988 Stock Option Plan, incorporated by reference
to Exhibit 10(c) of Registration Statement 33-
27112, effective March 28, 1989.
10(c) 1988 Restricted Stock Purchase Plan, incorporated
by reference to Exhibit 10(d) of Registration
Statement 33-27112, effective March 28, 1989.
10(d) Confidentiality Agreement between the Company and
Heidelberger Druckmaschinen A.G., effective
December 7, 1989 as amended, incorporated by
reference to Exhibit 10(i) of the Company's Annual
Report on Form 10-K for the year ended December
31, 1989.
10(e) Development and Supply Agreement dated July 23,
1991, by and between the Company and Inx
-37-
Incorporated, incorporated by reference to the Company's
Quarterly Report on Form 10-Q for the Quarter Ended June 30,
1991.
10(f) Master Agreement effective January 1, 1991 by and
between Heidelberger Druckmaschinen
Aktiengesellschaft and the Company, incorporated
by reference to the Company's Form 8-K, dated
January 1, 1991.
10(g) Technology License effective January 1, 1991 by
and between Heidelberger Druckmaschinen
Aktiengesellschaft and the Company, incorporated
by reference to the Company's Form 8-K, dated
January 1, 1991.
10(h) Supply Agreement effective January 1, 1991 by and
between Heidelberger Druckmaschinen
Aktiengesellschaft and the Company, incorporated
by reference to the Company's Form 8-K, dated
January 1, 1991.
10(i) Memorandum of Performance No. 3 dated April 27,
1993 to the Master Agreement, Technology License,
and Supply Agreement between the Company and
Heidelberger Druckmaschinen Aktiengesellschaft,
incorporated by reference to the Company's
Quarterly Report on Form 10-Q for the Quarter
Ended June 30, 1993.
10(j) Modification to Memorandum of Performance No. 3
dated April 27, 1993 to the Master Agreement,
Technology License, and Supply Agreement between
the Company and Heidelberger Druckmaschinen
Aktiengesellschaft.+
10(k) Memorandum of Performance No. 4 dated November
9, 1995 to the Master Agreement and Technology
License and Supply Agreement between the Comapany
and Heidelberger Druckmaschinen
Aktiengesellschaft.
10(l) Lease dated as of September 10, 1987, relating to
real property located at 8 Commercial Street,
Hudson, New Hampshire, incorporated by reference
to Exhibit 10(e) of Registration Statement 33-
27112, effective March 28, 1989.
10(m) Amendment to Lease relating to real property
located at 8 Commercial Street, Hudson, New
Hampshire, incorporated by reference to Exhibit
10(k) of the Company's Annual Report on Form 10-K
for the year ended December 31, 1989.
-38-
10(n) Third Amendment to Lease, dated September 15,
1990, relating to real property located at 8
Commercial Street, Hudson, New Hampshire,
incorporated by reference to Exhibit 10(o) of the
Company's Annual Report on Form 10-K for the year
ended December 31, 1990.
10(o) Fourth Amendment to Lease, dated as of March 16,
1993, relating to real property located at 8
Commercial Street, Hudson, New Hampshire,
Incorporated by reference to Exhibit 10(m) of the
Company's Annual Report on Form 10-K for the year
ended December 31, 1993.
10(p) Development and Supply Agreement dated November
13, 1991 by and between the Company and Gans Ink &
Supply Co., Inc.*
10(q) Amendment to Employment Agreement between the
Company and Richard Williams.*
10(r) 1991 Stock Option Plan.*
10(s) 1994 Stock Option Plan.+
10(t) Non Employee Director Stock Option Plan.+
10(u) Lease dated as of May 9, 1994, as amended,
relating to facilities located at 9 Commercial
Street, Hudson, New Hampshire.+
23(a) Consent of BDO Seidman LLP.
23(b) Consent of Deloitte & Touche LLP.
27 Financial Data Schedule
(b) During the quarter ended December 30, 1995 no reports on Form 8-K were
filed. However, during January 1996 the Company filed a Form 8-K with
respect to the termination of its former independent accountants on
December 28, 1995.
(c) See Item 14(a)(3) above.
(d) See Item 14(a)(2) above.
- --------------------
* Incorporated by reference to the Company's Annual report on Form 10-K for
the year ended December 31, 1991.
** Incorporated by reference to the exhibit filed with the Company's Form 8-K
for the event dated February 15, 1996.
-39-
+ Incorporated by reference to the exhibit of the corresponding number
continued under Company's Annual report on Form 10-K for the year ended
December 31, 1994
-40-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
PRESSTEK, INC.
Dated: March 26 , 1996 By: /s/ Richard A. Williams
-----------------------
Richard A. Williams
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Richard A. Williams Chief Executive Officer, March 26, 1996
- ----------------------- Secretary and Director,
Richard A. Williams (Principal Executive
Officer)
/s/ Robert E. Verrando President, Chief Operating March 26, 1996
- ----------------------- Officer and Director
Robert E. Verrando
/s/ Robert Howard Chairman of the Board and March 26, 1996
- ----------------------- Director
Robert Howard
/s/ Lawrence Howard Director March 26, 1996
- -----------------------
Dr. Lawrence Howard
/s/ Howard N. Sparks Director March 26, 1996
- -----------------------
Harold N. Sparks
/s/ Bert DePamphilis Director March 26, 1996
- -----------------------
Bert DePamphilis
- ----------------------- Director March 26, 1996
John Dreyer
/s/ Glenn J. DiBenedetto Chief Financial Officer March 26, 1996
- ------------------------ (Principal Financial and
Glenn J. DiBenedetto Accounting Officer)
-41-
INDEX TO FINANCIAL STATEMENTS
Page
----
Report of Independent Certified Public Accountants F-2
Independent Auditors' Report F-3
Balance Sheets as of December 31, 1994
and December 30, 1995 F-4
Statements of Operations for the Years Ended
December 31, 1993 and 1994, and December 30, 1995 F-5
Statements of Changes in Stockholders' Equity
for the Three Years Ended December 30, 1995 F-6-7
Statements of Cash Flows for the Years Ended
December 31, 1993 and 1994, and December 30, 1995 F-8
Notes to Financial Statements F-9
Financial Statement Schedule:
Schedule II - Valuation and qualifying accounts
and reserves FS-1
F-1
REPORT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors
Presstek, Inc.
Hudson, New Hampshire
We have audited the accompanying balance sheet of PRESSTEK, INC. as of December
30, 1995 and the related statements of operations, changes in stockholders'
equity, and cash flows for the year then ended. We have also audited the
financial statement schedule listed in the accompanying index. These financial
statements and schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and schedule are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements and schedule.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of
the financial statements and schedule. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Presstek, Inc. at December 30,
1995 and the results of its operations and its cash flows for the year then
ended in conformity with generally accepted accounting principles.
Also, in our opinion, the schedule presents fairly, in all material respects,
the information set forth therein.
BDO SEIDMAN, LLP
New York, New York
February 16, 1996
F-2
INDEPENDENT AUDITORS' REPORT
PRESSTEK, INC.:
We have audited the accompanying balance sheet of Presstek, Inc. as of December
31, 1994, and the related statements of operations, changes in stockholders'
equity, and cash flows for each of the two years in the period ended December
31, 1994. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit and to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statement present fairly, in all material
respects the financial position of Presstek, Inc. as of December 31, 1994, and
the results of its operations and its cash flows for each of the two years in
the period ended December 31, 1994, in conformity with generally accepted
accounting principles.
As discussed in Note 3 to the financial statements, the Company changed its
method of accounting for certain investments in debt and equity securities,
effective January 1, 1994, to conform with Statement of Financial Accounting
Standards No. 115.
DELOITTE & TOUCHE LLP
Bedford, New Hampshire
March 15, 1995
F-3
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
PRESSTEK, INC.
BALANCE SHEETS
December 31, December 30,
1994 1995
------------ ------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 1,532,636 $ 3,628,021
Marketable securities 254,381 3,050,825
Accounts receivable 4,187,049 7,888,559
Inventory 2,796,165 5,861,743
Other current assets 756,592 350,031
---------- ----------
Total current assets 9,526,823 20,779,179
---------- ----------
MARKETABLE SECURITIES - NON CURRENT 4,807,821 -
---------- ----------
PROPERTY AND EQUIPMENT:
Machinery and equipment 3,820,160 5,659,211
Furniture and fixtures 281,844 372,889
Leasehold improvements 956,574 1,247,803
Other 38,184 34,498
---------- ----------
Total 5,096,762 7,314,401
Less accumulated depreciation
and amortization ( 2,322,770) ( 3,023,089)
---------- ----------
Property and equipment, net 2,773,992 4,291,312
---------- ----------
OTHER ASSETS:
Patent application costs, net 685,044 1,012,147
Software development costs 530,350 585,980
---------- ----------
Total other assets 1,215,394 1,598,127
---------- ----------
TOTAL $ 18,324,030 $ 26,668,618
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 1,275,492 $ 2,392,846
Accrued expenses 226,834 1,091,036
Accrued salaries and employee benefits 348,784 458,300
---------- ----------
Total current liabilities 1,851,110 3,942,182
---------- ----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value; authorized
1,000,000 shares; no shares issued or
outstanding - -
Common stock, $.01 par value; authorized
25,000,000 shares; issued and outstanding
7,194,020 shares at December 31, 1994;
14,765,300 shares at December 30, 1995 71,940 147,653
Additional paid-in capital 18,437,839 21,559,856
Unrealized loss on investments
available for sale ( 199,334) ( 3,176)
Retained earnings (deficit) ( 1,837,525) 1,022,103
---------- ----------
Stockholders' equity 16,472,920 22,726,436
---------- ----------
TOTAL $ 18,324,030 $ 26,668,618
========== ==========
See notes to financial statements
F-4
PRESSTEK, INC.
STATEMENTS OF OPERATIONS
For the Years Ended
December 31, December 31, December 30,
1993 1994 1995
------------ ------------ ------------
REVENUES:
Product sales $ 1,126,818 $ 9,462,032 $ 20,028,548
Royalties and fees from licensees 10,555,336 7,055,826 7,582,908
---------- ---------- ----------
Total revenues 11,682,154 16,517,858 27,611,456
---------- ---------- ----------
COSTS AND EXPENSES:
Cost of products sold 754,700 6,944,268 14,923,968
Engineering and product development 5,647,562 5,123,439 6,155,421
Marketing 1,147,926 1,225,756 1,727,301
General and administrative 1,535,289 1,603,729 2,050,075
Nonrecurring charge 1,948,878 - -
---------- ---------- ----------
Total costs and expenses 11,034,355 14,897,192 24,856,765
---------- ---------- ----------
OTHER INCOME (EXPENSE):
Dividend and interest income 412,025 407,977 327,213
Other - net - 166 ( 2,276)
---------- ---------- ----------
Other income - net 412,025 408,143 324,937
---------- ---------- ----------
INCOME BEFORE INCOME TAXES 1,059,824 2,028,809 3,079,628
PROVISION FOR INCOME TAXES ( 100,000) ( 186,600) ( 220,000)
---------- ---------- ----------
NET INCOME $ 959,824 $ 1,842,209 $ 2,859,628
========== ========== ==========
WEIGHTED AVERAGE NUMBER OF COMMON AND
COMMON EQUIVALENT SHARES 14,222,574 14,865,344 15,855,076
========== ========== ==========
NET INCOME PER COMMON AND
COMMON EQUIVALENT SHARE $ .07 $ .12 $ .18
=== === ===
See notes to financial statements
F-5
PRESSTEK, INC.
STATEMENTS OF CHANGES IN
STOCKHOLDERS' EQUITY For the Three
Years Ended December 30, 1995
Common Stock Additional
------------ Paid-in
Shares Amount Capital
------ ------ -------
BALANCE AT DECEMBER 31, 1992 5,260,248 $52,602 $15,214,852
January through December, 1993:
Issuances of common stock relative to the exercise
of incentive stock options at $1.50 per share 91,000 910 135,590
Issuances of common stock relative to the exercise
of nonqualified stock options at $5.00 - $14.75
per share 34,300 343 320,327
November, 1993:
Issuances of common stock relative to the exercise
of underwriter's warrants and unit warrants for
cash at $5.75 and $6.25 per share, respectively 3,420 35 20,485
Tax benefit of disposition of stock options 80,000
Net income for the year
----------- ---------- -----------
BALANCE AT DECEMBER 31, 1993 5,388,968 53,890 15,771,254
February through March 1994:
Issuance of common stock relative to the exercise
of warrants at $12.50 and $14.25 per share 50,000 500 668,250
August, 1994:
Five for four stock split, effected in
the form of a 25% stock dividend, net of
fractional shares 1,410,235 14,102 (17,782)
January through December, 1994:
Issuances of common stock relative to the
exercise of incentive stock options at:
$1.50 per share 54,361 544 341,126
$1.20 per share 62,500 625 74,375
Issuances of common stock relative to the
exercise of nonqualified stock options at
$5.00 - $16.75 per share 74,856 748 612,963
Issuances of common stock relative to the
exercise of underwriters' warrants and unit
warrants for cash at:
$5.75 and $6.25 per share, respectively 95,254 953 570,571
$4.60 and $5.00 per share, respectively 57,846 578 277,082
Tax benefit of disposition of stock options
Unrealized loss on marketable securities 140,000
Net income for the year
----------- ---------- -----------
BALANCE AT DECEMBER 31, 1994 7,194,020 71,940 18,437,839
January through December, 1995:
Issuance of common stock relative to the
exercise of incentive stock options at
$10.00 - $15.55 per share 112,877 1,129 1,628,242
Issuance of common stock relative to the
exercise of non-qualified stock options at
$4.00 - $19.20 per share 159,931 1,599 1,282,760
January through March, 1995:
Issuance of common stock relative to the exercise
of underwriters' warrants
and unit warrants for cash at $4.60 and $5.00
per share, respectively 22,500 225 107,775
May, 1995:
Two for One stock split effected in
the form of a 100% stock dividend 7,275,972 72,760 (72,760)
Tax benefit of disposition of stock options 176,000
Unrealized gain on investments available for sale
Net income for the year
----------- ---------- -----------
BALANCE AT DECEMBER 30, 1995 14,765,300 $147,653 $21,559,856
=========== ========== ===========
Unrealized Loss
On Investments Retained
Available Earning Stockholders'
For Sale (Deficit) Equity
-------- --------- ------
BALANCE AT DECEMBER 31, 1992 $ -- $(4,639,558) $10,627,896
January through December, 1993:
Issuances of common stock relative to the exercise
of incentive stock options at $1.50 per share 136,500
Issuances of common stock relative to the exercise
of nonqualified stock options at $5.00 - $14.75
per share 320,670
November, 1993:
Issuances of common stock relative to the exercise
of underwriter's warrants and unit warrants for
cash at $5.75 and $6.25 per share, respectively 20,520
Tax benefit of disposition of stock options 80,000
Net income for the year 959,824 959,824
----------- ---------- -----------
BALANCE AT DECEMBER 31, 1993 -- (3,679,734) 12,145,410
February through March 1994:
Issuance of common stock relative to the exercise
of warrants at $12.50 and $14.25 per share 668,750
August, 1994:
Five for four stock split, effected in
the form of a 25% stock dividend, net of
fractional shares (3,680)
January through December, 1994:
Issuances of common stock relative to the
exercise of incentive stock options at:
$1.50 per share 341,670
$1.20 per share 75,000
Issuances of common stock relative to the
exercise of nonqualified stock options at
$5.00 - $16.75 per share 613,711
Issuances of common stock relative to the
exercise of underwriters' warrants and unit
warrants for cash at:
$5.75 and $6.25 per share, respectively 571,524
$4.60 and $5.00 per share, respectively 277,660
Tax benefit of disposition of stock options 140,000
Unrealized loss on marketable securities (199,334) (199,334)
Net income for the year 1,842,209 1,842,209
----------- ---------- ----------
BALANCE AT DECEMBER 31, 1994
January through December, 1995: (199,334) (1,837,525) 16,472,920
Issuance of common stock relative to the
exercise of incentive stock options at
$10.00 - $15.55 per share 1,629,371
Issuance of common stock relative to the
exercise of non-qualified stock options at
$4.00 - $19.20 per share 1,284,359
January through March, 1995:
Issuance of common stock relative to the exercise of
underwriters' warrants
and unit warrants for cash at $4.60 and $5.00
per share, respectively 108,000
May, 1995:
Two for One stock split effected in
the form of a 100% stock dividend
Tax benefit of disposition of stock options 176,000
Unrealized gain on investments available for sale 196,158 196,158
Net income for the year 2,859,628 2,859,628
----------- ---------- -----------
BALANCE AT DECEMBER 30, 1995 $(3,176) $1,022,103 $22,726,436
=========== ========== ===========
See notes to financial statements
F-6-7
PRESSTEK, INC.
STATEMENTS OF CASH FLOWS
For the Years Ended
December 31, December 31, December 30,
1993 1994 1995
------------ ------------ ------------
CASH FLOWS - OPERATING ACTIVITIES:
Net income $ 959,824 $ 1,842,209 $ 2,859,628
Adjustments to reconcile net income
to net cash provided by (used for)
operating activities:
Noncash elements of nonrecurring charge 1,453,101 -- --
State tax benefit of disposition of
stock options 80,000 140,000 176,000
Depreciation 657,475 601,197 819,507
Amortization -- 55,639 178,529
Provision for warranty and other costs 20,000 215,000 916,242
(Gain) on disposal of equipment (3,617) (28,388) (25,748)
Loss on sale of marketable securities -- -- 28,024
(Increase) decrease in:
Accounts receivable 655,483 (3,384,070) (3,759,012)
Inventory (821,546) (1,562,606) (3,165,578)
Other current assets (191,674) (532,375) 406,561
Increase (decrease) in:
Accounts payable and accrued expenses 987,149 (126,332) 1,222,816
Accrued salaries and employee benefits 55,672 105,134 109,516
Accrued state income taxes (160,000) -- --
Deferred income (1,811,664) -- --
----------- ----------- -----------
Net cash provided by (used for)
operating activities 1,880,203 (2,674,592) (233,515)
----------- ----------- -----------
CASH FLOWS - INVESTING ACTIVITIES:
Purchases of property and equipment (599,898) (1,746,470) (2,387,379)
Proceeds from sale of equipment -- 31,017 76,300
Increase in other assets (210,194) (674,200) (561,261)
Sales and maturities of
marketable securities 175,000 5,157,394 2,179,510
Purchases of marketable securities (3,224,743) (2,095,152) --
----------- ----------- -----------
Net cash provided by (used for)
investing activities (3,859,835) 672,589 (692,830)
----------- ----------- -----------
CASH FLOWS - FINANCING ACTIVITIES:
Net proceeds from sale of common
stock and warrants 477,690 2,544,635 3,021,730
----------- ----------- -----------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (1,501,942) 542,632 2,095,385
CASH AND CASH EQUIVALENTS -
BEGINNING OF PERIOD 2,491,946 990,004 1,532,636
----------- ----------- -----------
CASH AND CASH EQUIVALENTS -
END OF PERIOD $ 990,004 $ 1,532,636 $ 3,628,021
=========== =========== ===========
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION -
Cash paid during the period for income taxes $ 160,000 $ 52,000
=========== ===========
See notes to financial statements
F-8
PRESSTEK, INC.
NOTES TO FINANCIAL STATEMENTS
1. NATURE OF BUSINESS
Business - Presstek, Inc. ("the Company" or "Presstek") was organized as a
Delaware corporation on September 3, 1987 and was a development stage company
through 1991. In September, 1991, Heidelberger Druckmaschinen A.G.
("Heidelberg") the world's largest printing press manufacturer introduced the
Company's initial spark discharge based imaging technology, in a jointly
developed product, the Heidelberg GTO-DI. In 1993, after investing substantial
effort and resources, the Company completed the development of PEARL(R), a
patented proprietary, nonphotographic, toxic-free, digital imaging and printing
plate technology for the printing and graphic arts industries. PEARL's laser
diode technology is capable of imaging various types of Presstek printing plates
either off-press or on-press which may then be used to produce high quality,
full-color lithographic printed materials. PEARL has completely replaced the
Company's spark discharge technology. The GTO-DI was re-introduced in September
1993, utilizing PEARL as its direct imaging technology. The Company is now
building an installed base of customers which utilizes its proprietary
consumable printing plates on PEARL equipped Heidelberg presses. During the
second quarter of 1995, the Company commenced shipments of kits to be utilized
on Heidelberg's recently introduced Quickmaster DI 46-4. Presstek is also
engaged in the development of additional products and applications that
incorporate its proprietary PEARL technologies and consumables, including both
computer-to-plate and other direct-to-press applications. At this time, the
Company relies on Heidelberg to generate substantially all of its revenues.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Fiscal Year - On January 19, 1995, the Company's Board of Directors
determined to change its fiscal year from a calendar year ending December 31 to
a fiscal year ending on the Saturday closest to December 31; accordingly, the
1995 fiscal year ended December 30. Fiscal 1993, 1994, and 1995 each reflect 52
week periods.
Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from these estimates.
Many of the Company's estimates and assumptions used in the financial statements
relate to the Company's products, which are subject to rapid technological
change. It is reasonably possible that changes may occur in the near term that
would affect management's estimates with respect to inventories, equipment and
software development costs.
Revenue Recognition - The Company records revenues on product sales and
related royalties at the time of shipment. Certain fees and other reimbursements
are recognized as revenue when the related services have been performed or the
revenue otherwise earned.
Product Warranties - The Company warrants its products against defects in
material and workmanship for a period of one year. Anticipated future
F-9
warranty costs are accrued by a charge to expense as products are shipped and
the related revenue recognized. At December 31, 1994 and December 30, 1995,
accrued expenses included accrued warranty costs of $199,000 and $601,000 and
product replacement reserves of $28,000 and $291,000, respectively.
Property and Equipment - Property and equipment are stated at cost and are
depreciated using a straight-line method for both financial reporting and for
tax purposes over their estimated useful lives (ranging from 3 to 7 years).
Leasehold improvements are amortized over the life of the lease for financial
reporting purposes and a required longer period for tax purposes.
Software Development Costs - Software development costs for products and
certain product enhancements are capitalized subsequent to the establishment of
their technological feasibility (as defined in Statement of Financial Accounting
Standards No. 86) based upon the existence of working models of the products
which are ready for initial customer testing. Costs incurred prior to such
technological feasibility or subsequent to a product's general release to
customers are expenses as incurred. Prior to 1994, the Company did not incur
material costs subject to capitalization. During 1994 and 1995, the Company
incurred and capitalized $530,350 and $154,129, respectively, of costs subject
to capitalization. Amortization of these costs commenced during 1995 using the
straight-line method. Amortization expense for the year ended December 30, 1995
was $98,500.
Inventory - Inventory is valued at the lower of cost or market, with cost
determined on the first-in, first-out method. At December 31, 1994, and December
30, 1995, inventory consisted of the following:
1994 1995
---- ----
Raw materials $ 1,269,607 $ 3,476,713
Work in process 952,704 1,959,382
Finished goods 573,854 425,648
----------- -----------
Total $ 2,796,165 $ 5,861,743
=========== ===========
Patent Application Costs - Patent application costs represent the expense
of preparing and filing applications to patent the Company's proprietary
technologies. Such costs are amortized against income over a period of five
years, beginning on the date the patents are issued. As of December 30, 1995,
the Company had been issued 49 patents. Amortization expense for the years ended
December 31, 1993 and 1994, and December 30, 1995 was $53,904, $55,639, and
$72,530, respectively. (Also see Note 10.)
Research and Development Costs - Research and development costs are
expenses as incurred for financial reporting purposes.
Cash Flow Information - For purposes of reporting cash flows, the Company
considers all savings deposits, certificates of deposit, and money market funds
and deposits purchased with a maturity of three months or less to be cash
equivalents. At December 31, 1994 and December 30, 1995, cash and cash
equivalents consisted of cash balances on deposit and money market funds.
Reclassification - Various accounts in the prior years' balance sheet and
statement of operations have been reclassified for comparative purposes to
conform with the presentation in the current-year financial statements.
F-10
Effect of New Accounting Pronouncements
Long-Lived Assets - Long-lived assets, such as property and equipment, are
evaluated for impairment when events or changes in circumstances indicate that
the carrying amount of the assets may not be recoverable through the estimated
undiscounted future cash flows from the use of these assets. When any such
impairment exists, the related assets will be written down to fair value. This
policy is in accordance with Statement of Financial Accounting Standards No.
121, "Accounting for the Impairment of Long-Lived Assets to be Disposed Of,"
which is effective for fiscal years beginning after December 15, 1995. No write
downs have been necessary through December 30, 1995.
Stock-Based Compensation - The Company does not presently intend to adopt
the fair value based method for accounting for stock compensation plans, as
permitted by Statement of Financial Accounting Standards No. 123, "Accounting
for Stock-Based Compensation," which is effective for transactions entered into
in fiscal years that begin after December 15, 1995.
3. MARKETABLE SECURITIES
Effective January 1, 1994, the Company adopted the provisions of Statement
of Financial Accounting Standards (SFAS) No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." Marketable Securities are classified
as available for sale and consist of United States Treasury Bills and Notes
having maturity dates of more than three months, and are stated at fair value.
Marketable securities are classified based on expected realization which,
as of December 31, 1994, was consistent with security maturity date.
Accordingly, at that date such securities were classified as current where
maturity dates were one year or less, or noncurrent where maturity dates exceed
one year from the balance sheet date. Expected maturities may differ from
contractual maturities because borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties. Aggregate net
unrealized holding losses of $199,334 and $3,176 at December 31, 1994 and
December 30, 1995, respectively, have been included as a separate component of
stockholders' equity in the accompanying balance sheet. Certain information with
respect to the Company's marketable securities as of December 31, 1994 and
December 30, 1995 is presented below:
1994 1995
-----------------------------------------------------
Current Noncurrent Total Total
------- ---------- ----- -----
Amortized Cost $254,154 $ 5,007,382 $ 5,261,536 $ 3,054,001
Gross Unrealized
Holding Gains 227 - 227 7,810
Gross Unrealized
Holding Losses ( 199,561) ( 199,561) ( 10,986)
------- --------- --------- ---------
Fair Value $254,381 $ 4,807,821 $ 5,062,202 $ 3,050,825
======= ========= ========= =========
For the years ended December 31, 1994 and December 30, 1995, the Company
received proceeds from the sale or maturity of available for sale securities of
$5,157,394 and $2,179,510 and recorded net realized losses of $28,174 and
$28,024. In computing such realized losses, cost was determined using the
specific cost method. The change in net unrealized holding gain or loss on
F-11
available for sale securities that has been included in the separate component
of stockholders' equity for the years ended December 31, 1994 and December 30,
1995 was $199,334 and $3,176, respectively.
4. NET INCOME PER COMMON SHARE
Net income per common share is computed by dividing net income by the
weighted average number of Common Stock and Common Stock equivalent shares
outstanding. Common Stock equivalents represent the dilutive effect of the
assumed exercise of outstanding stock options and warrants. On August 2, 1994,
the Company's Board of Directors authorized a five-for-four stock split,
effected in the form of a 25% stock dividend, during the third quarter of 1994.
The split resulted in the issuance of 1,410,235 shares of common stock. On April
19, 1995, the Company's Board of Directors declared a two-for-one stock split,
effected in the form of a 100% stock dividend, during the second quarter of
1995. The split resulted in the issuance of 7,275,972 shares of common stock.
All references to average number of shares outstanding and prices per share have
been restated retroactively to reflect the splits. A summary of the calculations
for the years ended December 31, 1993 and 1994, and December 30, 1995 follows:
F-12
(In Thousands, Except Per Share)
1993 1994 1995
----------------- ---------------- -----------------
Fully Fully Fully
Primary Diluted Primary Diluted Primary Diluted
------- ------- ------- ------- ------- -------
Net income $ 960 $ 960 $ 1,842 $ 1,842 $ 2,860 $ 2,860
====== ====== ====== ====== ====== ======
Weighted average common
shares outstanding 13,255 13,472 14,026 14,388 14,562 14,562
Common equivalent shares
from assumed conversion of
outstanding options and
warrants whose effect are
not antidilutive on
earnings per share 1,663 1,663 1,938 2,131 1,742 1,770
Less shares assumed
repurchased using the
treasury method for
calculation of net
shares outstanding ( 695) ( 684) ( 1,099) ( 917) ( 449) ( 239)
------ ------ ------ ------ ------ ------
Weighted average common
and common equivalent
shares outstanding 14,223 14,451 14,865 15,602 15,855 16,093
====== ====== ====== ====== ====== ======
Net income per common
and common equivalent
shares $ .07 $ .07 $ .12 $ .12 $ .18 $ .18
=== === === === === ===
5. INCOME TAXES
The Company adopted Statement of Financial Accounting Standards No. 109
(SFAS 109), "Accounting for Income Taxes," as of January 1, 1993. SFAS 109
requires that the Company utilize an asset and liability approach for financial
accounting and reporting for income taxes. The primary objectives of accounting
for taxes under SFAS 109 are to (a) recognize the amount of tax payable for the
current year and (b) recognize the amount of deferred tax liability or asset for
the future tax consequences of events that have been reflected in the Company's
financial statements or tax returns.
F-13
The components of the provision for income taxes for the years ended
December 31, 1993 and 1994 and December 30, 1995 were as follows:
1993 1994 1995
---- ---- ----
Current tax expense $ 70,000 $ 46,600 $ 44,000
State tax benefit of disposition 80,000 140,000 176,000
of stock options
Change in deferred tax asset - net (50,000) - -
-------- -------- --------
Total provision $100,000 $186,600 $220,000
======== ======== ========
Deferred income taxes reflect the impact of temporary differences between
the amount of assets and liabilities for financial reporting purposes and such
amounts as measured by tax laws and regulations. These temporary differences are
determined in accordance with SFAS 109. Deferred tax assets and liabilities
consisted of the following at December 31, 1994 and December 30, 1995:
1994 1995
---- ----
Deferred tax assets:
NOL carryforwards $ 2,856,000 $5,600,000
Tax credits 300,000 350,000
Warranty provision and other accruals 258,000 640,000
--------- ---------
Gross deferred tax assets 3,414,000 6,590,000
--------- ---------
Deferred tax liabilities:
Patent application costs 274,000 368,000
Accumulated depreciation 162,000 187,000
--------- ---------
Gross deferred tax liabilities 436,000 555,000
--------- ---------
2,978,000 6,035,000
Less valuation allowance (2,928,000) (5,985,000)
--------- ---------
Deferred tax asset - net $ 50,000 $ 50,000
========= =========
The $50,000 deferred tax asset was included in other current assets at
December 31, 1994 and December 30, 1995. The valuation allowance increased
$403,000, $195,000, and $3,057,000 in 1993, 1994, and 1995, respectively.
The difference between income taxes at the United States federal income tax
rate and the effective income tax rate was as follows for the years ended
December 31, 1993 and 1994, and December 30, 1995:
F-14
1993 1994 1995
---- ---- ----
Computed at federal statutory rate 34% 34% 34%
Increase (decrease) resulting from:
Expenses producing no current tax benefit 17% 2% 11%
State tax, net of federal benefit 7% 7% 7%
Alternative minimum tax 2% 2% -
Net operating loss carryforwards 19% 10% 98%
Compensation relative to stock option plans -58% -38% -140%
Deductions for tax purposes previously
expenses for financial statement purposes - 7% - 7% -
Patent perfection costs and other - 5% - 1% - 3%
-- -- ---
Effective rate, net 9% 9% 7%
== == ===
As of December 30, 1995, the Company had net operating loss carryforwards
totaling approximately $16,500,000 resulting from compensation deductions
relative to stock option plans. To the extent net operating losses resulting
from stock option plan compensation deductions become realizable, the benefit
will be credited directly to additional paid in capital. The amount of the net
operating loss carryforwards which may be utilized in any future period may be
subject to certain limitations, based upon changes in the ownership of the
Company's common stock. The following is a breakdown of the net operating losses
and their expiration dates:
Expiration date Amount of remaining NOL
2005 $2,230,000
2006 $5,020,000
2007 $ 550,000
2008 $ 600,000
2009 $8,100,000
In addition, the Company has available tax credit carryforwards (adjusted
to reflect provisions of the Tax Reform Act of 1986) of approximately $350,000,
which are available to offset future taxable income and income tax liabilities,
when earned or incurred.
6. RELATED PARTIES
During the years ended December 31, 1993 and 1994 and December 30, 1995,
the Company made various sales to Howtek totaling approximately $38,800,
$114,500, and $23,250, respectively. Mr. Robert Howard, Chairman and a principal
stockholder of the Company, is the Chairman of the Board of Directors and a
principal stockholder of Howtek and the father of Dr. Lawrence Howard, who was
the President and Chief Executive Officer of the Company through November 30,
1992, when he resigned as President and was appointed, by the Board of
F-15
Directors, Vice Chairman of the Board. Dr. Lawrence Howard was a director of
Howtek until May 30, 1989.
The Company subleases certain of its office facilities from Mr. Robert
Howard, Chairman, as a tenant-at-will. Payments totaled $33,352, $35,379, and
$35,400, respectively, for the years ended December 31, 1993 and 1994 and
December 30, 1995. Mr. Howard was paid $100,000 during each of 1993 and 1994 as
a bonus for consulting services rendered. The Company paid Mr. Howard $110,000
for consulting services provided to the Company during 1995.
7. STOCKHOLDERS' EQUITY
References herein to shares, options, warrants and the prices per share
have been restated to the 1994 and 1995 stock splits, effected in the form of
stock dividends, referred to in Note 4.
Preferred Stock - The Company's certificate of incorporation empowers the
Board of Directors, without stockholder approval, to issue up to 1,000,000
shares of $.01 par value preferred stock, with dividend, liquidation,
conversion, and voting or other rights to be determined upon issuance by the
Board of Directors.
Restricted Stock Purchase Plan - On August 22, 1988, the Company adopted a
Restricted Stock Purchase Plan ("the Purchase Plan") authorizing the sale of up
to 125,000 shares of common stock to its employees at a price to be determined
by the Board of Directors, but in no event to be less than $.01 per share or
greater than 10% of the then fair market value. At December 30, 1995, after
adjustment for the 1994 and 1995 splits 40,000 shares remained available for
sale.
Stock Option Plans - On August 22, 1988, the Company adopted the 1988 Stock
Option Plan (the "1988 Plan"), and effective August 19, 1991, the Company
adopted the 1991 Stock Option Plan (the "1991 Plan"), and effective April 8,
1994, the Company adopted the 1994 Stock Option Plan (the "1994 Plan"). Each
plan originally provided for the aware, to key employees and other persons,
options to purchase up to 500,000 shares of the Company's common stock. As a
result of the 1994 and 1995 stock splits, the number of shares of common stock
issuable upon exercise of outstanding options granted under the above plans and
upon exercise of options available for future grants increased by 25% and 100%,
respectively. Options granted under the plans may be either Incentive Stock
Options ("ISOs") or Nonqualified Options. Generally, ISOs may only be granted to
employees of the
F-16
Company, at an exercise price of not less than fair market value of the stock at
the date of grant. Nonqualified Options may be granted to any person, at any
exercise price. Nonqualified Options may be granted to any person, at any
exercise price not less than par value, within the discretion of the Board of
Directors or a committee appointed by the Board of Directors ("Committee"). Any
options granted will generally become exercisable in increments over a period
not to exceed ten years from the date of grant, to be determined by the Board of
Directors or Committee, and generally will expire not more than ten years from
the date of grant.
Information concerning incentive stock option activity under the 1988,
1991, and 1994 plans for the years ended December 31, 1993 and 1994, and
December 30, 1995 is summarized as follows:
Option Option price Options
Shares per share Exercisable
------ --------- -----------
Outstanding at December 31, 1992 193,800 $ 1.20 - $ 1.50 118,799
=======
Granted 186,808 $10.00 - $25.00
Exercised (91,000) $ 1.50
Cancelled/Expired -
-------
Outstanding at December 31, 1993 289,608 $ 1.20 - $25.00 289,608
=======
Granted 509,000 $15.55 - $19.50
Exercised (116,861) $ 1.20 - $20.00
Cancelled/Expired (14,844) $20.00 - $25.00
-------
Outstanding at December 31, 1994 666,903 $10.00 - $19.50 12,591
=======
Granted 34,500 $41.275 - $52.75
Exercised (112,877) $15.55 - $20.00
Cancelled/Expired -
-------
Outstanding at December 30, 1995 588,526 $10.00 - $52.75 76,279
======= ======
The proceeds to the Company from incentive stock options exercised during
the years ended December 31, 1993 and 1994 and December 30, 1995 totaled
$136,500, $416,670, and $1,629,371, respectively.
Information concerning nonqualified stock option activity under the 1988,
1991, and 1994 Plans for the years ended December 31, 1993 and 1994 and December
30, 1995 is summarized as follows:
F-17
Option Option price Options
Shares per share Exercisable
------ --------- -----------
Outstanding at December 31, 1992 819,719 $ 2.00 - $16.75 487,219
=======
Granted 268,624 $ 7.10 - $21.00
Exercised (34,300) $ 5.00 - $14.75
Cancelled/Expired (64,250) $10.38 - $21.00
-------
Outstanding at December 31, 1993 989,793 $ 2.00 - $19.40 865,543
=======
Granted 421,687 $ 9.70 - $29.20
Exercised (74,856) $ 5.00 - $16.75
Cancelled/Expired (2,878) $11.80 - $29.20
-------
Outstanding at December 31, 1994 1,333,746 $ 2.00 - $25.00 878,802
=======
Granted 52,750 $22.313 - $62.00
Exercised (191,381)* $ 4.00 - $15.55
Cancelled/Expired (245) $12.20 - $18.40
---------
Outstanding at December 30, 1995 1,194,870 $ 4.00 - $62.00 802,800
========= =======
* Includes 31,450 additional options arising from the 1995 stock split.
The incentive and nonqualified stock options summarized in the tables above
were granted under various vesting schedules ranging from immediate to five
years, with termination dates ranging from five to six years from dates of grant
and may be subject to earlier termination as provided in the Plans.
The proceeds to the Company from nonqualified stock options exercised
during the years ended December 31, 1993 and 1994 and December 30, 1995 totaled
$320,670, $613,711, and $1,284,359, respectively.
Director Stock Option Plan - Effective December 1993, the Company adopted
its Nonemployee Director Stock Option Plan (the "Director Plan"). Only
nonemployee directors of the Company (other than Robert Howard or Dr. Lawrence
Howard) are eligible to receive grants under the Director Plan. The Director
Plan provides that eligible directors automatically receive a grant of options
to purchase 5,000 shares of Common Stock at fair market value upon first
becoming a director and, thereafter, an annual grant, in January of each year,
options to purchase 2,500 shares at fair market value. Pursuant to the terms of
the Director Plan, options to purchase 3,125 shares, after adjustment for the
five-for-four stock split, were automatically granted to each of two of the
directors in January, 1994, and options to purchase
F-18
5,000 shares, after adjustment for the two-for-one stock split, were
automatically granted to each of two of the directors in January, 1995.
Underwriter's Warrants - In connection with an initial public offering
during 1989, the Company issued the underwriter warrants to purchase 260,000
shares of common stock.
Through December 30, 1995, 138,034 shares of common stock at $5.75 per
share and 138,034 shares of common stock at $6.25 ($4.60 and $5.00 for exercises
after the four-for-five stock split) were issued to certain designees of the
underwriter pursuant to their exercise of warrants and unit warrants. The
proceeds to the Company from these transactions totaled $1,559,993.
At December 30, 1995, there were no remaining warrants outstanding.
Other - On January 20, 1992, in consideration of the payment by Union Bank
of Switzerland (the "Bank") to the Company of $25,000, the Company issued to the
Bank a warrant which, entitled the Bank or its assigns to purchase from the
Company 25,000 shares of common stock at $26.00 per share, which was
subsequently amended to $14.25 per share. The Warrant was exercised during
March, 1994, generating proceeds to the Company of $356,250.
On February 11, 1994, the Company issued 25,000 shares of common stock, at
$12.50 per share, to a consultant, in consideration of payment of $312,000
pursuant to the exercise of a warrant granted on August 12, 1992.
8. LEASES
Effective March 16, 1993, the Company entered into an agreement to amend
and extend the basic lease for its operating facilities for an additional period
of three years ending March 15, 1996 with three one-year renewal options. The
amended lease specifies a fixed base monthly rent of $8,693, plus a pro rata
share of real estate taxes and certain other expenses. The Company paid
approximately $132,000 in 1993, $130,000 in 1994, and $131,000 in 1995 under the
lease agreement and amendments. During May, 1994, the Company entered into an
additional three year lease agreement (which was amended in December 1994) for
approximately 36,000 square feet to accommodate its manufacturing facilities.
The lease, as amended, specifies a fixed base monthly rent of $11,250, plus real
estate taxes, utilities, and certain other expenses. The lease contains an
option to renew for an additional three years and a right of first refusal to
F-19
purchase the property. The Company paid approximately $71,500 in 1994 and
$165,000 in 1995 under this lease agreement. As of December 30, 1995, future
minimum lease payments under these agreements were as follows:
1996 $ 152,386
1997 45,000
---------
Total $ 197,386
=========
9. HEIDELBERG AGREEMENTS
In January 1991, the Company entered into a master agreement (the "Master
Agreement"), a technology license agreement (the "Technology License"), and a
supply agreement (the "Supply Agreement"), (the foregoing agreements being
sometimes collectively referred to herein as the "Heidelberg Agreements") with
Heidelberg. Pursuant to this series of related agreements, as amended, the
Company and Heidelberg agreed to certain terms relating to the integration of
the Company's proprietary Direct Imaging Technology into various presses
manufactured by Heidelberg and certain of its related parties (the "Heidelberg
Presses") and the manufacture of components for and the commercialization of
such presses.
Pursuant to the Heidelberg Agreements, the Company granted Heidelberg
certain exclusive rights, subject to the satisfaction of certain conditions, for
the use of the Direct Imaging Technology in Heidelberg Presses. In consideration
of such rights, Heidelberg agreed to pay to the Company royalties on the net
sales prices of various specified types of Heidelberg Presses.
The Heidelberg Agreements also provide for the Company to furnish, among
other things, engineering and development work based upon work projects and
budgets agreed to by the Company and Heidelberg. The terms of the Heidelberg
Agreements are for periods ending in December 2011 in the case of each of the
Master Agreement and Technology License and December 1995 in the case of the
Supply Agreement. The Heidelberg Agreements also contain, among other things,
certain early termination provisions and extension provisions.
10. NONRECURRING CHARGE
During the second quarter of 1993 the Company recorded a $1,949,000
nonrecurring charge associated with the Company's change from spark discharge
technology to its PEARL technology. The termination of shipments of units
incorporating the spark discharge technology dictated that certain assets
associated with the earlier imaging process, including certain property and
F-20
equipment, unamortized patent costs and inventory, be written off, and that
reserves be established for the transition to PEARL technology. The individual
elements making up the charge consisted of write-offs of property and equipment,
inventory, and patent application costs of $613,000, $546,000, and $294,000,
respectively, and a reserve of $496,000 for certain estimated costs required to
retrofit existing customer equipment. The reserve was fully utilized during
1993, 1994, and 1995.
11. OTHER INFORMATION
In April 1995 the Company commenced an action against Agfa-Gevaert, N.V.
("Agfa") in the U.S. District Court for the District of New Hampshire alleging
that Agfa violated provisions of a confidentiality agreement and a manufacturing
agreement (the "Manufacturing Agreement") between the parties and
misappropriated certain trade secrets of the Company. In June 1995, Agfa
commenced an arbitration proceeding against the Company in the International
Chamber of Commerce in which it seeks arbitration of the disputes between the
parties arising from the Manufacturing Agreement and also seeks to have the
trade secret issues determined in arbitration. In its request for arbitration
Agfa has, among other things, charged Presstek with breaches of the
Manufacturing Agreement, good faith and fair dealing, and is seeking damages in
an amount alleged to be $2,000,000. The action commenced by the Company in
District Court has been stayed to allow the arbitrators to determine the issues
in dispute between the parties.
The Company has vigorously pursued its claims against Agfa and intends to
vigorously contest Agfa's assertions of breach of the Manufacturing Agreement
and other claims. Although the Company and its counsel believes that an
unfavorable outcome of the litigation and arbitration is unlikely, there can be
no assurance as to the outcome of the proceedings.
The Company has been advised that the Securities and Exchange Commission
(the "Commission") has entered a formal order of private investigation with
respect to certain activities by certain unnamed persons and entities in
connection with the securities of the Company. In that connection, the Company
has received subpoenas duces tecum requesting it to produce certain documents
and has complied with the requests. The Company has not been advised by the
Staff of the Commission that the Staff intends to recommend to the Commission
that it initiate a proceeding against the Company in connection with the
foregoing investigation.
F-21
12. SUBSEQUENT EVENTS
During February, 1996, the Company completed private placements of an
aggregate of 282,846 shares of its common stock for net proceeds of $20,208,758
to a limited number of domestic individual and institutional investors.
A portion of the funds raised from the private placements were utilized to
complete the acquisition referred to below, with the balance to be utilized for
general working capital purposes.
On February 15, 1996, the Company acquired 90% of the outstanding common
stock (the "Purchased Shares") of Catalina Coatings, Inc., an Arizona
corporation ("Catalina"). Catalina is engaged in the development, manufacture
and sale of vacuum deposition coating equipment and the licensing and
sublicensing of patent rights with respect to vapor deposition process to coat
moving webs of material at high rates. The Company intends to continue the
business of Catalina which will operate as a subsidiary of the Company. The
Purchased Shares were acquired from the selling shareholders pursuant to a Stock
Purchase Agreement (the "Stock Purchase Agreement") dated and effective as of
January 1, 1996. The aggregate consideration paid by the Company pursuant to the
Stock Purchase Agreement was $8,400,000, of which $8,200,000 represented the
purchase price of the Purchased Shares and $200,000 represented consideration
for the non-competition and confidentiality covenants of the selling
shareholders.
Simultaneous with the closing of the acquisition, the Company entered into
a Put and Call Option Agreement (the "Option Agreement") which provides the
Company with the right, at any time after February 15, 2000, to acquire the
remaining 10% of the outstanding common stock of Catalina for aggregate
consideration of $2,000,000. The Option Agreement also provides the selling
shareholders and another employee of Catalina with the right, at any time after
August 15, 2000, to cause the Company to purchase the remaining shares for
aggregate consideration of $1,000,000. The Option Agreement will terminate if
Catalina consummates an initial public offering of its securities prior to
February 15, 2000.
The Company granted the Selling Shareholders and the other employee of
Catalina five-year non-qualified options to purchase an aggregate 100,000 of the
Company's common stock at an exercise price of $89.50 per share and Catalina
granted to the same individuals an option to purchase an aggregate 5% of the
issued and outstanding common stock of Catalina in the event that a registration
statement relating to an initial public offering of Catalina common stock is
declared effective by February 15, 2000.
F-22
PRESSTEK, INC.
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
Charged to
Balance at Charged to Other Changes Balance
Beginning Costs and Account - Add (Deduct) - at End
Year Description of Year Expenses Describe Describe of Year
- ---- ----------- ---------- ---------- ---------- ------------- --------
1993 Warranty reserve $ 70,000 $ 20,000 $ - $(12,556) (1) $ 77,444
======= ======= ======= ======= =======
Equipment replacement
reserve - 495,880 - (94,900) (2) 400,980
======= ======= ======= ======= =======
1994 Warranty reserve 77,444 215,000 - (93,360) (1) 199,084
======= ======= ======= ======= =======
Equipment replacement
reserve 400,980 - - (373,230) (2) 27,750
======= ======= ======= ======= =======
1995 Warranty reserve 199,084 467,500 - (65,370) (1) 601,214
======= ======= ======= ======= =======
Equipment replacement
reserve 27,750 291,240 - (27,750) (2) 291,240
======= ======= ======= ======= =======
- ----------
(1) Warranty expenditures
(2) Equipment replacement expenditures
FS-1
EXHIBIT INDEX
Exhibit No. Description Page No.
2(a) Stock Purchase Agreement dated and effective as of
January 1, 1996, among the Company and David G.
Shaw, Marc G. Langlois and David G. Shaw and Lynn
R. Shaw, as Trustees of the David and Lynn Shaw
Charitable Remainder Unitrust, dated February 12,
1996 and John E. Madocks and Catalina. **
2(b) Put and Call Option Agreement by and among the
Company, David G. Shaw, Marc G. Langlois and John
E. Madocks. **
2(c) Confidentiality and Non-Competition Agreement by
and among the Company, David G. Shaw and Catalina.
**
2(d) Confidentiality and Non-Competition Agreement by
and among the Company, Marc G. Langlois and
Catalina. **
2(e) Confidentiality and Non-Competition Agreement by
and among the Company, John E. Madocks and
Catalina. **
2(f) Special Option Agreement, among the Company,
Catalina, David G. Shaw, Marc G. Langlois and John
E. Madocks. **
3(a)(1) Amended and Restated Certificate of Incorporation of the
Company, incorporated by reference to Exhibit 3(a)(1) of
Registration Statement 33-27112, effective March 28, 1989.
3(a)(2) Certificate of Amendment to the Amended and Restated
Certificate of Incorporation of the Company, incorporated by
reference to Exhibit 3(a)(2) of Registration Statement
33-27112, effective March 28, 1989.
3(a)(3) Certificate of Amendment to the Amended and
Restated Certificate of Incorporation of the
Company filed June 3, 1994.+
3(b) By-laws of the Company.
10(a) Employment Agreement dated August 23, 1988, by and
between the Company and Richard Williams, incorpo-
rated by reference to Exhibit 10(b) of Registra-
tion Statement 33-27112, effective March 28, 1989.
10(b) 1988 Stock Option Plan, incorporated by reference
to Exhibit 10(c) of Registration Statement 33-
27112, effective March 28, 1989.
42
Exhibit No. Description Page No.
10(c) 1988 Restricted Stock Purchase Plan, incorporated
by reference to Exhibit 10(d) of Registration
Statement 33-27112, effective March 28, 1989.
10(d) Confidentiality Agreement between the Company and
Heidelberger Druckmaschinen A.G., effective
December 7, 1989 as amended, incorporated by
reference to Exhibit 10(i) of the Company's Annual
Report on Form 10-K for the year ended December
31, 1989.
10(e) Development and Supply Agreement dated July 23,
1991, by and between the Company and Inx
Incorporated, incorporated by reference to the Company's
Quarterly Report on Form 10-Q for the Quarter Ended June 30,
1991.
10(f) Master Agreement effective January 1, 1991 by and
between Heidelberger Druckmaschinen
Aktiengesellschaft and the Company, incorporated
by reference to the Company's Form 8-K, dated
January 1, 1991.
10(g) Technology License effective January 1, 1991 by
and between Heidelberger Druckmaschinen
Aktiengesellschaft and the Company, incorporated
by reference to the Company's Form 8-K, dated
January 1, 1991.
10(h) Supply Agreement effective January 1, 1991 by and
between Heidelberger Druckmaschinen
Aktiengesellschaft and the Company, incorporated
by reference to the Company's Form 8-K, dated
January 1, 1991.
10(i) Memorandum of Performance No. 3 dated April 27,
1993 to the Master Agreement, Technology License,
and Supply Agreement between the Company and
Heidelberger Druckmaschinen Aktiengesellschaft,
incorporated by reference to the Company's
Quarterly Report on Form 10-Q for the Quarter
Ended June 30, 1993.
10(j) Modification to Memorandum of Performance No. 3
dated April 27, 1993 to the Master Agreement,
Technology License, and Supply Agreement between
the Company and Heidelberger Druckmaschinen
Aktiengesellschaft.+
43
Exhibit No. Description Page No.
10(k) Memorandum of Performance No. 4 dated November
9, 1995 to the Master Agreement and Technology
License and Supply Agreement between the Comapany
and Heidelberger Druckmaschinen
Aktiengesellschaft.
10(l) Lease dated as of September 10, 1987, relating to
real property located at 8 Commercial Street,
Hudson, New Hampshire, incorporated by reference
to Exhibit 10(e) of Registration Statement 33-
27112, effective March 28, 1989.
10(m) Amendment to Lease relating to real property
located at 8 Commercial Street, Hudson, New
Hampshire, incorporated by reference to Exhibit
10(k) of the Company's Annual Report on Form 10-K
for the year ended December 31, 1989.
10(n) Third Amendment to Lease, dated September 15,
1990, relating to real property located at 8
Commercial Street, Hudson, New Hampshire,
incorporated by reference to Exhibit 10(o) of the
Company's Annual Report on Form 10-K for the year
ended December 31, 1990.
10(o) Fourth Amendment to Lease, dated as of March 16,
1993, relating to real property located at 8
Commercial Street, Hudson, New Hampshire,
Incorporated by reference to Exhibit 10(m) of the
Company's Annual Report on Form 10-K for the year
ended December 31, 1993.
10(p) Development and Supply Agreement dated November
13, 1991 by and between the Company and Gans Ink &
Supply Co., Inc.*
10(q) Amendment to Employment Agreement between the
Company and Richard Williams.*
10(r) 1991 Stock Option Plan.*
10(s) 1994 Stock Option Plan.+
10(t) Non Employee Director Stock Option Plan.+
10(u) Lease dated as of May 9, 1994, as amended,
relating to facilities located at 9 Commercial
Street, Hudson, New Hampshire.+
23(a) Consent of BDO Seidman LLP.
23(b) Consent of Deloitte & Touche LLP.
27 Financial Data Schedule
- -------------
* Incorporated by reference to the Company's Annual report on Form 10-K for
the year ended December 31, 1991.
** Incorporated by reference to the exhibit filed with the Company's Form 8-K
for the event dated February 15, 1996.
+ Incorporated by reference to the exhibit of the corresponding number
continued under Company's Annual report on Form 10-K for the year ended
December 31, 1994
44