SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
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CURRENT REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report: December 18, 1995
Commission File Number 0-11518
PPT VISION, INC.
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(Exact name of registrant as specified in its charter)
MINNESOTA 41-1413345
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(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
10321 West 70th Street Eden Prairie, Minnesota 55344
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(Address of principal executive offices) (Zip Code)
(612) 996-9500
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(Registrant's telephone number including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 of 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 last 90 days. Yes X No
Total pages this report: 16
Page: 1
Page-1
INDEX
PPT VISION, INC.
Page
----
Items 1, 2, 3, 4, 6, 8, and 9 are not applicable and therefore are omitted.
Item 5. Other Events
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The Company is filing with this Form 8-K its audited financial statements for
the year ended October 31, 1995.
Item 7. Financial Statements and Exhibits
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Exhibit 1: Audited Financial Statements for the Year 3
Ended October 31, 1995, Including the
Report of Independent Accountants
Exhibit 27: Financial Data Schedule 16
Signatures 15
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Page 2
EXHIBIT 1: AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED
OCTOBER 31, 1995, INCLUDING THE REPORT OF INDEPENDENT ACCOUNTANTS
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REPORT OF INDEPENDENT ACCOUNTANTS
November 22, 1995
To the Shareholders and Board of Directors of PPT VISION, Inc.
In our opinion, the accompanying balance sheet and the related statements of
operations, cash flows, and shareholders' equity present fairly, in all material
respects, the financial position of PPT VISION, Inc. (formerly Pattern
Processing Technologies, Inc.) at October 31, 1995 and 1994, and the results of
its operations and cash flows for each of the three fiscal years in the period
ended October 31, 1995 in conformity with the generally accepted accounting
principles. 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 of these statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
/s/Price Waterhouse LLP
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Price Waterhouse LLP
Page 3
<TABLE>
BALANCE SHEET
October 31
1995 1994
<S> <C> <C>
ASSETS
Current Assets:
Cash and Cash Equivalents $1,234,890 $1,092,186
Accounts Receivable, Net 2,686,862 1,937,657
Inventories, Net 942,861 784,604
Other Current Assets 47,832 40,177
Total Current Assets $4,912,445 $3,854,624
Restricted Cash 212,792 212,792
Other Assets 64,348 65,429
Furniture, Fixtures & Equipment, Net 501,085 315,933
Deferred Income Tax Benefit 407,000 -
Total Assets $6,097,670 $4,448,778
LIABILITIES & SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts Payable $564,151 $461,954
Commissions Payable 54,440 43,054
Accrued Expenses 162,282 96,878
Total Current Liabilities $780,873 $601,886
Commitments and Contingencies
Deferred Rent 171,921 128,350
Shareholders' Equity:
Preferred Stock: Authorized 10,000,000 Shares;
Issued and Outstanding 0 and 87,499 - 255,952
Common Stock $.10 Par Value;
Authorized 10,000,000 Shares;
Issued and Outstanding 2,385,860 and 2,293,714 238,586 229,371
Capital in Excess of Par Value 11,787,237 11,461,135
Accumulated Deficit (6,880,947) (8,227,916)
Total Shareholders' Equity $5,144,876 $3,718,542
Total Liabilities and Shareholders' Equity $6,097,670 $4,448,778
Page 4
</TABLE>
<TABLE>
STATEMENT OF OPERATIONS
Year Ended October 31
1995 1994 1993
<S> <C> <C> <C>
Net Revenues $9,749,589 $6,587,245 $5,935,173
Cost of Sales 4,441,673 3,026,107 2,538,621
Gross Margin 5,307,916 3,561,138 3,396,552
Expenses:
Selling 2,279,041 1,969,909 1,575,824
General and Administrative 850,765 711,222 550,341
Research and Development 1,299,050 1,133,182 831,045
Total Expenses 4,428,856 3,814,313 2,957,210
Income (Loss) from Operations 879,060 (253,175) 439,342
Interest Income 61,342 39,328 14,395
Interest Expense (1,933 (361) -
Other Income (Expense) 1,500 1,506 (18,508)
Net Income (Loss) before Taxes 939,969 (212,702) 435,229
Income Tax Benefit 407,000 - -
Net Income (Loss) $1,346,969 $(212,702) $435,229
Per Share Data:
Weighted Average Common Shares
Outstanding 2,433,014 2,303,439 2,157,449
Net Income (Loss) per Share $0.55 $(0.09) $0.20
Page 5
</TABLE>
<TABLE>
STATEMENT OF CASH FLOWS
Year Ended October 31
1995 1994 1993
<S> <C> <C> <C>
Net Income (Loss) $1,346,969 $(212,702) $435,229
Adjustment to Reconcile Net Income (Loss)
to Net Cash Provided by Operating Activities:
Depreciation and Amortization 165,386 131,406 114,930
Deferred Rent 43,571 128,350 -
Deferred Income Tax Benefit (407,000) - -
Change in Assets and Liabilities:
Accounts Receivables (749,205) (72,003) (888,717)
Inventories (158,257) 8,522 (187,954)
Other Assets (7,869) 5,252 16,388
Restricted Cash - (212,792) -
Accounts Payable 102,197 31,176 28,832
Commissions Payable 11,386 (6,346) 29,766
Accrued Expenses 65,404 (44,529) 25,587
Total Adjustments (934,387) (30,964) (861,168)
Net Cash Provided (Used) by Operating Activities 412,582 (243,666) (425,939)
Cash Flows From Investing Activities:
Capital Acquisitions (349,243) (193,880) (83,755)
Net Cash Used by Investing Activities (349,243) (193,880) (83,755)
Cash Flows from Financing Activities:
Proceeds from Issuance of Common Stock 79,365 547,482 1,115,715
Net Cash Provided by Financing Activities 79,365 547,482 1,115,715
Net Increase in Cash and Cash Equivalents 142,704 109,936 606,021
Cash and Cash Equivalents at Beginning of Year 1,092,186 982,250 376,229
Cash and Cash Equivalents at End of Year $1,234,890 $1,092,186 $982,250
Page 6
</TABLE>
<TABLE>
STATEMENT OF SHAREHOLDERS' EQUITY
Capital in Excess Accumulated
Common Shares Common Stock of Par Value Preferred Shares Preferred Stock (Deficit)
<S> <C> <C> <C>
October 31, 1992 1,754,394 $175,439 $9,632,480 162,499 $475,342 $(8,450,443)
Stock Issued through the
Exercise of Stock Options 22,066 2,207 15,586
Stock Issued through the
Employee Stock Purchase Plan 14,562 1,456 44,851
Stock Issued through
Conversion of Preferred Shares 28,571 2,857 192,157 (66,667) (195,014)
Stock Issued through Private
Placement (Net of Issue Costs) 330,000 33,000 1,018,615
Net Income 435,229
October 31, 1993 2,149,593 214,959 10,903,689 95,832 280,328 (8,015,214)
Stock Issued through the
Exercise of Stock Options 43,162 4,316 34,553
Stock Issued through the
Employee Stock Purchase Plan 17,388 1,739 68,509
Stock Issued through
Conversion of Preferred Shares 3,571 357 24,019 (8,333) (24,376)
Stock Issued through Private
Placement (Net of Issue Costs) 80,000 8,000 430,365
Net Loss (212,702)
October 31, 1994 2,293,714 229,371 11,461,135 87,499 255,952 (8,227,916)
Stock Issued through the
Exercise of Stock Options 43,580 4,358 38,600
Stock Issued through the
Employee Stock Purchase Plan 11,066 1,107 35,300
Stock Issued through
Conversion of Preferred Shares 37,500 3,750 252,202 (87,499) (255,952)
Net Income 1,346,969
October 31, 1995 2,385,860 $238,586 $11,787,237 - $- $(6,880,947)
Page 7
</TABLE>
NOTES TO FINANCIAL STATEMENTS
Note 1:
Organization and Operations
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The Company designs, manufactures, markets and integrates machine vision-
based automated inspection systems. The systems are used to improve
productivity and quality by automating inspection tasks in manufacturing
applications such as assembly verification, flaw detection, character
verification or measurement tasks.
In March 1995, the Company's shareholders approved a change in the Company's
name to PPT VISION, Inc. The Company was formerly known as Pattern Processing
Technologies, Inc.
Note 2:
Summary of Significant Accounting Policies
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Accounts Receivable
Accounts receivable are shown net of allowance for doubtful accounts of
$35,000 at October 31, 1995 and $55,000 at October 31, 1994.
Inventories
Inventories are stated at the lower of cost or market, with costs determined
on a first-in, first-out (FIFO) basis. As of October 31, 1995 and 1994
inventories consist of the following:
1995 1994
Manufactured and
Purchased Parts $680,919 $493,567
Work-In-Process 214,410 230,924
Finished Goods 47,532 60,113
Totals $942,861 $784,604
Other Assets and Amortization
Other Assets at October 31, 1995 and 1994 consist of the following:
1995 1994
Patent and
Trademark $70,515 $63,307
Security Deposits 192 7,187
Investment in
Related Party 52,500 52,500
123,207 122,994
Less Accumulated
Amortization (58,859) (57,565)
Total other assets $64,348 $65,429
The investment in a related party represents common stock the Company intends to
hold as an investment and is recorded at cost. During 1994, the Company adopted
Statement of Financial Accounting Standards (SFAS) No. 115, "Accounting for
Page 8
Certain Investments in Debt and Equity Securities" (SFAS). No. 115 requires
certain investments in debt and equity securities to be recorded at fair market
value. The adjustment to market value as of October 31, 1995 and 1994 was not
made due to the immaterial amount. Patent and trademark costs are amortized
over 60 months.
Fixed Assets and Depreciation
Furniture, fixtures and equipment are stated at cost net of accumulated
depreciation. Depreciation is computed for book purposes on a straight-line
basis over the estimated useful life of the asset and for tax purposes over five
and ten years using accelerated and straight-line methods. At October 31
furniture, fixtures and equipment consisted of the following:
1995 1994
Equipment $1,743,291 $1,412,187
Furniture and
fixtures 234,967 231,584
1,978,258 1,643,771
Accumulated
depreciation (1,477,173) (1,327,838)
Total $501,085 $315,933
Revenue Recognition
The Company records sales revenue based on shipment to the customer.
Research and Development
Expenditures for research and development are expensed as incurred.
Income Taxes
Income taxes are provided on the liability method. Under the liability
method, deferred income taxes are provided on the difference in basis of assets
and liabilities between financial reporting and tax returns using expected tax
rates.
Income (Loss) Per Share
Income per share computations are based on the weighted average number of
common shares and common share equivalents outstanding during the year. Common
share equivalents consist of convertible preferred stock, options and warrants
outstanding during the year.
Cash Flows
For purposes of reporting cash flows, cash and cash equivalents include cash
on hand and investments with original maturities of three months or less.
Non-cash transactions in 1995 consist of $255,952 related to the conversion
of 87,499 preferred shares into 37,500 shares of common stock and $37,514
related to the transfer of long-term assets to inventory. In 1994 non-cash
transactions consist of $24,376 related to the conversion of 8,333 preferred
shares into 3,571 shares of common stock and $15,345 related to the transfer of
long-term assets to inventory. In 1993 non-cash transactions consist of $16,093
related to the transfer of long-term assets to inventory.
Page 9
Note 3:
Customer Information
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Significant Customer Information
During 1995, revenue from one customer accounted for 17% of net revenues.
During 1994 and 1993, revenue from another customer accounted for 10% and 18% of
net revenues respectively.
Customer Geographic Data
North American and export sales as a percentage of net revenues in 1995 and
1994 is as follows:
1995 1994 1993
North 67% 73% 87%
America
Europe 21% 24% 10%
Far East 12% 3% 3%
Note 4:
Accrued Expenses
Accrued liabilities at October 31, 1995 and 1994 include:
1995 1994
Vacation $30,152 $30,152
Employee Stock Purchase
Plan Payroll Deductions 33,053 33,813
Compensation Accrual 68,257
Other 30,820 32,913
Total $162,282 $96,878
Note 5:
Common Stock Options and Warrants
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Under the Company's 1988 Stock Option Plan the Company may issue up to
400,000 shares of common stock to employees and directors. Options are granted
at prices equal to the average of the bid and ask prices on the date of the
grant. The granting of options and their vesting is within the discretion of
the Company's Board of Directors.
Page 10
A summary of stock options issued and outstanding under the 1988 Stock Option
Plan is as follows:
Number of Shares
------------------
Employee Director
Options Options
Balance at
October 31, 1992 156,565 18,300
Granted 38,500 2,000
Exercised (22,066) (8,000)
Balance at
October 31, 1993 173,002 12,300
Granted 47,500 26,000
Exercised (43,162) 0
Forfeited (975) 0
Balance at
October 31, 1994 176,365 38,300
Granted 14,750 0
Exercised (42,580) (1,000)
Forfeited (3,125) 0
Balance at
October 31, 1995 145,410 37,300
As of October 31, 1995:
Price Range of Outstanding Options
$1.50- $2.50-
Options $9.50 $6.00
Expiration
Dates 1996-2000 1996-1999
Options
Exercisable 109,385 19,450
During the year ended October 31, 1995, stock options were exercised at
prices of $0.66 to $5.38 per share under the Employee Stock Option Plan.
In April of 1993, the Company issued a warrant to purchase 33,000 shares of
common stock with an exercise price of $3.75 and an expiration date of April of
1996.
Note 6:
Preferred Stock
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In 1985, the Company issued a total of 166,666 shares of Series 1985
Convertible Preferred shares ("Series 1985 Shares"). Prior to September 1995,
holders of 79,167 Series 1985 Shares converted their shares to common stock.
The Company called the remaining 87,499 outstanding Series 1985 Shares for
redemption effective September 11, 1995, subject to the holders' rights to
convert their Shares to common stock prior to the effective time of redemption.
Each of the holders of the remaining outstanding Series 1985 Shares converted
the shares prior to the effective time of the redemption and the Company issued
a total of 37,500 shares of common stock upon the conversion. Accordingly,
effective as of September 11, 1995, all the Company's Series 1985 Shares have
been converted to common stock and any future obligations of the Company to
redeem the Series of 1985 Shares or to pay dividends with respect to the Series
1985 Shares have been eliminated.
Page 11
Note 7:
Stock Offerings
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In February of 1994, the Company completed a private equity placement,
issuing 80,000 shares of common stock at $5.50 per share, that raised $438,365
net of offering costs of $1,635.
Note 8:
Employee Stock Purchase Plan
- ----------------------------
In March 1995 shareholders approved the adoption of the 1995 Employee Stock
Purchase Plan to replace the 1990 Employee Stock Purchase Plan which expired in
1995. Under the terms of the 1995 Purchase Plan, 150,000 shares have been
reserved for issuance under the Plan.
The first phase of the Plan began on June 1, 1995 and employees were granted
the right to purchase 19,950 shares at $3.29 per share under the Plan.
Phase five of the 1990 Plan ended on May 31, 1995 and employees purchased
11,066 shares at $3.29 per share.
Note 9:
Commitments & Contingencies
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Rental expense under operating leases was $163,100, $162,823 and $97,960 in
1995, 1994 and 1993 respectively. Minimum future rental payments due under
noncancelable operating lease agreements are as follows:
1996 $156,048
1997 179,688
1998 184,416
1999 189,198
Thereafter 262,436
Total $971,786
Letter of Credit
During 1994 the Company obtained a standby letter of credit for a security
deposit related to the Company's building lease. The letter of credit is
secured by the restricted cash balance of $212,792. Beginning in June 1996 the
restricted cash balance begins to decrease on a dollar for dollar basis with
cash base rental payments through August 1997.
Note 10:
Employee Saving Plan
- --------------------
The Company provides a supplementary retirement savings plan which is
structured in accordance with Section 401(k) of the Internal Revenue Code.
Employees eligible for the Plan may contribute from one to fifteen percent of
their monthly earnings on a pre-tax basis subject to annual contribution
limitations. The Company makes matching contributions of fifty cents for each
dollar contributed by each Plan participant up to a maximum of $750 annually.
The Company's contributions under this program were approximately $30,876,
$26,407 and $14,620 for the years ended October 31, 1995, 1994 and 1993
respectively.
Page 12
Note 11:
Income Taxes
- ------------
No current tax provisions were recorded in the fiscal years ended October 31,
1995 and 1994 due to the utilization of net operating loss (NOL) carry forwards.
The deferred tax provisions of approximately $36,000 and $60,000 for the years
ended October 31, 1995 and 1994, respectively, are negated by reductions in the
FAS 109 valuation allowances.
At October 31, 1995, the Company has approximately $6.6 million of combined
loss carry forwards and net deductible temporary differences available to offset
taxable income in future periods. The $6.6 million of future tax deduction is
comprised of net operating loss carry forwards for tax return purposes of
approximately $5.9 million (expiring in fiscal 1999 to 2009) and net deductible
temporary differences available to offset taxable income in future periods of
approximately $700,000. The Company also has approximately $340,000 of research
and development tax credit carry forwards which generally expire over the same
time period. At existing tax rates, the future tax benefit approximates $2.6
million for financial statement purposes.
The utilization of the carry forwards and net deductible temporary
differences to offset future tax liabilities is dependent upon the Company's
ability to generate sufficient taxable income during the carry forward periods.
The carry forwards are also subject to certain annual limitations pursuant to
IRS Code Section 382. A valuation allowance was established for the entire net
tax benefit associated with all carry forwards and temporary differences at
October 31, 1994. At October 31, 1995, a reduction to the valuation allowance
was recorded because future realization of a portion of this benefit is
expected.
An analysis of the effective rate on earnings and a reconciliation of the
expected federal statutory rate for the years ended October 31, 1995, and 1994
is as follows:
1995 1994
Expected tax provision
at statutory rate $320,000 ($72,000)
State income tax
provision, net of
federal tax effect 56,000 (13,000)
Research and
Development Credit 17,000 17,000
Increase/(Utilization)
of net operating loss
carry forward (397,000) 66,000
(Reduction) of
valuation allowance (407,000)
Other 4,000 2,000
Total ($407,000) $0
Page 13
Deferred tax assets (liabilities) are comprised of the following at
October 31:
1995 1994
Depreciation $102,000 $90,000
Deferred Rent 69,000 51,000
Other 94,000 88,000
Net Operating
Loss Carry
forwards 2,361,000 2,794,000
Valuation
Allowance (2,219,000) (3,023,000)
Net deferred
tax asset $407,000 $0
Page 14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on behalf of the undersigned
duly authorized.
PPT VISION, INC.
Date: December 18, 1995
/s/Thomas R. Northenscold
------------------------------
Thomas R. Northenscold
Chief Financial Officer
Page 15
EXHIBIT 27: FINANCIAL DATA SCHEDULE
------------------------------------
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> OCT-31-1995
<CASH> 1234890
<SECURITIES> 0
<RECEIVABLES> 2721862
<ALLOWANCES> (35000)
<INVENTORY> 942861
<CURRENT-ASSETS> 4912445
<PP&E> 1978258
<DEPRECIATION> 1477173
<TOTAL-ASSETS> 6097670
<CURRENT-LIABILITIES> 780873
<BONDS> 0
<COMMON> 12025823
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 6097670
<SALES> 9749589
<TOTAL-REVENUES> 9749589
<CGS> 4441673
<TOTAL-COSTS> 8870529
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 68630
<INTEREST-EXPENSE> 1933
<INCOME-PRETAX> 939969
<INCOME-TAX> (407000)
<INCOME-CONTINUING> 1346969
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1346969
<EPS-PRIMARY> 0.554
<EPS-DILUTED> 0.557
</TABLE>
