SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
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(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the fiscal year ended October 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the Transition period from to
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 or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
10321 West 70th Street
Eden Prairie, MN 55344
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(Address of principal executive offices and zip code)
Registrant's telephone number, including area code: (612) 995-9500
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock ($.10
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. ( )
As of January 7, 1997, assuming as market value the closing sale price of
$8.375 as reported by the NASDAQ System on that date, the aggregate market value
of shares of Common Stock held by non-affiliates was $34.9 million.
As of January 7, 1997, 5,360,682 shares of common stock, $.10 par value were
outstanding.
Documents Incorporated by Reference: The Company's Proxy Statement for its
Annual Meeting of Shareholders to be held March 5, 1997 is incorporated by
reference into Part III of this Form 10-K.
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TABLE OF CONTENTS
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PART I Page
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Item 1. Business.............................................. 3
Executive Officers of the Company.................. 14
Item 2. Properties............................................ 15
Item 3. Legal Proceedings..................................... 15
Item 4. Submission of Matters for a
Vote of Security Holders........................... 15
PART II
Item 5. Market for Registrant's Common
Equity and Related Stockholder Matters............. 16
Item 6. Selected Financial Data............................... 17
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations................ 19
Item 8. Financial Statements and Supplementary Data........... 21
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure................ 21
PART III
Item 10. Directors and Executive Officers of the Registrant.... 23
Item 11. Executive Compensation................................ 23
Item 12. Security Ownership of Certain
Beneficial Owners and Management................... 23
Item 13. Certain Relationships and Related Transactions........ 23
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K........................................ 24
Signatures...................................................... 26
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BUSINESS
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OVERVIEW
PPT VISION is a leading designer, manufacturer, marketer and integrator of a
complete family of machine vision systems for end user manufacturers, system
integrators and machine builders. The Company's machine vision systems consist
of a combination of proprietary computer software and hardware, cameras and
lighting, working together to capture and analyze images of moving parts to
determine the quality of manufactured parts and control manufacturing
processes. PPT VISION's systems enable manufacturers to achieve 100% on-line
inspection, thus achieving zero defect production, in situations where
previously only random sampling or less precise human inspection was used as a
means of monitoring quality. In addition to functioning as a quality control
tool, PPT VISION systems provide manufacturers a window on their manufacturing
processes by producing real-time statistical process control feedback. This
allows manufacturers to take earlier corrective action to improve their
manufacturing process.
The Company's machine vision systems are used for a broad range of
manufacturing applications, including electronic and mechanical assembly
verification, verification of printed characters, packaging integrity, surface
flaw detection and gauging and measurement tasks. The Company's systems are
sold principally throughout North America, Europe and the Far East to various
industries, including electronics, pharmaceutical, medical, automotive,
consumer products and plastics. Major manufacturing end users of PPT VISION
systems include AMP, Abbott Labs, Berg Electronics, Chrysler, the Delphi
Electronic Division of General Motors, Imation, Johnson & Johnson, Kemet,
Molex, Siemens and 3M.
PPT VISION believes that it has a leadership position as the most vertically
integrated developer of machine vision systems and solutions for a wide range
of manufacturing applications. Through this approach, PPT VISION can rapidly
and cost-effectively provide machine vision system solutions to a wide variety
of manufacturing end users while enabling them to concentrate their engineering
and manufacturing expertise on the products they manufacture. PPT VISION's
library of machine vision software tools enables end users to implement machine
vision solutions to a growing number of manufacturing applications quickly and
cost effectively.
BACKGROUND
A machine vision system consists of computer software and hardware, working
together with cameras and lighting, to perform image analysis and image
processing for automated inspection, measurement and identification functions
in the manufacturing process. Commercial use of machine vision technology for
manufacturing quality control began to emerge in the early 1980s. However,
machine vision systems at that time were complex to program and maintain,
difficult to install, limited in performance and not cost effective. Through
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advances in microprocessor and software technologies, these barriers have been
removed, enabling machine vision to emerge as a powerful process control
technology that allows manufacturers to improve quality and increase
productivity.
The machine vision market is large and highly fragmented. The Automated
Imaging Association ("AIA") estimates that the North American market for machine
vision systems in 1995 was approximately $900 million, with worldwide levels
estimated at approximately $2.3 billion. The AIA expects this market to grow at
approximately 15% per year through the year 2000. According to the AIA, over 70%
of the estimated 200 companies in the North American machine vision market have
less than $5 million in annual revenues. Demand for machine vision systems comes
from end user manufacturers who apply these systems as an integral part of their
manufacturing process, OEMs who incorporate machine vision systems into their
products, systems integrators and machine builders. The AIA estimates that a
substantial majority of the North American market for machine vision systems
consists of sales to end user manufacturers.
A key factor in the expansion of the machine vision market is the growth in
the demand for machine vision systems in the semiconductor and electronics
industries. The growth in demand for personal computers, cellular
communications and other electronic devices, as well as the increase in
electronic components inside other products such as consumer appliances and
automobiles, is stimulating demand for electronic and semiconductor components.
In an effort to rapidly ramp up manufacturing capability while at the same time
introducing innovative new designs and improving quality, manufacturers of
these components are increasingly turning to machine vision as a vital part of
their manufacturing process.
The growth of the end user machine vision market is also being driven by
global competitive trends, which have led manufacturers worldwide to
dramatically redesign manufacturing processes in order to reduce cost and
increase productivity and quality. In order to meet today's manufacturing
quality requirements, statistical sampling methods are insufficient and 100%
on-line inspection is required. To accomplish these objectives, manufacturers
are increasingly adopting machine vision solutions.
Manufacturers are demanding expanded capabilities from machine vision
systems, including faster processing capabilities and greater ease of use.
Manufacturers are also demanding more comprehensive services from machine
vision providers, including application engineering, technical support and
training. Furthermore, manufacturers are seeking the ability to monitor trends,
to better comprehend the manufacturing process and to identify problems. In
addition, manufacturers are being challenged to maintain high production levels
which require rapid set up times, flexibility and seamless networking with the
host manufacturing control system to provide comprehensive diagnostic and
process control feedback.
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THE PPT VISION SOLUTION
The Company's machine vision systems are primarily targeted at providing
manufacturers with 100% on-line inspection in high speed discrete part
manufacturing applications. This typically replaces older off-line random
sampling techniques or human vision inspection techniques as a means of
monitoring quality, thus enabling manufacturers to achieve zero defect
production.
PPT VISION's family of machine vision systems which include its proprietary
VPM graphical programming software provide significant performance advantages
that meet manufacturers' critical requirements. These requirements include high
speed, flexibility, ease-of-use, networkability and statistical feedback, all
without sacrificing performance. All PPT VISION systems are supported by the
Company's focus on providing its customers with complete solutions, not just
components, and a major commitment to providing its customers with value-added
application engineering services.
PPT VISION has developed products which have specific advantages in terms of
speed and ease-of-use. The Company's machine vision systems are capable of
operating speeds of over 12,000 parts per minute performing 100% on-line
inspection. This speed is critical to successfully employing machine vision in
many applications. PPT VISION also pioneered the use of an icon-based visual
programming system (VPM) operating in the Microsoft(R) Windows(TM) environment.
Users are able to program the Company's systems by creating a flowchart of
icons linked together rather than having to write a computer program in a
programming language such as C or using a complex, pull-down menu-based system.
This results in lower cost and time for implementation.
The Company is pursuing what it believes is the most fully vertically
integrated business model in the machine vision industry. PPT VISION develops
its own image acquisition and processing hardware, image analysis software,
application specific software tools and general purpose graphical user
interface. The Company also provides lighting solutions and value-added
application engineering services on a direct basis to manufacturers. These
capabilities enable PPT VISION to provide its customers with (i) application
specific software tools (such as the Connector Tool used for
inspection of fully assembled electronic connectors), (ii) complete
application specific products (such as the Stampede providing high speed
inspection for precision metal stamping applications), and (iii) complete
custom solutions. This strategy enables PPT VISION to leverage its investment
in core software and hardware architectures while providing improved service
for the end user manufacturing customers. In addition, PPT VISION markets its
vision systems to manufacturing system integrators and machine builders who
address the end user market with unique expertise in specific vertical
markets. Many system integrators and machine builders prefer to use the
Company's complete vision systems, which enable them to reduce programming
development time, save money and concentrate their expertise on material
handling and integration issues. The Company believes that this business model
gives it a decisive competitive advantage in providing cost effective,
complete solutions to the end user machine vision market.
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PPT VISION STRATEGY
The Company's objective is to be a worldwide leader in the design,
manufacture, marketing and integration of machine vision systems for automated
manufacturing applications in the end user machine vision market. Through the
successful integration of the Company's five core competencies, including
image acquisition, image processing, application development software, optics
and illumination and vision system integration, the Company believes it will
be able to meet its objective and successfully implement its strategy.
Key elements of the Company's strategy include:
* Provide Complete Solutions to End Users: The Company focuses on providing
complete machine vision solutions to end user manufacturers, system
integrators and machine builders. PPT VISION is pursuing what it believes
to be the most fully vertically integrated business model in the
industry, including the design, manufacturing, marketing and integration
of complete machine vision solutions. The Company believes this provides
it with a competitive advantage in delivering cost effective complete
vision solutions.
* Extend Technology Leadership in Speed and Ease-of-Use: The Company is
continuing to aggressively invest in next generation software and
hardware architectures that will expand its lead in speed, ease-of-use
and the ability to deliver cost effective complete solutions to its
customers. New products currently in development will feature significant
enhancements in speed, accuracy and breadth of application through new
proprietary technology. Key software products will enable support for
different hardware and user interfaces, as well as increasing the
development speed of application specific software tools.
* Target Expanding Markets Through Continued Development of Application
Specific Software Tools: The Company's application specific software
tools are a proven solution for a wide variety of electronic component
inspection applications. In response to the worldwide expansion of the
semiconductor and electronics industries, the Company is developing
additional software tools for electronic component, electronics and
semiconductor applications. The Company also focuses considerable effort
on expanding the offerings of application specific software tools to the
industries it identifies as being poised to exhibit significant growth in
demand for machine vision solutions, such as pharmaceuticals, medical
devices, automotive and plastics.
* Provide a Superior Level of Value-Added Application Engineering Support:
The Company delivers a high level of value-added application engineering
support to its end user customers through its own in-house applications
engineering resources. Manufacturing end users increasingly want to
concentrate their engineering expertise on the products they manufacture,
not on engineering machine vision systems. They are seeking complete
machine vision solutions with the associated application engineering
support on an on-going basis.
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* Increase International Market Presence: The Company is aggressively
focusing on increasing its market share in the worldwide machine vision
market. The Company believes international
markets represent a significant opportunity and intends to capture a
significant share of this market through investment and expansion in its
international sales distribution and support infrastructure.
PRODUCTS
PPT VISION's systems consist of proprietary software and hardware working
together with cameras and lighting to capture and analyze images of parts on-
line. The four key process steps in the PPT VISION solution are lighting and
optics, image acquisition, image processing and outputs. In lighting and
optics, cameras, lenses and lighting options are configured to capture a high-
definition image of each part as it passes the camera. Image acquisition
involves capturing an image at extremely high rates of speed and preparing the
image for further processing. In image processing, the machine vision system
measures critical part features and compares algorithmically the digital image
to a preset standard that has been programmed into the system. The output
function typically involves sending the results of the inspection process to
the production line controller or the host manufacturing control system, as
well as providing real-time process control data which can be used to improve
the production process over time.
Software Operating System and Tools. All PPT VISION systems run on
proprietary software in a Microsoft(R) Windows(TM) environment using the
Company's VPM user interface. VPM is an icon-based, graphical language which
is easy to use and extremely flexible. It allows the Company's customers to
create complete inspection solutions with no training in computer programming
languages. Instead of writing a computer program in a programming language
such as C or using a complex, pull-down menu-based system, the vision system
is set up by creating visual flowcharts. Clicking the trackball, the user
graphically grabs icons (representing machine vision functions) out of system
toolboxes and arranges them in the workspace on the system monitor. The icons
are then connected with different colored lines to indicate execution and data
flow throughout the inspection routine.
Machine vision functions are performed by the Company's extensive set of
software tools. PPT VISION has developed a library of over 40 vision tools
contained in four toolboxes covering imaging, input/output ("I/O"), utility
and control functions. The Company's imaging toolbox contains all system tools
directly associated with image acquisition, processing and analysis. These
tools provide access to all of the Company's vision algorithms, which are the
vital core of all inspections performed by its vision systems. The I/O toolbox
holds all the tools which permit an inspection developer to control vision
system input and output options. These tools allow for system networking, data
collection and application control. The tools in the utility and control
toolboxes access functions such as counters, reset and display functions, math
and logical operations, data collection and screen controls. These toolboxes
also provide control of data flow to a variety of peripherals such as disk
drives, serial ports and Microsoft(R) Visual Basic(TM) programs.
Page 8
Hardware Architecture. PPT VISION's machine vision processor includes the
Company's proprietary high performance Framegrabber and Image Processor boards
with a Texas Instruments DSP (digital signal processor) and high speed
pipeline architecture along with an integrated PC for inspection set-up and
networking and fully integrated I/O capability. All PPT VISION systems are
capable of capturing full framed video images at a rate of up to 3,600 images
per minute, in both strobed and shuttered modes. Most competitors are limited
to capturing full frame images at 1,800 images per minute, which is the
industry standard. Much higher inspection rates are achieved through the use
of the Company's exclusive partial scanning technology and split-screen
imaging, which enables speeds of over 12,000 parts per minute.
PPT VISION Product Family. The Company's machine vision systems are the
Passport(R) 440, Passport(R) 240, and Scout(R). Each of these systems includes a
machine vision processor, a Super VGA touch-screen color monitor and VPM.
The Passport(R) 440 is the Company's top of the line product, designed to
operate with up to four asynchronously functioning cameras for multiple
inspection views and complex imaging tasks. The Passport(R) 240 has all of the
basic capabilities of the Passport(R) 440 in a two-camera model. Both systems
are housed in industrially rugged enclosures and are capable of operating at
speeds of over 12,000 inspections per minute. These systems are widely used in
the electronic connector, metal stamping and automotive components industries
that demand speed, accuracy and flexibility while maintaining industrial
ruggedness.
The Scout(R) is a cost-effective machine vision system designed for industrial
applications that do not require rugged enclosures. It is packaged in a non-
industrial desktop style enclosure and is capable of running two cameras with
similar speed and power to the Passport(R) 240.
In addition, the Company sells a broad range of peripheral services and
components, including applications engineering, installation and training
services, custom lighting solutions, fixturing, cameras, cabling and various
software options.
MARKETS AND CUSTOMERS
The Company sells its products to a broad range of industries, including
manufacturers of electronic components, pharmaceuticals, medical devices,
automotive components, consumer products and plastics. As of October 31, 1996,
the Company had sold 1,573 machine vision systems to over 200 customers since
inception. In the area of electronic components, eight of the ten largest
electronic connector manufacturers in the world have purchased PPT VISION
systems. These companies are included in the list shown below.
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The following is a representative list of end users of the Company's
products.
AMP ITT Cannon Philips
Abbott Labs Imation Reynolds Metals
Akso I-Stat Siemens
Allied Signal JST Sumitomo
Augat Japan Aviation Electronics Suzuki
Berg Electronics Johnson & Johnson Syntex
Chrysler Kemet Thomas & Betts
Framatome Molex 3M
Ford Motorola Toshiba
GM-Delphi Division Novo Nordisk United Technologies
Hewlett Packard Philip Morris Vishay
In each of the past several years, the Company has had one or more customers
that have accounted for ten percent or more of the Company's net revenues.
During the fiscal year ended October 31, 1996, sales to one customer, Simac
Masic B.V., a European distributor for the Company, represented 14% of net
revenues. Sales to another customer, Advantek, Inc., represented 12% of net
revenues during fiscal 1996. The loss of, or significant curtailment of
purchases by, any of the Company's principal customers could have a material
adverse effect on the Company's results of operations.
SALES, MARKETING AND CUSTOMER SUPPORT
The Company sells its products primarily on a direct basis in the United
States to end users, system integrators and machine builders. Outside the
United States, the Company sells primarily through a network of five
distributors covering Europe, Singapore, Taiwan, Korea and Japan. The Company
markets its products through appearances at industry trade shows, advertising
in industry journals, articles published in industry and technical journals and
through direct-selling in specific vertical markets. In addition, the Company's
strong customer relationships serve as valuable references.
The Company focuses on delivering a high level of value-added applications
engineering support to its end user customers through its own in-house
applications engineering resources. The Company also provides extensive
training opportunities for its customers, either at the Company's facilities or
on-site at the customer's facilities.
The Company's sales and applications engineering departments are structured
along a team concept, with each team having dedicated sales and applications
engineering resources. The Company believes this team approach provides it with
increased flexibility in responding to customers' needs.
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The following table sets forth the percentage of the Company's net revenues
(including sales delivered through international distributors) by geographic
location during the past three years:
<TABLE>
YEAR ENDED
OCTOBER 31,
--------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
North America.............................. 73% 67% 73%
Europe..................................... 14% 21% 24%
Far East................................... 13% 12% 3%
</TABLE>
Substantially all of the Company's export sales are negotiated, invoiced and
paid in United States dollars.
BACKLOG
The Company does not believe backlog is a key indicator of future revenues in
the end user machine vision market. PPT VISION products are typically shipped
within 30 days after receipt of an order. The Company believes that maintaining
as short a time as practical for delivery is a competitive advantage in the end
user machine vision market. The nature of the end user machine vision market is
that customers do not normally place orders for large multiples of units with
scheduled deliveries over many months. Rather, end user machine vision
addresses a specific application or problem at a specific manufacturing site.
RESEARCH AND PRODUCT DEVELOPMENT
PPT VISION's products are distinguished by the Company's proprietary
technology and its significant commitment to research and product development
efforts. The Company's research and product development efforts are focused on
its five core competencies, including image acquisition, imaging processing,
application development software, optics and illumination and vision system
integration. The Company believes that the integration of these core
competencies is essential to achieving long term success in the machine vision
market. The Company's five core competencies can be described as follows:
Image Acquisition. This refers to the means and methods by which an image
is captured, stored, and then made available for subsequent processing and
display. Image acquisition combines the disciplines of photo-optics and
electrical engineering.
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Imaging Processing. This refers to the means and methods whereby an image
is analyzed or enhanced to produce some desired information, measurements
or results. Image processing combines the disciplines of software
engineering, mathematics, algorithm development and electrical engineering
to implement efficient solutions to computationally complex problems.
Typical image processing tasks include real-time inspection, guidance,
gauging and recognition.
Application Development Software. This refers to the means and methods
whereby a machine vision system is configured and controlled. The
development and support of applications development software requires
expertise in the disciplines of object-oriented programming, graphical
programming environments, man-machine interfaces, device drivers and
general software engineering.
Optics and Illumination. This refers to the means and methods by which a
scene is illuminated and optically presented to an input device such as a
video camera. Special optics and illumination techniques are often used to
reveal features in an image which would otherwise go undetected or to
optimize an image for subsequent processing. Strobed illumination is often
used to "freeze" the motion of continuously moving parts. Optics and
illumination draw on skills from the disciplines of physics, mechanical
engineering and electrical engineering.
Vision System Integration. This refers to the means and methods whereby a
machine vision system is interfaced to and combined with other factory
automation equipment for purposes of creating a complete solution for the
customer. This may include the development of application specific solutions
for certain vertical market applications along with mechanical fixturing for
mounting camera and lighting components, networking and programmable
controllers for process control, and reject mechanisms for ejection of
defective parts.
Various configurations of the Company's products include proprietary design
work performed by the Company's employees in each of these five areas.
PPT VISION believes that continued and timely development of new products
and enhancements to existing product characteristics is essential to
maintaining its competitive position. The Company has committed and expects to
continue to commit substantial resources to its research and development
effort, which plays a significant role in maintaining and advancing its
position as a leading provider of complete machine vision systems. The
Company's current research and development efforts are directed to increasing
performance in image acquisition, image processing and application development
software, which could produce systems with greater speed attributes while also
providing end users with more expanded software tools. New products currently
in development will feature significant enhancements in speed, accuracy and
robustness through new proprietary technology. Key software products will
enable support for different hardware and user interfaces, as well as
increasing the development speed of application specific software tools. The
Company also intends to expand its offerings of application specific software
Page 12
tools to the industries it identifies as being poised to exhibit significant
growth in demand for machine vision solutions, such as the electronics,
semiconductor, pharmaceutical, medical, automotive, consumer products and
plastics markets.
Research and development expenditures were $1.8 million, $1.3 million, and
$1.1 million in the fiscal years ended October 31, 1996, 1995, and 1994,
respectively.
MANUFACTURING
The Company assembles, configures and tests its products at its suburban
Minneapolis facility. The Company's printed circuit boards are custom built by
several manufacturers. Most of the components used in the Company's machine
vision systems are available off-the-shelf. However, some components are
available from only a single supplier or from a limited number of suppliers.
The Company typically purchases inventory and builds products in response to
quarterly sales forecasts, enabling it to ship products within 30 days after
receipt of an order.
Much of the Company's product manufacturing, consisting primarily of circuit
board manufacturing and assembly and machined parts production, is contracted
with outside vendors. Company personnel inspect incoming parts and perform
final assembly and testing of finished products. The Company believes that its
outsourcing strategy enables it to employ its resources on the key core
competency areas from which it derives its competitive advantages.
COMPETITION
The machine vision industry is highly fragmented. Recent data provided by the
AIA show that there were approximately 200 machine vision companies in North
America in 1995, of which over 70% had revenues of less than $5 million.
Currently, no competitor holds a significant aggregate market share percentage,
although some dominate individual niches within the overall machine vision
industry. The Company believes that over the next several years, the industry
will experience a continuing trend toward consolidation. However, given the
application specific nature of the industry, the Company also believes that the
machine vision industry will continue to have a relatively large number of
competitors.
Although the Company believes that its products are unique, competitors offer
technologies and systems that are capable of certain of the functions performed
by the Company's products. The Company faces competition from a number of
companies in the machine vision market, some of which have greater
manufacturing and marketing capabilities and greater financial, technological
and personnel resources. Certain competitors in this market include the machine
vision group of Allen Bradley, the Acuity Imaging division of Robotic Vision
Systems, Inc. and Cognex Corporation.
Although the Company believes that its current products offer several
advantages in terms of speed and ease-of-use and although the Company has
attempted to protect the proprietary nature of such products, it is possible
that any of the Company's products could be duplicated by other companies in
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the same general market. There can be no assurances that the Company would be
able to compete with similar products produced by a competitor.
PATENTS AND TRADEMARKS
The Company relies on a combination of patent, copyright, trademark and trade
secret laws to establish its proprietary rights in its products. The Company has
applied for foreign and domestic patents which are now pending with respect to
several key technologies. United States patent No. 5,530,813 application was
issued on June 25, 1996. Although the Company believes that its patents may have
been useful in protecting its proprietary products and may be useful in
protecting potential future products, the Company also believes its ability to
efficiently develop and sell high performance, cost-effective vision systems on
a timely basis, whether patented or not, is more crucial to the Company's future
success. The Company requires each of its employees to enter into standard
agreements pursuant to which the employee agrees to keep confidential all
proprietary information of the Company and to assign to the Company all rights
in any proprietary information or technology made or contributed by the employee
during his or her employment or made thereafter as a result of any inventions
conceived or work done during such employment. Despite these precautions, it may
be possible for a third party to copy or otherwise obtain and use the Company's
products or technology without authorization or to develop similar technology
independently. In addition, effective patent, copyright, trademark and trade
secret protection may be unavailable or limited in certain foreign countries.
The Company has obtained United States federal registration for its "PPT",
"PPT VISION", "Passport" and "Scout" trademarks. The Company intends to file for
federal registration of additional trademarks in the future. Although no
assurance can be given as to the strength or scope of the Company's trademarks,
the Company believes that its trademarks have been and will be useful in
developing and protecting market recognition for its products.
EMPLOYEES
As of October 31, 1996, the Company had 74 employees, including 27 employees
in research and development, 28 in sales and marketing, 14 in manufacturing and
5 in finance and administration. To date, the Company has been successful in
attracting and retaining qualified technical personnel, although there can be no
assurance that this success will continue. None of the Company's employees are
covered by collective bargaining agreements or are members of a union. The
Company has never experienced a work stoppage and believes that its relations
with its employees are excellent.
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EXECUTIVE OFFICERS OF THE COMPANYAND DIRECTORS
The executive officers and directors of the Company are as follows:
<TABLE>
NAME AGE POSITION
- ----- --- --------
<S> <C> <C>
Joseph C. Christenson.......... 38 President, Director
Thomas R. Northenscold......... 38 Chief Financial Officer
Larry G. Paulson............... 45 Vice President of Research and Development,
Secretary, Director
Arye Malek..................... 40 Vice President of Marketing
</TABLE>
- - --------
Joseph C. Christenson has been President of the Company since January 1989
and a director since December 1987. Prior to being elected President of the
Company, he had been its Chief Operating Officer and Chief Financial Officer
from December 1987 to December 1988, General Manager and Chief Financial
Officer from August 1986 to November 1987, and financial analyst and marketing
manager since joining the Company in May 1985. Mr. Christenson has a Masters in
Business Administration from the University of Michigan and a Bachelor of Arts
degree from St. Olaf College.
Thomas R. Northenscold has been Chief Financial Officer of the Company since
February 1995. Prior to that, he had been the Senior Vice President of
Operations in the City Directory Division of R.L. Polk and Company, a directory
publishing company, from April 1992 to April 1994. Mr. Northenscold was
previously employed at Cardiac Pacemakers, Inc., a medical device company, in
several finance and operations positions from June 1985 to April 1992. He has a
Masters in Business Administration in finance from the University of Michigan
and a Bachelor of Science degree from Mankato State University.
Larry G. Paulson was a co-founder of the Company and has been Vice President
of Research and Development, Secretary and a director of the Company since
December 1981. Mr. Paulson is also a Registered Professional Engineer and holds
Bachelors and Masters Degrees in Science from the University of Minnesota.
Arye Malek has been the Vice President of Marketing of the Company since May
1996. He joined the Company in May 1990 as a Senior Account Manager and became
Director of International Operations in November 1992. Mr. Malek holds a
Bachelor of Science Degree from the University of Minnesota.
Page 15
Item 2. PROPERTIES
- -------------------
The Company leases approximately 28,400 square feet of office and
manufacturing space in suburban Minneapolis pursuant to a seven year lease
beginning in March 1994. Rent payments for its facilities commenced at $7,093
per month during the first year of the lease and increase over the term of the
lease to $16,551 during the final twelve months of the lease. The Company
believes that its facilities are adequate for its current operations and that
additional space will be available for expansion, if necessary.
Item 3. LEGAL PROCEEDINGS
- -------------------------
None.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- -----------------------------------------------------------
None.
Page 16
PART II
-------
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
- ------------------------------------------------------------------------------
PRICE RANGE OF COMMON STOCK
Since December 28, 1995, the Common Stock of the Company has been listed on
the Nasdaq National Market under the symbol "PPTV." Prior to that time, the
Common Stock was traded on the Nasdaq SmallCap Market. The following table sets
forth the high and low sales prices of the Company's Common Stock on the Nasdaq
National Market for the period beginning December 28, 1995, and the high and low
closing bid prices for the Company's Common Stock on the Nasdaq SmallCap Market
for the periods prior to December 28, 1995, each as reported by Nasdaq. The
Nasdaq SmallCap Market quotations listed below indicate inter-dealer prices
without retail mark-up, mark-down or commissions, and may not represent actual
transactions.
<TABLE>
HIGH LOW
------ -----
<S> <C> <C>
FISCAL YEAR ENDED OCTOBER 31, 1995
First Quarter............................................. $ 2.50 $1.67
Second Quarter............................................ 2.75 2.17
Third Quarter............................................. 3.83 2.33
Fourth Quarter............................................ 8.67 3.50
FISCAL YEAR ENDING OCTOBER 31, 1996
First Quarter............................................. $13.17 $8.50
Second Quarter............................................ 16.00 8.83
Third Quarter............................................. 19.25 6.88
Fourth Quarter............................................ 10.62 7.12
</TABLE>
The Company estimates that there were approximately 3,700 beneficial holders
of the Company's Common Stock at January 7, 1997.
DIVIDEND POLICY
The Company has never declared or paid any dividends on its Common Stock. The
Company currently intends to retain any earnings for use in its operations and
expansion of its business and therefore does not anticipate paying any cash
dividends in the foreseeable future.
Page 17
Item 6. SELECTED FINANCIAL DATA
- --------------------------------
<TABLE>
YEAR ENDED OCTOBER 31,
---------------------------------------------------------
1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net revenues..............$12,693,000 $9,750,000 $6,587,000 $5,935,000 $4,294,000
Cost of sales............. 5,044,000 4,442,000 3,026,000 2,539,000 1,855,000
---------- ---------- ---------- ---------- -----------
Gross profit............. 7,649,000 5,308,000 3,561,000 3,396,000 2,439,000
Selling expenses.......... 2,897,000 2,279,000 1,970,000 1,576,000 1,005,000
General and administrative
expenses................. 976,000 851,000 711,000 550,000 451,000
Research and development
expenses................. 1,827,000 1,299,000 1,133,000 831,000 687,000
---------- ---------- ---------- ---------- -----------
Income (loss) from
operations.............. 1,949,000 879,000 (253,000) 439,000 296,000
Other income
(expense), net.......... 453,000 61,000 40,000 (4,000) 42,000
---------- ---------- ---------- ---------- -----------
Net income (loss) before
taxes................... 2,402,000 940,000 (213,000) 435,000 338,000
Income tax benefit........ 1,309,000 407,000 -0- -- --
--------- ---------- ---------- ---------- -----------
Net income (loss)........ $3,711,000 $1,347,000 $ (213,000) $ 435,000 $ 338,000
========== ========== ========== ========== ===========
Net income (loss) per
share.................... $ 0.84 $ 0.37 $ (0.06) $ 0.13 $ 0.12
========== ========== ========== ========== ===========
Weighted average common
and common equivalent
shares outstanding....... 4,410,000 3,650,000 3,455,000 3,236,000 2,899,000
========== ========== ========== ========== ===========
</TABLE>
Page 18
<TABLE>
OCTOBER 31,
-----------------------------------------------------------
1996 1995 1994 1993 1992
----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital................... $24,083,000 $4,131,000 $3,253,000 $3,071,000 $1,502,000
Total assets...................... 28,056,000 6,098,000 4,449,000 4,005,000 2,370,000
Shareholders' equity.............. 26,809,000 5,145,000 3,719,000 3,384,000 1,833,000
</TABLE>
Page 19
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Comparison of Year Ended October 31, 1996 to Year Ended October 31, 1995
- ------------------------------------------------------------------------
Net Revenues: Net revenues increased 30% to $12,693,000 in fiscal 1996,
compared to net revenues of $9,750,000 in fiscal 1995. The increase in net
revenues in fiscal 1996 was due to a 40% growth in unit sales, with sales of the
Company's machine vision systems increasing to 465 in fiscal 1996 versus 333
in fiscal 1995. The Company attributes its sales growth to increased demand in
all markets. Net revenues in fiscal 1996 increased 42% in North America and 7%
outside North America. Sales to customers outside North America represented 27%
of total revenues in fiscal 1996, compared to 33% for in fiscal 1995. The
increase in North America is primarily the result of increased sales to
electronic component and automobile manufacturers.
Gross Profit: Gross profit increased 44% to $7,649,000 in fiscal 1996,
compared to $5,308,000 in fiscal 1995. Gross profit as a percentage of net
revenues for fiscal 1996 increased to 60%, compared with 54% in fiscal 1995. The
increase in gross profit as a percentage of net revenues in 1996 is primarily
due to economies of scale related to increasing volume, model mix shift, and
decreased material costs. The Company anticipates that it can support increased
net revenues at its current manufacturing capacity. The Company anticipates
that the gross profit as a percentage of net revenues may fluctuate and may
decline temporarily at certain times in fiscal 1997 due to normal start-up costs
associated with expected new product introductions.
Selling Expenses: Selling expenses increased 27% to $2,897,000 in fiscal 1996,
compared to $2,279,000 in fiscal 1995. As a percentage of net revenues, fiscal
1996 selling expenses remained relatively constant at 23%. Although the Company
anticipates selling expenses to increase in fiscal 1997 as the Company maintains
its investments in sales and applications engineering, the Company believes that
these expenditures will not increase substantially as a percentage of net
revenues in fiscal 1997.
General and Administrative Expenses: General and administrative expenses
increased 15% to $976,000 in fiscal 1996, compared to $851,000 in fiscal 1995.
As a percentage of net revenues, general and administrative expenses decreased
to 8% for fiscal 1996, compared to 9% for fiscal 1995. The increase in
expenditures in fiscal 1996 is primarily attributable to increased expenses
associated with operating the Company as it continues to grow and to investments
in management infrastructure. The decrease as a percentage of net revenues is
mainly related to operating leverage provided by the Company's growing revenue
base. The Company believes that general and administrative expenses may decline
slightly as a percentage of net revenues during fiscal 1997.
Research and Development Expenses: Research and development expenses
increased 41% to $1,827,000 in fiscal 1996, compared to $1,299,000 in fiscal
1995. Research and development expenses as a percentage of net revenues for
fiscal 1996 increased to 14%, compared to 13% for fiscal 1995. The increase in
expenses in fiscal 1996 is mainly due to new product development programs and
Page 20
increased staffing to support these efforts. As the Company continues to invest
in next generation software and hardware development, it expects research and
development expenses may remain constant or increase slightly as a percentage of
net revenues during fiscal 1997.
Interest income increased 625% to $442,000 in fiscal 1996, compared to $61,000
in fiscal 1995. The increase in interest income is primarily due to interest on
the proceeds of a public stock offering completed in June of 1996.
Income Tax Benefit: The income tax benefit of $1,309,000 recorded in fiscal
1996 reflects full recognition of the potential future tax benefits of loss
carry forwards and net deductible temporary differences available to offset
taxable income in future periods. As a result of this full recognition,
beginning in fiscal 1997 the Company will report earnings on a fully-taxed
basis.
Comparison of Year Ended October 31, 1995 to Year Ended October 31, 1994
- ------------------------------------------------------------------------
Net Revenues: Net revenues increased 48% to $9,750,000 in fiscal 1995,
compared to $6,587,000 in fiscal 1994. The increase in net revenues was
due to a 48% growth in unit sales, with sales of the Company's machine vision
systems increasing to 333 in fiscal 1995 versus 225 in fiscal 1994. The
Company attributes its sales growth to increased demand in all markets, with
particularly strong results in international markets. In fiscal 1995 revenues
increased 84% outside of North America and 35% in North America. The increase
internationally was primarily the result of a 492% increase in Far East sales
through distributors. The increase in North America is primarily due to demand
in the electronic components market as well as increased sales to systems
integrators.
Gross Profit: Gross profit increased 49% to $5,308,000 in fiscal 1995,
compared to $3,561,000 in fiscal 1994. The gross profit as a percentage
of net revenues for fiscal 1995 remained constant at 54%.
Selling Expenses: Selling expenses increased 16% to $2,279,000 in fiscal
1995, compared to $1,970,000 in fiscal 1994. As a percentage of net
revenues, fiscal 1995 selling expenses declined to 23% from 30% in fiscal
1994. The increase in selling expenses in 1995 was related to expanded
marketing and promotion efforts and the addition of new employees in the sales
and customer support areas. The decline in selling expenses as a percentage of
net revenues in fiscal 1995 is primarily due to increased productivity from
the Company's sales and applications engineering teams and increased sales
through international distributors.
General and Administrative Expenses: General and administrative expenses
increased 20% to $851,000 in fiscal 1995, compared to $711,000 in
fiscal 1994. As a percentage of net revenues, general and administrative
expenses decreased to 9% in fiscal 1995 compared with 11% in fiscal 1994. The
increase in expenditures in 1995 is primarily due to incurring a full year of
lease expense in the Company's new facility and investments in management
infrastructure. The decrease as a percentage of net revenues is mainly related
to operating leverage provided by the Company's growing revenue base.
Page 21
Research and Development Expenses: Research and development expenses increased
15% to $1,299,000 in fiscal 1995, compared to $1,133,000 in fiscal 1994.
Research and development expenses as a percentage of net revenues declined to
13% in fiscal 1995 from 17% in fiscal 1994. The increase in expenditures in 1995
is mainly due to new product development programs and the necessary new
employees to support these efforts. The decline as a percentage of net revenues
in 1995 is the result of the Company's growing revenue base.
Income Tax Benefit: Income tax benefit of $407,000 was recorded in fiscal
1995.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Working capital increased to $24,083,000 at October 31, 1996 from $4,131,000
at October 31, 1995 primarily as a result of the Company's continued
profitability and the successful completion of a secondary offering in June of
1996. The Company financed its increased sales in fiscal 1996 through internally
generated cash flow and existing cash and cash equivalents. Net cash provided
from operating activities in fiscal 1996 was $788,000. Accounts receivable
increased $1,764,000 due to a higher level of sales volume and in part to a
higher percentage of sales occurring in the last month of the fourth quarter of
fiscal 1996. Inventories increased $285,000 in fiscal 1996 due to raw material
purchases to support increased sales and new product introductions.
The Company used $15,797,000 in cash flow in investing activities, primarily for
the purchase of marketable securities and capital equipment. Investments in
marketable securities consist of short-term investment grade securities. In
addition, the Company generated $17,953,000 from its financing activities as a
result of the completion of a public stock offering in June of 1996 and
issuances of its Common Stock upon exercise of stock options and warrants.
Current assets increased to $25,164,000 at October 31, 1996 from $4,912,000 at
October 31, 1995. This increase was primarily due to an increase in marketable
securities to $15,135,000 at October 31, 1996 from no marketable securities at
October 31, 1995. Cash and cash equivalents also increased to $4,179,000 at
October 31, 1996 from $1,235,000 at October 31, 1995.
The Company's current liabilities increased to $1,081,000 at October 31, 1996
from $781,000 at October 31, 1995. This was mainly due to increased trade
accounts payable associated with a higher level of sales.
The Company believes that its cash flow from operations, existing cash and
cash equivalents, and marketable securities at October 31, 1996 will
be adequate for its foreseeable operating needs.
DILUTION
- --------
Management expects further dilution of earnings per share in fiscal 1997 due
to the issuance of 1,600,000 shares of common stock in June of 1996 through a
public stock offering. Given that these shares were outstanding for less than
five months of fiscal 1996 and that they will be outstanding for all of fiscal
Page 22
1997, the weighted average common shares outstanding will increase to 5.5
million from 4.4 million in fiscal 1996. This represents approximately 20%
dilution.
FORWARD LOOKING STATEMENT
Certain of the statements contained in this Form 10-K that relate to
expectations regarding future sales and profitability contains forward-looking
statements regarding future performance of the Company. The Company's actual
results could differ materially from the estimates made in the forward-looking
statements as a result of a number of factors, including (i) risks and
uncertainty in the market for machine vision, (ii) cyclicality of capital
spending by customers, (iii) quarterly fluctuations in operating results by the
Company due to the long selling cycle for machine vision products, (iv) the
Company's continued ability to achieve significant international revenue, (v)
competition in the Company's principal markets and (vi) the Company's ability to
continue to enhance its current products and develop new products that keep pace
with technological developments and evolving industry standards. The Company
wishes to caution readers not to place undue reliance upon any such forward-
looking statement, which speak only as of the date made.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ----------------------------------------------------
See Item 14 for a list of the financial statements included in this Form 10-K.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
- -----------------------------------------------------------------------
Not applicable.
Page 23
PART III
--------
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- ------------------------------------------------------------
Information required under this item with respect to directors is contained
in the section "Election of Directors" in the Company's Proxy Statement for the
Annual Meeting of Shareholders to be held in March 1997 (the "1997 Proxy
Statement"), a definitive copy of which will be filed with the Commission within
120 days of the close of the past fiscal year, and is incorporated herein by
reference.
Information concerning executive officers is set forth in the Section
entitled "Executive Officers of the Company" in Part I of this Form 10-K
pursuant to Instruction 3 to paragraph (b) of Item 401 of Regulation S-K.
Item 11. EXECUTIVE COMPENSATION
- --------------------------------
Information required under this item is contained in the sections entitled
"Executive Compensation," "Employment Agreements" and "Stock Option Plan" in the
Company's 1997 Proxy Statement and is incorporated herein by reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- ------------------------------------------------------------------------
Information required under this item is contained in the section entitled
"Shareholdings of Principal Shareholders, Directors and Officers" in the
Company's 1997 Proxy Statement and is incorporated herein by reference.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- --------------------------------------------------------
Information required under this item is contained in the section entitled
"Certain Transactions" in the Company's 1997 Proxy Statement which is
incorporated herein by reference.
Page 24
PART IV
-------
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
- --------------------------------------------------------------------------
(a) Documents filed as Part of this Report
(1) FINANCIAL STATEMENTS. The following financial statements of the
Company are hereby included in this Form 10-K.
Page
----
Report of Independent Accountants..................... 28
Income Statements for the three years ended
October 31, 1996, 1995 and 1994.................. 29
Balance Sheets as of October 31, 1996 and 1995........ 30
Statements of Cash Flows for the Years
ended October 31, 1996, 1995 and 1994............ 31
Statements of Shareholders' Equity for the Years
ended October 31, 1996, 1995 and 1994............ 32
Notes to Financial Statements......................... 33
(2) FINANCIAL STATEMENT SCHEDULES FOR THE THREE YEARS
ENDED OCTOBER 31, 1996
VIII. Valuation and Qualifying Accounts.............. 42
All other schedules are omitted because they are not
applicable or the required information is shown in the
Financial Statements or the notes thereto.
(b) Reports on Form 8-K
-------------------
No reports on Form 8-K were filed during the
quarter ended October 31, 1996.
Page 25
(c) Listing of Exhibits
-------------------
Exhibit
No. Description Page
- ------- ---------------------------------------------------------- ----
3.1..... Restated Articles of Incorporation of Registrant........... 43
3.2..... By-Laws of Registrant...................................... 47
10.1.... Lease Agreement dated February 11, 1993 for facilities at
10321 West 70th Street, Eden Prairie, Minnesota
(Incorporated by reference to Exhibit 10.3 of
1993 Form 10-K)
10.2*... PPT VISION, Inc. 1988 Stock Option Plan, as amended
(incorporated by reference from Exhibit 10.4 to
1993 Form 10-K)
10.3.... Employment Agreement with Joseph C. Christenson dated as of
May 7, 1984 (incorporated by reference from Exhibit 10.4 to
May 15, 1996 Form S-2)
10.4.... Employment Agreement with Larry G. Paulson dated as of
February 1, 1984 (incorporated by reference from
Exhibit 10.5 to May 15, 1996 Form S-2)
10.5.... Employment Agreement with Tom Northenscold dated as of
February 27, 1995 (incorporated by reference from
Exhibit 10.6 to May 15, 1996 Form S-2)
10.6.... Employment Agreement with Arye Malek dated as of
May 1, 1990 (incorporated by reference from
Exhibit 10.7 to May 15, 1996 Form S-2)
22...... The Company has no subsidiaries
23...... Consent of Price Waterhouse LLP............................ 53
27...... Financial Data Schedule.................................... 54
*Indicates compensatory plan
Page 26
SIGNATURES
----------
Pursuant to the requirements of Section 13 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.
PPT VISION, INC.
Date: January 28, 1997 By:/s/Joseph C. Christenson
----------------------------
Joseph C. Christenson
(Principal Executive Officer)
Date: January 28, 1997 By:/s/Thomas R. Northenscold
----------------------------
Thomas R. Northenscold
Chief Financial Officer
Signatures and Power of Attorney
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed by the following persons on behalf of the Registrant, in
the capacities, and on the dates, indicated. Each person whose signature
appears below constitutes and appoints Joseph C. Christenson and Thomas R.
Northenscold as his true and lawful attorneys-in-fact and agents, each acting
alone, with full power of substitution and resubstitution, for him and in his
name, place, and stead, in any and all capacities, to sign any or all amendments
to this Annual Report on Form 10-K and to file the same, with the exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission.
Date Signature and Title
---- -------------------
January 28, 1997 /s/Joseph C. Christenson
----------------------------
Joseph C. Christenson
President, Director
(Principal Executive Officer)
January 28, 1997 /s/Thomas R. Northenscold
----------------------------
Thomas R. Northenscold
Chief Financial Officer
January 28, 1997 /s/Larry G. Paulson
----------------------------
Larry G. Paulson, Secretary,
Vice President of Research
and Development, Director
Page 27
January 28, 1997 /s/Bruce C. Huber
----------------------------
Bruce C. Huber, Director
January 28, 1997 /s/David C. Malmberg
----------------------------
David C. Malmberg, Director
January 28, 1997 /s/Peter R. Peterson
----------------------------
Peter R. Peterson, Director
Page 28
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors of PPT VISION, Inc.
In our opinion, the financial statements listed in the index appearing under
Item 14(a)(1) and (2) present fairly, in all material respects, the financial
position of PPT VISION, Inc. at October 31, 1996 and 1995, and the results of
its operations and cash flows for each of the three fiscal years in the period
ended October 31, 1996 in conformity with 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
- ------------------------
Price Waterhouse LLP
Minneapolis, MN
November 22, 1996
Page 29
PPT VISION, INC.
INCOME STATEMENTS
<TABLE>
YEAR ENDED OCTOBER 31,
-----------------------------------
1996 1995 1994
----------- ---------- ----------
<S> <C> <C> <C>
Net revenues............................ $12,693,000 $9,750,000 $6,587,000
Cost of sales........................... 5,044,000 4,442,000 3,026,000
----------- ---------- ----------
Gross profit........................ 7,649,000 5,308,000 3,561,000
----------- ---------- ----------
Expenses:
Selling............................... 2,897,000 2,279,000 1,970,000
General and administrative............ 976,000 851,000 711,000
Research and development.............. 1,827,000 1,299,000 1,133,000
----------- ---------- ----------
Total expenses...................... 5,700,000 4,429,000 3,814,000
----------- ---------- ----------
Income (loss) from operations........... 1,949,000 879,000 (253,000)
Interest income......................... 442,000 61,000 39,000
Other income (expense).................. 11,000 -- 1,000
----------- ---------- ----------
Net income (loss) before taxes........ 2,402,000 940,000 (213,000)
Income tax benefit...................... 1,309,000 407,000 --
----------- --------- ----------
Net income (loss)................... $ 3,711,000 $1,347,000 $ (213,000)
=========== ========== ==========
Per share data:
Net income (loss) per share........... $ 0.84 $ 0.37 $ (0.06)
=========== ========== ==========
Weighted average common
shares outstanding................... 4,410,000 3,650,000 3,455,000
=========== ========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements
Page 30
PPT VISION, INC.
BALANCE SHEETS
<TABLE>
OCTOBER 31,
-------------------------
1996 1995
----------- ----------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents........................ $ 4,179,000 $1,235,000
Marketable securities 15,135,000 --
Accounts receivable, net......................... 4,451,000 2,687,000
Inventories...................................... 1,228,000 943,000
Other current assets............................. 171,000 47,000
----------- ----------
Total current assets........................... 25,164,000 4,912,000
Restricted cash.................................... 135,000 213,000
Fixed assets, net.................................. 863,000 501,000
Other assets, net.................................. 79,000 65,000
Deferred income taxes.............................. 1,815,000 407,000
----------- ----------
Total assets................................... $28,056,000 $6,098,000
=========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable................................. $ 754,000 $ 564,000
Commissions payable.............................. 62,000 55,000
Accrued expenses................................. 265,000 162,000
----------- ----------
Total current liabilities...................... 1,081,000 781,000
Deferred rent...................................... 166,000 172,000
Commitments and contingencies (Note 8)
Shareholders' equity
Common Stock $.10 par value; authorized
10,000,000 shares;
issued and outstanding 5,358,422 and. 3,578,705. 536,000 358,000
Capital in excess of par value................... 29,443,000 11,668,000
Accumulated (deficit)............................ (3,170,000) (6,881,000)
----------- ----------
Total shareholders' equity..................... 26,809,000 5,145,000
----------- ----------
Total liabilities and shareholders' equity..... $28,056,000 $6,098,000
=========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements
Page 31
PPT VISION, INC.
STATEMENT OF CASH FLOWS
<TABLE>
YEAR ENDED OCTOBER 31,
------------------------------------
1996 1995 1994
------------ ---------- ----------
<S> <C> <C> <C>
Net income (loss)....................... $ 3,711,000 $1,347,000 $ (213,000)
Adjustment to reconcile net income
(loss)
to net cash provided by operating
activities:
Depreciation and amortization......... 286,000 164,000 131,000
Deferred rent......................... (6,000) 44,000 128,000
Deferred income tax benefit........... (1,408,000) (407,000) --
Change in assets and liabilities:
Accounts receivable................... (1,764,000) (749,000) (72,000)
Inventories........................... (285,000) (158,000) 9,000
Other assets.......................... (124,000) (7,000) 5,000
Restricted cash....................... 78,000 -- (213,000)
Accounts payable...................... 190,000 102,000 31,000
Commissions payable................... 7,000 12,000 (6,000)
Accrued expenses...................... 103,000 65,000 (44,000)
------------ ---------- ----------
Total adjustments................... (2,923,000) (934,000) (31,000)
------------ ---------- ----------
Net cash provided (used) by operating
activities............................. 788,000 413,000 (244,000)
Cash flows from investing activities:
Purchase of fixed assets.............. (662,000) (349,000) (194,000)
Purchase of marketable securities (17,156,000) -- --
Proceeds on sales of marketable
securities 2,025,000 -- --
Realized gain on marketable securities (4,000) -- --
Unrealized loss on marketable
securities -- -- --
------------ ---------- ----------
Net cash used by investing activities... (15,797,000) (349,000) (194,000)
Cash flows from financing activities:
Proceeds from issuance of common
stock................................ 17,953,000 79,000 548,000
------------ ---------- ----------
Net cash provided by financing
activities............................. 17,953,000 79,000 548,000
------------ ---------- ----------
Net increase in cash and cash
equivalents............................ 2,944,000 143,000 110,000
Cash and cash equivalents at beginning
of year................................ 1,235,000 1,092,000 982,000
------------ ---------- ----------
Cash and cash equivalents at end of
year ................................. $ 4,179,000 $1,235,000 $1,092,000
============ ========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements
Page 32
PPT VISION, INC.
STATEMENT OF SHAREHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
CAPITAL IN
COMMON COMMON EXCESS OF PREFERRED PREFERRED ACCUMULATED
SHARES STOCK PAR VALUE SHARES STOCK (DEFICIT)
--------- --------- ----------- --------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
October 31, 1993........ 3,224,304 $ 322,000 $10,796,000 95,832 $280,000 $(8,015,000)
Stock issued through
the
exercise of stock
options.............. 64,743 6,000 32,000
Stock issued through
the
employee stock
purchase plan........ 26,082 3,000 68,000
Stock issued through
conversion of
preferred shares..... 5,357 1,000 24,000 (8,333) (24,000)
Stock issued through
private placement
(net of issue costs). 120,000 12,000 427,000
Net Loss.............. (213,000)
--------- -------- ----------- ------- -------- -----------
October 31, 1994........ 3,440,486 344,000 11,347,000 87,499 256,000 (8,228,000)
Stock issued through
the
exercise of stock
options.............. 65,370 6,000 37,000
Stock issued through
the
employee stock
purchase plan........ 16,599 2,000 35,000
Stock issued through
conversion of
preferred shares..... 56,250 6,000 249,000 (87,499) (256,000)
Net income............ 1,347,000
--------- -------- ----------- ------- -------- -----------
October 31, 1995........ 3,578,705 358,000 11,668,000 0 0 (6,881,000)
Stock issued through
public offering
(net of issue costs) 1,600,000 160,000 17,459,000
Stock issued through
the
exercise of stock
options.............. 94,526 9,000 123,000
Stock issued through
the
employee stock
purchase plan........ 35,691 4,000 74,000
Stock issued through
the
exercise of warrants. 49,500 5,000 119,000
Net income............ 3,711,000
--------- -------- ----------- ------- -------- ------------
October 31, 1996...... 5,358,422 $536,000 $29,443,000 0 0 $(3,170,000)
========= ======== =========== ======= ======== ============
</TABLE>
The accompanying notes are an integral part of the financial statements
Page 33
PPT VISION, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1: ORGANIZATION AND OPERATIONS
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.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ACCOUNTS RECEIVABLE
Accounts receivable are shown net of allowance for doubtful accounts of
$35,110 at October 31, 1996, and $35,000 at October 31, 1995.
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, 1996 and 1995
inventories consist of the following:
<TABLE>
OCTOBER 31,
-------------------
1996 1995
---------- --------
<S> <C> <C>
Manufactured and purchased parts............ $1,015,000 $681,000
Work-in-process............................. 144,000 214,000
Finished goods.............................. 69,000 48,000
---------- --------
Totals.................................. $1,228,000 $943,000
========== ========
</TABLE>
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist of cash and cash equivalents,
marketable securities, short-term trade receivables and payables for which
current carrying amounts approximate fair market value.
Page 34
OTHER ASSETS
Other assets at October 31, 1996 and 1995 consist of the following:
<TABLE>
OCTOBER 31,
----------------
1996 1995
------- -------
<S> <C> <C>
Patent and trademark.................................... $91,000 $71,000
Security deposits....................................... -- --
Investment in related party............................. 53,000 53,000
------- -------
144,000 124,000
Less accumulated amortization........................... (65,000) (59,000)
------- -------
Total other assets.................................. $79,000 $65,000
======= =======
</TABLE>
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 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. No adjustment to market value was recorded as of October 31, 1995 and
1996 as the difference was not material. Patent and trademark costs are
amortized over 60 months.
Page 35
FIXED ASSETS
Fixed assets consist of furniture, fixtures and equipment, and 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, 1996 and 1995 furniture, fixtures and equipment
consisted of the following:
<TABLE>
OCTOBER 31,
-----------------------
1996 1995
---------- ----------
<S> <C> <C>
Equipment....................................... $2,215,000 $1,743,000
Furniture and fixtures.......................... 407,000 235,000
---------- ----------
2,622,000 1,978,000
Less accumulated amortization................... (1,759,000) (1,477,000)
---------- ----------
Total fixed assets.......................... $ 863,000 $ 501,000
========== ==========
</TABLE>
REVENUE RECOGNITION
The Company records sales revenue upon 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 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.
Page 36
Non-cash transactions in 1996 consist of $10,568 related to the transfer of
long-term assets to inventory. In 1995 non-cash transactions consist of $255,952
related to the conversion of 87,499 preferred shares into 56,250 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 5,357 shares of common stock and
$15,345 related to the transfer of long-term assets to inventory.
ESTIMATES BY MANAGEMENT
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 those estimates.
STOCK SPLIT
On March 14, 1996, the Board of Directors approved a three-for-two stock split
in the form of a fifty percent (50%) stock dividend. The distribution of shares
was made on April 5, 1996 to shareholders of record as of March 25, 1996. All
historical share and per share data included in the financial statements and
exhibits have been restated to reflect the stock split.
NOTE 3: CUSTOMER INFORMATION
SIGNIFICANT CUSTOMER INFORMATION
During 1996 and 1995, revenue from one customer accounted for 14% and 17% of
net revenues respectively. During 1996, revenue from another customer accounted
for 12% of net revenues. During 1994, revenue from another customer accounted
for 10% of net revenues.
CUSTOMER GEOGRAPHIC DATA
North American and export sales as a percentage of net revenues in 1996, 1995
and 1994 are as follows:
<TABLE>
YEAR ENDED
OCTOBER 31,
----------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
North America........................................... 73% 67% 73%
Europe.................................................. 14% 21% 24%
Far East................................................. 13% 12% 3%
</TABLE>
Page 37
NOTE 4: ACCRUED EXPENSES
Accrued expenses at October 31, 1996 and 1995 include:
<TABLE>
OCTOBER 31,
----------------
1996 1995
-------- --------
<S> <C> <C>
Vacation............................................... $ 30,000 $ 30,000
Employee Stock Purchase Plan payroll deductions........ 42,000 33,000
Compensation........................................... 67,000 68,000
Other.................................................. 126,000 31,000
-------- --------
Total.............................................. $265,000 $162,000
======== ========
</TABLE>
NOTE 5: COMMON STOCK OPTIONS AND WARRANTS
Under the Company's 1988 Stock Option Plan the Company may issue options to
purchase up to 600,000 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 38
A summary of stock options issued and outstanding under the 1988 Stock Option
Plan is as follows:
<TABLE>
NUMBER OF SHARES
------------------------
EMPLOYEE DIRECTOR
OPTIONS OPTIONS
----------- -----------
<S> <C> <C>
Balance at October 31, 1993........................... 259,498 18,675
Granted............................................. 72,750 39,000
Exercised........................................... (64,743) 0
Forfeited........................................... (1,462) 0
----------- -----------
Balance at October 31, 1994........................... 266,043 57,675
Granted............................................. 22,125 0
Exercised........................................... (63,870) (1,500)
Forfeited........................................... (4,687) 0
----------- -----------
Balance at October 31, 1995........................... 219,611 56,175
Granted............................................. 122,350 4,500
Exercised........................................... (93,026) (1,500)
Forfeited........................................... (350) 0
----------- -----------
Balance at October 31, 1996........................... 248,585 59,175
=========== ===========
As of October 31, 1996:
Price Range of Outstanding Options
Options...........................................$2.00-$18.12 $1.66-$12.00
Expiration Dates.................................. 1997-2003 1997-2003
Options Exercisable............................... 116,647 36,675
</TABLE>
During the year ended October 31, 1996, stock options were exercised at
prices of $1.00 to $3.67 per share under the Employee Stock Option Plan.
The Company accounts for stock options and other equity instruments in
accordance with APB Opinion No. 25, "Accounting for Stock Issued to Employees."
Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for
Stock-Based Compensation," was issued in October 1995. SFAS No. 123 establishes
a fair value based method of accounting for employee stock based compensation
plans and encourages companies to adopt that method. However, it also allows
companies to continue to apply the intrinsic value based method currently
prescribed under APB Opinion No. 25, provided certain pro forma disclosures are
made. SFAS No. 123 is not required to be adopted until fiscal 1997. The
Company currently intends to continue to apply the accounting method prescribed
by APB Opinion No. 25 and, accordingly, the adoption of SFAS No. 123 will not
have a material impact on the Company's operating results.
Page 39
NOTE 6: STOCK OFFERINGS
In June of 1996, the Company completed a public stock offering, issuing
1,600,000 shares of common stock at $12.00 per share, that raised $17,618,522
net of offering costs of $1,581,478.
In February of 1994, the Company completed a private equity placement,
issuing 120,000 shares of common stock at $3.66 per share, that raised $438,365
net of offering costs of $1,635.
NOTE 7: 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 Plan, 225,000 shares have been
reserved for issuance under the Plan.
The second phase of the 1995 Plan began on June 1, 1996 and employees were
granted the right to purchase 6,773 shares at $14.66 per share under the Plan.
The first phase of the 1995 Plan ended on May 31, 1996 and employees purchased
35,691 shares at $2.19 per share under the Plan.
Phase five of the 1990 Plan ended on May 31, 1995 and employees purchased
16,599 shares at $2.19 per share.
NOTE 8: COMMITMENTS & CONTINGENCIES
Rental expense under operating leases was $170,987, $163,100, and $162,823 in
1996, 1995, and 1994 respectively. Minimum future rental payments due under
noncancelable operating lease agreements are as follows:
<TABLE>
<S> <C>
1997............................ 180,000
1998............................ 185,000
1999............................ 189,000
2000............................ 196,000
Thereafter...................... 66,000
--------
Total....................... $816,000
========
</TABLE>
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 $134,771. As of June 1996 the
restricted cash balance decreases on a dollar for dollar basis as rental
payments are made.
Page 40
NOTE 9: 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 $1,000 annually.
The Company's contributions under this program were approximately $52,250,
$30,876, and $26,407 for the years ended October 31, 1996, 1995 and 1994
respectively.
NOTE 10: INCOME TAXES
No current tax provisions were recorded in the fiscal years ended October 31,
1996 and 1995 due to the utilization of net operating loss (NOL) carry forwards.
The deferred tax provisions of approximately $14,000 and $36,000 for the years
ended October 31, 1996 and 1995, respectively, are negated primarily by
reductions in the FAS 109 valuation allowances.
At October 31, 1996, the Company has available net operating loss and research
and development tax credit carry forwards for income tax purposes of $3.6
million and $340,000, respectively. These carry forwards expire in the years
ending October 31, 2001 through 2009.
The utilization of the net operating loss and tax credit carry forwards is
dependent upon the Company's ability to generate sufficient taxable income
during the carry forward period. A valuation allowance was established in 1994
and subsequent taxable earnings and an analysis of likely taxable income
resulted in reductions of the allowance by $2,219,000 and $804,000 for the years
ended October 31, 1996 and 1995, respectively.
An analysis of the effective rate on earnings and a reconciliation of the
expected federal statutory rate for the years ended October 31, 1996 and 1995 is
as follows:
<TABLE>
1996 1995
----------- ---------
<S> <C> <C>
Expected tax provision
at statutory rate..........................$ 783,000 $ 320,000
State income tax provision,
net of federal tax effect.................. 138,000 56,000
Research and development credit............ (17,000) 0
(Reduction) of valuation allowance......... (2,219,000) (804,000)
Other...................................... 6,000 21,000
----------- ---------
Total...................................$(1,309,000) $(407,000)
=========== =========
</TABLE>
Page 41
Deferred tax assets (liabilities) are comprised of the following at October 31:
<TABLE>
1996 1995
---------- -----------
<S> <C> <C>
Depreciation.............................$ 147,000 $ 102,000
Deferred rent............................ 66,000 69,000
Other.................................... 170,000 94,000
Net operating loss carry forwards........ 1,432,000 2,361,000
Valuation allowance...................... 0 (2,219,000)
---------- -----------
Net deferred tax asset................$1,815,000 $ 407,000
========== ===========
</TABLE>
Page 42
SCHEDULE VIII
Valuation and Qualifying Accounts
Allowance for Doubtful Accounts:
<TABLE>
Balance at Additions Deductions Balance at
Beginning Charged to and Write- End of
of Period Earnings offs Period
---------------------------------------------------
<S> <C> <C> <C> <C>
Year Ended October 31, 1994 $55,000 $44,000 ($44,000) $55,000
Year Ended October 31, 1995 $55,000 $69,000 ($89,000) $35,000
Year Ended October 31, 1996 $35,000 $ 2,000 ($ 2,000) $35,000
</TABLE>
Page 43
EXHIBIT 3.1: RESTATED ARTICLES OF INCORPORATION OF PPT VISION, INC.
--------------------------------------------------------------------
ARTICLE 1
NAME
1.1) The name of the corporation shall be PPT Vision, Inc.
ARTICLE 2
REGISTERED OFFICE
2.1) The location and post office address of the registered office of the
corporation shall be 10025 Valley View Road, Suite 170, Eden Prairie, Minnesota
55344.
ARTICLE 3
PURPOSES
3.1) The corporation shall have general business purposes.
ARTICLE 4
CAPITAL STOCK
4.1) Authorized Capital Stock - The authorized capital stock of this
corporation shall be Ten Million (10,000,000) shares of Common Stock with $.10
par value per share and Ten Million (10,000,000) shares of preferred stock with
no par value per share. In accordance with the Statutes of the State of
Minnesota, the Board of Directors may subdivide the Common and Preferred Stock
into one or more series and may designate the relative rights and preferences of
the different classes and series to the extent the relative rights and
preferences of the different classes and series are not otherwise fixed in the
Articles, including with respect to the preferred stock, the right to create
voting, dividend and liquidation preferences greater than those of the Common
Stock. All shares are to be held, sold and paid for at such times and in such
manner as the Board of Directors may from time to time determine, in accordance
with the statutes of Minnesota.
4.2) Voting Rights - Each holder of record of the common stock of the
corporation shall be entitled to one (1) vote for each share of common stock
held by him at each meeting of the shareholders and in respect to any matter on
which the shareholders have a right to vote. The right to vote shall be subject
to the provisions of the by-laws of the corporation in effect from time to time
with respect to closing the transfer books and fixing a record date for the
determination of shareholders entitled to vote. Cumulative voting for directors
is not permitted.
Page 44
4.3) Pre-emptive Rights - The shareholders of the corporation shall not have
the pre-emptive right of subscription to any shares of common stock of the
corporation to be issued or sold, or hereafter authorized, or any obligations or
securities exchangeable for or convertible into stock of the corporation which
has not yet been authorized.
4.4) Stock Rights and Options - The Board of Directors shall have the power
to create and issue rights, warrants, or options entitling the holders thereof
to purchase from the corporation any shares of its capital stock of any class or
series, upon such terms and conditions and at such times and prices as the Board
of Directors may provide, which terms and conditions shall be incorporated in an
instrument evidencing such rights.
4.5) Dividends - The holders of the common stock shall be entitled to
receive, when and as declared by the Board of Directors, out of earnings or
surplus legally available therefor, any and all dividends, payable either in
cash, in property or in shares of the capital stock of the corporation. The
Board of Directors may authorize dividends only if the corporation will be able
to pay its debts in the ordinary course of business after paying the dividend.
4.6) Other Distributions - The Board of Directors may authorize, and the
holders of the common stock may receive, distributions other than dividends only
if the corporation will be able to pay its debts in the ordinary course of
business after making the distribution.
4.7) Board of Directors' Powers - The capital stock may be issued as and
when the Board of Directors shall determine, and, under and pursuant to the laws
of the State of Minnesota, the Board of Directors shall have the power to fix or
alter, from time to time, in respect to shares then unissued, any or all of the
following: dividend rate; redemption price; the liquidation price; the
conversion rights and the sinking or purchase fund rights of shares of any
class, or of any series of any class, or the number of shares constituting any
series of any class.
4.8) Change in Par Value and Combination of Common Shares; Fractional Shares
Terminated. Without further action, each twenty (20) of the common shares of
this corporation now issued with no par value per share (for convenience herein
called "Old Shares"), hereby are changed and combined into one fully paid and
non-assessable common share, par value $.10, authorized under the Company's
Articles of Incorporation as amended (for convenience herein called "New
Shares"). A holder of a New Share resulting from the combination of twenty Old
Shares shall be issued a new certificate for the New Share upon surrender by the
holder of a certificate for Old Shares totaling in the aggregate twenty Old
Shares. In addition, no fractional shares shall be issued but each holder of
Old Shares holding less than twenty shares (after exchange of all other Old
Shares held by the holder) shall be issued one New Share in exchange for such
remaining Old Shares.
Page 45
ARTICLE 5
DIRECTORS
5.1) The Board of Directors is expressly authorized to make and alter by-
laws of this corporation subject to the power of the shareholders to change or
repeal such by-laws; provided, the Board of Directors shall not adopt, amend or
repeal any by-laws fixing a quorum for meetings of shareholders, prescribing
procedures for removing directors or filling vacancies in the board or fixing
the number of directors or their classifications or terms of office.
5.2) Any action required or permitted to be taken at a duly called Board of
Directors meeting may be taken by written action signed by the number of
directors that would be required to take the same action at a meeting of the
board, except that on an action which requires shareholder approval the written
action must be signed by all the directors.
ARTICLE 6
VOLUNTARY TRANSFER OF CORPORATE ASSETS
6.1) The holders of a majority of all the shares entitled to vote at any
duly constituted meeting of the shareholders shall have the power to authorize
the Board of Directors to sell, lease, exchange or otherwise dispose of all or
substantially all of the property and assets of this corporation, including its
goodwill, upon such terms and conditions and for such consideration as the Board
of Directors deems advisable; to adopt or reject an agreement of merger,
provided, however, that notice of such proposal shall have been mailed to each
shareholder entitled to vote at such meeting at least fourteen (14) days prior
to such meeting, or the written consent of such shareholder is given to such
action as provided by statute.
ARTICLE 7
AMENDMENT OF ARTICLES
7.1) The holders of a majority of all shares entitled to vote at any duly
constituted meeting of the shareholders shall have the power to amend, alter or
repeal the Articles of Incorporation to the extent and the manner prescribed by
the laws of the State of Minnesota.
ARTICLE 8
LIMITATION OF DIRECTOR LIABILITY
8.1) No director of the corporation shall be personally liable to the
corporation or its shareholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the corporation or its shareholders; (ii) for acts or
omissions not in good faith or that involve intentional misconduct or a knowing
violation of law; (iii) under Section 302A.559 or 80A.23 of Minnesota Statutes;
Page 46
(iv) for any transaction from which the director derived any improper personal
benefit; or (v) for any act or omission occurring prior to the date when this
provision becomes effective.
8.2) The provisions of this Article 8 shall not be deemed to limit or
preclude indemnification of a director by the corporation for any liability of a
director which has not been eliminated by the provisions of this Article 8.
8.3) If Minnesota Statutes hereafter are amended to authorize the further
elimination or limitation of the liability of directors, then the liability of a
director of the corporation shall be eliminated or limited to the fullest extent
permitted by the Minnesota Statutes, as so amended.
Page 47
EXHIBIT 3.2: BYLAWS OF PPT VISION, INC.
----------------------------------------
ARTICLE I
OFFICES AND CORPORATE SEAL
Section 1.01. Registered and Other Offices. The registered office of the
corporation in Minnesota shall be that set forth in the Articles of
Incorporation or in the most recent amendment of the Articles of Incorporation
or statement of the Board of Directors filed with the Secretary of State of
Minnesota changing the registered office in the manner prescribed by law. The
corporation may have such other offices, within or without the State of
Minnesota, as the Board of Directors shall, from time to time, determine.
Section 1.02. Corporate Seal. The corporation shall have no corporate
seal.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 2.01. Time and Place of Meetings. Regular or special meetings of
the shareholders, if any, shall be held on the date and at the time and place
fixed by the Chairman of the Board of Directors or if a Chairman of the Board of
Directors has not been elected, by the President in the absence of Board action,
or the Board, except that a special meeting called by, or at the demand of a
shareholder or shareholders, shall be held in the county where the principal
executive office is located.
Section 2.02. Regular Meetings. At any regular meeting of the
shareholders there shall be an election of qualified successors for directors
who serve for an indefinite term and whose terms have expired or are due to
expire within six (6) months after the date of the meeting. Any business
appropriate for action by the shareholders may be transacted at a regular
meeting. No meeting shall be considered a regular meeting unless specifically
designated as such in the notice of meeting or unless all the shareholders are
present in person or by proxy and none of them objects to such designation.
Section 2.03. Demand by Shareholders. Regular or special meetings may be
demanded by a shareholder or shareholders, pursuant to the provisions of
Minnesota Statutes Sections 302A.431, Subd. 2, and 302A.433, Subd. 2,
respectively.
Section 2.04. Quorum, Adjourned Meetings. The holders of fifty percent
(50%) of the voting power of the shares entitled to vote at a meeting constitute
a quorum for the transaction of business; said holders may be present at the
meeting either in person or by proxy. In the absence of a quorum, any meeting
may be adjourned to a subsequent date. If a quorum is present, a meeting may be
adjourned from time to time without notice other than announcement at such
meeting. At adjourned meetings at which a quorum is present, any business may
be transacted which might have been transacted at the meeting as originally
noticed. If a quorum is present when a duly called or held meeting is convened,
Page 48
the shareholders present may continue to transact business until adjournment,
even though withdrawal of shareholders originally present leaves less than the
proportion or number otherwise required for a quorum.
Section 2.05. Voting. At each meeting of the shareholders, every
shareholder having the right to vote shall be entitled to vote either in person
or by proxy. Unless otherwise provided by the Articles of Incorporation or a
resolution of the Board of Directors filed with the Secretary of State, each
shareholder shall have one vote for each share held. Upon demand of any
shareholder, the vote upon any question before the meeting shall be by ballot.
Section 2.06. Notice of Meetings. Notice of all meetings of shareholders
shall be given to every holder of voting shares, except where the meeting is an
adjourned meeting at which a quorum was present and the date, time and place of
the meeting were announced at the time of adjournment. The notice shall be
given at least five (5), but not more than sixty (60) days before the date of
the meeting, except that written notice of a meeting at which there is to be
considered either (i) an agreement of merger or consolidation, (ii) a proposal
to dispose of all or substantially all of the property and assets of the
corporation, (iii) a proposal to dissolve the corporation, or (iv) a proposal to
amend the Articles of Incorporation, shall be mailed to all shareholders,
whether entitled to vote or not, at least fourteen
days prior thereto. Every notice of any special meeting shall
state the purpose or purposes for which the meeting has been called, and the
business transacted at all special meetings shall be confined to the purpose
stated in the call, unless all of the shareholders are present in person or by
proxy and none of them objects to consideration of a particular item of
business.
Section 2.07. Waiver of Notice. A shareholder may waive notice of any
meeting of shareholders. A waiver of notice by a shareholder entitled to notice
is effective whether given before, at or after the meeting and whether given in
writing, orally or by attendance.
Section 2.08. Authorization Without a Meeting. Any action required or
permitted to be taken at a meeting of the shareholders may be taken without a
meeting by written action signed by all of the shareholders entitled to vote on
that action.
ARTICLE III
DIRECTORS
Section 3.01. General Powers. Except as authorized by the shareholders by
unanimous affirmative vote, the business and affairs of the corporation shall be
managed by and shall be under the direction of the Board of Directors.
Section 3.02. Number, Qualifications and Term of Office. The Board of
Directors of this corporation shall consist of one or more directors, but not
less than three, the exact number to be fixed from time to time solely by
resolution of the Board of Directors, acting by not less than a majority of the
directors then in office.
Page 49
Section 3.03. Board Meetings; Place and Notice. Meetings of the Board of
Directors may be held from time to time at any place within or without the State
of Minnesota that the Board of Directors may designate. In the absence of
designation by the Board of Directors, Board meetings shall be held at the
principal executive office of the corporation, except as may be otherwise
unanimously agreed orally or in writing or by attendance. The Chairman of the
Board, the President, or directors comprising at least one third of the number
of directors then in office may call a Board meeting by giving five (5) days,
notice if by mail or two (2) days, notice if by telephone, telex, telegram or in
person, to all directors of the day or date and time of the meeting. The notice
need not state the purpose of the meeting. If a meeting schedule is adopted by
the Board, or if the date and time of a Board meeting has been announced at a
previous meeting, no notice is required.
Section 3.04. Action Without Meeting. An action required or permitted to
be taken at a Board meeting may be taken by written action signed by all of the
directors. Any such written action is effective when signed by the required
number of directors, unless a different effective time is provided in the
written action.
Section 3.05. Waiver of Notice. A director may waive notice of a meeting
of the Board. A waiver of notice by a director is effective, whether given
before, at or after the meeting and whether given in writing, orally or by
attendance.
Section 3.06. Quorum. A majority of the directors currently holding
office is a quorum for the transaction of business. If a quorum is present when
a duly called or held meeting is convened, the directors present may continue to
transact business until adjournment, even though withdrawal of directors
originally present leaves less than the proportion or number otherwise required
for a quorum.
Section 3.07. Vacancies. Vacancies on the Board resulting from the death,
resignation or removal of a director may be filled by the affirmative vote of a
majority of the remaining directors, even though less than a quorum. Each
director elected under this Section to fill a vacancy shall hold office until a
qualified successor is elected by the shareholders at the next regular or
special meeting of the shareholders.
ARTICLE IV
OFFICERS
Section 4.01. Numbers. The officers of the corporation shall consist of a
President and may also consist of one or more Vice Presidents, a Secretary and
Chief Financial Officer. The Board may elect or appoint any officers it deems
necessary for the operation and management of the corporation, each of whom
shall have the powers, rights, duties, responsibilities and terms of office
determined by the Board from time to time. Any number of officers or functions
of those offices may be held or exercised by the same person.
Page 50
Section 4.02. Election and Term of Office. The Board of Directors shall
from time to time elect a President and may elect one or more Vice Presidents, a
Secretary and Chief Financial Officer and any other officers or agents the Board
deems necessary. Such officers shall hold their offices until their successors
are elected and qualified.
Section 4.03. President. Unless otherwise stipulated, the President shall
be the chief executive officer of the corporation and shall have responsibility
for the general active management of the corporation. When present, he shall
preside at all meetings of the shareholders, and unless a Chairman of the Board
of Directors has been elected and is present, shall preside
at all meetings of the Board of Directors and see that all orders and
resolutions of the Board of Directors are carried into effect. The President,
unless some other person is specifically authorized by vote of the Board of
Directors, shall sign all certificates of stock, bonds, deeds, mortgages,
agreements, modification of mortgage agreements, leases, and contracts of the
corporation. The President, if no Secretary has been elected, shall maintain
records of and whenever necessary, shall certify all proceedings of the Board of
Directors and the shareholders. The President shall perform such other duties
as the Board of Directors shall designate.
Section 4.04. Vice President. If a Vice President or Vice Presidents have
been elected, they shall have such powers and perform such duties as may be
prescribed by the Board of Directors or by the President. In the event of
absence or disability of the President, Vice Presidents shall succeed to the
Board President's power and duties in the order designated by the Board of
Directors.
Section 4.05. Secretary. If a Secretary has been elected, the Secretary
shall keep accurate minutes of all meetings of the shareholders and the Board of
Directors, shall give proper notice of meetings of shareholders and directors,
and shall perform such other duties and have such other powers as the Board of
Directors or the President may from time to time prescribe. In the Secretary's
absence at any meeting, the President, an Assistant Secretary or a Secretary Pro
Tempore shall perform the Secretary's duties.
Section 4.06. Chief Financial Officer. The Chief Financial Officer shall
keep accurate financial records of the corporation; deposit all money, drafts
and checks in the name of and to the credit of the corporation in the banks and
depositories designated by the Board of Directors; endorse for deposit all
notes, checks and drafts received by the corporation as ordered by the Board of
Directors, making proper vouchers therefor; and disburse corporate funds and
issue checks and drafts in the name of the corporation, as ordered by the Board
of Directors. The Chief Financial Officer shall perform such other duties and
have such other powers as the Board of Directors or the President may from time
to time prescribe.
Section 4.07. Removal and Vacancies. Any officer may be removed from
office by a majority of the whole Board of Directors, with or without cause.
Such removal, however, shall be without prejudice to the contract rights of the
person so removed. If there is a vacancy among the officers of the
corporation by reason of death, resignation or otherwise, such vacancy may be
filled for the unexpired term by the Board of Directors.
Page 51
Section 4.08. Delegation of Authority. An officer elected or appointed by
the Board may delegate some or all of the duties or powers of such office to
other persons, provided that such delegation is in writing.
ARTICLE V
SHARES AND THEIR TRANSFER
Section 5.01. Certificates for Shares. Every shareholder of this
corporation shall be entitled to a certificate, to be in such form as prescribed
by law and adopted by the Board of Directors, certifying the number of shares of
the corporation owned by such shareholder. The certificates shall be numbered
in the order in which they are issued and shall be signed by the President. If
a Secretary has been elected, the certificates may also be signed by the
Secretary. Every certificate surrendered to the corporation for exchange or
transfer shall be canceled and no new certificate or certificates shall be
issued in exchange for any existing certificate until such existing certificate
has been so canceled.
Section 5.02. Transfer of Shares. Transfer of shares on the books of the
corporation may be authorized by the shareholder named in the certificate or the
shareholder's legal representative, and upon surrender of the certificate or the
certificates for such shares. Subsequent to consent, the corporation may treat,
as the absolute owner of the shares of the corporation, the person or persons in
whose name or names the shares are registered on the books of the corporation.
Section 5.03. Lost Certificates. A new share certificate may be issued in
place of one that is alleged to have been lost, stolen or destroyed, but only in
accordance with applicable law and such other reasonable requirements imposed by
the Board of Directors.
ARTICLE VI
AMENDMENTS
Section 6.01. Subject to the power of shareholders to adopt, amend, or
repeal these Bylaws as provided in Minnesota Statutes Section 302A.181,
subdivision 3, any Bylaw may be amended or repealed by the Board of Directors at
any meeting, provided that, after adoption of these Bylaws by the shareholders
of the Company, the Board shall not adopt, amend, or repeal a Bylaw fixing a
quorum for meetings for shareholders, prescribing procedures for removing
directors or filling vacancies in the Board, or fixing the number of directors
or their classifications, qualifications or terms of office.
Page 52
ARTICLE VII
INDEMNIFICATION
Section 7.01. Any person who at any time shall serve or shall have served
as director, officer or employee of the corporation, or of any other enterprise
at the request of the corporation, and the heirs, executors and administrators
of such person shall be indemnified by the corporation, in accordance with and
to the fullest extent permitted by Minnesota law as it may be amended from time
to time.
Page 53
EXHIBIT 23: CONSENT OF INDEPENDENT ACCOUNTANTS
-----------------------------------------------
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statement on Form S-3, Number 33-66472,
and the Registration Statements on Form S-8, Numbers 33-39459 and 33-61266 of
PPT VISION, Inc. of our report dated November 22, 1996 appearing in this Annual
Report on Form 10-K.
/s/ Price Waterhouse LLP
- ------------------------
PRICE WATERHOUSE, LLP
Minneapolis, Minnesota
January 28, 1997
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