<PAGE> 1
THIS DOCUMENT IS A COPY OF THE QUARTERLY REPORT ON FORM 10Q OF PRESSTEK, INC.
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1995 FILED ON MARCH 15, 1995 PURSUANT
TO A RULE 201 TEMPORARY HARDSHIP EXEMPTION.
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------------
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
------------------------------------------------
OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________________ to _____________________
Commission file number 0-17541
--------------------------------------------
PRESSTEK, INC.
- - - - - -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 02-0415170
- - - - - -------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8 Commercial Street, Hudson, New Hampshire 03051-3907
- - - - - -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (603) 595-7000
-----------------------------
- - - - - -------------------------------------------------------------------------------
Former name, former address and former fiscal year,
if changed since last report.
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 the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date: As of April 26, 1995, there
were 7,244,522 shares outstanding of the Registrant's common stock, $.01 par
value per share.
<PAGE> 2
PRESSTEK, INC.
INDEX
PAGE
PART I FINANCIAL INFORMATION
Item 1 Financial Statements
Balance Sheets as of March 31, 1995
(unaudited) and December 31, 1994 3
Statements of Operations for the
three month periods ended March 31,
1995 and 1994 (unaudited) 4
Statements of Cash Flows for the three
month periods ended March 31, 1995
and 1994 (unaudited) 5
Notes to Financial Statements (unaudited) 6
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of
Operations 9
PART II OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K 12
Signatures 13
-2-
<PAGE> 3
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
PRESSTEK, INC.
BALANCE SHEETS
March 31, December 31,
1995 1994
----------- ------------
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 3,195,655 $ 1,532,636
Marketable securities 1,059,390 254,381
Accounts receivable 3,673,918 4,187,049
Inventory 2,917,631 2,796,165
Other current assets 795,958 756,592
------------ ------------
Total current assets 11,642,552 9,526,823
------------ ------------
MARKETABLE SECURITIES - NON CURRENT 2,921,283 4,807,821
------------ ------------
PROPERTY AND EQUIPMENT:
Machinery and equipment 4,356,923 3,820,160
Furniture and fixtures 289,077 281,844
Leasehold improvements 956,574 956,574
Other 42,572 38,184
------------ ------------
Total 5,645,146 5,096,762
Less accumulated depreciation
and amortization (2,473,244) (2,322,770)
------------ ------------
Property and equipment, net 3,171,902 2,773,992
------------ ------------
OTHER ASSETS:
Patent application costs, net 718,128 685,044
Software development costs, net 558,892 530,350
------------ ------------
Total other assets 1,277,020 1,215,394
------------ ------------
TOTAL $ 19,012,757 $ 18,324,030
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 1,207,080 $ 1,275,492
Accrued expenses 451,143 226,834
Accrued salaries and employee benefits 309,000 348,784
------------ ------------
Total current liabilities 1,967,223 1,851,110
------------ ------------
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value; authorized
1,000,000 shares; no shares issued or
outstanding -- --
Common stock, $.01 par value; authorized
25,000,000 shares; issued and outstanding
7,235,560 shares at March 31, 1995;
7,194,020 shares at December 31, 1994 72,356 71,940
Additional paid-in capital 18,755,291 18,437,839
Unrealized loss on marketable securities (104,590) (199,334)
Deficit (1,677,523) (1,837,525)
------------ ------------
Stockholders' equity 17,045,534 16,472,920
------------ ------------
TOTAL $ 19,012,757 $ 18,324,030
============ ============
See notes to financial statements
-3-
<PAGE> 4
PRESSTEK, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Three Months
March 31, March 31,
1995 1994
------------ ------------
REVENUES:
Product Sales $ 3,583,413 $ 1,576,260
Royalties and fees from licensees 1,500,838 1,430,977
----------- -----------
Total revenues 5,084,251 3,007,237
----------- -----------
COSTS AND EXPENSES:
Cost of products sold 2,648,490 1,316,778
Engineering and product development 1,483,211 872,648
Marketing 384,223 257,483
General and administrative 456,372 337,146
----------- -----------
Total costs and expenses 4,972,296 2,784,055
----------- -----------
OTHER INCOME (EXPENSE):
Dividend and interest 76,768 105,493
Other (16,721) 21,000
----------- -----------
Total other income - net 60,047 126,493
----------- -----------
INCOME BEFORE INCOME TAXES 172,002 349,675
PROVISION FOR STATE INCOME TAXES 12,000 30,000
----------- -----------
NET INCOME $ 160,002 $ 319,675
=========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON AND
COMMON EQUIVALENT SHARES 7,766,344 7,335,493
=========== ===========
NET INCOME PER COMMON AND COMMON
EQUIVALENT SHARE $.02 $.04
==== ====
See notes to financial statements
-4-
<PAGE> 5
PRESSTEK, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Three Months
March 31, March 31,
1995 1994
------------ ------------
CASH FLOWS - OPERATING ACTIVITIES:
Net income $ 160,002 $ 319,675
Adjustments to reconcile net income to net
cash provided by (used for)
operating activities:
Tax benefit of disposition of stock options -- 30,000
Depreciation and amortization 200,515 146,555
Provision for warranty cost 110,000 --
Gain on sale of equipment (1,300) (21,000)
Loss on sale of marketable securities 18,021 --
(Increase) decrease in:
Inventory (121,466) 46,712
Other current assets (39,366) 38,392
Accounts receivable 513,131 (448,088)
Increase (decrease) in:
Accounts payable and accrued expenses 45,897 (233,359)
Accrued salaries and employee benefits (39,784) (44,916)
----------- -----------
Net cash provided by (used for)
operating activities 845,650 (166,029)
----------- -----------
CASH FLOWS - INVESTING ACTIVITIES:
Purchases of property and equipment (573,981) (459,820)
Increase in other assets (86,069) (247,918)
Proceeds from sale of equipment 1,300 21,000
Sales and maturities of marketable securities 1,158,251 1,114,571
Purchases of marketable securities -- (169,084)
----------- -----------
Net cash provided by investing activities 499,501 258,749
----------- -----------
CASH FLOWS - FINANCING ACTIVITIES:
Net proceeds from sale of common stock
and warrants 317,868 1,099,907
----------- -----------
INCREASE IN CASH AND CASH EQUIVALENTS 1,663,019 1,192,627
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 1,532,636 990,004
----------- -----------
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 3,195,655 $ 2,182,631
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION --
Income taxes paid $ 52,000
===========
See notes to financial statements
-5-
<PAGE> 6
PRESSTEK, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 1995
1. BASIS OF PRESENTATION
The unaudited financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Rule 10 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. The financial
information included in the quarterly report should be read in conjunction with
the Company's audited financial statements and related notes thereto for the
year ended December 31, 1994. In the opinion of management, all adjustments
considered necessary for a fair presentation have been included and all such
adjustments were normal and recurring.
The Company was organized as a Delaware corporation on September 3, 1987
and was a development stage company through 1991. In September 1991,
Heidelberger Druckmaschinen A.G. ("Heidelberg"), the world's largest printing
press manufacturer introduced the Company's initial spark discharge based
imaging technology, in a jointly developed product, the Heidelberg GTO-DI. In
1993, after investing substantial effort and resources, the Company completed
the development of PEARL , a patented, proprietary, nonphotographic, digital
imaging and printing plate technology for the printing and graphic arts
industries. PEARL's laser diode technology is capable of imaging various types
of Presstek printing plates either off-press or on-press which may then be used
to produce full-color printed materials. PEARL has completely replaced the
Company's spark discharge technology. The GTO-DI was reintroduced in September
1993, utilizing PEARL as its Direct Imaging technology. The Company is now
building an installed base of customers which utilizes its proprietary
consumable printing plates on PEARL equipped GTO-DI Heidelberg presses. Presstek
is also engaged in the development of additional products and applications that
incorporate its proprietary PEARL technologies and consumables, including both
computer-to-plate and other direct-to-press applications. At this time, the
Company relies on Heidelberg to generate substantially all of its revenues.
The results of operations for the first quarter ended March 31, 1995 are
not indicative of results of operations to be expected for the full year.
-6-
<PAGE>
2. INVENTORY
Inventory is valued at the lower of cost or market, with cost determined on
the first-in, first-out method. At March 31, 1995 and December 31, 1994,
inventory consisted of the following:
March 31, 1995 December 31, 1994
-------------- -----------------
Raw materials $1,450,001 $1,269,607
Work in process 1,170,550 952,704
Finished goods 297,080 573,854
---------- ----------
Total $2,917,631 $2,796,165
========== ==========
Finished goods include $116,080 and $392,854 of consumable products available
for resale at March 31, 1995 and December 31, 1994, respectively.
3. NET INCOME PER COMMON SHARE
Net income per common share is computed by dividing net income by the
weighted average number of common and common equivalent shares outstanding.
Common stock equivalents represent the dilutive effect of the assumed exercise
of outstanding stock options and warrants. A summary of the calculations for the
three month periods ended March 31, 1995 and March 31, 1994 follows:
<TABLE>
<CAPTION>
1995 1994
-------------------------- --------------------------
Fully Fully
Primary Diluted Primary Diluted
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net income $ 160,002 $ 160,002 $ 319,675 $ 319,675
=========== =========== =========== ===========
Weighted average common
shares outstanding 7,206,906 7,235,560 6,855,553 6,920,147
Common equivalent shares
from assumed conversion
of outstanding options
and warrants whose effect
are not antidilutive on
earnings per share 1,017,413 1,017,413 872,040 872,040
Less shares assumed
repurchased using the
treasury method for
calculation of net
shares outstanding (457,975) (355,624) (392,100) (392,100)
----------- ----------- ----------- -----------
Weighted average common
and common equivalent
shares outstanding 7,766,344 7,897,349 7,335,493 7,400,087
=========== =========== =========== ===========
Net income per common
and common equivalent
share $ .02 $ .02 $ .04 $ .04
=========== =========== =========== ===========
</TABLE>
-7-
<PAGE> 8
4. INCOME TAXES
There was no provision for federal income taxes for the three months ended
March 31, 1995 or March 31, 1994 as a result of net operating loss
carryforwards.
As of March 31, 1995, the Company had net operating loss carryforwards
totaling approximately $9,000,000. The amount of the net operating loss
carryforwards which may be utilized in any future period may be subject to
certain limitations, based upon changes in the ownership of the Company's common
stock.
5. SUBSEQUENT EVENT
On April 19, 1995, the Board of Directors declared a two-for-one split of the
Company's common stock to be effected in the form of a 100% stock dividend
payable on May 22, 1995 to holders of record of its common stock on May 1, 1995.
-8-
<PAGE> 9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
-------------------------------------------------
Results of Operations
The Company was organized as a Delaware corporation on September 3, 1987 and
was a development stage company through 1991. In September 1991, Heidelberger
Druckmaschinen A.G. ("Heidelberg"), the world's largest printing press
manufacturer introduced the Company's initial spark discharge based imaging
technology, in a jointly developed product, the Heidelberg GTO-DI. In 1993,
after investing substantial effort and resources, the Company completed the
development of PEARL , a patented, proprietary, nonphotographic, digital imaging
and printing plate technology for the printing and graphic arts industries.
PEARL's laser diode technology is capable of imaging various types of Presstek
printing plates either off-press or on-press which may then be used to produce
full-color printed materials of a quality that industry experts consider
comparable to lithographic industry standards. PEARL can print in color or black
and white, at a lower cost than competitive processes. PEARL has completely
replaced the Company's spark discharge technology. The GTO-DI was reintroduced
in September 1993, utilizing PEARL as its Direct Imaging technology. PEARL
Direct Imaging technology as implemented on the GTO-DI has been well accepted by
the market and the Company is now building an installed base of customers which
utilizes its proprietary consumable printing plates on PEARL equipped GTO-DI
Heidelberg presses. Presstek is also engaged in the development of additional
products and applications that incorporate its proprietary PEARL technologies
and consumables, including both computer-to-plate and other direct-to-press
applications. A new automated direct-to-press digital product manufactured by
Heidelberg containing the Company's PEARL technology, and the Presstek
PEARLsetterTM, a new Presstek stand-alone computer-to-plate system for off press
plate making, will be shown at DRUPA'95. At this time, the Company relies on
Heidelberg to generate substantially all of its revenues.
Revenues
Revenues for the three month period ended March 31, 1995 of approximately
$5,084,000 consisted principally of product sales, royalties, fees and other
reimbursements earned under the Company's agreements with Heidelberg. Revenues
increased $2,077,000 (69%) comparing the first quarter of 1995 with the same
period in 1994, principally as a result of increased sales of PEARL imaging
systems and consumable printing plates.
-9-
<PAGE> 10
Costs of Products Sold
Costs of products sold for the three month periods ended March 31, 1995 and
1994 of approximately $2,648,000 and $1,317,000, respectively, consisted of the
material, labor, and overhead associated with product sales, as well as
anticipated future warranty costs. The increase in margins, comparing the first
quarter of 1995 with 1994, is a result of 1994 sales of PEARL retrofit imaging
systems being made at lower margins than new systems.
Engineering and Product Development
Engineering and product development expenses totaled $1,483,000 for the three
month period ended March 31, 1995 compared to $873,000 for the same period in
1994. The increase in these expenditures of $610,000 (70%) resulted principally
from increased expenditures for parts, supplies, and labor related to the
Company's development programs with respect to the new Heidelberg press, the
Presstek PEARLsetter, and other applications of the Company's technology.
Marketing
Marketing expenses increased $127,000 (49%) for the first quarter of 1995
compared with the same period in 1994 primarily due to increased expenditures
for additional personnel and for other promotional activities.
General and Administrative
General and administrative expenses increased $119,000 (35%) comparing the
first quarter of 1995 with 1994. This increase related principally to increased
expenditures for salaries and other costs required to conduct the various
general and administrative functions of the Company.
Net Income
As a result of the foregoing, the Company realized net income of $160,000 for
the first quarter of 1995 compared to net income of $320,000 for the same period
in 1994.
Liquidity and Capital Resources
At March 31, 1995, the Company had working capital of $9,676,000, an increase
of $2,000,000 as compared to working capital of $7,676,000 at December 31, 1994.
This increase was primarily attributable to net income from operations of
$160,000; noncash items of depreciation and amortization of $201,000 and the
provision for warranty costs of $110,000; a decrease in noncurrent marketable
securities of $1,887,000 and issuances of common stock of $318,000 offset by
additions to property and equipment and other assets of $574,000 and $86,000,
respectively.
-10-
<PAGE> 11
Net cash provided by operating activities of $846,000 for the three month
period ended March 31, 1995 resulted primarily from the net income from
operations of $160,000 plus noncash items of depreciation and amortization and
the provision for warranty costs of $201,000 and $110,000, respectively, a
decrease in accounts receivable of $513,000 and an increase in accounts payable
and accrued expenses of $46,000 offset by increases in inventory and other
current assets of $121,000 and $39,000, respectively, and a decrease in accrued
salaries and employee benefits of $40,000.
Net cash provided by investing activities of $500,000 resulted principally
from proceeds from the sales and maturities of marketable securities of
$1,158,000 offset by additions to property and equipment used in the Company's
business of $574,000 and increases in other assets of $86,000.
Net cash provided by financing activities during the first quarter of 1995,
consisted of $318,000 received from the sale of common stock incident to the
exercise of various stock options and warrants.
The Company's agreements with Heidelberg provide that during 1995 the Company
will receive certain royalty payments and be reimbursed for certain engineering
and development work provided to Heidelberg. Further, on April 4, 1995, the
Company accepted orders totaling $19,000,000 from Heidelberg. This sum
represents equipment and royalty revenues that will result from shipments of the
Company's PEARL digital imaging hardware and software products. These products
will be used by Heidelberg in both its existing GTO-DI product, as well as its
newest digital imaging printing press.
The Company estimates that existing funds and the funds generated under its
agreements with Heidelberg will be sufficient to satisfy its anticipated cash
requirements for the foreseeable future.
Effect of Inflation
Inflation has not had, and is not expected to have, a material impact upon
the Company's operations.
-11-
<PAGE> 12
PART II - OTHER INFORMATION
---------------------------
Item 5. Other Information
On April 27, 1995 the Company commenced legal action for misappropriation of
trade secrets in Federal District Court in New Hampshire against Agfa-Gevaert,
N.V. of Mortsel, Belgium ("Agfa").
In the Complaint, the Company charged Agfa with misappropriation of the
Company's trade secrets and breach of a Confidentiality Agreement entered into
between the parties in the Fall of 1989, as well as violation of a Manufacturing
Agreement entered into between the parties in 1991. According to the Company's
pleadings, Agfa obtained confidential information from the Company with regard
to the Company's direct imaging plate technology during the 1989-1991 time
period when the Company was considering Agfa as a potential supplier to the
Company of the Company's plates. The Company alleges that Agfa subsequently used
the Company's confidential technology in its own development efforts, and that
Agfa filed several patent applications in its own name based upon the Company's
developments.
The Company has requested a Preliminary Injunction enjoining Agfa from
further use or disclosure of the Company's trade secrets and precluding Agfa
from transferring or abandoning patent applications which the Complaint alleges
Agfa filed based upon the Company's technology until the court can resolve the
controversy.
On April 21, 1995 the Company and Richard A. Williams, an Executive Vice
President and Chief Operating Officer of the Company, entered into an amendment
to Mr Williams' employment agreement with the Company which extended the term of
his employment with the Company until March 31, 1997.
Item 6. Exhibits and Reports on Form 8-K.
(a) 10.1 Amendment to Employment Agreement of Richard A. Williams.
27 Financial Data Schedule
(b) No reports on Form 8-K were filed for the quarter for which this report is
filed.
-12-
<PAGE> 13
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated: May 12, 1995
PRESSTEK, INC.
--------------
(Registrant)
By: /s/ Richard A. Williams
------------------------------
Richard A. Williams
Executive Vice President
and Chief Operating Officer
(Duly Authorized Officer)
By: /s/ Glenn J. DiBenedetto
------------------------------
Glenn J. DiBenedetto
Chief Financial Officer
(Principal Financial and
Accounting Officer)
-13-
<PAGE> 14
EXHIBIT INDEX
EXHIBIT PAGE NO.
- - - - - ------- --------
10.1 Amendment to Employment Agreement of 15
Richard A Williams.
27 Financial Data Schedule 17
-14-
<PAGE> 15
Exhibit 10.1
Amendment to Employment Agreement
AMENDMENT dated as of April 21, 1995, to Employment Agreement, dated
as of August 23, 1988, by and between Presstek, Inc., a Delaware corporation
(the "Company" or "Employer") and Richard A. Williams (the "Executive").
W I T N E S S E T H
-------------------
WHEREAS, the Executive is currently the Company's Chief
Operating Officer, Executive Vice President and Secretary; and
WHEREAS, the Company and Employee entered into an Employment Agreement
dated as of February 23, 1988 (the "Agreement") which Agreement, as amended,
provided for the employment by the Company of the Executive until March 28,
1995; and
WHEREAS, the Company and Executive have continued to operate
under the terms of the Agreement; and
WHEREAS, the Company wishes to formally extend the term of the
Executive's employment with the Company pursuant to the Agreement for a period
expiring in March 1997; and
WHEREAS, the Company and Executive desire to amend the terms of
the Agreement as provided herein;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements hereinafter set forth, and other good and valuable consideration, the
sufficiency of which is hereby acknowledged, the Company and Executive hereby
agree as follows:
1. Section 2. (a) of the Agreement is hereby amended to provide that
Employer shall pay to Executive an annual salary of $135,000, payable in monthly
installments or more frequent pay periods as may be determined by the Employer.
Said salary shall be subject to periodic review by and possible upward
adjustment in the sole discretion of the Board of Directors of the Employer.
2. Section 8. (d) of the Agreement is hereby amended to
provide that the Employer agrees to employ the Employee as an executive
officer for a period expiring on March 31, 1997.
3. Except as specifically set forth above, all of the other
provisions of the Agreement shall remain in full force and effect.
-15-
<PAGE> 16
IN WITNESS WHEREOF, the parties hereto have executed this amendment as
of the date first written above.
PRESSTEK, INC.
By: /s/ Robert E. Verrando
--------------------------
Robert E. Verrando, EVP
/s/ Richard A. Williams
---------------------------
Richard A. Williams
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
March 31, 1995 Form 10-Q and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 3,196
<SECURITIES> 3,981
<RECEIVABLES> 3,674
<ALLOWANCES> 0
<INVENTORY> 2,918
<CURRENT-ASSETS> 11,643
<PP&E> 5,645
<DEPRECIATION> 2,473
<TOTAL-ASSETS> 19,013
<CURRENT-LIABILITIES> 1,967
<BONDS> 0
<COMMON> 72
0
0
<OTHER-SE> 16,973
<TOTAL-LIABILITY-AND-EQUITY> 19,013
<SALES> 3,583
<TOTAL-REVENUES> 5,084
<CGS> 2,648
<TOTAL-COSTS> 4,972
<OTHER-EXPENSES> (60)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 172
<INCOME-TAX> 12
<INCOME-CONTINUING> 160
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 160
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
</TABLE>
