-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, E5G5UXKXqx0PlVqSHIdJySpYBTOs6z747EUSEpteYYGCCd8+l+S5LpaUh9NGsUeZ xIYSESdbylxLcTe3cLHb9w== /in/edgar/work/20000913/0000704460-00-000012/0000704460-00-000012.txt : 20000922 0000704460-00-000012.hdr.sgml : 20000922 ACCESSION NUMBER: 0000704460-00-000012 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000731 FILED AS OF DATE: 20000913 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PPT VISION INC CENTRAL INDEX KEY: 0000704460 STANDARD INDUSTRIAL CLASSIFICATION: [3823 ] IRS NUMBER: 411413345 STATE OF INCORPORATION: MN FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-11518 FILM NUMBER: 722236 BUSINESS ADDRESS: STREET 1: 12988 VALLEY VIEW ROAD CITY: EDEN PRAIRIE STATE: MN ZIP: 55344 BUSINESS PHONE: 6129425747 MAIL ADDRESS: STREET 1: 10321 W 70TH ST CITY: EDEN PRAIRIE STATE: MN ZIP: 55344 FORMER COMPANY: FORMER CONFORMED NAME: PATTERN PROCESSING TECHNOLOGIES INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: PATTERN PROCESSING CORP DATE OF NAME CHANGE: 19840318 10-Q 1 0001.txt Page 4 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q --------- QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended July 31, 2000 Commission File Number 0-11518 PPT VISION, INC. ----------------------------------------------------- (Exact name of registrant as specified in its charter) MINNESOTA 41-1413345 ---------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 12988 Valley View Road Eden Prairie, Minnesota 55344 ---------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (952) 996-9500 ---------------------------------------------------------------------- (Registrant's telephone number including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the last 90 days. Yes X No Shares of $.10 par value common stock outstanding at September 8, 2000: 5,477,407 INDEX PPT VISION, INC. Part I. Financial Information Page - ------- --------------------- ---- Item 1. Financial Statements Balance Sheets as of July 31, 2000 and October 31, 1999........................................ 3 Income Statements for the Three and Nine Months Ended July 31, 2000 and July 31, 1999........................ 4 Statements of Cash Flows for the Nine Months Ended July 31, 2000 and July 31, 1999........................ 5 Notes to Interim Financial Statements-July 31, 2000.... 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations...................... 7 Item 3. Quantitative and Qualitative Disclosures about Market Risk ............................................. 10 Part II. Other Information........................................ 11 - -------- ----------------- Item 1. Legal Proceedings Item 2. Changes in Securities and Use of Proceeds Item 3. Defaults Upon Senior Securities Item 4. Submission of Matters to a Vote of Security Holders Item 5. Other Information Item 6. Exhibits and Reports on Form 8-K Signatures............................................... 12 PPT VISION, INC. BALANCE SHEETS July 31, 2000 October 31, 1999 Note A Note A ------------ ------------ (unaudited) ASSETS Cash and cash equivalents............. $ 2,236,000 $ 2,135,000 Investments........................... 4,118,000 8,262,000 Accounts receivable, net.............. 4,554,000 3,325,000 Inventories: Manufactured and purchased parts.... 2,242,000 1,649,000 Work-in-process..................... 307,000 512,000 Finished goods...................... 15,000 30,000 ------------ ------------ Inventories, net...................... 2,564,000 2,191,000 Other current assets.................. 268,000 205,000 ------------ ------------ Total current assets............. 13,740,000 16,118,000 Fixed assets, net..................... 2,441,000 2,400,000 Other assets, net..................... 3,316,000 3,327,000 ------------ ------------ Total assets..................... $19,497,000 $21,845,000 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY Accounts payable and accrued expenses. $ 1,736,000 $ 2,674,000 Deferred revenue...................... 260,000 -- ------------ ------------ Total current liabilities........ 1,996,000 2,674,000 Shareholders' equity: Common stock.......................... 548,000 526,000 Capital in excess of par value........ 30,053,000 28,862,000 Accumulated (deficit)................. (13,035,000) (10,141,000) Unrealized loss, investments.......... (65,000) (76,000) ------------ ------------ Total shareholders' equity....... 17,501,000 19,171,000 ------------ ------------ Total liabilities and shareholders' equity............. $19,497,000 $21,845,000 ============ ============ See accompanying notes to condensed financial statements PPT VISION, INC. INCOME STATEMENTS (UNAUDITED) Three Months Ended Nine Months Ended July 31, July 31, ------------------------ -------------------------- 2000 1999 2000 1999 ----------- ----------- ------------ ------------ Net revenues............. $4,714,000 $2,915,000 $12,945,000 $7,897,000 Cost of sales............ 2,063,000 1,323,000 5,658,000 3,600,000 ----------- ----------- ------------ ------------ Gross profit............. 2,651,000 1,592,000 7,287,000 4,297,000 Expenses: Sales and marketing.... 1,200,000 1,131,000 3,426,000 3,241,000 General and administrative........ 598,000 509,000 1,638,000 1,238,000 Research and development........... 1,343,000 1,158,000 3,882,000 3,138,000 Non-recurring legal costs........... 1,319,000 - 1,700,000 - ----------- ----------- ------------ ------------ Total expenses......... 4,460,000 2,798,000 10,646,000 7,617,000 ----------- ----------- ------------ ------------ Loss from operations.............. (1,809,000) (1,206,000) (3,359,000) (3,320,000) Interest income.......... 101,000 162,000 353,000 554,000 Other income............. 60,000 - 112,000 17,000 ----------- ----------- ------------ ------------ Net loss before taxes.... (1,648,000) (1,044,000) (2,894,000) (2,749,000) Income tax benefit....... - - - 587,000 ----------- ----------- ------------ ------------ Net loss........ $(1,648,000) $(1,044,000) $ (2,894,000) $(2,162,000) =========== =========== ============ ============ Per share data: Common shares outstanding 5,380,000 5,440,000 5,301,000 5,418,000 Common and common equivalent shares outstanding............ 5,380,000 5,440,000 5,301,000 5,418,000 Basic loss per share..... $ (0.31) $ (0.19) $ (0.55) $ (0.40) =========== =========== ============ ============ Diluted loss per share... $ (0.31) $ (0.19) $ (0.55) $ (0.40) =========== =========== ============ ============ See accompanying notes to condensed financial statements PPT VISION, INC. STATEMENTS OF CASH FLOWS (UNAUDITED) Nine Months Nine Months Ended Ended July 31, 2000 July 31, 1999 ---------------- --------------- - - Net loss....................................... $(2,894,000) $ (2,162,000) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization.................. 805,000 730,000 Deferred rent.................................. -- (102,000) Deferred income tax (benefit) expense.......... -- (587,000) Accrued interest income (loss)................. 31,000 53,000 Realized gain on sale of investments........... -- (14,000) Change in assets and liabilities Accounts receivable............................ (1,229,000) (1,063,000) Inventories.................................... (373,000) (72,000) Other assets................................... (63,000) 129,000 Accounts payable and accrued expenses.......... (938,000) (438,000) Deferred revenue............................... 260,000 -- ---------- ---------- Total adjustments............................. (1,507,000) (1,364,000) ---------- ---------- Net cash used in operating activities......... (4,401,000) (3,526,000) Cash flows from investing activities: Purchase of fixed assets....................... (773,000) (1,441,000) Purchase of investments........................ (2,643,000) (8,842,000) Sales and maturities of investments............ 6,767,000 14,468,000 Net investment in other long-term assets....... (62,000) (5,000) ---------- ---------- Net cash provided by investing activities..... 3,289,000 4,180,000 Cash flows from financing activities Proceeds from issuance of common stock......... 1,213,000 363,000 Repurchases of common stock.................... -- (415,000) ---------- ---------- Net cash provided by (used in) financing activities............. 1,213,000 (52,000) ---------- ---------- Net (decrease) increase in cash and cash equivalents.................. 101,000 602,000 Cash and cash equivalents at beginning of year.. 2,135,000 1,986,000 ---------- ---------- Cash and cash equivalents at end of period...... $ 2,236,000 $ 2,588,000 ========== ========== See accompanying notes to condensed financial statements PPT VISION, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) July 31, 2000 NOTE A - ORGANIZATION We design, manufacture, market and integrate machine vision-based automated inspection systems for manufacturing applications such as electronic and mechanical assembly verification, verification of printed characters, packaging integrity, surface flaw detection, and gauging and measurement tasks. A machine vision system is a combination of cameras, lighting, and computer hardware and software working together to capture and analyze images of moving parts to determine if the parts match a defined standard. Machine vision-based inspection systems enable manufacturers to realize significant economic paybacks by increasing the quality of manufactured parts and improving the productivity of manufacturing processes. The Company's vision systems are sold throughout the Americas, Europe and Asia to a broad range of industry categories, including automotive, electronic and semiconductor components, consumer goods, medical devices, pharmaceuticals and plastics. NOTE B - BASIS OF PRESENTATION The accompanying unaudited condensed financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 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. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The Balance Sheet at October 31, 1999 has been derived from the Company's audited financial statements for the fiscal year ended October 31, 1999 but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. For further information, refer to the financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the year ended October 31, 1999. NOTE C - COMPREHENSIVE LOSS Three Months Ended Nine Months Ended July 31, July 31, ------------------------ -------------------------- 2000 1999 2000 1999 ----------- ----------- ------------ ------------ Net loss $(1,648,000) $(1,044,000) $(2,894,000) $(2,162,000) Other comprehensive loss: Unrealized income (Loss) on investments 13,000 (21,000) 11,000 (77,000) ----------- ----------- ------------ ------------ Total comprehensive loss $(1,635,000) $(1,065,000) $(2,883,000) $(2,239,000) =========== =========== ============ ============ NOTE D - RECLASSIFICATIONS Certain reclassifications have been made to the 1999 financial statements to conform to the July 31, 2000 presentation. Item 2 - ------ MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations - --------------------- Net revenues increased 62% to $4,714,000 for the three-month period ended July 31, 2000, compared to net revenues of $2,915,000 for the same period in fiscal 1999 and increased to $12,945,000 for the nine-months ended July 31, 2000, up from $7,897,000 for the same period of 1999. Unit sales of the Company's machine vision systems increased to 233 for the third quarter of fiscal 2000 versus 118 for the same period in fiscal 1999. Unit sales for the nine-month period ended July 31, 2000 increased to 597 compared to 279 for the same period in fiscal 1999. The increase in the number of units sold is attributed to strong performance both domestically and internationally in the Company's core markets, including electronics and automotive. Gross revenues for the first nine-months of fiscal 2000 increased 22% in North America and 160% outside North America. Sales to customers outside North America represented 48% of gross revenues for the first nine-months of fiscal 2000, compared to 30% for the same period in fiscal 1999. The Company expects fourth quarter fiscal 2000 net revenues and unit sales to increase compared to the third quarter of fiscal 2000. Gross profit increased 66% to $2,651,000 for the three-month period ended July 31, 2000, compared to $1,592,000 for the same period in fiscal 1999. For the nine-month period ended July 31, 2000, gross profit increased 70% to $7,287,000, compared to $4,297,000 for the same period in fiscal 1999. As a percentage of net revenues, the gross profit for the third quarter of fiscal 2000 increased slightly to 56% compared 55% in the same period in fiscal 1999. For the nine- month period ended July 31, 2000, gross profit as a percentage of net revenues increased to 56%, compared to 54% for the same period in fiscal 1999. This increase in gross profit in absolute dollars for the three and nine month period ended July 31, 2000 is primarily attributed to the increase in net revenues. The Company anticipates that the gross profit as a percentage of net revenues to remain constant for the remainder of fiscal 2000. Sales and marketing expenses increased 6% to $1,200,000 for the three-month period ended July 31, 2000, compared to $1,131,000 for the same period in fiscal 1999. For the nine-month period ended July 31, 2000, selling expenses increased 6% to $3,426,000, compared to $3,241,000 for the same period in fiscal 1999. As a percentage of net revenues, sales and marketing expenses decreased to 25% for the third quarter of fiscal 2000, compared to 39% for the third quarter of fiscal 1999. For the nine-month period ended July 31, 2000, selling expenses as a percentage of net revenues decreased to 26%, compared to 41% for the same period in fiscal 1999. The decrease in expenses as a percentage of net revenues is attributed to the increase in net revenues. Although the Company will limit the rate of growth in sales and marketing expenses, it is anticipated that sales and marketing expenses may increase slightly in the remainder of fiscal 2000 as the Company makes the necessary investments to support strategic initiatives. General and administrative expenses increased 17% to $598,000 for the three- month period ended July 31, 2000, compared to $509,000 for the same period in fiscal 1999. For the nine-month period ended July 31, 2000, general and administrative expenses increased 32% to $1,638,000, compared to $1,238,000 for the same period in fiscal 1999. As a percentage of net revenues general and administrative expenses decreased to 13% for the third quarter of fiscal 2000, compared to 17% for the third quarter of fiscal 1999. For the nine-month period ended July 31, 2000, general and administrative expenses as a percentage of net revenues decreased to 13%, compared to 16% for the same period in fiscal 1999. The increase in expenditures in absolute dollars is primarily attributable to increases associated with the Company's revenue growth along with amortization expense related to the Company's SMI patent which commenced in June 2000. The SMI patent is being amortized on a straight-line basis over a ten year period resulting in an incremental $75,000 of amortization expense per quarter. Research and development expenses increased 16% to $1,343,000 for the three- month period ended July 31, 2000, compared to $1,158,000 for the same period in fiscal 1999. For the nine-month period ended July 31, 2000, research and development expenses increased 24% to $3,882,000, compared to $3,138,000 for the same period in fiscal 1999. As a percentage of net revenues, research and development expenses decreased to 28% for the third quarter of fiscal 2000, compared to 40% for the third quarter of fiscal 1999. For the nine-month period ended July 31, 2000, research and development expenses as a percentage of net revenues decreased to 30%, compared to 40% for the same period in fiscal 1999. The increase in research and development expenses is in line with the Company's objective to commit the necessary resources to support strategic initiatives. The Company expects its research and development expenses to increase slightly in its fourth quarter of fiscal 2000 as compared to the third quarter of fiscal 2000. Non-recurring legal costs for the three and nine-month period ended July 31, 2000 relate to costs and expenses incurred in connection with the Company's defense and settlement of the patent infringement lawsuit brought by National Instruments Corporation and the Company's defense and settlement of the breach of contract lawsuit brought by Integrated Electronic Technologies. Both lawsuits were settled during the quarter ended July 31, 2000. See Part II, Item 1 "Legal Proceedings" of this Form 10-Q for more detailed information regarding the lawsuits. Interest income decreased 37% to $101,000 for the three-month period ended July 31, 2000, compared to $162,000 for the same period in fiscal 1999. For the nine- month period ended July 31, 2000, interest income decreased 36% to $353,000, compared to $554,000 for the same period in fiscal 1999. The decrease in interest income is related to a reduction in the balances in cash and cash equivalents and short-term investments. The Company did not record an income tax benefit or expense for the first nine- months ended July 31, 2000, compared to an income tax benefit of $587,000 for the first nine-months in fiscal 1999. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- Working capital decreased to $11,744,000 at July 31, 2000 from $13,444,000 at October 31, 1999. The Company financed its operations during the first nine- months of fiscal 2000 through internally generated cash flow and existing cash and cash equivalents. Net cash used by operating activities during the first nine months of fiscal 2000 was $4,401,000. Accounts receivable increased $1,229,000 primarily due to increased revenues and product shipments during the third quarter ended July 31, 2000. Inventories increased $373,000 during the first nine-months of fiscal 2000 due to the purchase of inventory items with extended delivery lead times to fulfill future orders. Accounts payable and accrued expenses decreased by $938,000. The decrease in accounts payable and accrued expenses primarily results from the reduction of accruals established at the previous fiscal year-end. Net cash provided by investing activities was $3,289,000, primarily due to sales and maturities of investments. The Company used $773,000 of cash for the purchase of fixed assets, mainly consisting of computer, lab and manufacturing equipment. The Company anticipates that it will expend approximately $150,000 on capital expenditures over the last quarter of fiscal 2000. Investments consist of short-term investment grade securities. Net cash provided by financing activities was $1,213,000. The financing activities for the nine-month period ended July 31, 2000 consisted of stock option exercises, issuance of shares pursuant to the Company's employee stock purchase plan and a $1.0 million equity investment made by Mr. Peter R. Peterson, a member of the Board of Directors. The Company believes that its cash flow from operations, existing cash and cash equivalents, and investments at July 31, 2000 will provide adequate liquidity to meet the Company's normal working capital and capital resource needs for at least the next twelve months. FORWARD LOOKING STATEMENTS - -------------------------- This Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements regarding the Company's expectations, beliefs, intentions or strategies regarding the future. Forward-looking statements include, without limitation, statements regarding the extent and timing of future revenues and expenses and customer demand. These statements include, but are not limited to, changes in worldwide general economic conditions, cyclicality of capital spending by customers, PPT VISION's ability to keep pace with technological developments and evolving industry standards, worldwide competition, and PPT VISION's ability to protect its existing intellectual property from challenges from third parties and other factors. All forward-looking statements included in this document are based on information available to the Company as of the date hereof, and the Company assumes no obligation to update any such forward-looking statements. It is important to note that the Company's actual results could differ materially from those in such forward-looking statements. The forward-looking statements of the Company are subject to risks and uncertainties. Some of the factors that could cause future results to materially differ from the Company's recent results or those projected in the forward-looking statements are detailed in our Annual Report on Form 10-K for the year ended October 31, 1999, filed with the SEC. Item 3: Quantitative and Qualitative Disclosures about Market Risk. The Company believes it does not have material exposure to quantitative and qualitative market risks. The carrying amounts reflected in the balance sheets of cash and cash equivalents, investments, trade receivables and trade payables approximate fair value at July 31, 2000 due to the short maturities of these instruments. Interest Rate Risk The Company maintains investment portfolio holdings of various issuers, types and maturities, primarily U.S. government and agency securities and other short term, interest-bearing investment grade securities. The Company's cash and investments include cash equivalents, which the Company considers to be investments purchased with original maturities of three months or less. Investments having original maturities in excess of three months are stated at amortized cost, which approximates fair value, and are classified as available for-sale. Given the short maturities and investment grade quality of the portfolio holdings at July 31, 2000, as well as the Company's policy of holding rate sensitive instruments to maturity, a 100 basis point rise in interest rates would not be expected to have a material adverse impact on the fair value of the Company's investment portfolio. As a result, the Company does not currently hedge these interest rate exposures. Foreign Currency Exchange Rate Risk. The Company's international sales, which are primarily in Europe, South America, Japan and Southeast Asia, have historically been transacted in U.S. Dollars. As a result, the Company believes it is not subject to adverse movements in foreign currency exchange rates. PART II. Other Information Item 1: LEGAL PROCEEDINGS ----------------- National Instruments Corporation v. PPT Vision, Inc. As previously disclosed, in July 1999, the Company was served by National Instruments Corporation ("NIC") of Austin, Texas, in a patent infringement lawsuit filed in United States District Court for the Western District of Texas. NIC alleged that the Company's Vision Program Manager software ("VPM") infringed certain United States patents held by NIC that it claimed related to certain aspects of graphical user interfaces. The Company filed a counterclaim and requested that the Court declare the NIC patents invalid or determine that the Company did not infringe the NIC patents. On June 16, 2000, PPT Vision announced that it had entered into a settlement agreement with NIC under which PPT agreed to make a one-time payment of $1,000,000 to NIC and to make a minor modification to its Vision Program ManagerO (VPM) software, and NIC agreed to dismiss the case with prejudice. PPT also dismissed its counterclaims with prejudice. The District Court entered an Order dismissing the case with prejudice on June 23, 2000. Electronic Technologies, Inc v. PPT Vision, Inc. On July 9, 1999, Integrated Electronic Technologies, Inc. ("IET") of Cicero, New York, filed a complaint against the Company in the United States District Court for the Northern District of New York. IET asserted breach of contract and related claims in connection with the proposed purchase by the Company of certain handling systems to be manufactured by IET. The Company filed an answer denying all liability and asserted counterclaims seeking damages from IET. The parties entered into a settlement agreement under which the parties agreed to dismiss the lawsuit with prejudice and the Company agreed to pay IET a total of $160,000. The District Court entered an Order dismissing the case with prejudice in July 2000. For further information see "Patents and Proprietary Rights" and "Important Factors Regarding Forward-Looking Statements- Proprietary Technology" in Part 1, Item 1 of the Company's Annual Report on Form 10-K. Item 2: CHANGES IN SECURITIES AND USE OF PROCEEDS ----------------------------------------- In June, 2000, Mr. Peter R. Peterson, a director of the Company, purchased 170,000 shares of the common stock directly from the Company at a price of $6.00 per share for total consideration of $1,020,000. The Company believes the transaction was exempt pursuant to Section 4(2) of the Securities Act of 1933. Item 3: DEFAULTS UPON SENIOR SECURITIES ------------------------------ Not Applicable Item 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS --------------------------------------------------- None. Item 5: OTHER INFORMATION ----------------- On July 7, 2000, PPT VISION announced the election of Robert W. Heller to its Board of Directors. Item 6: EXHIBITS AND REPORTS ON FORM 8-K -------------------------------- (a) Exhibits: The following exhibits are filed as part of this Quarterly Report on Form 10-Q for the quarterly period ended July 31, 2000: ..................................... 12 27.1 Financial Data Schedule (b) Reports on Form 8-K None. 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. PPT VISION, INC. Date: September 14, 2000 /s/Richard R. Peterson ----------------------------- Richard R. Peterson (Principal Accounting Officer) Chief Financial Officer EX-27 2 0002.txt
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