UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
|
ý |
ANNUAL
REPORT PURSUANT TO SECTION 13 |
|
|
|
|
For the fiscal year ended December 31, 2004 |
|
|
|
|
|
OR |
|
|
|
|
|
o |
TRANSITION
REPORT PURSUANT TO SECTION |
|
|
|
|
For the transition period of to |
|
Commission File No. 1-14227
AMERICAN BANK NOTE HOLOGRAPHICS, INC.
(Exact Name of Registrant as Specified in Its Charter)
|
DELAWARE |
|
13-3317668 |
|
(State or Other Jurisdiction of |
|
(I.R.S. Employer |
|
|
|
|
|
399 EXECUTIVE BOULEVARD |
|
10523 |
|
(Address of Principal Executive Offices) |
|
(Zip Code) |
(914) 592-2355
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $.01 PAR VALUE PER SHARE
(Title of Class)
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 ý NO o
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. ý
Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). YES o NO ý
The aggregate market value of the common stock, $0.01 par value, held by non-affiliates of the registrant, based upon the closing sale price of the common stock on June 30, 2004, was approximately $32,859,300. Shares of common stock held by each officer and director and by each person who controls 10% or more of the outstanding voting power of the registrant have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.
The aggregate number of shares of common stock, $.01 par value, outstanding on March 15, 2005 was 18,517,907.
DOCUMENTS INCORPORATED BY REFERENCE
NONE
AMERICAN BANK NOTE HOLOGRAPHICS, INC.
2004 Form 10-K
Table of Contents
American Bank Note Holographics, Inc. (“ABNH” or the “Company”) originates, produces and markets holograms. Our holograms are used primarily for security applications such as counterfeiting protection and authentication of transaction cards, identification cards, documents of value and consumer products. Our ability to create distinctive, secure optically variable devices, to reproduce them with high quality and to distribute them securely has enabled us to become a market leader in security holography. Our products are used by over 200 companies worldwide, including MasterCard, VISA, American Express, Discover, Diners Club, Quaker State, Sony, Sears, Exxon Mobil and Eli Lilly, as well as agencies of the United States government and certain foreign governments. We also produce non-secure holograms for design and promotional applications.
We believe we have a number of strengths that provide us with a competitive advantage in the security sector of the holography industry, including:
• our reputation as a quality supplier of secure holograms with over 20 years of experience in the industry,
• our expertise in holographic technology and production techniques which enables us to offer effective security solutions for a variety of end use markets and application environments,
• our secure production and distribution processes and capabilities which qualify us to meet the security requirements of security conscious customers,
• our origination laboratories, which enable us to produce distinctive holograms with a variety of security features that make them difficult to counterfeit, and
• our ISO 9001:2000 certified manufacturing facilities, which allow us to mass produce our products in accordance with the highest quality standards.
The Holography Industry
A hologram is a unique type of image that is created through the diffraction of light at pre-determined angles to create various visual effects. Holograms are created with special laser configurations and do not use ink, thereby enabling a holographic image to be easily distinguished from a traditionally printed or copied image. When a hologram is viewed from different angles, the viewer is able to see features such as depth and movement, which would not typically be possible in most two-dimensional images. Holograms can also include information that is detectable only with the aid of special devices.
The holography industry is divided into two main sectors: security and non-security.
Security
The security sector of the holography industry includes products that protect and authenticate transaction cards, documents of value, consumer and industrial products and identification cards. Using holography, and other techniques, we can develop a unique holographic security device for each customer with which to identify and protect the customer’s products. Holograms provide the following major benefits as security devices:
3
• difficult to copy - holograms cannot be copied with conventional copying equipment such as color copiers or scanners. The unique properties and high resolution of a security hologram make it extremely difficult to replicate even with specialized equipment and expertise.
• overt features - the unique visual aspects of a hologram are easily recognizable, making authentication of products and documents practical for the general public without special machinery, equipment or training. Overt features that we offer include:
• 3-D Imagery - an image that has three dimensions and gives the illusion of depth or varying distances.
• TrueColor- a holographic image that gives the illusion of color.
• Parallax - - images created on different planes that move in relation to one another when viewed from different angles.
• Secondary Flip Image - an image that appears and disappears when viewed at certain angles.
• Diffractive Mercurial - a bright, sharp, color shifting two-dimensional image.
• Animation - - a two or three-dimensional image that gives the illusion of motion.
• covert features - hidden features that can only be detected with high-powered microscopes or specialized readers can be incorporated into a hologram to make it more difficult to counterfeit, facilitate verification in the field and support forensic investigation. Covert features that we offer include:
• Hidden Latent Image - a hidden element within a holographic image that is machine-readable only with a proprietary reader.
• HoloScan™ - - ABNH’s hidden machine readable code within a holographic image that can be read with special readers.
• Micro Imagery - text or a logo within a holographic image that is visible only under magnification.
• Nano Imagery - microscopic text or a logo within a holographic image that is visible only with high-powered magnification.
• physical features - features that can be combined with holographic materials to increase the security of the holographic product. Physical features that we offer include:
• Micro-demetallization - - a feature whereby a designed portion of the vacuum deposited aluminum materials are removed from the holographic film to create additional unique aesthetic features that can be used to differentiate and authenticate the materials. This can be used to create see through screens, additional micro text in the metallization layer, and images that are only visible under magnification.
• Tamper Apparent - an invisible feature used in labels which when combined with the holographic image will act as a self destructive layer and produce a predictable release pattern that indicates that a product has been tampered with or altered. This release pattern can be in the form of a customized or generic design.
4
• Holomagnetics – an integrated hologram and magnetic stripe that is functionally equivalent to a traditional magnetic stripe, but has the security of an integrated hologram.
• Taggants – unique features which are added during the manufacturing process to the holographic films or coatings that are verifiable by specialized equipment.
The security sector of the holography industry addresses concerns relating to counterfeiting, diversion, tampering and fraud. The cost of the hologram is generally relatively small compared to the value of the item being protected and the risk of loss. Consequently, customers typically select suppliers primarily based on the effectiveness of their security solutions, quality, reliability and price.
Our research, product development, marketing and sales activities are primarily focused on the security sector of the holography industry. We offer a diverse set of security, authentication and design features. Based on customer specific needs and applications, we can combine these techniques creating a unique set of effects in a well-constructed and effective holographic security product.
Non-Security
The non-security sector of the holography industry includes design, packaging and other decorative applications.
The unique visual appeal of holograms makes them attractive for use on consumer products. Holograms are used to enhance the design of a wide variety of products including greeting cards, decorative clothing, point-of-purchase displays, and for other promotional uses. Holograms are also used for packaging of food and other products. These holograms are generally used on consumer product packaging for their eye-catching appeal, including packaging for candy, beer, toothpaste, soft drinks and other consumer products. Non-secure holograms are generally not as complex, secure or proprietary as security holograms. Since there are more companies capable of producing non-secure holograms than there are qualified to produce and market security holograms, the competition is more intense in the non-security sector, and the margins are typically lower than in the security market. Customers in the non-security sector of the holographic industry typically distinguish between suppliers primarily based upon price, quality and production capacity.
Markets and Products
We have five target markets, and we market various products to meet the needs of these markets:
Transaction Cards. In the early 1980’s, we began marketing our secure holograms for use on credit cards and, as a result, helped to create and expand the security sector of the holography market. Since that time, holograms have been established as an important fraud prevention device on credit cards and other transaction cards. They are also commonly used to enhance the brand image of a transaction card issuer. Our products include:
Holographic Hot-Stamp Patch. Our largest source of revenue since our inception has been security holograms embossed into hot-stamp foil, for credit card authentication. Holographic hot-stamp patches can also enhance the design and branding of a card. Our customers for this product include the issuers or printers of MasterCard, Visa, American Express, Discover, Diners Club and various other retail and payment cards. We are the market leader in this segment and have developed a secure, global distribution system for secure holograms to the payment card industry.
5
HoloMagTM. Our technology for combining a hologram with the magnetic stripe on a card. HoloMag not only enables efficient utilization of real estate on the card with attractive imagery on the magnetic stripe, but it significantly enhances card security. Multiple levels of security plus distinct visual recognition make this device a very effective tool against counterfeiting.
HoloCardTM. HoloCard incorporates a hologram on a card’s entire face, creating a customized marketing tool and a counterfeit deterrent. A full-faced hologram can support brand recognition, product enhancement campaigns, customer retention and overall product differentiation efforts.
Identification Documents. We provide secure holographic laminates and patches for identity documents such as national ID cards, passports, government credentials, military credentials and drivers’ licenses. We have patents on demetallized holograms which are transparent and used to see printed information under the holograms.
We believe there are significant security advantages for demetallized holograms used on ID cards and other documents. We currently supply demetallized laminates for certain secure U.S. government credentials as well as national identity cards for certain foreign countries. We believe there is a need to improve the security of many identity documents used in the United States and other countries, and we are proposing security holograms as a component of the security enhancements that are being considered by major issuers of identification documents.
Product Authentication and Security Packaging. The use of holograms for product authentication and security packaging is driven by concerns regarding counterfeiting, piracy, pilfering, diversion and other infractions that can result in lost sales, lost goodwill and product liability claims. Holograms are used as authentication devices in, among others, pharmaceuticals, licensed consumer products and high value consumer and industrial products. Product authentication holograms are either machine or hand-applied to individual products. A holographic label that is tampered with can become permanently damaged, leaving a visible footprint on the product. Our products for this market segment include:
Holographic Labels. Our pressure-sensitive label is available with a broad array of authenticating features such as demetallizing, latent imagery, machine readability and other overt and covert features. By combining multiple security techniques, we achieve higher levels of security and make the entire product or package easier to authenticate and difficult to simulate.
HoloSealTM. HoloSeal integrates several key security features into one innovative device. A high security hologram, customized tamper-apparent break pattern, black light verification system and machine-readable embedded code are all features of this security label. In addition, HoloSeal can be manufactured to be transparent or semi-transparent so that printed regulatory or marketing copy can be seen through the hologram.
HoloCapTM. HoloCap is ABNH’s innovative approach to sealing bottles or containers with a higher level of security. Utilizing an induction seal process, this application provides for authentication, tamper-resistance and branding. A holographic layer becomes part of the seal itself. HoloCap can be combined with other security features to create an effective approach for the security needs of a wide range of sealed products.
Holographic Shrink Sleeves. ABNH has developed a heat-shrink seal with an integrated holographic stripe that can be applied to the lids of bottles to deter product fraud and tampering. By including overt and covert security features within the hologram, a customized tamper-apparent break pattern and an embedded black light verification system, ABNH’s holographic shrink sleeves provide manufacturers of bottled goods with a tool to combat criminals that, at the same time, can be easily integrated into a customer’s existing manufacturing operations.
6
Documents of Value. Concerns over counterfeiting and copying have led to an increased use of holograms produced by international suppliers for international markets for currency, checks, gift certificates, tax stamps and other financial instruments. Holographic products for paper documents of value include:
Holographic Thread. A holographic thread is a security device made up of a narrow-strip hologram, approximately 2-5 millimeters wide, and is typically incorporated into the paper substrate at the security paper mill. The hologram is often partially embedded into the paper creating a window or serpentine-thread. This holographic product offers both visual and covert security features and helps raise the recognition and perceived value of the document it is embedded into. We produce holographic material for security threads with our proprietary process, which we believe provides significant advantages for brighter and more durable holographic threads compared to other methods of holographic replication.
Holographic Ribbons. A holographic ribbon is an anti-counterfeiting device that can be used on documents of value such as checks and currency. The system is comprised of a narrow strip hologram made of hot-stamp foil and slit into ribbons that are applied on security paper by either the paper maker or the printer.
Holographic Patch. A holographic patch is created by embossing a hologram into hot-stamp foil, and is used for authenticating currency and other secure documents. It is machine applied for registered placement and quality. Depending on the design of the document, patches can be created to meet specific size, shape, creative and security requirements. A holographic patch is applied with heat and pressure forming a distinctly recognizable, security component of the document.
Commercial. We also produce holographic imagery for decorative and promotional purposes. Our products for this market include pressure sensitive labels with a rich array of designs and wide web holographic patterns for flexible packaging applications.
Strategy
Protect and Enhance Our Position in Our Core Transaction Card Business. We hold a leadership position in the market for holograms on transaction cards as a result of our relationships with companies such as MasterCard, VISA, American Express, Diners Club, Discover and many of the major security card manufacturers. We intend to maintain our leadership position in the card industry and grow through excellent customer service and the distribution of new products, such as HoloMag, that address the security needs and design objectives of this market.
Focus Sales and Marketing. We have narrowed the focus of our sales and marketing efforts to those specific applications within our target markets in which we can establish and sustain competitive advantages through a combination of product differentiation, intellectual property and market position.
Broaden and Enhance Our Security Offerings. We are developing better security solutions for our target markets which incorporate innovative applications of holography and other complimentary technologies.
Control Costs. We intend to invest in more efficient operations and prudently manage our expenses to strengthen our competitive position and enhance profitability.
Strengthen Operational Capabilities. We intend to invest in enhancing our production and operational capabilities to broaden our product range, improve the products and services we provide to our customers and to gain operational efficiencies.
7
Production Process
We are one of the most experienced security production companies in the holographic industry. We have ISO certified security production facilities containing a total of nine origination laboratories and twenty-one mass replication lines as well as extensive security and quality control procedures. We will be investing in moving, consolidating, enhancing and expanding these production capabilities in 2005. We also have a distribution network for secure holographic products.
Our production process is integrated to handle most aspects of production, including materials sourcing, processing, finishing, packaging, storage and logistics. From time to time, we subcontract certain production functions or customer orders to third parties. The production process consists of the following steps:
Design
The first step of the production process is the design of the hologram. In our art department, our experienced personnel work with the customer to develop a conceptual design that incorporates the necessary features, both security and non-security, to satisfy the customer’s requirements.
Origination
After the design has been completed, various laser-ready components (magnetic disc, three-dimensional sculpture, flat art, etc., referred to as “information”) are delivered to our origination studios.
The conversion from information to hologram is based on our ability to record light in an organized format. Coherent light, which is delivered by a laser, is best understood as light, which has one wavelength of the visible spectrum and possesses a high degree of organization. The coherent light is split into two beams (the object beam and the reference beam) directed toward photo-resist treated glass. The object beam is interfered with by the information before continuing its travel toward the photo-resist treated glass. The reference beam is not interfered with and travels directly toward the photo-resist treated glass.
The object beam then interferes with the reference beam, creating an interference pattern, which is recorded on the light sensitive photo-resist glass. After developing the photo-resist glass, the film is re-illuminated approximating the original angle(s) of the reference beam. The resulting interference pattern within the film reflects some of the light, striking it into a re-creation of the pattern of light that originally came from the object beam, due to a property of light called diffraction. The reflected light, now organized and containing all information that the object beam once carried, allows the viewer to see all of the information in three dimensions, true color or with other desired effects. There are less complex methods of creating a hologram origination than the process described above. However, in our opinion, the above process produces the clarity, depth perception, movement and mass replication properties that are essential components of our secure holograms. We believe that our largest competitors in the security sector may use similar processes among others.
Plate Making
Once the origination process is completed, a plate is created in order to permit mass production. The “one-up” image is “step and repeated” to a pre-determined size with multiple identical images recorded on a photo-resist glass. We have designed and built a proprietary step and repeat process to create very precise plates for mass production of tightly registered images. The glass is then converted to a production plate in an electrolytic process where nickel is grown on the surface of the glass. Nickel is used because its molecular nature allows for an exact transfer of the origination to the production plate.
8
We believe that our plate making process is an important component of our ability to mass-produce our secure holograms with high precision.
The electrolytic process creates different “generations” of plates prior to the production phase. Each generation, identical to the last, creates a more wear resistant plate for use in a mass production environment, thereby extending the useful life of the plate. The production plate will have varying degrees of hardness, depending upon the processes used in production.
Mass Production
Manufacturing specifications are determined in collaboration with the customer. We typically enter into production planning with the customer where drawings and overall specifications are written and distributed to the various production and quality control departments.
We employ three methods of mass-production of holograms. Hard embossing transfers images to an aluminum foil/polyester substrate through heat and pressure. Heat and pressure on the holographic plate force the holographic image into the foil, which is then converted into the final product. Soft or compliant embossing permits embossing into pre-metallized and other films and allows for embossing on wider-web materials.
The other method of mass production we employ is casting. We developed a proprietary casting method involving ultraviolet curing, which we refer to as In-Situ Polymeric Replication. Using this method, a polymer is transferred to a substrate (polyester, polypropylene, etc.) which is then put in contact with the holographic plate so that holographic imagery is replicated. The material is then metallized using a vacuum deposition process.
Finishing for each of these methods may include some combination of metallization, demetallization, application of adhesive, magnetic coating, slitting, die-cutting, lamination and custom numbering. The completed holographic material may then be applied to the customer’s product.
We perform the above processes through a combination of our internal production resources and outside subcontractors.
Quality
Through the ISO 9001:2000 certification program, we continually make improvements to our processes through the use of an effective and efficient business management system.
Our manufacturing facilities located in Elmsford, New York and Huntingdon Valley, Pennsylvania are ISO certified.
Our manufacturing facility located in Elmsford, New York includes our art department, origination labs, plate making and replication and maintains the ISO 9001:2000 standard covering quality assurance for design, development and production.
Our manufacturing facility located in Huntingdon Valley, Pennsylvania maintains ISO 9001:2000 certification covering quality assurance for production.
In 2005, we intend to move and consolidate our facilities from Elmsford, New York and Huntingdon Valley, Pennsylvania into a new facility in Robbinsville, New Jersey. (See “Manufacturing Facilities” below and “Item 2. Properties”). We will begin the ISO 9001-2000 certification process for this facility during 2005.
9
Information Technology
We have implemented an integrated enterprise resource planning system that provides information for management decision making. We made improvements to this system in 2004 and we intend to make further improvements in 2005 in connection with the move to the new facility in Robbinsville, New Jersey.
Research and Product Development
We have devoted significant attention to research and product development to continue to enhance our origination, replication and mass production capabilities. Our research and development has enabled us to create new technologies and proprietary production processes and to deliver innovative products to the marketplace. We intend to continue to make on-going investments in research and development in order to:
• Develop better solutions for our customers’ problems.
• Create features which differentiate our products from those of our competitors.
• Develop and improve processing techniques to improve the quality and reduce the costs of our products.
Manufacturing Facilities
On December 14, 2004, we entered into agreements to lease a 134,000 square foot modern manufacturing and office building in Robbinsville, New Jersey, which will be the future site of our primary operations. We will be doing construction within this facility to meet our specialized operational and security requirements through approximately May 2005. The new facility provides substantial room for expansion as we will consolidate our operations that are currently being conducted within a 58,000 square foot facility in Elmsford, New York and a 30,000 square foot facility in Huntingdon Valley, Pennsylvania into the new facility in Robbinsville, New Jersey. We are also acquiring additional equipment and technology to be installed in the new facility in order to broaden our capabilities to serve our target customers, expand capacity and improve efficiency. See “Item 2. Properties.”
Sales and Marketing
In 2004, we provided holographic products to over 200 customers worldwide. We are the exclusive supplier of holograms to MasterCard and we are one of two authorized manufacturers of VISA holograms for sale to approved manufacturers of VISA cards. In addition, we supply holograms to American Express, Diners Club, Discover, Sony, Sears, Eli Lilly, Quaker State, agencies of the United States government, foreign governments and other companies.
In the sales department we currently employ a Vice President of Sales, a Vice President of Corporate Development, three full-time, incentive-compensated salespeople and two customer sales service personnel. We also utilize incentive-based international sales agents around the world.
Our sales process generally involves identifying a customer problem, designing a solution for the customer problem, creating samples for customer evaluation and testing. Most of our target customers are credit card issuers, government agencies and large corporations that are experiencing counterfeiting or other security problems. The sales process is generally at least three months, and in some cases, the sales process can last several years.
10
Pricing decisions are generally made centrally by our operating executives. We focus some of our marketing efforts on trade shows such as the Card Tech/SecureTech trade show, Cartes and a number of other security industry conferences.
Competition
The holographic industry is highly competitive and highly fragmented. A number of our competitors are larger, and have greater financial resources, than us. The industry has become increasingly competitive over the past several years as low cost foreign producers have entered our target markets, and low cost holographic producers that previously focused on non-security applications are increasingly competing in security applications. The holographic industry has also experienced consolidation, which has increased the breadth and scale of some of our competitors. In the holographic industry, competition is generally based on technology, price, product quality and customer service. We also compete with other non-holographic methods or devices.
Trademarks and Patents
We utilize a combination of patents, trade secrets and confidentiality agreements, as well as restricted access and other forms of intellectual property protection, to safeguard certain of our proprietary technology and processes. We also hold certain trademarks with respect to certain products and services. We currently hold approximately 30 U.S. patents and numerous foreign patents, as well as patents pending and service marks that are used in our business.
We cannot assure you that the degree of protection offered by our patents is sufficient, the success of any of our enforcement actions or the likelihood that patents will be issued for pending applications. Competitors in the U.S. and foreign countries may have applied for or obtained, or may in the future apply for and obtain, patents that will prevent, limit or interfere with our ability to make and sell some of our products.
Employees
As of March 15, 2005, we employed 106 persons of which 61 are covered by collective bargaining agreements. We consider our relations with our employees to be good. We are party to collective bargaining agreements with Paper, Allied-Industrial, Chemical & Energy Workers International Union Local 1-0318 (“Local 1-0318”) and PACE International Union Local 286 (“Local 286”). The agreement with Local 1-0318 has a three-year term, will expire on December 31, 2006 and covers 21 employees in our Elmsford, New York facility. In connection with our move to Robbinsville, New Jersey, we have entered into a closure agreement with Local 1-0318, dated March 19, 2005, that provides for the termination of the contract with Local 1-0318, which will occur in approximately May 2005. The agreement with Local 286 has a five-year term, will expire on January 28, 2010, currently covers 40 employees and will cover approximately 60 employees in our Robbinsville, New Jersey facility when the facility becomes operational in 2005.
Available Information
Our investor relations website is accessable through www.abnh.com. We make available on this website under the caption “Investor Relations (SEC Filings)” free of charge, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports as soon as reasonably practicable after we electronically file or submit such materials to the Securities and Exchange Commission.
11
Risk Factors
Important Factors Regarding Forward-Looking Statements
In addition to other information in this Annual Report on Form 10-K, the following risk factors should be carefully considered in evaluating our business and us because these factors currently have a significant impact or may have a significant impact on our business, operating results or financial condition. This Form 10-K contains forward-looking statements that have been made pursuant to the provisions of the Private Securities Litigation Reform Act of 1995. Actual results could differ materially from those projected in the forward-looking statements as a result of the risk factors set forth below and elsewhere in this Form 10-K.
Our quarterly and annual operating results may fluctuate and the price of our common stock may change in response to those fluctuations.
Our quarterly and annual operating results have varied in the past and may vary significantly in the future depending on factors such as:
• timing of customer orders,
• customer business cycles,
• cancellation or expiration of customer contracts or programs,
• card expiration patterns,
• inventory replenishment,
• increased competition,
• changes in our and our competitors’ pricing policies,
• patent expiration and fluctuating amounts of royalty income,
• changes in the cost of materials or labor,
• cost and availability of the services of subcontractors,
• costs of recruiting or relocating personnel,
• increased research and development expenses,
• expenses associated with litigation,
• financing costs,
• market acceptance of our products,
• the time required for customer testing and evaluation,
• costs associated with implementing changes in operations,
• investments in new technology and equipment,
• changes in facility requirements,
• changes in our business strategy, and
• general economic factors.
Because our revenues and operating results may fluctuate, it is possible that in some future quarter, our revenues or operating results will be below the expectations of public market analysts and investors, which could cause our stock price to decrease.
We depend on sales to credit card manufacturers for a substantial portion of our business, the loss of which would significantly reduce our revenues.
Sales to credit card companies accounted for approximately 84% of our total sales in 2004 and 76% of our total sales in 2003. Sales to MasterCard and approved manufacturers of VISA brand credit cards together accounted for approximately 66% of our total sales in 2004 and 63% of our total sales in 2003.
12
We entered into an agreement with MasterCard dated February 28, 2003, which replaced the agreement dated February 1, 1996, as amended. We entered into an amendment to this agreement on September 29, 2003, in which MasterCard retained us to produce a new hologram for the Debit MasterCard and extended the a