___________________________________________________________________________
UNITED STATES
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 June 30, 2000
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: 0-26832
Lumisys Incorporated
(Exact name of registrant as specified in its charter)
Delaware 77-0133232
(State of incorporation) (I.R.S. Employer Identification No.)
225 Humboldt Court, Sunnyvale, CA 94089
(Address of principal executive offices) (Zip Code)
(408) 733-6565
(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 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 August 8, 2000, 9,275,014 shares of the registrant's Common Stock, $.001
par value, were outstanding.
Lumisys Incorporated
Index
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets at June 30, 2000 and
December 31, 1999 (unaudited) 3
Condensed Consolidated Statements of Operations for the Three
and Six Months Ended June 30, 2000 and 1999 (unaudited) 4
Condensed Consolidated Statements of Cash Flow for the
Six Months
Ended June 30, 2000 and 1999 (unaudited) 5
Notes to Condensed Consolidated Financial Statements (unaudited) 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 9
Item 3. Quantitative and Qualitative Disclosures About Market Risk 19
Part II. OTHER INFORMATION
Item 1. Legal Proceedings 19
Item 2. Changes in Securities and Use of Proceeds 19
Item 3. Defaults Upon Senior Securities 19
Item 4. Submission of Matters to a Vote of Security Holders 20
Item 5. Other 20
Item 6. Exhibits and Reports on Form 8-K 20
SIGNATURES 21
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements
Lumisys Incorporated
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands)
June 30, December 31,
2000 1999
--------------- ---------------
ASSETS
Current assets:
Cash and cash equivalents $ 8,467 $ 6,393
Short-term investments 6,953 9,965
Accounts receivable, net of allowances
of $1,537 and $1,871, respectively 2,175 2,068
Inventories 3,509 2,585
Deferred tax asset 1,453 1,453
Other current assets 1,201 994
--------------- ---------------
Total current assets 23,758 23,458
Property and equipment, net 705 569
--------------- ---------------
$24,463 $24,027
=============== ===============
LIABILITES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 948 $ 510
Accrued expenses 3,757 3,151
Merger and related costs 532 542
--------------- ---------------
Total current liabilities 5,237 4,203
Note payable to related party 175 164
--------------- ---------------
Total liabilities 5,412 4,367
--------------- ---------------
Stockholders' equity:
Preferred stock, $0.001 par value;
5,000 shares authorized; no shares
issued or outstanding --- ---
Common stock, $0.001 par value;
25,000 shares authorized; 9,275 and
9,240 shares issued and outstanding,
respectively 9 9
Additional paid-in capital 27,756 27,675
Accumulated deficit (8,714) (8,024)
--------------- ---------------
Total stockholders' equity 19,051 19,660
--------------- ---------------
$24,463 $24,027
The accompanying notes are an integral part of these condensed consolidated
financial statements.
Lumisys Incorporated
Condensed Consolidated Statements of Operations
(Unaudited)
(In thousands, except per share amounts)
Three Months Ended Six Months Ended
--------------------- ---------------------
June 30, June 30, June 30, June 30,
2000 1999 2000 1999
---------- ---------- ---------- ----------
Sales $ 5,130 $ 5,035 $10,282 $10,936
Cost of sales 2,684 2,738 5,564 5,739
---------- ---------- ---------- ----------
Gross profit 2,446 2,297 4,718 5,197
---------- ---------- ---------- ----------
Operating expenses:
Production, content and other
website costs 316 --- 662 ---
Sales and marketing 1,261 748 2,539 1,509
Research and development 609 654 1,296 1,257
General and administrative 796 849 1,367 1,407
---------- ---------- ---------- ----------
Total operating expenses 2,982 2,251 5,864 4,173
---------- ---------- ---------- ----------
Income (loss) from operations (536) 46 (1,146) 1,024
Interest income, net 243 234 456 377
---------- ---------- ---------- ----------
Income from continuing operations
before income taxes (293) 280 (690) 1,401
Provision for income taxes --- 109 --- 551
---------- ---------- ---------- ----------
Net income (loss) from continuing
operations (293) 171 (690) 850
---------- ---------- ---------- ----------
Discontinued operations, net of
income taxes --- (4,000) --- (4,427)
---------- ---------- ---------- ----------
Net loss $ (293) $(3,829) $ (690) $(3,577)
========== ========== ========== ==========
Net income (loss) from continuing
operations per share:
Basic $ (0.03) $ 0.02 $ (0.07) $ 0.09
========== ========== ========== ==========
Diluted $ (0.03) $ 0.02 $ (0.07) $ 0.09
========== ========== ========== ==========
Net loss per share:
Basic $ (0.03) $ (0.40) $ (0.07) $ (0.37)
========== ========== ========== ==========
Diluted $ (0.03) $ (0.40) $ (0.07) $ (0.37)
========== ========== ========== ==========
Shares used to compute net income
(loss) from continuing operations
per share:
Basic 9,257 9,534 9,249 9,563
========== ========== ========== ==========
Diluted 9,257 9,617 9,249 9,650
========== ========== ========== ==========
Shares used to compute net loss
per share:
Basic 9,257 10,083 9,249 10,153
========== ========== ========== ==========
Diluted 9,257 10,083 9,249 10,153
========== ========== ========== ==========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
Lumisys Incorporated
Condensed Consolidated Statements of Cash Flow
(Unaudited)
(In thousands)
Six Months Ended
-----------------------
June 30, June 30,
2000 1999
---------- ----------
Cash flow from operating activities:
Net loss $ (690) $(3,577)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 277 429
Non-cash charge related to discontinued
operations --- 3,550
Other 11 9
Changes in assets and liabilities:
Accounts receivable (107) 564
Inventories (924) (656)
Other current assets (207) 35
Accounts payable 438 (701)
Accrued expenses 606 (266)
Merger and related costs (10) (56)
---------- ----------
Net cash used in operating activities (606) (669)
---------- ----------
Cash flows from investing activities:
Sales of short-term investments, net 3,012 1,451
Proceeds from sale of discontinued operations --- 250
Purchases of property and equipment (413) (245)
---------- ----------
Net cash provided by investing activities 2,599 1,456
---------- ----------
Cash flows from financing activities:
Sales (purchases) of common stock, net 81 (232)
---------- ----------
Net cash provided by (used in) financing
activities 81 (232)
---------- ----------
Net increase in cash and cash equivalents 2,074 555
Cash and cash equivalents at beginning of period 6,393 10,651
---------- ----------
Cash and cash equivalents at end of period $ 8,467 $11,206
========== ==========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
Lumisys Incorporated
Notes to Condensed Consolidated Financial Statements
Note 1 - Basis of Presentation
The condensed consolidated financial statements of Lumisys Incorporated (the
"Company") presented herein have been prepared by the Company, without audit,
pursuant to the rules of the Securities and Exchange Commission for quarterly
reports on Form 10-Q and do not include all of the information and note
disclosures required by generally accepted accounting principles. These
statements should be read in conjunction with the consolidated financial
statements and notes thereto for the year ended December 31, 1999, included in
the Company's Annual Report on Form 10-K as filed with the Securities and
Exchange Commission.
The condensed consolidated balance sheets as of June 30, 2000 and December 31,
1999, the condensed consolidated statements of operations for the three and
six months ended June 30, 2000 and 1999, and the condensed consolidated
statements of cash flow for the six months ended June 30, 2000 and 1999 are
unaudited but, in the opinion of management, include all adjustments
(consisting of normal, recurring adjustments) necessary for a fair
presentation of the results for these interim periods.
The results of operations for the three and six months ended June 30, 2000,
are not necessarily indicative of the results to be expected for the entire
fiscal year ending December 31, 2000 or any future period.
Note 2 - Net Income (Loss) Per Share
Basic earnings per share is computed by dividing net income (loss) by the
weighted-average common shares outstanding for the period. Diluted earnings
per share reflects the weighted-average common shares outstanding plus the
potential effect of dilutive securities which are convertible into common
shares such as options, warrants, convertible debt and preferred stock.
The following is a reconciliation between the components of the basic and
diluted net income (loss) per share calculations for the periods presented
below (in thousands):
Three Months Ended Six Months Ended
------------------ ----------------
June 30, June 30, June 30, June 30,
2000 1999 2000 1999
-------- -------- -------- --------
Net income (loss) from continuing
Operations $(293) $ 171 $(690) $ 850
-------- -------- -------- --------
Net loss $(293) $(3,829) $(690) $(3,577)
Shares used to compute net income
(loss) from continuing operations
per share:
Weighted average shares outstanding
- basic 9,257 9,534 9,249 9,563
Effect of dilutive securities:
Potential common stock: stock options
and warrants --- 83 --- 87
-------- -------- -------- --------
Weighted average shares outstanding
- diluted 9,257 9,617 9,249 9,650
======== ======== ======== ========
Shares used to compute net loss
per share:
Weighted average shares outstanding
- basic 9,257 10,083 9,249 10,153
Effect of dilutive securities:
Potential common stock: stock options
and warrants --- --- --- ---
-------- -------- -------- --------
Weighted average shares outstanding
- diluted 9,257 10,083 9,249 10,153
======== ======== ======== ========
For the three months ended June 30, 1999, 1,428,000 shares and for the six
months ended June 30, 1999, 1,479,000 shares of potential common stock are
considered anti-dilutive using the treasury stock method and are excluded from
the calculation of diluted net income from continuing operations per share.
Due to the loss from continuing operations in the three and six months ended
June 30, 2000, and the net loss for the three and six months ended June 30,
2000 and 1999, all potential common stock outstanding is considered anti-
dilutive and is excluded from the calculation of net loss from continuing
operations and net loss per share.
Note 3 - Comprehensive Income
Comprehensive income (loss)is comprised of net income and other comprehensive
earnings such as unrealized gains or losses on available-for-sale short-term
investments. The Company's unrealized gains and losses on available-for-sale
short-term investments have been insignificant for all periods presented.
Note 4 - Composition of Certain Financial Statement Amounts
June 30, December 31,
2000 1999
--------- ------------
Inventories:
Raw materials $ 3,878 $ 3,319
Work-in-process 724 700
Finished goods 1,132 757
--------- ------------
5,734 4,776
Less: inventory reserves (2,254) (2,191)
--------- ------------
$ 3,509 $ 2,585
========= ============
Accrued expenses:
Payroll and related benefits $ 1,690 $ 1,308
Warranty 312 334
Professional fees 511 202
Unearned revenue 320 169
Related to discontinued
Operations 381 379
Income taxes 259 274
Marketing expenses 147 292
Other 137 193
========= ============
$ 3,757 $ 3,151
Note 5- Segment Information
Since July of 1999, the Company has organized its continuing business into two
reportable segments: the Lumisys division ("Lumisys") and the AuntMinnie.com
division ("AuntMinnie.com"). The Company's reportable business segments are
strategic business units that offer different products. Each segment is
managed separately because they require different technologies and market to
distinct classes of customers. Lumisys manufactures and markets an integrated
suite of hardware and software products for digitizing medical images. The
AuntMinnie.com division includes an Internet portal, intended to be the most
comprehensive Internet site for radiologists and professionals in the medical
imaging industry, and software that enables healthcare clinicians to access
medical images and clinical information at any point of care.
The Company's chief operating decision makers evaluate performance for each
segment based on net income (loss) before income taxes. Lumisys' total assets
include the initial investment in AuntMinnie.com and amounts receivable from
AuntMinnie.com, which are eliminated on consolidation.
Elimination of
Intercompany
Lumisys AuntMinnie.com Transactions Consolidated
------- -------------- ------------ ------------
Three months ended
June 30, 2000
Revenues $ 5,094 $ 36 $ --- $ 5,130
Income (loss) from
operations $ 565 $(1,101) $ --- $ (536)
Six months ended
June 30, 2000
Revenues $10,156 $ 126 $ --- $10,282
Income (loss) from
Operations $ 852 $(1,998) $ --- $(1,146)
Total assets $26,802 $ 744 $(3,083) $24,463
Note 6- Discontinued Operations
On June 3, 1999, the Company signed a definitive technology transfer agreement
with Foresight Imaging, LLC, ("Foresight"), under which certain assets and
technology of the Company's Imagraph subsidiary were sold to Foresight for
approximately $300,000, with additional royalties to be paid to the Company
over a three year period. All remaining operations of Imagraph were
terminated. The principals of Foresight were all employees of Imagraph, one
of which was an officer of the Company until the execution of the technology
transfer agreement. Operating losses through June 3, 1999 and the estimated
loss on terminating the Imagraph business, totaled $4.4 million (net of tax)
and consisted primarily of write-downs of certain assets and accrual of costs
related to an unfavorable sub-lease of the Imagraph facility. Foresight also
purchased certain other assets, consisting primarily of inventory and fixed
assets, in exchange for approximately $250,000, which was included in accounts
receivable at June 30, 1999.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Except for the historical information contained herein, the following
discussion 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. As such, they are subject to a number of uncertainties that could
cause actual results to differ materially from the statements. The words
"expect," "believe," "anticipate," "intend" and words of similar import are
intended to identify these statements as forward-looking statements. Factors
that could cause or contribute to such differences include, but are not
limited to, those discussed in this section, as well as those discussed in the
Company's 1999 Annual Report on Form 10-K and other documents filed by the
Company with the Securities and Exchange Commission. The Company does not
undertake any obligation to update forward-looking statements.
Overview
Lumisys Incorporated ("Lumisys" or the "Company") designs, manufactures and
markets computed radiography ("CR") systems that scan medical or industrial
images from a reusable phosphor plate and a family of precision digitizers
that convert medical images on film into digital format. Once in digital
form, the medical images can be stored, transmitted, viewed, enhanced,
manipulated and printed within a medical imaging network. The Company
currently offers a comprehensive family of products for digitizing medical
images under the Lumiscan label. These CR and film digitizers process images
from all commercially available medical imaging modalities, including x-ray,
computed tomography ("CT"), magnetic resonance imaging ("MRI"), ultrasound and
nuclear medicine. The Company is the leading supplier of laser-based film
digitizers, with sales of more than 6,000 Lumiscan units since its first
product was introduced in 1990.
In 1999, the Company substantially completed its restructuring plan resulting
from the 1997 merger with CompuRAD, a leading provider of software that
enables healthcare clinicians to access medical images and clinical
information at any point of care. The Company currently sells its software
products exclusively to its existing OEM and VAR customers or bundled with its
family of laser and CCD film digitizers and its DesktopCR products.
Utilizing the core technological competencies and market expertise of the
software design and marketing groups, the Company developed AuntMinnie.com, a
comprehensive Internet portal for radiologists and professionals in the
medical imaging industry. AuntMinnie.com provides a vertical portal for
radiologists, imaging managers, technologists, members of organized medicine,
industry, and radiology practices to meet, transact, research, and collaborate
on topics within the field of radiology with the ease and speed that only the
Internet can provide. Organized into various sections of interest to the
radiology community, AuntMinnie.com has set itself apart from other medical
information sites by its singular and unified focus on radiology
professionals, aggregating the information they require and facilitating the
commerce in which they engage. AuntMinnie.com generates revenue through the
sale of corporate sponsorships and advertising on the various web pages and
intends to earn commissions on e-commerce and used equipment transactions.
Currently, all development and marketing expenses are funded by the Company.
In 1998, the Company introduced its first CR system for use in the medical
market, the ACR-2000 DesktopCR. The DesktopCR system utilized many of the
design features of the CR system the Company developed for use in the
industrial inspection market in 1996. The DesktopCR system reads medical or
industrial images from reusable phosphor plates, which replaces the need for
film and film processing. This was followed in 1999 by the second generation
model, the ACR-2000i DesktopCR with an integrated eraser, allowing users to
automatically erase phosphor plates without removing them from the system.
Also in 1999, the Company introduced the iLuminator, a unique image management
system based upon the ACR-2000i DesktopCR , providing digital x-ray
acquisition with computed radiography, image viewing, permanent storage of the
digital images, and if required, transmission of these images to local and/or
remote sites. The iLuminator is a self-contained, fully integrated system
that allows the user to completely replace film and chemistry and all their
attendant costs and problems. The Company's CR systems are low-cost, small
systems and particularly suited for low volume environments.
In 1999, the Company signed a definitive technology transfer agreement with
Foresight Imaging, LLC ("Foresight") under which certain assets and technology
of the Company's Imagraph subsidiary were sold to Foresight. The remaining
operations of Imagraph were discontinued.
Results of Operations
Total sales for the three months ended June 30, 2000 increased 1.9% to $5.1
million from $5.0 million for the three months ended June 30, 1999 due to
increased sales volume of the digitizer products. Total sales for the six
months ended June 30, 2000 decreased 6.0% to $10.3 million from $10.9 million
for the six months ended June 30, 1999. The decrease in sales is a result of
lower sales volume of the Company's DesktopCR products during the six months
ended June 30, 2000 as compared to the same period in 1999. The higher sales
of DesktopCR products sold during the six months ended June 30, 1999, were
due to sales of units to be used as demonstration models by the Company's
distributors.
Gross profit for the three months ended June 30, 2000 increased to $2.4
million from $2.3 million compared to the same period in 1999. Gross profit
decreased for the six months ended June 30, 2000 to $4.7 million from $5.2
million for the same period in 1999. Gross margin increased to 47.7% for the
three months ended June 30, 2000 from 45.6% for the same period in 1999 and
decreased to 45.9% for the six months ended June 30, 2000 from 47.5% for the
same period in 1999. The increase in gross profit and gross margin for the
three month period ended June 30, 2000 is primarily due to increased sales
volume and therefore increased overhead absorption compared to the same period
in 1999. The decrease in gross profit and gross margin for the six months
ended June 30, 2000 was a result of lower sales compared to the same period in
1999. If sales volume of the Desktop CR products increases in the future,
the Company believes its gross margins should improve.
Production, content and other website costs for the three and six months ended
June 30, 2000 were $316,000 and $662,000, respectively, and 6.2% and 6.4% of
total revenues, respectively. These expenses relate to the AuntMinnie.com
Internet portal which was developed in the second half of 1999 and include
editorial staff, consultants, engineering and development expenses. The
Company expects these expenses to increase in the future as it expands the
functionality of AuntMinnie.com.
Sales and marketing expenses for the three and six months ended June 30, 2000
increased 68.6% and 68.3% to $1.3 million and $2.5 million, respectively, from
$748,000 and $1.5 million for the three and six months ended June 30, 1999,
respectively. The increase was due primarily to marketing costs related to
AuntMinnie.com, which was developed and launched in the second half of 1999.
The Company expects its sales and marketing expenses to increase to further
develop and support the CR distribution channel and sponsorship and e-commerce
revenue for AuntMinnie.com. As a percentage of sales for the three and six
months ended June 30, 2000, these expenses increased to 24.6% and 24.7%,
respectively, from 14.9% and 13.8% for the three and six months ended June 30,
1999, respectively.
Research and development expenses for the three months ended June 30, 2000
decreased 6.9% to $609,000 from $654,000 for the three months ended June 30,
1999. Research and development expenses for the six months ended June 30,
2000 increased 3.1% from the same period in 1999. The decrease in the three
month period and the slight increase in the six month period ended June 30,
2000 is a result of normal quarterly fluctuations in development expenses for
items such as prototype material and contract labor.
General and administrative expenses decreased in the three months ended June
30, 2000 6.2% to $796,000 from $849,000 for the same period in 1999. As a
percentage of sales, general and administrative expenses decreased slightly to
15.5% from 16.9% for the three months ended June 30, 2000 compared to 1999.
For the six months ended June 30, 2000 and 1999, general and administrative
expenses were approximately $1.4 million for each period. The slight decrease
primarily relates to receipt of a legal settlement in March 2000 offset by
expenses related to AuntMinnie.com. As a percentage of sales for the six
months ended June 30, 2000, these expenses increased to 13.3% from 12.9% for
the same period in the prior year.
The provision for income taxes for continuing operations for the three and six
months ended June 30, 1999 was $109,000 and $551,000, respectively. No tax
provision or benefit was recognized for the three and six months ended June
30, 2000 due to the net loss from continuing operations. The Company has
provided a partial valuation allowance against the balance of its deferred tax
assets remaining as of June 30, 2000. If the Company generates income from
continuing operations for the year ended December 31, 2000, the Company
expects continuing operations to be subject to an effective tax rate of
approximately 11%.
For the three and six months ended June 30, 1999, the Company recognized a
primarily non-cash loss of $4.0 million and $4.4 million, respectively,
related to discontinued operations of the Imagraph subsidiary. The loss for
the periods consisted of operating losses through June 3, 1999, the date of
the technology transfer agreement, and the estimated loss on terminating the
Imagraph business, primarily the write-down of certain assets and accrual of
costs related to an unfavorable sub-lease of the Imagraph facility. This was
offset by payments received under the technology transfer agreement with
Foresight. In future periods, the Company expects to recognize income from
the discontinued operations related to royalty payments to be paid by
Foresight.
Liquidity and Capital Resources
At June 30, 2000, the Company's working capital was $18.5 million. The
Company had cash, cash equivalents and short-term investments of approximately
$15.4 million at June 30, 2000, compared with $16.4 million at December 31,
1999. The decrease is primarily due to operating expenditures and capital
equipment purchases for the AuntMinnie.com Internet portal.
The Company believes that its existing cash, cash equivalents, short-term
investments and funds to be generated by operations will satisfy the Company's
cash flow requirements through December 2000 or later. Thereafter, if cash
generated from operations is insufficient to satisfy the Company's projected
requirements, the Company may be required to sell additional equity or debt
securities or obtain bank or other credit facilities. There can be no
assurance that the Company will be able to sell such securities or obtain such
credit facilities on acceptable terms in the future. The sale of additional
equity or debt securities could result in additional dilution to the Company's
stockholders.
Risk Factors
Significant Fluctuations in Operating Results. The Company reported a loss
from continuing operations for the six months ended June 30, 2000. There can
be no assurances that the Company will be profitable on a quarterly or annual
basis in the future. The Company has experienced quarterly fluctuations in
operating results caused by various factors, including the timing of orders by
major customers, customer inventory levels, mergers and acquisitions by the
Company's customers, shifts in product mix, the incurrence of acquisition-
related costs by the Company, the incurrence of costs associated with
discontinued operations of the Company and general conditions in the
healthcare industry which have reduced capital equipment budgets and delayed
or reduced the adoption of teleradiology, Picture Archiving and Communication
Systems ("PACS") and mini-PACS. The Company expects that these fluctuations
will continue.
The Company typically does not obtain long-term volume purchase contracts from
its customers, and a substantial portion of the Company's backlog is scheduled
for delivery within 60 days or less. Customers may cancel orders and change
volume levels or delivery times without penalty. Quarterly sales and
operating results therefore depend on the volume and timing of the backlog as
well as bookings received during the quarter. A significant portion of the
Company's operating expenses are fixed, and planned expenditures are based
primarily on sales forecasts and product development programs. If sales do
not meet the Company's expectations in any given period, the materially
adverse impact on operating results may be magnified by the Company's
inability to adjust operating expenses sufficiently or quickly enough to
compensate for such a shortfall. Furthermore, the Company's gross margins may
decrease in the future due to increasing sales of lower margin products and
volume discounts. Results of operations in any period should not be
considered indicative of the results to be expected for any future period.
Fluctuations in operating results may also result in fluctuations in the price
of the Company's common stock.
New Product Development in Hardware, Software and Internet Products;
Uncertainty of Market Acceptance. The Company's success is dependent on market
acceptance of its new and existing products. There can be no assurance that
sales of new products will achieve significant market acceptance in the
future. The market for PACS, teleradiology software and Internet products and
services for radiology is uncertain. Current and future competitors are
likely to introduce competing hardware, software and Internet products for
radiology, making it difficult to predict the rate at which the market will
grow, if at all, or the rate at which new or increased competition will result
in market saturation. If the market for such Internet products, software and
hardware fails to grow or grows more slowly than anticipated, the Company's
business, financial condition and results of operations would be materially
adversely affected.
The Company expects that the sales cycle for PACS and teleradiology software
and CR hardware through the OEM, System Integrator sales channels and direct
sales will be longer than that for its other existing hardware products.
Accordingly, the Company's quarterly revenues and operating results may be
subject to greater fluctuation. Additionally, the Company has limited
experience in marketing, installing and supporting its software and CR
hardware through these sales channels and direct sales, and there can be no
assurance that the Company can obtain the necessary resources to market,
install and support its PACS and teleradiology software and CR hardware in an
efficient, cost-effective and competitive manner.
The Company has limited experience in Internet products and services and there
can be no assurance that AuntMinnie.com will generate significant revenue.
AuntMinnie.com will rely heavily on revenues derived from Internet advertising
and sponsorships under short-term contracts, which are difficult to forecast
accurately and which may prove to be an ineffective means of advertising for
our current and potential customers. AuntMinnie.com's business services,
while costly to develop, may fail to gain market acceptance. The Company has
invested a significant amount of money and resources in the creation of
business services, such as facilitating used imaging equipment sales, but such
services are unproven and may fail to gain market acceptance. Because the
market for these business services is new and evolving, it is difficult to
predict the size of this market and its rate of growth, if any. If the market
fails to develop, develops more slowly than expected or becomes more
competitive than is currently expected, the Company's business, financial
condition and results of operations would be materially adversely affected.
Significant Risks Associated with Acquisitions. The integration of any
acquisition will require special attention from management, which may
temporarily distract its attention from the day-to-day business of the
Company. Any acquisitions will also require integration of the companies'
product offerings and coordination of research and development and sales and
marketing activities. Furthermore, as a result of acquisitions, the Company
may enter markets in which it has no or little direct prior experience. There
can also be no assurance that the Company will be able to retain key technical
personnel of an acquired company or recruit new management personnel for the
acquired businesses, or that the Company will, or may in the future, realize
any benefits as a result of such acquisitions. Acquisitions by the Company
may result in potentially dilutive issuances of equity securities, the
incurrence of debt, one-time acquisition charges and amortization expenses
related to goodwill and intangible assets, each of which could be significant
and could materially adversely affect the Company's financial condition and
results of operations. In addition, the Company believes that it may be
required to expand and enhance its financial and management controls,
reporting systems and procedures as it integrates acquisitions. There can be
no assurance that the Company will be able to do so effectively, and failure
to do so when necessary would have a material adverse effect upon the
Company's business and results of operations.
New Product Development; Rapid Technological Change; Risk in Delays of Product
Development. The market for the Company's products is characterized by rapid
technological advances, changes in customer requirements and frequent new
product introductions and enhancements. The Company's future success will
depend upon its ability to enhance its current products, to develop and
introduce new products that keep pace with technological developments and to
respond to evolving customer requirements. Any failure by the Company to
anticipate or respond adequately to technological developments by its
competitors or to changes in customer requirements, or any significant delays
in product development or introduction, could result in a loss of
competitiveness or revenues. In the past, the Company has experienced delays
in the development and introduction of new products and product enhancements,
and there can be no assurance that the Company will not experience such delays
in the future. In addition, new product introductions or enhancements by the
Company's competitors or the use of other technologies that do not depend on
film digitization or computed radiography could cause a decline in sales or
loss of market acceptance of the Company's hardware and software products. In
particular, several companies have announced developments leveraging the
technology used in flat panel displays to produce high-resolution, two
dimensional image sensor arrays that make it possible for x-ray images to be
captured digitally without film or chemical processing. While this emerging
technology, known as digital radiography ("DR"), is expensive, there can be no
assurance that future advances in this technology or other technologies will
not produce systems better positioned for the marketplace that will therefore
reduce the digitizer and CR market to the then installed base of imaging
systems. There can be no assurance that the Company will be successful in
developing and marketing new products or product enhancements on a timely or
cost-effective basis, and such failure could have a material adverse effect on
the Company's business and results of operations.
The Company established a new business entity, AuntMinnie.com, and is
incurring costs to establish this business line. There can be no assurance
that the Company will be successful in implementing and developing the
radiology portal, meeting the expectations as to revenue generation,
attracting executive talent, strategic partnerships and sponsors, competing
with other internet sites, or achieving market acceptance by the radiology
community, and such failure could have a material adverse effect on the
Company's business and results of operations. AuntMinnie.com may have
difficulty scaling and adapting existing architecture and infrastructure to
accommodate increased traffic and technology advances. In the future,
AuntMinnie.com may be required to make significant changes to architecture
including moving to a completely new architecture. If AuntMinnie.com is
required to switch architectures, the Company would incur substantial costs
and users may experience delays or interruptions in service. Delays or
interruptions in service may cause users to become dissatisfied with
AuntMinnie.com and move to competing providers of online services. Further,
to the extent that demand for AuntMinnie.com's services increase, the Company
will need to expand its infrastructure, including the capacity of its hardware
servers and the sophistication of its software. This expansion is likely to
be expensive and complex and require additional technical expertise. Any loss
of traffic, increased costs, inefficiencies or failures to adapt to new
technologies and the associated adjustments to AuntMinnie.com's architecture
would have a material adverse effect on the Company's business and results of
operations.
Risks Associated With Software Products. Software and systems as complex as
those offered by the Company frequently contain undetected errors or failures
when first introduced or when new versions are released. The Company has in
the past discovered bugs and system errors in certain of its software
enhancements, both before and after initial shipment. There can be no
assurance that, despite testing by the Company, errors will not occur in the
Company's products resulting in loss of, or delay in, the Company recognizing
revenue or collecting payments for these products. The Company's reputation
from such errors could also be damaged, resulting in fewer orders. Peripherals
and hardware from third party manufacturers also may contain defects and
incompatibilities which could adversely affect market acceptance of the
Company's software products.
Risks Associated With the Internet. The Internet may not prove to be a viable
commercial marketplace for a number of reasons, including the lack of
acceptable security technologies, potentially inadequate development of the
necessary infrastructure, or the lack of timely development and
commercialization of performance improvements.
AuntMinnie.com's operations could be significantly hindered by the occurrence
of a natural disaster or other catastrophic event. AuntMinnie.com's
operations are susceptible to outages due to fire, floods, power loss,
telecommunications failures, break-ins and similar events. In addition,
substantially all of AuntMinnie.com's network infrastructure is located in
Tucson, Arizona. The Company does not have multiple site capacity in the
event of any such occurrence. Despite the Company's implementation of network
security measures, its servers are vulnerable to computer viruses, break-ins,
and similar disruptions from unauthorized tampering with the Company's
computer systems. The Company's business interruption insurance may not be
sufficient to compensate the Company for losses that may occur as a result of
any of these events. Such events could have a material adverse effect on the
Company's business and results of operations.
Long Sales Cycles. The OEM and System Integrator sales cycle for the Company's
products is lengthy. The sales cycle of the Company's products is subject to
delays associated with changes or the anticipation of changes in the
regulatory environment affecting healthcare enterprises, changes in the
customer's strategic system initiatives, competing information systems
projects within the customer organization such as, but not limited to,
consolidation in the healthcare industry in general, the highly sophisticated
nature of the Company's software and competition in the PACS and teleradiology
markets in general. The time required from initial contact to purchase order
typically ranges from one to nine months, and the time from purchase order to
delivery and recognition of revenue typically ranges from one to nine months.
During the sales process, the Company expends substantial time, effort and
funds preparing a contract proposal, demonstrating the software and
negotiating the purchase order. For these and other reasons, the Company
cannot predict when or if the sales process with a prospective customer will
result in a purchase order.
Competition. Competition in the CR market is well established and includes
Fuji, Agfa and Kodak. In addition, PhorMax and Digident plan to debut a
desktop-sized CR in the near future. Furthermore, other healthcare and non-
healthcare equipment companies not presently offering competing products may
enter the CR market. Increased competition could result in price reduction,
reduced gross margins and loss of market share, any of which could materially
adversely affect the Company's business, financial condition and results of
operations. In addition, many of the Company's competitors and potential
competitors have significantly greater financial, technical, product
development, marketing and other resources and market recognition than the
Company in the CR area. Many of the Company's competitors also currently
have, or may develop or acquire, substantial installed customer bases in the
healthcare industry. As a result of these factors, the Company's competitors
may be able to respond more quickly to new or emerging technologies and
changes in customer requirements or to devote greater resources to the
development, promotion and sale of their products than the Company. There can
be no assurances that the Company will be able to compete successfully against
current and future competitors or that competitive pressures faced by the
Company will not have a materially adverse effect on its business, financial
condition or results of operations.
Competition in the United States laser-based film digitizer market has not
been significant. In 1996, CLS entered the market with a product similar to
the laser-based film digitizers offered by the Company and in 1998, General
Scanning introduced a laser-based film digitizer. To date, the Company is
unaware of any sales made by CLS or General Scanning. However, several
Japanese competitors such as Konica, Nishimoto Sangyo and Abe Sekkei offer
competitive products on an international basis and may decide in the future to
devote additional resources to marketing competitive products in the United
States. The markets for medical film digitizers incorporating CCD's are
highly competitive. The Company faces competition from companies such as
Vidar Systems Inc., Canon Inc., Hell Linotype and Howtek in the CCD-based film
digitizer market. There can be no assurance that the Company's competitors
will not develop enhancements to, or future generations of, competitive
products that will offer superior price or performance features that render
the Company's products less competitive or obsolete.
In addition, large companies, such as Kodak, Sterling, Fuji, GE, Siemens,
Philips and Agfa, have the technical and financial ability to design and
market CR and digitizer products competitive with the Company's products, and
some of them have in the past produced and marketed such products. While many
of these companies currently purchase products from the Company, the Company
believes that it will be required to continue to improve the price and
performance characteristics of its products to retain their business
especially in view of the fact that these customers are not contractually
required to purchase their CR and digitizers exclusively or at all from the
Company. All of these companies have significantly greater financial,
marketing and manufacturing resources than the Company and would be
significant competitors if they decide to enter this market.
Competition in the markets for PACS and teleradiology software products and
services is intense and is expected to increase. The Company's software
products support the Company's CR and film digitizers but do not generate
significant income as stand-alone products. By bundling software with the CR
and film digitizers the Company allows its OEM and VAR customers to utilize
either the Company's software or at their discretion, their own or competing
software. The principal providers of software in the PACS and teleradiology
market are ISG, Applicare Medical Imaging B.V., Mitra Imaging Inc., and Emed
Technologies Corporation. The success of the Company's software does not have
a direct impact on the Company's financial condition or results of operations
but rather brings additional value to the Company's CR and digitizer products.
Competition in the Internet portal business is intense and includes other
vertical Internet portals focused on the radiology community such as
Radiology.com, as well as companies offering e-commerce products using the
Internet, such as Neoforma and companies offering content, products and
services to a broader medical market, such as WebMD. Some of the Company's
competitors and potential competitors may have significantly greater
financial, technical, product development, marketing and other resources and
market recognition than the Company in the Internet portal business. Many of
the Company's competitors also currently have, or may develop or acquire,
substantial market acceptance by the radiology community. As a result of
these factors, the Company's competitors may be able to respond more quickly
to new or emerging technologies and changes in customer requirements or to
devote greater resources to the development, promotion and sale of their
products than the Company. There can be no assurances that the Company will
be able to compete successfully against current and future competitors or that
competitive pressures faced by the Company will not have a materially adverse
effect on its business, financial condition or results of operations.
Proprietary Rights. The Company relies on a combination of trade secrets,
copyright and trademark laws, nondisclosure and other contractual provisions
to protect its proprietary rights. The Company currently has no blocking
patents covering its technology and it has not registered any of its
trademarks. There can be no assurance that measures taken by the Company to
protect its intellectual property will be adequate or that the Company's
competitors will not independently develop systems and services that are
substantially equivalent or superior to those of the Company. Substantial
litigation regarding intellectual property rights exists in the industry, and
the Company expects that its products may be increasingly subject to third-
party infringement claims as the number of competitors in the Company's
industry segment grows and the functionality of systems overlap. Although the
Company believes that its systems and applications do not infringe upon the
proprietary rights of third-parties, there can be no assurance that third-
parties will not assert infringement claims against the Company in the future,
that the Company would prevail in any such dispute or that a license or
similar agreement will be available on reasonable terms in the event of an
unfavorable ruling on any such claim. In addition, any such claim may require
the Company to incur substantial litigation expenses or subject the Company to
significant liabilities and could have a material adverse effect on the
Company's business, financial condition and results of operations.
Customer Concentration; Reliance on OEMs. For the six months ended June 30,
2000, no customers represented 10% of the Company's total sales. A number of
large customers accounted for a significant portion of the Company's backlog
at June 30, 2000. The Company expects to continue to depend upon its
principal customers for a significant portion of its sales, although there can
be no assurance that the Company's principal customers will continue to
purchase products and services from the Company at current levels, if at all.
The loss of one or more major customers or a change in their buying patterns
could have a material adverse effect on the Company's business and results of
operations.
Single-Source Suppliers. The Company purchases industry-standard parts and
components for the assembly of its products, generally from multiple vendors.
Although the Company relies on single-source suppliers for certain components,
such as lasers, photomultiplier tubes and certain electronic components
primarily to control price and quality, the Company believes that alternate
sources of supply are available from other vendors for such components and has
qualified second source suppliers for some, but not all, single-sourced parts.
The Company maintains good relationships with its vendors and, to date, has
not experienced any material supply problems. While the Company seeks to
maintain an adequate inventory of single-sourced components, there can be no
assurances that such inventory will be sufficient or that delays in part or
component deliveries will not occur in the future, which could result in
delays or reductions in product shipments. Furthermore, even if currently
single-sourced components could be replaced by other qualified parts, product
redesign and testing could be costly and time consuming. These factors could
have a material adverse effect on the Company's business, financial condition
and results of operations.
Third Party Content. The future success of AuntMinnie.com depends in part on
its ability to aggregate compelling content and deliver that content through
its online properties. Much of the content that attracts users to
AuntMinnie.com, such as news items, continuing medical education ("CME"),
industry standards and regulations, stock quotes and weather reports is
licensed from third parties such as Massachusetts General Physicians
Organization, Reuters and The Weather Channel. Many of AuntMinnie.com's
content licenses with third parties are non-exclusive and extend for a period
of less than two years. There can be no guarantee that such licenses will be
renewed upon their expirations or that other radiology Internet portals will
not be able to offer similar or identical content. If AuntMinnie.com is
unable to license or acquire compelling content for its Internet site from
third parties, or if other companies are able to broadcast content that is
similar to or the same as that provided by AuntMinnie.com, the number of users
on AuntMinnie.com may not grow at all or at a slower rate than anticipated or
may decrease, which would decrease advertising and e-commerce revenue and
would have a material adverse effect on the Company's business and results of
operations.
Litigation. On July 9, 1997 and July 10, 1997 two securities class action
lawsuits were filed in the Superior Court of the State of California, County
of Santa Clara, and the United States District Court for the Northern District
of California against the Company, several of its current and former officers
and directors, and its underwriters. The complaints are brought on behalf of
all persons who purchased the Company's common stock between November 15, 1995
and July 11, 1996. The complaints allege that defendants made material false
statements and omitted to disclose material information concerning the
Company's actual and expected performance, causing the price of the Company's
stock to be artificially inflated. The federal complaint alleges claims under
Sections 10(b) and 20(a) of the Securities Exchange Act of 1934; the state
complaint alleges claims under California's securities statutes. Neither
complaint specifies the amount of damages sought. The Company and the other
defendants deny all allegations of wrongdoing.
In December 1998, the state court granted in part and denied in part
defendants' motion to dismiss plaintiff's amended complaint. Discovery is in
progress in the state case. There can be no assurance that the Company will
prevail in the state case. In July 1999, plaintiff voluntarily dismissed the
federal case.
Government Regulation. The manufacturing and marketing of the Company's
digitizers, CR products and software products are subject to extensive
government regulation in the United States and in other countries, and the
process of obtaining and maintaining required regulatory approvals is lengthy,
expensive and uncertain. If a medical device manufacturer can establish that
a newly developed device is "substantially equivalent" to a device that was
legally marketed prior to May 1976, the date on which the Medical Device
Amendments of 1976 were enacted, or to a device the FDA found to be
substantially equivalent to a legally marketed pre-1976 device, the
manufacturer may seek marketing clearance from the FDA to market the device by
filing a 510(k) premarket notification. The 510(k) premarket notification
must be supported by appropriate data establishing the claim of substantial
equivalence to the satisfaction of the FDA. Receipt of 510(k) clearance
normally takes at least three months, but may take much longer and may require
the submission of clinical safety and efficacy data to the FDA. All of the
Company's laser-based film digitizers, the CCD-based film digitizer, CR
product and software products that are commercially available have received
510(k) clearance. There can be no assurance that 510(k) clearance for any
future product or any modification of an existing product will be granted, or
that the process will not be unduly lengthy. In the future, the FDA may
require manufacturers of certain medical devices to engage in a more thorough
and time consuming approval process than the 510(k) process, which could have
a material adverse effect on the Company's business and results of operations.
The Company is also required to register as a Class II medical device
manufacturer with the FDA and state agencies, such as the California
Department of Health Services ("CDHS"). As such, the Company may be inspected
on a routine basis by both the FDA and the CDHS for compliance with the FDA's
Good Manufacturing Practices ("GMP"), Quality Standard Regulations ("QSR") and
other applicable regulations. These regulations require that the Company
manufacture its products and maintain its documents in a prescribed manner
with respect to manufacturing, reporting of product malfunctions and other
matters. If the FDA believes that a company is not in compliance with federal
regulatory requirements, it can institute proceedings to detain or seize
products, issue a recall, prohibit marketing and sales of the company's
products and assess civil and criminal penalties against the company, its
officers or its employees. Failure to comply with the regulatory requirements
could have a material adverse effect on the Company's business and results of
operations. The Company's Sunnyvale facility was inspected by the CDHS and
the FDA in 1996 and was found to be compliant with both the CDHS's and FDA's
GMP regulations. In the second quarter of 1998 the Company's Tucson facility
was inspected by the FDA and was found to have some items not in compliance
with the FDA's GMP regulations. The Company took corrective action on the
FDA's observations and was re-inspected at the Tucson facility in the first
quarter of 1999 and found to be in compliance with the FDA's GMP regulations.
Sales of the Company's products outside the United States are subject to
foreign regulatory requirements that vary from country to country. Additional
approvals from foreign regulatory authorities may be required, and there can
be no assurance that the Company will be able to obtain foreign approvals on a
timely basis or at all, or that it will not be required to incur significant
costs in obtaining or maintaining its foreign regulatory approvals. Starting
in mid 1998, the Company has been required to obtain certifications necessary
to enable the "CE" mark to be affixed to the Company's products to continue
commercial sales in member countries of the European Union. The CE mark is an
international symbol of quality and complies with applicable European
information device equipment directives. The Company has obtained this CE
certification. Failure to comply with foreign regulatory requirements could
have a material adverse effect on the Company's business, financial condition
and results of operations.
AuntMinnie.com is subject to U.S. and foreign government regulation of the
Internet, the impact of which is difficult to predict. There are currently
few laws or regulations directly applicable to the Internet. The application
of existing laws and regulations to AuntMinnie.com relating to issues such as
user privacy, defamation, pricing, advertising, taxation, sweepstakes,
promotions, content regulation, quality of products and services, and
intellectual property ownership and infringement can be unclear. In addition,
AuntMinnie.com will also be subject to new laws and regulations directly
applicable to AuntMinnie.com's activities. Any existing or new legislation
applicable to AuntMinnie.com could expose the Company to substantial
liability, including significant expenses necessary to comply with such laws
and regulations, and dampen the growth in use of the Internet.
AuntMinnie.com posts privacy policies concerning the use and disclosure of
user data. Any failure by the Company to comply with the posted privacy
policies could have a material adverse effect on the Company's business,
financial condition and results of operations.
Due to the global nature of the Internet, it is possible that the governments
of other states and foreign countries might attempt to regulate its
transmissions or prosecute AuntMinnie.com for violations of their laws.
AuntMinnie.com might unintentionally violate such laws, such laws may be
modified and new laws may be enacted in the future. Any such developments
could have a material adverse effect on the Company's business, financial
condition and results of operations.
Third-Party Reimbursement. Third-party payers, such as governmental programs
and private insurance plans, can indirectly affect the pricing or the relative
attractiveness of the Company's products by regulating the maximum amount of
reimbursement that they will provide for the taking, storing and
interpretation of medical images. In recent years, healthcare costs have
risen substantially, and third-party payers have come under increasing
pressure to reduce such costs. In this regard, extensive studies undertaken
by the Clinton Administration, even though not successfully translated into
regulatory action, have stimulated widespread analysis and reaction in the
private sector focused on healthcare cost reductions, which may involve
reductions in reimbursement rates in radiology. A decrease in the
reimbursement amounts for radiological procedures may decrease the amount
which physicians, clinics and hospitals are able to charge patients for such
services. As a result, adoption of teleradiology, PACS and mini-PACS may slow
as capital investment budgets are reduced, and the demand for the Company's
products could be significantly reduced.
Product Liability and Insurance. The manufacture and sale of medical products
entails significant risk of product liability claims. While the Company
believes that its current insurance coverage is appropriate, there can be no
assurance that such coverage is adequate to protect the Company from any
liabilities it might incur in connection with the sale of the Company's
products. In addition, the Company may require increased product liability
coverage as additional products are commercialized. Such insurance is
expensive and in the future may not be available on acceptable terms, if at
all. A successful product liability claim or series of claims brought against
the Company in excess of its insurance coverage could have a material adverse
effect on the Company's business and results of operations.
The Company periodically enters into arrangements to offer third-party
products, services or content under the AuntMinnie.com brand or via
distribution on AuntMinnie.com, including stock quotes and trading
information. AuntMinnie.com may be subject to claims concerning these
products, services or content by virtue of AuntMinnie.com's involvement in
marketing, branding, broadcasting or providing access to them, even if
AuntMinnie.com does not host, operate, provide, or provide access to these
products, services or content. While the agreements with these parties often
provide that AuntMinnie.com will be indemnified against such liabilities, such
indemnification may not be adequate. It is also possible that, if any
information provided directly by AuntMinnie.com contains errors or is
otherwise negligently provided to users, third parties could make claims
against the Company. Investigating and defending any of these types of claims
is expensive, even to the extent that the claims do not result in liability.
Volatility of Stock Prices. The market price of the Company's common stock
has been and may continue to be volatile. This volatility may result from a
number of factors, including fluctuations in the Company's quarterly revenues
and net income, announcements of technical innovations or new commercial
products by the Company or its competitors, and conditions in the market for
the teleradiology and health care industry, for PACS and teleradiology
products, healthcare information systems and Internet products and services
for the radiology community. Also, the stock market has experienced and
continues to experience extreme price and volume fluctuations which have
affected the market prices of securities, particularly those of medical
technology companies, and which often have been unrelated to the operating
performance of the companies. These broad market fluctuations, as well as
general economic and political conditions, may adversely affect the market
price of the Company's common stock in future periods.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Market Risk Disclosures. The Company is exposed to market risk related to
changes in interest rates and foreign currency exchange rates. The Company
does not use derivative financial instruments for speculative or trading
purposes.
Interest Rate Sensitivity. The Company maintains a short-term investment
portfolio consisting mainly of fixed income securities with an average
maturity of less than 180 days. These available-for-sale securities are
subject to interest rate risk and will fall in value if market interest rates
increase. If market interest rates were to increase immediately and uniformly
by 10 percent from levels at June 30, 2000, the fair value of the Company's
investment portfolio would decline by an immaterial amount. The Company has
the ability to hold its fixed income securities until maturity. The Company
does not therefore expect that a sudden change in market interest rates would
have any significant effect on its operating results or cash flows .
Exchange Rate Sensitivity. From time to time, Lumisys makes certain capital
equipment or other purchases denominated in foreign currencies. As a result,
Lumisys' cash flows and earnings are exposed to fluctuations in foreign
currency exchange rates. Lumisys attempts to limit these exposures through
operational strategies and generally has not hedged its foreign currency
exposures. At June 30, 2000, the Company has no purchase commitments
denominated in foreign currencies.
Part II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities and Use of Proceeds
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
The 2000 Annual Meeting of Stockholders ("Annual Meeting") of the Company was
held on June 15, 2000. The total number of shares of the Company's common
stock, $0.001 par value per share, outstanding as of April 24, 2000, the
record date of the Annual Meeting, was 9,459,892 shares. Management of the
Company solicited proxies pursuant to Section 14 of the Securities Exchange
Act of 1934, as amended, and Regulation 14A promulgated thereunder for the
Annual Meeting. At the meeting, the following proposals were voted upon by
the stockholders as indicated below:
1. To elect three directors to serve until the 2003 annual meeting
Directors Voted For Witheld
--------- --------- -------
Dr. Phillip Berman 6,818,407 788,835
Daniel Burstein 6,826,377 780,865
Craig L. Klosterman 6,830,377 776,865
2. To approve an amendment to the Company's 1995 Stock Option Plan
Voted For Voted Against Abstained
--------- ------------- ---------
6,466,896 1,115,936 24,410
3. To approve an amendment and restatement to the Company's 1995 Employee
Stock Purchase Plan
Voted For Voted Against Abstained
--------- ------------- ---------
7,389,255 185,977 32,010
4. To ratify the selection of PriceWaterhouseCoopers LLP as independent
accountants
Voted For Voted Against Abstained
--------- ------------- ---------
7,526,006 58,766 22,470
Item 5. Other Information
Pursuant to the Company's bylaws, stockholders who wish to bring matters or
propose nominees for director at the Company's 2001 Annual Meeting of
Stockholders must provide specified information to the Company between March
10, 2001 and April 9, 2001 (unless such matters are included in the Company's
proxy statement pursuant to Rule 14a-8 under the Securities Exchange Act of
1934, as amended).
Item 6. Exhibits and Reports on Form 8-K
(a). Exhibits furnished:
Exhibit
Number Description of Document
-------- ---------------------------
27.1 Financial Data Schedule
(b). Reports on Form 8-K:
The Company filed no Current Reports on Form 8-K during the three months
ended June 30, 2000.
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
LUMISYS INCORPORATED
Dated August 09, 2000 By:/s/ Bala S. Manian
------------------
Dr. Bala S. Manian
Chief Executive Officer
August 09, 2000 /s/ Dean MacIntosh
------------------
Dean MacIntosh
Executive Vice President
and Chief Financial
Officer (Principal
Financial and
Accounting Officer)