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, 1996
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 6, 1996, 6,372,022 shares of the registrant's Common Stock,
$.001 par value, were outstanding.
<PAGE>
Lumisys Incorporated
Index
Page
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated balance sheets at
June 30, 1996 and December 31, 1995 3
Consolidated statements of income for
the three and six months ended June 30,
1996 and 1995 4
Consolidated statements of cash flows
for the six months ended June 30, 1996
and 1995 5
Notes to financial statements 6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 7 - 9
Part II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of
Security Holders 9
Item 6. Exhibits and Reports on Form 8-K 9
SIGNATURES 10
2
<PAGE>
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements
Lumisys Incorporated
Consolidated Balance Sheets
(Unaudited)
June 30, December 31,
1996 1995
--------- ------------
(In thousands)
ASSETS
Current assets:
Cash and cash equivalents $ 16,338 $ 11,426
Short-term investments --- 3,934
Accounts receivable, net of
allowances of $280 and $249 2,847 2,410
Inventories 3,571 3,003
Deferred tax assets 1,429 1,114
Other current assets 198 294
--------- ------------
Total current assets 24,383 22,181
Property and equipment, net 151 162
Other assets 457 400
--------- ------------
$ 24,991 $ 22,743
========= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,343 $ 1,525
Accrued expenses 2,010 1,468
--------- ------------
Total current liabilities 3,353 2,993
--------- ------------
Stockholders' equity
Preferred stock, $0.001 par value;
5,000 shares authorized; no shares
issued and outstanding --- ---
Common stock, $0.001 par value;
25,000 shares authorized; 6,366 and
6,240 shares issued and outstanding 6 6
Additional paid-in capital 22,784 22,702
Accumulated deficit (904) (2,521)
Notes receivable from stockholders (128) (297)
Deferred compensation related to stock
options (120) (140)
--------- ------------
Total stockholders' equity 21,638 19,750
--------- ------------
$ 24,991 $ 22,743
========= ============
The accompanying notes are an integral part of these
financial statements.
3
<PAGE>
Lumisys Incorporated
Consolidated Statements of Income
(Unaudited)
Three months ended Six months ended
------------------- ------------------
June 30, June 30, June 30, June 30,
1996 1995 1996 1995
------- -------- -------- -------
(In thousands) (In thousands)
Sales $5,872 $4,674 $10,982 $7,078
Cost of sales 2,716 2,191 5,111 3,259
------ -------- -------- ------
Gross profit 3,156 2,483 5,871 3,819
------ -------- -------- ------
Operating expenses:
Sales and marketing 456 453 938 700
Research and development 1,036 834 2,035 1,221
General and administrative 584 516 1,213 782
Acquired in-process
research and development --- --- --- 1,442
------ -------- -------- ------
Total operating expenses 2,076 1,803 4,186 4,145
------ -------- -------- ------
Income (loss) from operations 1,080 680 1,685 (326)
Interest income 214 31 429 78
------ -------- -------- ------
Income (loss) before
income taxes 1,294 711 2,114 (248)
Provision (benefit) for
income taxes 398 (731) 497 (677)
------ -------- -------- ------
Net income $ 896 $ 1,442 $ 1,617 $ 429
====== ======== ======== ======
Net income per share $ 0.13 $ 0.28 $ 0.24 $ 0.08
====== ======== ======== ======
Shares used to compute net
income per share 6,848 5,096 6,841 5,104
====== ======== ======== ======
The accompanying notes are an integral part of these
financial statements.
4
<PAGE>
Lumisys Incorporated
Consolidated Statements of Cash Flows
(Unaudited)
Six months ended
-----------------------
June 30, June 30,
1996 1995
--------- ----------
(In thousands)
Cash flows from operating activities:
Net income $1,617 $ 429
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 101 85
Deferred income taxes (315) (821)
Interest on notes receivable from stockholders (5) (7)
Acquired research and development in-process --- 1,442
Changes in assets and liabilities (net of
effects of Imagraph and XRS acquisitions):
Accounts receivable (437) (101)
Inventories (568) (643)
Other assets 39 (86)
Accounts payable (182) 203
Accrued expenses 542 153
------ ------
Net cash provided by operating activities 792 654
------ ------
Cash flows from investing activities:
Proceeds from sale of short-term investments 3,934 ---
Purchases of property and equipment (70) (34)
Purchase of Imagraph --- (1,800)
Purchase of XRS --- (200)
------ ------
Net cash provided (used) in investing activities 3,864 (2,034)
------ ------
Cash flows from financing activities:
Proceeds from sale of common stock, net 82 40
Payment on notes receivable from stockholders 174 ---
------ ------
Net cash provided by financing activities 256 40
------ ------
Net increase (decrease) in cash and cash equivalents 4,912 (1,340)
Cash and cash equivalents at beginning of period 11,426 3,633
------ ------
Cash and cash equivalents at end of period $16,338 $ 2,293
====== ======
Supplemental disclosure of cash flow information:
Cash paid for income taxes $ 499 $ 95
Supplemental schedule of noncash investing and
financing activities:
Common stock issued for purchase of XRS and to
consultant --- $ 33
Series C mandatorily redeemable convertible
preferred stock issued for purchase of Imagraph --- 200
The accompanying notes are an integral part of these
financial statements.
5
<PAGE>
Lumisys Incorporated
Notes to Consolidated Financial Statements
Note 1 - Basis of Presentation
The consolidated financial statements of Lumisys Incorporated (the
"Company") presented herein have been prepared 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, 1995, included in the Company's Annual Report on
Form 10-K as filed with the Securities and Exchange Commission.
The consolidated balance sheet as of June 30, 1996, and the consolidated
statements of income for the three and six months ended June 30, 1996 and
1995, and the consolidated statements of cash flows for the six months ended
June 30, 1996 and 1995, are unaudited but, in the opinion of management,
include all adjustments (consisting of normal, recurring adjustments)
necessary for a fair statement of the results for these interim periods.
The results of operations for the three and six months ended June 30, 1996,
are not necessarily indicative of the results to be expected for the entire
fiscal year ending December 31, 1996.
Note 2 - Composition of Certain Financial Statement Amounts
June 30, 1996 December 31, 1995
------------- -----------------
(In thousands)
Inventories:
Raw materials $2,747 $2,283
Work-in-process 690 774
Finished goods 763 779
-------- ------------
4,200 3,836
Less: inventory reserves (629) (833)
-------- ------------
$3,571 $3,003
======== ============
Accrued expenses:
Payroll and related benefits $ 566 $ 538
Warranty 612 533
Accrued income taxes 402 173
Other 430 224
-------- ------------
$2,010 $1,468
======== ============
6
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Overview
Lumisys develops, manufactures and markets a broad product line of
laser-based very high resolution medical film digitizers, CCD-based film
scanners and video digitizer products necessary for converting analog medical
images into diagnostic quality digital formats.
Except for the historical information contained herein, the following
discussion contains forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from
those discussed here. 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 1995 Annual Report on Form 10-K
and other documents filed by the Company with the Securities and Exchange
Commission.
Results of Operations
Total sales for the three months ended June 30, 1996 increased 25.6% to
$5.9 million from $4.7 million for the three months ended June 30, 1995.
Total sales for the six months ended June 30, 1996 increased 55.2% to $11.0
million from $7.1 million for the six months ended June 30, 1995. The
increase for the six month period was due in part to the acquisitions of
Imagraph and XRS in March of 1995 as well as an increase in system sales.
The percentage increase in sales of systems, including film digitizers and
computed radiography readers, was 43.4%, primarily as a result of growth in
demand for teleradiology.
Gross profit for the three months ended June 30, 1996 increased 27.1% to
$3.2 million from $2.5 million for the corresponding period of 1995. Gross
margin increased in the three month period ended June 30, 1996 to 53.7% from
53.1% in the same period of 1995 primarily due to the lower gross margins
associated with the Imagraph video digitizer products which accounted for 20%
of revenue in the three months ended June 30, 1996 compared to 26% of revenue
in the same period of 1995. Gross profit for the six months ended June 30,
1996 increased 53.7% to $5.9 million from $3.8 million for the same period of
1995 primarily due to the lower gross margins associated with the Imagraph
video digitizer products which accounted for 24% of revenue in the six months
ended June 30, 1996 compared to 17% of revenue in 1995.
Sales and marketing expenses increased less than 1% in the three months
ended June 30, 1996 to $456,000 from $453,000 in 1995. As a percentage of
sales, these expenses declined to 7.8% in 1996 from 9.7% in 1995. Sales and
marketing expenses increased 34% to $938,000 for the six months ended June
30, 1996 from $700,000 for the same period of 1995. As a percentage of sales,
these expenses decreased to 8.5% in the six months ended June 30, 1996 from
9.9% in 1995. The increase in absolute dollars for the six month period was
primarily due to the increase in the Company's sales and marketing personnel
as a result of the acquisition of Imagraph. The Company expects sales and
marketing expenses to increase in absolute dollars as the Company grows.
Research and development expenses increased 24.2% in the three months ended
June 30, 1996 to $1,036,000 from $834,000 in the same quarter of 1995. As a
percentage of sales, research and development expenses decreased slightly to
17.6% in the three months ended June 30, 1996 from 17.8% in the same quarter
of 1995. For the six months ended June 30, 1996, research and development
expenses increased 66.6% to $2,035,000 from $1,221,000 for the six months
ended June 30, 1995. As a percentage of sales, research and development
expenses increased to 18.5% in the six months ended June 30, 1996 from
17.2% in 1995. The increases for both the three and six month periods were
primarily due to increased engineering personnel expenses as a result of the
acquisition of QuickSilver Systems in March of 1996. The Company believes
that advanced technology is a key element in the success of its business and
expects to continue to increase its research and development expenditures in
absolute dollar amounts.
General and administrative expenses increased 13.2% in the three months
ended June 30, 1996 to $584,000 from $516,000 in the same quarter of 1995.
As a percentage of sales, these expenses decreased to 9.9% from 11.0%.
General and administrative expenses increased 55.1% in the six months ended
June 30, 1996 to $1,213,000 from $782,000 in the same period of 1995. As a
percentage of sales, general and administrative expenses were 11.0% in each
of the six month periods ended June 30, 1996 and 1995. The increase in
absolute dollars for the six month period was due to the ongoing expenses of
complying with the responsibilities of being a public company. The Company
expects that its general and administrative expenses will increase in
absolute dollars in the future as the Company continues to grow.
Acquired in-process research and development expenses represent a non-
recurring charge in the first quarter of 1995 of $1.4 million relating to
products being developed by Imagraph and XRS at the time of the
acquisitions.
The Company recognized a provision for income taxes of $503,000 in the
three months ended June 30, 1996, which was partially offset by the
recognition of $105,000 of deferred tax assets, resulting in a net
provision for income taxes of $398,000. In the same period of 1995, the
Company recognized a provision for income taxes of $90,000, which was more
than offset by the recognition of $821,000 of deferred tax assets,
resulting in a net benefit for income taxes of $731,000. The Company
recognized a provision for income taxes of $812,000 in the six months ended
June 30, 1996, which was partially offset by the recognition of $315,000 of
deferred tax assets, resulting in a net provision for income taxes of
$497,000. In the same period of 1995, the Company recognized a provision for
income taxes of $144,000, which was more than offset by the recognition of
$821,000 of deferred tax assets, resulting in a net benefit for income taxes
of $677,000. The Company's recognition of
8
deferred tax assets was based on the Company's assessment that it is
more likely than not that this portion of the deferred tax assets will
be realized. The Company expects to be subject to an effective tax rate of
approximately 39% beginning in the quarter ending September 30, 1996.
Liquidity and Capital Resources
The Company has financed its activities primarily from net cash provided by
operations and the issuance of securities.
At June 30, 1996, the Company's working capital was $21.0 million. The
Company had $16.3 million in cash and cash equivalents at June 30, 1996
compared with $15.4 million of cash, cash equivalents and short-term
investments at December 31, 1995. The increase is primarily due to net
income for the period and an increase in accrued expenses which were
partially offset by increases in the Company's inventories and accounts
receivable. The increase in inventories are primarily due to increasing
sales and the Company's production ramp-up for new products.
The Company does not currently have any significant capital commitments and
believes that existing sources of liquidity and funds expected to be
generated from operations will provide adequate cash to fund the Company's
anticipated working capital and other cash needs for the foreseeable future.
Part 2 - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The 1995 Annual Meeting of Shareholders ("Annual Meeting") of the Company was
held on April 10, 1996. The total number of shares of the Company's common
stock, $.001 par value per share, outstanding as of February 28, 1996, the
record date of the Annual Meeting, was 6,240,780. 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. One (1) director, C. Richard Kramlich, was elected to serve until
the 1999 Annual Meeting of Shareholders and the election and qualification of
his successor. The director was elected by a vote of 4,686,749 votes "FOR"
and 8,350 votes "AGAINST." The selection of Price Waterhouse LLP as the
Company's independent accountants for its fiscal year ending December 31,
1996 was also ratified. The selection was ratified by a vote of 4,688,674
votes "FOR," 1,350 votes "AGAINST," and 5,075 votes "ABSTAIN."
Item 6. Exhibits and Reports on Form 8-K.
a) Exhibits furnished:
Exhibit
Number Description of Document
------- -----------------------
27 Financial Data Schedule
b) Reports on Form 8-K: none.
9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LUMISYS INCORPORATED
Dated: August 13, 1996 By:/s/ Stephen J. Weiss
--------------- --------------------------------
Stephen J. Weiss
President, Chief Executive Officer
August 13, 1996 /s/ Craig L. Klosterman
--------------- --------------------------------
Craig L. Klosterman
Chief Operating and Chief
Financial Officer
10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM LUMISYS
INCORPORATED CONSOLIDATED BALANCE SHEETS AT JUNE 30, 1996 AND CONSOLIDATED
STATEMENTS OF INCOME FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 16338
<SECURITIES> 0
<RECEIVABLES> 3127
<ALLOWANCES> 280
<INVENTORY> 3571
<CURRENT-ASSETS> 1627
<PP&E> 151
<DEPRECIATION> 0
<TOTAL-ASSETS> 24991
<CURRENT-LIABILITIES> 3353
<BONDS> 0
0
0
<COMMON> 6
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 24991
<SALES> 10982
<TOTAL-REVENUES> 10982
<CGS> 5111
<TOTAL-COSTS> 5111
<OTHER-EXPENSES> 4186
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (429)
<INCOME-PRETAX> 2114
<INCOME-TAX> 497
<INCOME-CONTINUING> 1617
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<NET-INCOME> 1617
<EPS-PRIMARY> .24
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</TABLE>
