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 MARCH 31, 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 May 8, 1996, 6,347,684 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 March 31, 1996
and December 31, 1995 3
Consolidated statements of income for the three
months ended March 31, 1996 and 1995 4
Consolidated statements of cash flow for the
three months ended March 31, 1996 and 1995 5
Notes to financial statements 6
Item 2. Management's discussion and Analysis of
Financial Condition and Results of Operations 7
Part II. OTHER INFORMATION
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)
March 31, December 31,
1996 1995
---------- ------------
(In thousands)
ASSETS
Current assets:
Cash and cash equivalents $15,560 $11,426
Short-term investments --- 3,934
Accounts receivable, net of allowances
of $376 and $249 2,681 2,410
Inventories 3,436 3,003
Deferred tax assets 1,324 1,114
Other current assets 179 294
---------- ------------
Total current assets 23,180 22,181
Property and equipment, net 184 162
Other assets 469 400
---------- ------------
$23,833 $22,743
---------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,638 $ 1,525
Accrued expenses 1,696 1,468
---------- ------------
Total current liabilities 3,334 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; 6,270 and 6,240 shares issued
and outstanding 6 6
Additional paid-in capital 22,623 22,702
Accumulated deficit (1,799) (2,521)
Notes receivable from stockholders (202) (297)
Deferred compensation related to stock options (129) (140)
---------- ------------
Total stockholders' equity 20,499 19,750
---------- ------------
$23,833 $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
---------------------
March 31, March 31,
1996 1995
-------- --------
(In thousands)
Sales $ 5,110 $ 2,404
Cost of sales 2,395 1,068
-------- --------
Gross profit 2,715 1,336
-------- --------
Operating expenses:
Sales and marketing 483 247
Research and development 999 387
General and administrative 628 266
Acquired in-process research and development --- 1,442
-------- --------
Total operating expenses 2,110 2,342
-------- --------
Income (loss) from operations 605 (1,006)
Interest income 215 47
-------- --------
Income (loss) before income taxes 820 (959)
Provision for income taxes 98 54
-------- --------
Net income (loss) $ 722 $ (1,013)
======== ========
Net income (loss) per share $ 0.11 $ (0.20)
======== ========
Shares used to compute net income
(loss) per share 6,826 5,118
======== ========
The accompanying notes are an integral part of these financial
statements.
4
<PAGE>
LUMISYS INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOW
(Unaudited)
Three months ended
----------------------
March 31, March 31,
1996 1995
--------- ---------
(In thousands)
Cash flows from operating activities:
Net income $ 722 $ (1013)
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 47 12
Deferred income taxes (210) ---
Interest on notes receivable from stockholders (3) (4)
Acquired research and development in-process --- 1,442
Changes in assets and liabilities (net of
effects of Imagraph and XRS acquisitions):
Accounts receivable (271) (75)
Inventories (433) (283)
Other assets 46 (108)
Accounts payable 113 234
Accrued expenses 228 (104)
--------- ---------
Net cash provided by operating activities 239 95
--------- ---------
Cash flows from investing activities:
Proceeds from sale of short-term investments 3,934 ---
Purchases of property and equipment (58) ---
Purchase of Imagraph --- (1,800)
Purchase of XRS --- (200)
--------- ---------
Net cash provided (used) in investing activities 3,876 (2,000)
--------- ---------
Proceeds from sale of common stock, net (79) 13
Payment on notes receivable from stockholders 98 ---
--------- ---------
Net cash provided by financing activities 19 13
--------- ---------
Net increase (decrease) in cash and cash equivalents 4,134 (1,892)
Cash and cash equivalents at beginning of period 11,426 3,633
--------- ---------
Cash and cash equivalents at end of period $ 15,560 $ 1,741
========= =========
Supplemental disclosure of cash flow information:
Cash paid for income taxes $ 89 $ 28
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 March 31, 1996, and the
consolidated statements of income and of cash flows for the three months
ended March 31, 1996 and 1995 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 months ended March 31, 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
March 31, March 31,
1996 1995
--------- ---------
(In thousands)
Inventories:
Raw materials $ 3,230 $ 2,283
Work-in-process 557 774
Finished goods 545 779
-------- --------
4,332 3,836
Less: inventory reserves (896) (833)
-------- --------
$ 3,436 $ 3,003
======== ========
Accrued expenses:
Payroll and related benefits $ 455 $ 538
Warranty 587 533
Other 654 397
-------- --------
$ 1,696 $ 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 first quarter of 1996 increased 112.6% to $5.1
million from $2.4 million for the first quarter of 1995. This increase
was due in part to the acquisitions of Imagraph and XRS, which
contributed approximately 31.0% of total sales in the first quarter of
1996 and no sales in the first quarter of 1995. Excluding the
acquisitions, the percentage increase in sales would have been 46.6%,
primarily as a result of growth in demand for teleradiology networks.
Gross profit for the first quarter of 1996 increased 103.2% to $2.7
million from $1.3 million for the corresponding period of 1995. Gross
margin declined from 55.6% to 53.1% primarily due to the lower gross
margins associated with the Imagraph video digitizer products.
Sales and marketing expenses increased 95.5% in the first quarter of
1996 to $483,000 from $247,000 in the first quarter of 1995. The
increase was primarily due to the increase in the Company's sales and
marketing personnel as a result of the acquisition of Imagraph. As a
percentage of sales, these expenses decreased to 9.5% in the first
quarter of 1996 from 10.3% in the first quarter of 1995.
Research and development expenses increased 158.1% in the first quarter
of 1996 to $999,000 from $387,000 in the same quarter of 1995. The
increase was primarily due to increased engineering personnel as a
result of the acquisitions of Imagraph and XRS. As a percentage of
sales, research and development expenses increased to 19.5% in the first
quarter of 1996 from 16.1% in the same quarter of 1995. 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.
7
<PAGE>
General and administrative expenses increased 136.1% in the first
quarter of 1996 to $628,000 from $266,000 in the first quarter of 1995.
The increase was due to the ongoing costs associated with increased
personnel expenses following the acquisitions of Imagraph and XRS and
the expenses of complying with the responsibilities of being a public
company. As a percentage of sales, general and administrative expenses
increased to 12.3% in the first quarter of 1996 from 11.1% in the first
quarter of 1995. The Company expects that its general and
administrative expenses will increase in absolute dollars in the future
as the Company continues to expand.
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 in the first quarter
of 1996 of $98,000 compared with a provision of $54,000 in the
corresponding period of 1995. The acquired in-process research and
development expenses are not deductible for tax purposes, which resulted
in significantly higher alternative minimum taxes for the first quarter
of 1995. The Company partially offset its provision for taxes in the
first quarter of 1996 by the recognition of $210,000 of deferred tax
assets, 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 has provided a partial valuation allowance against the balance
of the deferred tax assets. Once the Company fully recognizes its
deferred tax assets, it expects to be subject to an effective tax rate
of approximately 39%.
Liquidity and Capital Resources
The Company has financed its activities primarily from net cash provided
by operations and the issuance of securities.
At March 31, 1996, the Company's working capital was $19.8 million. The
Company had $15.6 million in cash and cash equivalents at March 31, 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
receivables. The increases 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.
8
<PAGE>
Part 2 - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
Exhibits furnished:
Exhibit
Number Description of Document
--------- --------------------------
27 Financial Data Schedule
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: May 13, 1996 By: /s/ Stephen J. Weiss
------------- --------------------------
Stephen J. Weiss
President, Chief Executive
Officer
May 13, 1996 /s/ Craig L. Klosterman
------------- ---------------------------
Craig L. Klosterman
Chief Operating and Chief
Financial Officer
10
<PAGE>
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