UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended September 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 0-17139
GENUS, INC.
(Exact name of registrant as specified in its charter)
CALIFORNIA 94-279080
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1139 KARLSTAD DRIVE, SUNNYVALE, CALIFORNIA 94089
(Address of principal executive offices) (Zip code)
(408) 747-7120
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1)has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such 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:
Common shares outstanding at November 13, 2000: 19,212,583
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
GENUS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(In thousands, except share data)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales . . . . . . . . . . . . . . . . . . $ 14,165 $ 8,818 $ 38,798 $ 22,736
Costs and expenses:
Cost of goods sold . . . . . . . . . . . . . 8,122 5,021 21,840 13,120
Research and development . . . . . . . . . . 2,034 1,474 5,762 4,018
Selling, general and administrative. . . . . 2,820 2,072 8,013 5,954
Income (loss) from operations . . . . . . . . 1,189 251 3,183 (356)
------------ ------------ ------------ ------------
Other income (expenses), net. . . . . . . . . 101 62 383 237
Income (loss) before income taxes . . . . . . 1,290 313 3,566 (119)
------------ ------------ ------------ ------------
Provision for income taxes. . . . . . . . . . 100 0 450 0
------------ ------------ ------------ ------------
Net income (loss) . . . . . . . . . . . . . . $ 1,190 $ 313 $ 3,116 $ (119)
============ ============ =========== ============
Net income (loss) per share - basic . . . . . $ 0.06 $ 0.02 $ 0.17 $ (0.01)
============ ============ =========== ============
Net income (loss) per share - diluted . . . . $ 0.06 $ 0.02 $ 0.15 $ (0.01)
============ ============ =========== ============
Shares used in per share calculation-basic. . 19,126 18,267 18,845 18,083
============ ============ =========== ============
Shares used in per share calculation-diluted. 20,593 18,943 20,600 18,083
============ ============ =========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
GENUS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In thousands, except share data)
SEPTEMBER 30, DECEMBER 31,
2000 1999
-------------- --------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents. . . . . . . . . . . . $ 9,105 $ 6,739
Accounts receivable (net allowance for doubtful
accounts of $241 in 2000 and $241 in 1999. . . 7,910 7,629
Inventories. . . . . . . . . . . . . . . . . . . 10,733 7,266
Other current assets . . . . . . . . . . . . . . 1,196 883
Total current assets . . . . . . . . . . . . . 28,944 22,517
-------------------- --------------
Property and equipment, net. . . . . . . . . . . 7,139 4,894
Other assets, net. . . . . . . . . . . . . . . . 252 333
-------------------- --------------
Total assets . . . . . . . . . . . . . . . . . $ 36,335 $ 27,744
==================== ==============
LIABILITIES
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . $ 7,686 $ 4,146
Accrued expenses . . . . . . . . . . . . . . . . 4,494 4,220
-------------------- --------------
Total current liabilities. . . . . . . . . . . 12,180 8,366
-------------------- --------------
Contingencies (see notes)
SHAREHOLDERS' EQUITY
Preferred stock, no par value:
Authorized 1,982,000 shares;
Issued and outstanding, none . . . . . . . . . 0 0
Common stock, no par value:
Authorized 50,000,000 shares;
Issued and outstanding 19,206,383 shares at
September 30, 2000 and 18,469,000 shares at
December 31, 1999. . . . . . . . . . . . . . . 102,682 101,042
Accumulated deficit. . . . . . . . . . . . . . . (76,756) (79,872)
Accumulated other comprehensive loss . . . . . . (1,771) (1,792)
-------------------- --------------
Total shareholders' equity . . . . . . . . . . 24,155 19,378
-------------------- --------------
$ 36,335 $ 27,744
==================== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
GENUS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In Thousands)
NINE MONTHS ENDED
SEPTEMBER 30,
2000 1999
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss). . . . . . . . . . . . . . . . . . . . $ 3,116 $ (119)
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating activities:
Depreciation and amortization. . . . . . . . . . . . . 1,080 1,327
Stock compensation . . . . . . . . . . . . . . . . . . 490 0
Changes in assets and liabilities:
Accounts receivable. . . . . . . . . . . . . . . . . (281) 927
Inventories. . . . . . . . . . . . . . . . . . . . . (3,467) (223)
Other assets . . . . . . . . . . . . . . . . . . . . (232) (53)
Accounts payable . . . . . . . . . . . . . . . . . . 3,540 1,574
Accrued expenses . . . . . . . . . . . . . . . . . . 274 (1,038)
------------ ------------
Net cash provided by operating activities. . . . . . 4,520 2,395
------------ ------------
Cash flows from investing activities:
Acquisition of property and equipment. . . . . . . . . . (3,325) (1,164)
------------ ------------
Net cash used in investing activities. . . . . . . . (3,325) (1,164)
------------ ------------
Cash flows from financing activities:
Proceeds from issuance of common stock . . . . . . . . . 1,150 165
Proceeds from short-term bank borrowings . . . . . . . . 4,000 0
Payments of short-term bank borrowings . . . . . . . . . (4,000) (4,000)
------------ ------------
Net cash provided by (used in) financing activities. 1,150 (3,835)
------------ ------------
Effect of exchange rate changes on cash . . . . . . . . . 21 13
------------ ------------
Net increase (decrease) in cash and cash equivalents. . . 2,366 (2,591)
Cash and cash equivalents, beginning of period. . . . . . 6,739 8,125
------------ ------------
Cash and cash equivalents, end of period. . . . . . . . . $ 9,105 $ 5,534
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
GENUS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 (UNAUDITED)
Basis of Presentation. The accompanying consolidated financial statements
have been prepared in accordance with SEC requirements for interim financial
statements. These financial statements should be read in conjunction with the
consolidated financial statements and notes thereto included in the Company's
1999 Annual Report on Form 10-K.
The information furnished reflects all adjustments (consisting only of
normal recurring adjustments) which are, in the opinion of management, necessary
for the fair statement of financial position, results of operations and cash
flows for the interim periods. The results of operations for the interim periods
presented are not necessarily indicative of results to be expected for the full
year.
Net Income (Loss) Per Share. Basic net income (loss) per share is computed
by dividing income (loss) available to common shareholders by the weighted
average number of common shares outstanding for the period. Diluted net income
(loss) per share is computed by dividing income (loss) available to common
shareholders, adjusted for convertible preferred dividends and after-tax
interest expense on convertible debt, if any, by the sum of the weighted average
number of common shares outstanding and potential common shares (when dilutive).
Net Income (Loss) Per Share
A reconciliation of the numerator and denominator of basic and diluted net
income (loss) per share is as follows (in thousands, except per share data):
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2000 1999 2000 1999
----------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
Numerator-basic:
Net income (loss) available to common shareholders
$ 1,190 $ 313 $ 3,116 $ (119)
Denominator-basic:
Weighted average common stock
outstanding. . . . . . . . . . . . . . . . . . . . 19,126 18,267 18,845 18,083
=========== =========== ========== ===========
Basic net income (loss) per share. . . . . . . . . $ 0.06 $ 0.02 $ 0.17 $ (0.01)
=========== =========== ========== ===========
Numerator-diluted:
Net income (loss) available to common shareholders
$ 1,190 $ 313 $ 3,116 $ (119)
Denominator-diluted:
Weighted average common stock outstanding. . . . . 19,126 18,267 18,845 18,083
Effect of dilutive securities: stock options . . . 1,313 676 1,552 0
Effect of dilutive securities: warrants 154 0 203 0
----------- ----------- --------- ----------
20,593 18,943 20,600 18,083
=========== =========== ========== ==========
Diluted net income (loss) per share. . . . . . . . $ 0.06 $ 0.02 $ 0.15 $ (0.01)
=========== =========== ========== ==========
</TABLE>
<PAGE>
GENUS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 (UNAUDITED)
Anti-dilutive stock options to purchase approximately 573,598 shares of
common stock were excluded from the computation of diluted net income per share
for the nine months ended September 30, 2000, because the exercise price of the
options exceeded the average fair market value of the stock for the nine months
ended September 30, 2000.
Stock options to purchase approximately 2,189,122 shares of common stock
were outstanding during the three months ended September 30, 1999 but were not
included in the computation of diluted loss per share because the Company had a
net loss for the three months ended September 30, 1999.
Warrants to purchase 400,000 shares of common stock were outstanding during
the three months ended September 30, 1999 but were not included in the
computation of diluted loss per share because the Company had a net loss for the
nine months ended September 30, 1999.
Statement of Cash Flow Information (amounts in thousands):
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
2000 1999
----- -----
<S> <C> <C>
Supplemental cash flow information:
Cash paid during the period for:
Interest . . . . . . . . . . . . $ 76 $ 183
Income taxes . . . . . . . . . . $ 152 $ 1
</TABLE>
<PAGE>
Line of Credit. In November 1999, the Company entered into a $10 million
revolving line of credit with Venture Bank. Amounts available under the line are
based on 80% of eligible accounts receivable, and borrowings under the line of
credit are secured by all corporate assets and bear interest at prime plus
0.25%. The line of credit expires in November 2001. The line of credit contains
covenants that require the Company to maintain a minimum quick ratio and a
maximum debt to tangible net equity ratio. In addition, the line requires the
Company to have annual profitability beginning in 2000 and a maximum quarterly
loss of $1 million with no two consecutive quarterly losses. Additionally, the
Company is prohibited from distributing dividends. The amount available to
borrow at September 30, 2000 was $2.1 million at a rate of 9.75%. There is no
current outstanding balance against this line of credit.
INVENTORIES
Inventories comprise the following (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
<S> <C> <C>
Raw materials and purchased parts $ 8,260 $ 5,439
Work in process . . . . . . . . . 2,388 1,055
Finished goods. . . . . . . . . . 85 772
-------------- -------------
$ 10,733 $ 7,266
============== =============
</TABLE>
GENUS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 (UNAUDITED)
ACCRUED EXPENSES
Accrued expenses comprise the following (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
<S> <C> <C>
System installation and warranty. . . . $ 1,217 $ 817
Accrued commissions and incentives. . . 468 364
Accrued compensation and related items. 1,099 872
Federal, state and foreign income taxes 962 622
Customer deposits . . . . . . . . . . . 0 420
Other 748 1,125
-------------- -------------
$ 4,494 $ 4,220
============== =============
</TABLE>
LEGAL PROCEEDINGS
The Company has been named as a defendant in a claim involving an
automobile accident by a former employee of the Company, which resulted in the
death of an individual. General, punitive, and exemplary damages are being
sought by the plaintiffs. The Company believes it is not at fault in this
matter, and has appointed legal counsel to defend the claim. While the outcome
of this matter is not presently determinable, management does not believe that
resolution of this matter will have a material adverse effect on the financial
position or results of operations of the Company.
<PAGE>
COMPREHENSIVE INCOME
Statement of Financial Accounting Standards No. 130 (SFAS 130), "Reporting
Comprehensive Income" establishes rules for the reporting and display of
comprehensive income and its components.
The following are the components of comprehensive income (loss) (in
thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2000 1999 2000 1999
------ ----- ------ ------
<S> <C> <C> <C> <C>
Net income (loss) . . . . . . . . . . . . $1,190 $ 313 $3,116 $(119)
Foreign currency translation adjustments. 1 52 21 13
------ ----- ------ ------
Comprehensive income (loss). . . . . . . $1,191 $ 365 $3,137 $(106)
====== ===== ====== ======
</TABLE>
The components of accumulated other comprehensive income, are as follows
(in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
<S> <C> <C>
Cumulative translation adjustments $ (1,771) $ (1,792)
</TABLE>
GENUS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 (UNAUDITED)
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" (SFAS 133), SFAS 133 established a new model for
accounting for derivative instruments and hedging activities. In July 1999, the
Financial Accounting Standards Boards issued SFAS No. 137, "Accounting for
Derivative Instruments and Hedging Activities--Deferral of the Effective Date of
FASB Statement No. 133" (SFAS 137). SFAS 137 deferred the effective date of SFAS
133 until the first quarter beginning after June 15, 2000. The impact of SFAS
133 on the consolidated financial statements has not yet been determined.
In December 1999, the SEC staff issued Staff Accounting Bulletin ("SAB")
No. 101, "Revenue Recognition." The SEC staff addresses several issues in SAB
No. 101, including the timing for recognizing revenue derived from selling
arrangements that involve contractual customer acceptance provisions and
installation of the product occurs after shipment and transfer of title. Our
existing revenue recognition policy is to recognize revenue at the time the
customer takes title to the product, generally at the time of shipment, because
we have, in the past, routinely met our installation obligations and obtained
customer acceptance. Applying the requirements of SAB No. 101 to our present
selling arrangements for the sale of semiconductor production equipment may
require a change in our accounting policy for revenue recognition and the
deferral of the recognition of revenue from such equipment sales until
installation is complete and accepted by the customer. The effect of such a
change, if any, must be recognized as a cumulative effect of a change in
accounting no later than the quarter ending December 31, 2000. We believe the
effects on liquidity, cash flow and financial position will not be material. At
the current time, it is not possible to determine the effect this change may
have on our results of operations. However, should the Company be required to
record a cumulative effect of a change in accounting, it will result in a charge
to net income (loss). We are also considering potential changes to our standard
contracts for equipment sales that could mitigate the potential impact of SAB
No. 101 on a going forward basis.
In March 2000, the Financial Accounting Standards Board issued
Interpretation No. 44 (FIN 44) "Accounting for Certain Transactions Involving
Stock Compensation," which addresses certain accounting issues that arose under
the previously-established accounting principles relating to stock-based
compensation. The adoption of this interpretation did not have a material
effect on our financial position or results of operations.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Statements in this report which express "belief", anticipation" or "expectation"
as well as other statements which are not historical fact are 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. These forward-looking
statements are subject to certain risks and uncertainties that could cause
actual results to differ materially from historical results or anticipated
results, including those set forth under "Risk Factors" in this "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
elsewhere in or incorporated by reference into this report. The following
discussion should be read in conjunction with the Company's Financial Statements
and Notes thereto included in this report.
RESULTS OF OPERATIONS
NET SALES. Net sales for the three and nine months ended September 30, 2000
were $14.2 million and $38.8 million, representing an increase of 61% and 71%
over the net sales of $8.8 million and $22.7 million for the corresponding
periods in 1999. System shipments in the third quarter consisted of our
mainstream tungsten silicide products to Samsung Electronics, Ltd. in Korea.
Non-system revenue was 22% of total sales, primarily due to process conversion
kits purchased by Samsung, enabling them to deposit a different film using their
existing equipment. Year to date system shipments included an atomic layer
deposition (ALD) system to a new customer, Infineon Technologies AG, and
tungsten silicide systems to Samsung. Year to date non-system revenue was 23%
of sales, compared to 14% during the first nine months of 1999. This increase
was primarily due to Samsung's program to upgrade their installed base of Lynx2
systems to the current generation high productivity process chamber, and the
process conversion kits shipped in the third quarter. The increase in sales
levels in 2000 over 1999 reflects an overall strengthening in the semiconductor
equipment market.
COST OF GOODS SOLD. Cost of goods sold for the three and nine months ended
September 30, 2000 was $8.1 million and $21.8 million, compared to $5.0 million
and $13.1 million for the same periods in 1999. Gross profit as a percentage of
net sales for the three and nine months ending September 30, 2000 was 43% and
44%, relatively flat with the 43% and 42% recorded for the same periods in 1999.
Third quarter gross margin percentage remained flat with 1999, despite higher
sales volumes. The systems we shipped this quarter had higher material costs
due to configuration enhancements, and our manufacturing and service costs
increased to support the higher sales volumes. Year to date gross margin of 44%
was a slight increase over 1999. Worldwide operations and service overhead
costs have increased to support the rapid revenue growth we have experienced
over the past year, and included opening a service organization in Japan. Our
gross profits have historically been affected by variations in average selling
prices, configuration differences, changes in the mix of product sales, unit
shipment levels, the level of foreign sales and competitive pricing pressures.
RESEARCH AND DEVELOPMENT. Research and development expenses for the quarter
ended September 30, 2000 were $2.0 million, representing 14% of net sales,
compared with $1.5 million or 17% of net sales for the same period in 1999. R&D
spending for the first nine months of 2000 was $5.8 million, or 15% of sales,
compared with $4.0 million, or 18% in 1999. These spending increases are
associated with investments in our ALD technology, particularly new films and
applications, tungsten products, and our 300mm Lynx3 system. We are aggressively
pursuing non-semiconductor applications for ALD, including magnetic disk drives,
telecommunications, and inkjet printers. We expect our research and development
spending levels to continue to increase throughout 2000.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses were $2.8 million, or 20% of sales, for the third quarter of 2000,
compared with $2.1 million, or 23% of sales, for the third quarter of 1999.
Year to date SG&A expenses were $8.0 million, or 21% of sales, compared to $6.0
million, or 26% of sales during the first half of 1999. Higher spending in 2000
is primarily due to the increase in business levels over the past 12 months, and
include higher sales commissions, profit sharing accruals, headcount increases,
and travel costs. Additional resources have been added to sales, focused ALD
marketing directed at semiconductor and non-semiconductor markets, and
information technology.
OTHER INCOME (EXPENSE), NET. Other income for the third quarter of 2000 was
$101,000 compared to other income of $62,000 for the same period in 1999. Year
to date other income was $383,000, compared to $237,000 in 1999, due primarily
to interest income received during the first quarter of 2000 from Samsung. The
remainder of other income consists of interest income from short-term interest
bearing deposits and foreign currency exchange gains due to the strengthening of
the Korean won against the U.S. dollar.
PROVISION FOR INCOME TAXES. Income taxes for the three- and six-month
periods ending September 30, 2000 were $100,000 and $450,000, compared to none
in the same 1999 periods. Income taxes are related to the profit generated from
our South Korean subsidiary.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 2000, our cash and cash equivalents were $9.1 million, an
increase of $2.4 million from cash and cash equivalents of $6.7 million held as
of December 31, 1999. During the third quarter of 2000, we collected accounts
receivable of approximately $13 million, including the amount due on four
systems.
Cash provided by operating activities totaled $4.5 million for the nine
months ending September 30, 2000, and consisted of net income of $3.1 million,
and increases in accounts payable of $3.5 million, depreciation and amortization
of $1.1 million, stock compensation of $490,000 and accrued expenses of
$274,000. Partially offsetting this were increases in inventory of $3.5
million, accounts receivable of $281,000, and other assets of $232,000. The
accounts payable increase was primarily due to increased levels of inventory
purchasing activity to support production requirements in the third and fourth
quarter. Inventories increased due to material to build several ALD modules for
use internally and for customer shipments. We also had most of the material to
support the fourth quarter revenue plan in inventory at the end of September,
2000.
Financing activities provided cash of $1.2 million for the nine months
ending September 30, 2000, from the issuance of common stock from our incentive
stock option plan and our employee stock purchase plan.
We made capital expenditures of $3.3 million for the nine months ending
September 30, 2000. These expenditures principally related to the acquisition
and upgrading of machinery and equipment for our research and development and
applications laboratories, and personal computer related equipment. We
anticipate spending an additional $2.5 million in capital expenditures during
the remainder of 2000. We currently anticipate that additional capital
expenditures will be funded through existing working capital or lease financing.
Our primary source of funds at September 30, 2000 consisted of $9.1 million
in cash and cash equivalents, and $7.9 million of accounts receivable, most of
which we expect to collect during the fourth quarter of 2000.
In November 1999, we entered into a $10 million revolving line of credit
with Venture Bank. Amounts available under the line are based on 80% of eligible
accounts receivable, and borrowings under the line are secured by all corporate
assets and bear interest at prime plus 0.25%. The line of credit expires in
November 2001. The line of credit contains covenants that require us to maintain
a minimum quick ratio and a maximum debt to tangible net equity ratio. In
addition, the line of credit requires us to have annual profitability beginning
in 2000 and a maximum quarterly loss of $1 million with no two consecutive
quarterly losses. Additionally, we are prohibited from distributing dividends.
The amount available to borrow at September 30, 2000 was $2.1 million at a rate
of 9.75%. There are no outstanding borrowings against this line of credit.
We believe that our existing working capital, as well as the $10 million
Venture Bank line of credit, will be sufficient to satisfy our cash needs for
the next 12 months. There can be no assurance that any required additional
funding, if needed, will be available on terms attractive to us, which could
have a material adverse affect on our business, financial condition and results
of operations. Any additional equity financing may be dilutive to shareholders,
and debt financing, if available, may involve restrictive covenants.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" (SFAS 133). SFAS 133 established a new model for
accounting for derivative instruments and hedging activities. In July 1999, the
Financial Accounting Standards Boards issued SFAS No. 137, "Accounting for
Derivative Instruments and Hedging Activities--Deferral of the Effective Date of
FASB Statement No. 133" (SFAS 137). SFAS 137 deferred the effective date of SFAS
133 until the first quarter beginning after June 15, 2000. The impact of SFAS
133 on the consolidated financial statements has not yet been determined.
In December 1999, the SEC staff issued Staff Accounting Bulletin ("SAB")
No. 101, "Revenue Recognition." The SEC staff addresses several issues in SAB
No. 101, including the timing for recognizing revenue derived from selling
arrangements that involve contractual customer acceptance provisions and
installation of the product occurs after shipment and transfer of title. Our
existing revenue recognition policy is to recognize revenue at the time the
customer takes title to the product, generally at the time of shipment, because
we have, in the past, routinely met our installation obligations and obtained
customer acceptance. Applying the requirements of SAB No. 101 to our present
selling arrangements for the sale of semiconductor production equipment may
require a change in our accounting policy for revenue recognition and the
deferral of the recognition of revenue from such equipment sales until
installation is complete and accepted by the customer. The effect of such a
change, if any, must be recognized as a cumulative effect of a change in
accounting no later than the quarter ending December 31, 2000. We believe the
effects on liquidity, cash flow and financial position will not be material. At
the current time, it is not possible to determine the effect this change may
have on our results of operations. However, should the Company be required to
record a cumulative effect of a change in accounting, it will result in a charge
to net income (loss). We are also considering potential changes to our standard
contracts for equipment sales that could mitigate the potential impact of SAB
No. 101 on a going-forward basis.
In March 2000, the Financial Accounting Standards Board issued
Interpretation No. 44 (FIN 44) "Accounting for Certain Transactions Involving
Stock Compensation," which addresses certain accounting issues that arose under
the previously-established accounting principles relating to stock-based
compensation. The adoption of this interpretation did not have a material
effect on our financial position or results of operations.
RISK FACTORS
Certain sections of Management's Discussion and Analysis contain
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. Actual results could differ materially from those projected in the
forward-looking statements as a result of the factors set forth above in
Management's Discussion and Analysis and this Risk Factors section. The
discussion of these factors is incorporated by this reference as if said
discussion was fully set forth in Management's Discussion and Analysis.
WE HAVE EXPERIENCED LOSSES OVER THE LAST FEW YEARS AND WE MAY NOT BE ABLE TO
ACHIEVE OR SUSTAIN PROFITABILITY
We have experienced losses of $1.6 million, $29.5 million, and $19.3
million for 1999, 1998 and 1997, respectively. While we recorded a profit of
$3.1 million during the nine months ending September 30, 2000, we may not be
able to attain or sustain consistent future revenue growth on a quarterly or
annual basis, or achieve and maintain consistent profitability on a quarterly or
annual basis. As a result, our business could be materially harmed.
SUBSTANTIALLY ALL OF OUR NET SALES COME FROM A SMALL NUMBER OF LARGE CUSTOMERS
Historically, we have relied on a small number of customers for a
substantial portion of our net sales. For example, Samsung Electronics Company,
Ltd. and Micron Technology, Inc. accounted of 84% and 11% of our net sales in
1999 respectively. During the first nine months of 2000, Samsung Electronics
Company, Ltd. and Infineon Technologies AG accounted for 88% and 9% of our net
sales. In addition, Samsung Electronics Company, Ltd., and Micron Technology,
Inc. represented 92% of accounts receivable at December 31, 1999. Samsung
Electronics Company, Ltd. and Infineon Technologies AG accounted for 91% of
accounts receivable at September 30, 2000. The semiconductor manufacturing
industry generally consists of a limited number of larger companies. We
consequently expect that a significant portion of our future product sales will
be concentrated within a limited number of customers.
None of our customers has entered into a long-term agreement with us
requiring them to purchase our products. In addition, sales to these customers
may decrease in the future when they complete their current semiconductor
equipment purchasing requirements. If any of our customers were to encounter
financial difficulties or become unable to continue to do business with us at or
near current levels, our business, results of operations and financial condition
would be materially adversely affected. Customers may delay or cancel orders or
may stop doing business with us for a number of reasons including:
- customer departures from historical buying patterns;
- general market conditions;
- economic conditions; or
- competitive conditions in the semiconductor industry or in the industries
that manufacture products utilizing integrated circuits.
OUR QUARTERLY FINANCIAL RESULTS FLUCTUATE SIGNIFICANTLY AND MAY FALL SHORT OF
ANTICIPATED LEVELS, WHICH COULD CAUSE OUR STOCK PRICE TO DECLINE
Our net sales and operating results may fluctuate significantly from
quarter to quarter. We derive our revenue primarily from the sale of a
relatively small number of high-priced systems, many of which may be ordered and
shipped during the same quarter. Our results of operations for a particular
quarter could be materially adversely affected if anticipated orders, for even a
small number of systems, were not received in time to enable shipment during the
quarter, if anticipated shipments were delayed or canceled by one or more
customers or if shipments were delayed due to manufacturing difficulties. At our
current revenue level, each sale, or failure to make a sale, could have a
material effect on us. Our lengthy sales cycle, coupled with our customers'
competing capital budget considerations, make the timing of customer orders
uneven and difficult to predict. In addition, our backlog at the beginning of a
quarter typically does not include all orders required to achieve our sales
objectives for that quarter. As a result, our net sales and operating results
for a quarter depend on us shipping orders as scheduled during that quarter as
well as obtaining new orders for systems to be shipped in that same quarter. Any
delay in scheduled shipments or in shipments from new orders would materially
and adversely affect our operating results for that quarter, which could cause
our stock price to decline.
In December 1999, the SEC issued Staff Accounting Bulletin No. 101. SAB 101
summarizes certain of the SEC staff's views in applying generally accepted
accounting principles to revenue recognition in financial statements. Prior to
SAB 101, we generally recognized revenue upon shipment of a system. Applying the
requirements of SAB 101 to the present selling arrangements we use for the sale
of semiconductor production equipment may require a change in our accounting
policy for revenue recognition and deferral of the recognition of revenue from
such equipment sales until installation is complete and accepted by the
customer. The effect of such a change, if any, must be recognized as a
cumulative effect of a change in accounting no later than the quarter ending
December 31, 2000. Although SAB 101 applies to every company within our
industry, there is a risk that our stock price may be materially and adversely
impacted by SAB 101 if we are required to transition from recognizing revenue at
shipment, to customer acceptance of a system.
Since it is possible that, under SAB 101, there may be a shift in revenue
recognition from the time of shipment to the time of acceptance by the customer,
certain revenue that we would have recognized in the first and third quarters of
2000 upon shipment of products may not be recognized until the products are
accepted. We cannot assure you as to the timing of such acceptances. Any
material delay in receipt of acceptances may have a material adverse effect on
our results of operations.
WE ARE HIGHLY DEPENDENT ON OUR INTERNATIONAL SALES, PARTICULARLY SALES IN ASIAN
COUNTRIES, AND FACE RISKS BEYOND OUR CONTROL OR INFLUENCE
Export sales accounted for approximately 86%, 56% and 74% of our total net
sales in 1999, 1998 and 1997, respectively, and accounted for 98% of our total
net sales during the nine months ended September 30, 2000. Net sales to our
South Korean-based customers accounted for approximately 84%, 30% and 50% of
total net sales, respectively, during the same year-end periods, and accounted
for 90% of our total net sales during the nine months ending September 30, 2000.
We anticipate that international sales, including sales to South Korea, will
continue to account for a significant portion of our net sales. As a result, a
significant portion of our net sales will be subject to certain risks,
including:
- unexpected changes in law or regulatory requirements;
- exchange rate volatility;
- tariffs and other barriers;
- political and economic instability;
- difficulties in accounts receivable collection;
- extended payment terms;
- difficulties in managing distributors or representatives;
- difficulties in staffing our subsidiaries;
- difficulties in managing foreign subsidiary operations; and
- potentially adverse tax consequences.
Our foreign sales are primarily denominated in U.S. dollars and we do not
engage in hedging transactions. As a result, our foreign sales are subject to
the risks associated with unexpected changes in exchange rates, which could
affect the price of our products.
In the past, turmoil in the Asian financial markets resulted in dramatic
currency devaluations, stock market declines, restriction of available credit
and general financial weakness. For example, prices fell dramatically in 1998 as
some integrated circuit manufacturers sold DRAMs at less than cost in order to
generate cash. Currency devaluations make dollar-denominated goods, such as
ours, more expensive for international customers. In addition, difficult
economic conditions may limit capital spending by our customers. These
circumstances may also affect the ability of our customers to meet their payment
obligations, resulting in the cancellations or deferrals of existing orders and
the limitation of additional orders. As a result of any or all these factors,
our business, financial condition and results of operations may be materially
harmed.
OUR SALES REFLECT THE CYCLICAL NATURE OF THE SEMICONDUCTOR INDUSTRY, WHICH COULD
CAUSE OUR OPERATING RESULTS TO FLUCTUATE SIGNIFICANTLY AND COULD CAUSE US TO
FAIL TO ACHIEVE ANTICIPATED SALES
Our business depends upon the capital expenditures of semiconductor
manufacturers, which in turn depend on the current and anticipated market demand
for integrated circuits and products utilizing integrated circuits. The
semiconductor industry is cyclical and experiences periodic downturns both of
which reduce the semiconductor industry's demand for semiconductor manufacturing
capital equipment. Semiconductor industry downturns have significantly decreased
our revenues, operating margins and results of operations in the past. There is
a risk that our revenues and operating results will be materially harmed by any
future downturn in the semiconductor industry.
OUR FUTURE GROWTH IS DEPENDENT ON ACCEPTANCE OF NEW THIN FILMS AND MARKET
ACCEPTANCE OF OUR SYSTEMS RELATING TO THOSE THIN FILMS
We believe that our future growth will depend in large part upon the
acceptance of our new thin films. As a result, we expect to continue to invest
in research and development in these new thin films and the systems that use
these films. There can be no assurance that the market will accept our new
products or that we will be able to develop and introduce new products or
enhancements to our existing products and processes in a timely manner to
satisfy customer needs or achieve market acceptance. The failure to do so could
have a material adverse effect on our business, financial condition and results
of operations.
In addition, we must manage product transitions successfully, as
introductions of new products could harm sales of existing products. We derive
our revenue primarily from the sale of our tungsten silicide CVD systems. We
estimate that the life cycle for these systems is three-to-five years. There is
a risk that future technologies, processes or product developments may render
our product offerings obsolete and we may not be able to develop and introduce
new products or enhancements to our existing products in a timely manner.
WE MAY NOT BE ABLE TO CONTINUE TO SUCCESSFULLY COMPETE IN THE HIGHLY COMPETITIVE
SEMICONDUCTOR INDUSTRY AGAINST COMPETITORS WITH GREATER RESOURCES
The semiconductor manufacturing capital equipment industry is highly
competitive. We face substantial competition throughout the world. We believe
that to remain competitive, we will require significant financial resources in
order to develop new products, offer a broader range of products, establish and
maintain customer service centers and invest in research and development.
Many of our existing and potential competitors have substantially greater
financial resources, more extensive engineering, manufacturing, marketing,
customer service capabilities and greater name recognition. We expect our
competitors to continue to improve the design and performance of their current
products and processes and to introduce new products and processes with improved
price and performance characteristics.
If our competitors enter into strategic relationships with leading
semiconductor manufacturers covering thin film products similar to those sold by
us, it would materially adversely affect our ability to sell our products to
such manufacturers. In addition, to expand our sales we must often replace the
systems of our competitors or sell new systems to customers of our competitors.
Our competitors may develop new or enhanced competitive products that will offer
price or performance features that are superior to our systems. Our competitors
may also 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 product lines. We may not be able to
maintain or expand our sales if competition increases and we are not able to
respond effectively.
WE MAY NOT ACHIEVE ANTICIPATED REVENUE GROWTH IF WE ARE NOT SELECTED AS VENDOR
OF CHOICE FOR NEW OR EXPANDED FABRICATION FACILITIES AND IF OUR SYSTEMS AND
PRODUCTS DO NOT ACHIEVE BROADER MARKET ACCEPTANCE
Because semiconductor manufacturers must make a substantial investment to
install and integrate capital equipment into a semiconductor fabrication
facility, these manufacturers will tend to choose semiconductor equipment
manufacturers based on established relationships, product compatibility and
proven financial performance.
Once a semiconductor manufacturer selects a particular vendor's capital
equipment, the manufacturer generally relies for a significant period of time
upon equipment from this vendor of choice for the specific production line
application. In addition, the semiconductor manufacturer frequently will attempt
to consolidate its other capital equipment requirements with the same vendor.
Accordingly, we may face narrow windows of opportunity to be selected as the
"vendor of choice" by potential new customers. It may be difficult for us to
sell to a particular customer for a significant period of time once that
customer selects a competitor's product, and we may not be successful in
obtaining broader acceptance of our systems and technology. If we are not able
to achieve broader market acceptance of our systems and technology, we may be
unable to grow our business and our operating results and financial condition
will be materially adversely affected.
OUR LENGTHY SALES CYCLE INCREASES OUR COSTS AND REDUCES THE PREDICTABILITY OF
OUR REVENUE
Sales of our systems depend upon the decision of a prospective customer to
increase manufacturing capacity. That decision typically involves a significant
capital commitment by our customers. Accordingly, the purchase of our systems
typically involves time-consuming internal procedures associated with the
evaluation, testing, implementation and introduction of new technologies into
our customers' manufacturing facilities. For many potential customers, an
evaluation as to whether new semiconductor manufacturing equipment is needed
typically occurs infrequently. Following an evaluation by the customer as to
whether our systems meet its qualification criteria, we have experienced in the
past and expect to experience in the future delays in finalizing system sales
while the customer evaluates and receives approval for the purchase of our
systems and constructs a new facility or expands an existing facility.
Due to these factors, our systems typically have a lengthy sales cycle
during which we may expend substantial funds and management effort. The time
between our first contact with a customer and the customer placing its first
order typically lasts from nine to twelve months and is often even longer. This
lengthy sales cycle makes it difficult to accurately forecast future sales and
may cause our quarterly and annual revenue and operating results to fluctuate
significantly from period to period. If anticipated sales from a particular
customer are not realized in a particular period due to this lengthy sales
cycle, our operating results may be adversely affected.
WE ARE DEPENDENT ON OUR INTELLECTUAL PROPERTY AND RISK LOSS OF A VALUABLE ASSET,
REDUCED MARKET SHARE AND LITIGATION EXPENSE IF WE CANNOT ADEQUATELY PROTECT IT
Our success depends in part on our proprietary technology. There can be no
assurance that we will be able to protect our technology or that competitors
will not be able to develop similar technology independently. We currently have
a number of United States and foreign patents and patent applications. There can
be no assurance that any patents issued to us will not be challenged,
invalidated or circumvented or that the rights granted thereunder will provide
us with competitive advantages.
From time to time, we have received notices from third parties alleging
infringement of such parties' patent rights by our products. In such cases, it
is our policy to defend against the claims or negotiate licenses on commercially
reasonable terms where appropriate. However, no assurance can be given that we
will be able to negotiate necessary licenses on commercially reasonable terms,
or at all, or that any litigation resulting from such claims would not have a
material adverse effect on our business and financial results.
WE ARE DEPENDENT UPON KEY PERSONNEL WHO ARE EMPLOYED AT WILL, WHO WOULD BE
DIFFICULT TO REPLACE AND WHOSE LOSS WOULD IMPEDE OUR DEVELOPMENT AND SALES
We are highly dependent on key personnel to manage our business, and their
knowledge of business, management skills and technical expertise would be
difficult to replace. Our success depends upon the efforts and abilities of Dr.
William W.R. Elder, our chairman and chief executive officer, Dr. Thomas E.
Seidel, our chief technology officer, and other key managerial and technical
employees who would be difficult to replace. The loss of Dr. Elder or Dr. Seidel
or other key employees could limit or delay our ability to develop new products
and adapt existing products to our customers' evolving requirements and would
also result in lost sales and diversion of management resources. None of our
executive officers are bound by a written employment agreement, and the
relationships with our officers are at will.
Because of competition for additional qualified personnel, we may not be
able to recruit or retain necessary personnel, which could impede development or
sales of our products. Our growth depends on our ability to attract and retain
qualified, experienced employees. There is substantial competition for
experienced engineering, technical, financial, sales and marketing personnel in
our industry. In particular, we must attract and retain highly skilled design
and process engineers. Competition for such personnel is intense, particularly
in the San Francisco Bay Area where we are based. If we are unable to retain our
existing key personnel, or attract and retain additional qualified personnel, we
may from time to time experience inadequate levels of staffing to develop and
market our products and perform services for our customers. As a result, our
growth could be limited due to our lack of capacity to develop and market our
products to customers, or fail to meet delivery commitments or experience
deterioration in service levels or decreased customer satisfaction.
OUR FAILURE TO COMPLY WITH ENVIRONMENTAL REGULATIONS COULD RESULT IN SUBSTANTIAL
LIABILITY TO US
We are subject to a variety of federal, state and local laws, rules and
regulations relating to the protection of health and the environment. These
include laws, rules and regulations governing the use, storage, discharge,
release, treatment and disposal of hazardous chemicals during and after
manufacturing, research and development and sales demonstrations. If we fail to
comply with present or future regulations, we could be subject to substantial
liability for clean up efforts, property damage, personal injury and fines or
suspension or cessation of our operations. Restrictions on our ability to expand
or continue to operate from our present locations could be imposed upon us or we
could be required to acquire costly remediation equipment or incur other
significant expenses.
WE DEPEND UPON A LIMITED NUMBER OF SUPPLIERS FOR MANY COMPONENTS AND
SUBASSEMBLIES; SUPPLY SHORTAGES OR THE LOSS OF THESE SUPPLIERS COULD RESULT IN
INCREASED COST OR DELAYS IN MANUFACTURE AND SALE OF OUR PRODUCTS
Certain of the components and sub-assemblies included in our products are
obtained from a single supplier or a limited group of suppliers. Disruption or
termination of these sources could have an adverse effect on our operations. We
believe that alternative sources could be obtained and qualified to supply these
products, if necessary. Nevertheless, a prolonged inability to obtain certain
components could have a material adverse effect on our business, financial
condition and results of operations.
WE DEPEND UPON SIX DISTRIBUTORSHIPS FOR THE SALE OF OUR PRODUCTS AND ANY
DISRUPTION IN THESE RELATIONSHIPS WOULD ADVERSELY AFFECT US
We currently sell and support our thin film products through direct sales
and customer support organizations in the U.S., Europe, South Korea and Japan
and through six independent sales representatives and distributors in the U.S.,
Europe, South Korea, Taiwan, China and Malaysia. We do not have any long-term
contracts with our sales representatives and distributors. Any disruption or
termination of our existing distributor relationships could have an adverse
effect on our business, financial condition and results of operations.
WE ESTABLISHED A DIRECT SALES ORGANIZATION IN JAPAN WHICH COULD RESULT IN LOST
SALES OR INCREASED RISKS TO OUR BUSINESS IN JAPAN
As part of our original strategy for penetrating the Japanese market, we
established a distribution relationship with Innotech Corp. In 1998, we shifted
our strategy in Japan to a direct sales model. We have terminated our
distribution relationship with Innotech and established our own direct sales
force in Japan. Although we intend to continue to invest significant resources
in Japan, including the hiring of additional personnel to support our direct
sales effort, we may not be able to maintain or increase our sales to the
Japanese semiconductor industry. We may miss sales opportunities or lose
competitive sales as we transition to this direct sales model, and our existing
Japanese customers and potential customers may be unwilling to purchase our
systems from us directly.
THE PRICE OF OUR COMMON STOCK HAS FLUCTUATED IN THE PAST AND MAY CONTINUE TO
FLUCTUATE SIGNIFICANTLY IN THE FUTURE, WHICH MAY LEAD TO LOSSES BY INVESTORS OR
TO SECURITIES LITIGATION
Our common stock has experienced substantial price volatility, particularly
as a result of quarter-to-quarter variations in our competitors' or our
customers' actual or anticipated financial results, in our competitors' or our
customers' announcements of technological innovations, revenue recognition
policies, or changes in earnings estimates by securities analysts and other
events or factors. Also, the stock market has experienced extreme price and
volume fluctuations which have affected the market price of many technology
companies, in particular, and which have often been unrelated to the operating
performance of these companies. These broad market fluctuations, as well as
general economic and political conditions in the United States and the countries
in which we do business, may adversely effect the market price of our common
stock.
In the past, securities class action litigation has often been instituted
against a company following periods of volatility in the company's stock price.
This type of litigation, if filed against us, could result in substantial costs
and divert our management's attention and resources.
YEAR 2000 COMPLICATIONS MAY DISRUPT OUR OPERATIONS BECAUSE, WHILE OUR UPGRADED
INTERNAL SYSTEMS ARE OPERATIONAL AND THE COST OF UPGRADES WAS NOT MATERIAL, WE
RELY ON EXTERNAL SYSTEMS THAT MAY NOT BE ADEQUATELY UPGRADED FOR YEAR 2000
The date fields coded in many software products and computer systems need
to be able to distinguish 21st century dates from 20th century dates, including
leap year calculations. The failure to be able to accurately distinguish these
dates is commonly known as the year 2000 problem. While we have yet to
experience year 2000 problems, the computer software programs and operating
systems used in our internal operations, including our financial, product
development, order management and manufacturing systems, could experience errors
or interruptions due to the year 2000 problem. For example, a significant
failure of our computer integrated manufacturing systems, which monitor and
control factory equipment, could disrupt manufacturing operations and cause a
delay in completion and shipping of products. In addition, it is possible that
our suppliers' and service providers' failure to adequately address the year
2000 problem could have an adverse effect on their operations, which, in turn,
could have an adverse impact on us.
FORWARD-LOOKING STATEMENTS
Some of the information in this Quarterly Report on Form 10-Q and in the
documents that are incorporated by reference, including the risk factors,
contains forward-looking statements that involve risks and uncertainties. These
statements relate to future events or our future financial performance. In many
cases, you can identify forward-looking statements by terminology such as "may,"
"will," "should," "expects," "plans," "anticipates," "believes," "estimates,"
"predicts," "potential," or "continue," or the negative of these terms and other
comparable terminology. These statements are only predictions. Our actual
results could differ materially from those anticipated in these forward-looking
statements as a result of a number of factors, including the risks faced by us
described above and elsewhere in this Quarterly Report on Form 10-Q.
We believe it is important to communicate our expectations to our
shareholders. However, there may be events in the future that we are not able to
predict accurately or over which we have no control. The risk factors listed
above, as well as any cautionary language in this Quarterly Report on Form 10-Q,
provide examples of risks, uncertainties and events that may cause our actual
results to differ materially from the expectations we describe in our
forward-looking statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We face exposure to adverse movements in foreign currency exchange rates.
These exposures may change over time as our business practices evolve and could
seriously harm our financial results. All of our international sales, except
spare parts and service sales made by our subsidiary in South Korea, are
currently denominated in U.S. dollars. All spare parts and service sales made by
the South Korean subsidiary are won denominated. An increase in the value of the
U.S. dollar relative to foreign currencies could make our products more
expensive and, therefore, reduce the demand for our products. Reduced demand for
our products could materially adversely affect our business, results of
operations and financial condition.
At any time, fluctuations in interest rates could affect interest earnings
on our cash, cash equivalents or increase any interest expense owed on the line
of credit facility. We believe that the effect, if any, of reasonably possible
near term changes in interest rates on our financial position, results of
operations and cash flows would not be material. Currently, we do not hedge
these interest rates exposures.
<PAGE>
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Pursuant to a Preferred Stock Rights Agreement between Genus, Inc. (the
"Company") and ChaseMellon Shareholder Services, Inc., as Rights Agent, entered
into as of September 26, 2000, the Company's Board of Directors declared a
dividend of one right to purchase one one-thousandth of a share of the Company's
Series C Participating Preferred Stock for each outstanding share of Common
Stock, no par value, of the Company. The dividend is payable on October 13,
2000, to shareholders of record as of the close of business on that date. Each
Right entitles the registered holder to purchase from the Company one
one-thousandth of a share of Series C Preferred at an exercise price of $40.00,
subject to adjustment.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The Exhibits listed on the accompanying "Index to Exhibits" are filed as part
hereof, or incorporated by reference into, the report.
(b) Report on Form 8-K
The Company filed a Form 8-K on September 27, 2000 reporting that on September
26, 2000, the Company issued a press release announcing that the Board of
Directors of the Company had approved the adoption of a Preferred Stock
Rights Agreement.
<PAGE>
GENUS, INC.
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.
Date: November 14, 2000 GENUS, INC.
/s/ William W. R. Elder
---------------------------
William W. R. Elder
Chief Executive Officer
and Chairman
/s/ Kenneth Schwanda
---------------------------
Kenneth Schwanda
Chief Financial Officer
(Principal Financial
and Principal
Accounting Officer)
<PAGE>
GENUS, INC.
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
----------- -----------
10.1 Preferred Stock Rights Agreement, dated as of September 26, 2000,
between Genus, Inc. and ChaseMellon Shareholder Services, Inc.,
including the Certificate of Designation, the form of Rights
Certificate and the Summary of Rights attached thereto as Exhibits
A, B, and C, respectively. (This is incorporated by reference
to Exhibit 4.7 to Genus, Inc.'s Form 8-A filed October 3, 2000.)
27.1 Financial Data Schedule
<PAGE>
