UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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: 0-21214
ORTHOLOGIC CORP.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 86-0585310
------------------------------- ------------------------------------
(State of other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1275 W. Washington Street, Tempe, Arizona 85281
----------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(602) 286-5520
----------------------------------------------------
(Registrant's telephone number, including area code)
--------------------------------------------------------------------------------
(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 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 [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
30,163,224 shares of common stock outstanding as of July 31, 2000
<PAGE>
ORTHOLOGIC CORP.
INDEX
Page No.
--------
Part I Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
June 30, 2000 and December 31, 1999 ............................ 3
Condensed Consolidated Statements of Operations and of
Comprehensive Income Three months and six months ended
June 30, 2000 and 1999 ......................................... 4
Condensed Consolidated Statements of Cash Flows
Six months ended June 30, 2000 and 1999 ........................ 5
Notes to Consolidated Financial Statements ..................... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ......................... 10
Part II Other Information
Item 1. Legal Proceedings ........................................... 13
Item 3. Quantitative and Qualitative Disclosures About Market
Risks ....................................................... 13
Item 4. Submission of Matters to Vote of Security Holders ........... 13
Item 6. Exhibits and Reports on Form 8-K ............................ 13
Page 2
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PART I - Financial Information
ITEM 1. FINANCIAL STATEMENTS
OrthoLogic, Corp.
Condensed Consolidated Balance Sheets
(in thousands)
Unaudited
June 30, December 31,
2000 1999
--------- -----------
ASSETS
Cash and cash equivalents $ 8,242 $ 6,023
Short term investments -- 250
Accounts receivable 30,847 30,429
Inventory 9,494 9,306
Prepaids and other current assets 1,240 987
Deferred income tax 2,625 2,631
--------- ---------
Total current assets 52,448 49,626
Rental fleet, furniture and equipment 28,145 26,361
Accumulated depreciation (15,725) (13,300)
--------- ---------
Fleet, furniture and equipment, net 12,420 13,061
Intangibles, net 27,752 28,749
Deposits and other assets 663 767
--------- ---------
Total assets $ 93,283 $ 92,203
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Accounts payable $ 2,644 $ 2,569
Accrued liabilities 5,865 6,192
--------- ---------
Total current liabilities 8,509 8,761
Deferred rent and capital lease obligations 185 209
--------- ---------
Total liabilities 8,694 8,970
--------- ---------
Series B Convertible Preferred Stock 3,690 10,180
--------- ---------
Stockholders' Equity
Common stock 15 14
Additional paid-in capital 131,880 125,206
Accumulated deficit (50,747) (51,992)
Comprehensive loss (249) (175)
--------- ---------
Total stockholders' equity 80,899 73,053
--------- ---------
Total liabilities and stockholders' equity $ 93,283 $ 92,203
========= =========
See notes to condensed consolidated financial statements
Page 3
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OrthoLogic, Corp.
Condensed Consolidated Statements of Operations and of Comprehensive Income
(in thousands, except per share data)
Unaudited
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
-------------------- --------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues $ 22,540 $ 20,728 $ 45,031 $ 41,796
Cost of revenues 4,295 4,609 9,104 9,327
-------- -------- -------- --------
Gross profit 18,245 16,119 35,927 32,469
Operating expenses
Selling, general and administrative 17,188 15,777 33,503 31,515
Research and development 548 556 1,214 1,076
-------- -------- -------- --------
Total operating expenses 17,736 16,333 34,717 32,591
Operating income (loss) 509 (214) 1,210 (122)
-------- -------- -------- --------
Other income
Grant/other revenue 1
Interest income 101 46 186 102
-------- -------- -------- --------
Total other income 101 46 186 103
-------- -------- -------- --------
Income (loss) before income taxes 610 (168) 1,396 (19)
-------- -------- -------- --------
Provision for income taxes 61 -- 151 16
-------- -------- -------- --------
Net income (loss) $ 549 $ (168) $ 1,245 $ (35)
======== ======== ======== ========
Accretion of non-cash preferred stock dividend -- (206) -- (824)
-------- -------- -------- --------
Net income (loss) applicable to common shareholder $ 549 $ (374) $ 1,245 $ (859)
======== ======== ======== ========
BASIC EARNINGS PER SHARE
Net income (loss) per common share $ 0.02 $ (0.01) $ 0.04 $ (0.03)
-------- -------- -------- --------
Weighted average number of common shares outstanding 29,962 25,492 29,511 25,436
-------- -------- -------- --------
DILUTED EARNINGS PER SHARE
Net income (loss) per common and equivalent shares $ 0.02 $ (0.01) $ 0.04 $ (0.03)
-------- -------- -------- --------
Weighted shares outstanding 31,057 25,492 30,849 25,436
-------- -------- -------- --------
Consolidated Statement of Comprehensive Income
Net income (loss) applicable to common shareholders $ 549 $ (374) $ 1,245 $ (859)
Foreign translation adjustment (61) (45) (74) (209)
-------- -------- -------- --------
Comprehensive income (loss) applicable to common
shareholders $ 488 $ (419) $ 1,171 $ (1,068)
======== ======== ======== ========
</TABLE>
See notes to condensed consolidated financial statements
Page 4
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Orthologic, Corp.
Consolidated Statements of Cash Flows
(In Thousands)
Unaudited
Six months ended June 30,
-------------------------
2000 1999
------- -------
OPERATING ACTIVITIES
Net income (loss) $ 1,245 $ (35)
Noncash items:
Depreciation and amortization 2,741 3,062
Net change on other operating items:
Accounts receivable (418) (2,319)
Inventory (188) 1,988
Prepaids and other current assets (247) (577)
Deposits and other assets 104 (274)
Accounts payable 75 (1,102)
Accrued liabilities (327) (646)
------- -------
Cash flows provided by operating activities 2,985 97
------- -------
INVESTING ACTIVITIES
Purchase of fixed assets, net (1,103) (2,833)
Cash paid for acquisition, net -- (171)
Sales (Purchases) of short-term investments 250 5,552
------- -------
Cash flows provided by (used in) investing
activities (853) 2,548
------- -------
FINANCING ACTIVITIES
Payments on capital leases (24) 30
Payment on loan payable -- (375)
Payments under co-promotion agreement -- (1,000)
Foreign exchange (74) (209)
Net proceeds from stock option exercises 185 586
------- -------
Cash flows provided by (used in) financing
activities 87 (968)
------- -------
NET INCREASE IN CASH AND CASH EQUIVALENTS 2,219 1,677
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 6,023 1,714
------- -------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 8,242 $ 3,391
======= =======
Supplemental disclosure of cash flow information
Accretion of non-cash preferred stock dividend $ -- $ 824
Cash paid during the period for interest 77 56
Cash paid during the period for income taxes 1 --
See notes to condensed consolidated financial statements
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ORTHOLOGIC CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. FINANCIAL STATEMENT PRESENTATION
The condensed consolidated balance sheet as of June 30, 2000, and the
condensed consolidated statements of operations and comprehensive income
for the three months ended June 30, 2000 and 1999 and six months ended June
30, 2000 and 1999 and the condensed consolidated statements of cash flows
for the six months ended June 30, 2000 and 1999 are unaudited, however, in
the opinion of management, include all adjustments (consisting only of
normal recurring adjustments) necessary for the fair presentation of the
financial position, results of operations and cash flows. The results of
operations for the interim periods are not necessarily indicative of the
results to be expected for the complete fiscal year. The Balance Sheet as
of December 31, 1999 is derived from the Company's audited financial
statements included in the 1999 Annual Report. It is suggested that these
financial statements be read in conjunction with the financial statements
and notes thereto included in the Company's 1999 Annual Report.
The preparation of financial statements in conformity with generally
accepted accounting principles necessarily requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from
these estimates. Significant estimates include the allowance for doubtful
accounts, which is based primarily on trends in historical collection
statistics, consideration of current events, payer mix and other
considerations. The Company derives a significant amount of its revenues in
the United States from third-party health insurance plans, including
Medicare. Amounts paid under these plans are generally based on fixed or
allowable reimbursement rates. In the opinion of management, adequate
allowances have been provided for doubtful accounts and contractual
adjustments. However, these estimates are subject to adjustments in the
near term, which could be material. Any differences between estimated
reimbursement and final determinations are reflected in the year finalized.
2. CO-PROMOTION AGREEMENT
The Company entered into an exclusive co-promotion agreement (the
"Agreement") with Sanofi Pharmaceuticals Inc. ("Sanofi") at a cost of $4.0
million on June 23, 1997 for the purpose of marketing Hyalgan, a hyaluronic
acid sodium salt, to orthopedic surgeons in the United States for the
treatment of pain in patients with osteoarthritis of the knee. During 1997
and 1998 the Company paid $3.0 million of this amount. The remaining $1.0
million was paid in the first quarter of 1999. The initial term of the
agreement ends on December 31, 2002. Upon the expiration of the initial
term, Sanofi may terminate the agreement, extend the agreement for up to
ten additional one-year periods or enter into a revised agreement with the
Company. Upon termination of the agreement, Sanofi must pay the Company the
amount equal to 50% of the gross compensation paid to the Company, pursuant
to the Agreement, for the immediately preceding year, provided the Company
met all contractual obligations pursuant to the agreement. The Company's
sales force began to promote Hyalgan in the third quarter of 1997.
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3. LICENSING AGREEMENT
The Company announced in January 1998 that it had acquired a minority
equity interest in a biotech firm, Chrysalis BioTechnology, Inc.
("Chrysalis") for $750,000. As part of the transaction, the Company was
awarded a nine-month world-wide exclusive option to license the orthopedic
applications of Chrysalin, a patented 23-amino acid peptide that has shown
promise in accelerating the healing process and has completed an extensive
pre-clinical safety and efficacy profile of the product. In pre-clinical
animal studies, Chrysalin was also shown to double the rate of fracture
healing with a single injection into the fresh fracture gap. The Company's
agreement with Chrysalis contains provisions for the Company to continue
and expand its option to license Chrysalin contingent upon regulatory
approvals, successful pre-clinical trials, and certain milestone payments
to Chrysalis by the Company. As part of the equity investment OrthoLogic
acquired options to license Chrysalin for orthopedic applications. An
additional fee of $750,000 for the initial license was expensed in the
third quarter of 1998 and the Agreement was extended to January 1999. In
January 1999, the Company exercised its option to license the U.S.
development, marketing and distribution rights for Chrysalin, for fracture
indications. As part of the license agreement, and in conjunction with the
U.S. Food and Drug Administration (the "FDA") clearance to begin human
clinical trials, OrthoLogic made a $500,000 milestone payment to Chrysalis
which was expensed in the fourth quarter of 1999. In January 2000, the
Company began enrolling patients in the combined Phase I/II clinical trial
for Chrysalin. The clinical trial is ongoing and is expected to be
completed by the end of 2000.
In July 2000, the Company announced it was extending its license agreement
with Chrysalis to include all Chrysalin orthopedic indications worldwide.
Under the terms of the agreement, OrthoLogic paid Chrysalis a license fee
of $2 million subsequent to June 30, 2000. This fee will result in a
one-time charge to earnings during the third quarter ending September 30,
2000. In addition, the agreement calls for the Company to pay certain
milestone payments and royalty fees, based upon products developed and
achievement of commercial success.
4. Litigation
During 1996, certain lawsuits were filed in the United States District
Court for the District of Arizona against the Company and certain officers
and directors, alleging violations of Section 10(b) of the Securities
Exchange Act of 1934 and SEC Rule 10b-5 promulgated thereunder.
Plaintiffs in these actions alleged that correspondence received by the
Company from the FDA pertaining principally to the promotion of the
Company's OrthoLogic 1000 Bone Growth Stimulator was material and
undisclosed, leading to an artificially inflated stock price. Plaintiffs
further alleged that practices referenced in the correspondence operated as
a fraud against plaintiffs. Plaintiffs further alleged that once the FDA
letter became known, a material decline in the stock price of the Company
occurred, causing damage to the plaintiffs. On March 31, 1999, the judge in
the consolidated case before the United States District Court granted the
Company's Motion to Dismiss and entered an order dismissing all claims in
the suit against the Company and two individual officers/directors. The
judge allowed certain narrow claims based on insider trading theories to
proceed against certain individual defendants. On December 22, 1999, the
District Court granted plaintiff's motion for class certification to
include purchasers of common stock between June 4 through June 18, 1996,
inclusive. Discovery is proceeding in the case.
In addition, the Company had been served with a substantially similar
action filed in Arizona State Court alleging state law causes of action
grounded in the same set of facts. The Company filed a Motion to Dismiss
the Complaint in Arizona State Court in May 1999. The Court denied the
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motion in July 1999 and granted the plaintiff's motion for the class
certification on November 24, 1999. Discovery is proceeding in the case.
In addition, a shareholder derivative complaint alleging, among other
things, breach of fiduciary duty in connection with the conduct alleged in
the aforesaid federal and state court class actions have also been filed in
Arizona state court. The Company filed a Motion to Dismiss the Complaint,
which was granted December 13, 1999.
Management believes that the remaining allegations in the federal court
case and the state court case are without merit and will vigorously defend
against them.
At June 30, 2000, in addition to the matters disclosed above, the Company
is involved in various other legal proceedings that arose in the ordinary
course of business.
The costs associated with defending the above allegations and the potential
outcome cannot be determined at this time and accordingly, no estimate for
such costs have been included in the accompanying Financial Statements. In
management's opinion, the ultimate resolution of the above legal
proceedings will not have a material effect on the financial position of
the Company.
5. COMMITMENTS
The Company has a $10 million accounts receivable revolving line of credit
with a bank. The Company may borrow up to 75% of the eligible accounts. The
interest rate is at prime for the revolving note. Interest accruing on the
note and a monthly administration fee is due in arrears on the first day of
each month. The revolving note matures February 28, 2003. There are certain
financial covenants and reporting requirements associated with the loan.
Included in the financial covenants are (1) tangible net worth of not less
that $43 million, (2) a quick ratio of not less than 2.0 to 1.0, (3) a debt
to tangible net worth ratio of not less that .50 to 1.0, and (4) capital
expenditures will not exceed more than $7.0 million during any fiscal year.
6. SERIES B CONVERTIBLE PREFERRED STOCK
In July 1998, the Company completed a private placement with two investors,
an affiliate of Credit Suisse First Boston Corp. and Capital Ventures
International. Under the terms of the Purchase Agreement, OrthoLogic sold
15,000 shares of Series B Convertible Preferred Stock for $15 million
(prior to costs). The Series B Convertible Preferred Stock will
automatically convert, to the extent not previously converted, into Common
Stock four years following the date of issuance. Each share of Series B
Convertible Preferred Stock is convertible into Common Stock at a per share
price equal to the lesser of the average of the 10 lowest closing bids
during the 30 days prior to conversion or, $ 3.0353. In the event of
certain Mandatory Redemption Events, each holder of Series B Preferred
Shares will have the right to require the Company to redeem those shares
for cash at the Mandatory Redemption Price. Mandatory Redemption Events
include, but are not limited to: the failure of the Company to timely
deliver Common Shares as required under the terms of the Series B Preferred
Shares or Warrants; the Company's failure to satisfy registration
requirements applicable to such securities; the failure by the Company to
maintain the listing of its Common Stock on NASDAQ or another national
securities exchange; and certain transactions involving the sale of assets
or business combinations involving the Company. In the event of any
liquidation, dissolution or winding up of the Company, holders of the
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Series B Preferred Shares are entitled to receive, prior and in preference
to any distribution of any assets of the Company to the holders of Common
Stock, the Stated Value for each Series B Preferred Share outstanding at
that time. The Purchase Agreement contains strict covenants that protect
against hedging and short-selling of OrthoLogic Common Stock while the
purchasers hold shares of the Series B Convertible Preferred Stock.
In connection with the private placement of the Series B Convertible
Preferred Stock, OrthoLogic issued to the purchasers warrants to purchase
40 shares of Common Stock for each share of Series B Convertible Preferred
Stock, exercisable at $5.50 per share. These warrants expire in 2008. The
warrants were valued at $1,093,980. Additional costs of the private
placement were approximately $966,000. Both the value of the warrants and
the cost of the private placement were recognized over the 10 month
conversion period ended April 1999 as an "accretion of non-cash Preferred
Stock Dividends" for the amount of $617,994 per quarter. The Company filed
a registration statement covering the underlying Common Stock.
Proceeds from the private placement are being used to fund new product
opportunities, including SpinaLogic, Chrysalin and Hyalgan as well as to
complete the re-engineering of the Company's key business processes.
As of June 30, 2000, 11,310 shares of Series B Convertible Preferred Stock
had been converted into 4,486,997 shares of Common Stock.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS
OF OPERATIONS.
The following is management's discussion of significant factors that affected
the Company's interim financial condition and results of operations. This should
be read in conjunction with Management's Discussion and Analysis of Financial
Condition and Results of Operations included in the Company's Annual Report on
Form 10-K for the year ended December 31, 1999.
RESULTS OF OPERATIONS
REVENUES
The Company reported revenues of $22.5 million for the second quarter of 2000
representing an 8.7% increase over revenues of $20.7 million for the same
quarter of 1999. The Company's revenues increased 7.7% to $45 million for the
six months ended June 30, 2000 from $41.8 million for the six months ended June
30, 1999. The growth in sales was primarily driven by the launch of SpinaLogic
in December 1999 and increased sales of the OL-1000. The SpinaLogic device, used
as an adjunct to lumbar spinal fusion surgery, has been prescribed by more than
300 physicians. Prescriptions for the OL-1000 increased over 20% for the
six-months ended June 30, 2000 compared to the same period in 1999. Sales for
Continuous Passive Motion devices declined for both the second quarter and first
half of the year compared with comparable periods in 1999 as the Company has
focused attention on improving profitability of the CPM business.
GROSS PROFIT
Gross profits increased from $16.1 million for the three months ended June 30,
1999 to $18.2 million for the three months ended June 30, 2000, a 13% increase.
Gross profits as a percentage of revenues was 80.9% for the quarter compared to
77.7% for the same period last year. For the six months ended June 30, 2000,
gross profits was $35.9 million as compared to $32.5 million for the six months
ended June 30, 1999. Gross profits as a percentage of revenues was 77.7% for the
six-month period ended June 30, 1999 and increased to 79.8% for the same period
in 2000. Gross profits improved due to increased sales of the Company's higher
margin products: the OL-1000 and SpinaLogic.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative ("SGA") expenses for the three months ended
June 30, 2000 were $17.2 million, an increase from $15.8 million for the three
months ended June 30, 1999. SGA expenses for the six months ended June 30, 2000
were $33.5 million, an increase from $31.5 million for the six months ended June
30, 1999. These increases occurred due to higher sales volume, and increased
advertising associated with both the contractual obligations to market Hyalgan
under the Co-Promotion Agreement referenced above and the launch of SpinaLogic.
RESEARCH AND DEVELOPMENT
Research and development ("R&D") expenses declined slightly to $548,000 in the
three-month period ended June 30, 2000 compared to $556,000 for the same period
last year. R&D expenses for the six months ended June 30, 2000 totaled $1.2
million, an increase from the $1.1 million for the six months ended June 30,
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1999. This year-to-date increase reflects expenses associated with the Chrysalis
clinical trials offset by a reduction in SpinaLogic related development costs
since that product was introduced at the end of 1999.
OTHER INCOME AND EXPENSES
Other income, consisting primarily of interest income, increased from $46,000 to
$101,000 for the three-month periods ended June 30, 2000 and 1999 respectively.
For the six-month period ended June 30, 2000, other income increased to $186,000
from $102,000 for the same period in the previous year.
LIQUIDITY AND CAPITAL RESOURCES
On June 30, 2000 the Company had cash and investments of $8.2 million compared
to $6.3 million as of December 31, 1999. Cash and investments totaled $7.1
million at March 31, 2000. Cash provided by operations amounted to $3.0 million
during the six-month period ended June 30, 2000, compared to $97,000 for the
same period in the previous year. The Company has an available $10 million
accounts receivable revolving line of credit with a bank.
The Company anticipates that its cash and short-term investments on hand, cash
from operations and the funds available from the line of credit will be
sufficient to meet the Company's presently projected cash and working capital
requirements for the next 12 months. There can be no assurances, however, that
this will prove to be the case. The timing and amounts of cash used will depend
on many factors, including the Company's ability to continue to increase
revenues, reduce and control its expenditures, continue profitability and
collect amounts due from third party payers. Additional funds may be required if
the Company is not successful in any of these areas. The Company's ability to
continue funding its planned operations beyond the next 12 months is dependent
on its ability to generate sufficient cash flow to meet its obligations on a
timely basis, or to obtain additional funds through equity or debt financing, or
from other sources of financing, as may be required.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995, including projections of
results of operations and financial condition, statements of future economic
performance, and general or specific statements of future expectations and
beliefs. The matters covered by such forward-looking statements are subject to
known and unknown risks, uncertainties and other factors which may cause the
actual results, performance or achievements of the Company to differ materially
from those contemplated or implied by such forward-looking statements. Important
factors which may cause actual results to differ include, but are not limited
to, the following matters, which are discussed in more detail in the Company's
Form 10-K for the 1999 fiscal year.
The Company intends to pursue sales in international markets. The Company,
however, has had little experience in such markets. Expanded efforts at pursuing
new markets necessarily involves expenditures to develop such markets and there
can be no assurance that the results of those efforts will be profitable. There
can be no assurance that the Company's estimates of the market will not cause
the nature and extent of that market to deviate materially from the Company's
expectations. To the extent that the Company presently enjoys perceived
technological advantages over competitiors, technological innovation by present
or future competitors may erode the Company's position in the market. To sustain
long-term growth, the Company must develop and introduce new products and expand
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applications of existing products; however, there can be no assurance that the
Company will be able to do so or that the market will accept any such new
products or applications. The Company operates in a highly regulated environment
and cannot predict the actions of regulatory authorities. The action or
non-action of regulatory authorities may impede the development and introduction
of new products and new applications for existing products, and may have
temporary or permanent effects on the Company's marketing of its existing or
planned products. There can be no assurance that the influence of managed care
will continue to grow either in the United States or abroad, or that such growth
will result in greater acceptance or sales of the Company's products. In
particular, there can be no assurance that existing or future decision makers
and third party payors within the medical community will be receptive to the use
of the Company's products or replace or supplement existing or future
treatments. Moreover, the transition to managed care and the increasing
consolidation underway in the managed care industry may concentrate economic
power among buyers of the Company's products, which concentration could
foreseeable adversely affect the Company's margins. Although the company
believes that existing litigation initiated against the Company is without merit
and the Company intends to defend such litigation vigorously, an adverse outcome
of such litigation could have a material adverse effect on the Company's
business, financial condition and results of operations.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See "Note 4 - Litigation" of the Notes to Consolidated Financial Statements
above.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
The Company has exposure to foreign exchange rates through its manufacturing
subsidiary in Canada.
The Company does not use foreign currency exchange forward contracts or
commodity contracts to limit its exposure. The Company is not currently
vulnerable to a material extent to fluctuations in interest rates and commodity
prices.
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
The annual meeting of the stockholders of the Company was held on May 19, 2000
to vote on: the election of Class III Directors (Proposal 1); an amendment to
the Company's 1997 Stock Option Plan to increase the number of shares of Common
Stock available for grant under the Plan by 1,000,000 shares (Proposal 2); and
the ratification of Deloitte & Touche LLP as independent accountant for the
fiscal year ending December 31, 2000 (Proposal 3). The results are as follow:
Broker
For Against Abstain Non-Votes
--- ------- ------- ---------
Proposal 1
Stuart H. Altman, Ph.D. 28,172,074 330,938 7,700 0
Elwood D. Howse, Jr. 28,166,474 336,538 7,700 0
Proposal 2 24,684,130 3,763,233 55,649 0
Proposal 3 28,394,175 64,396 44,441 0
A more detailed discussion of each proposal is included in the Company's Proxy
Statement for the 2000 Annual Meeting of Stockholders.
The Company's directors continuing in office are: John Holliman III, Frederick
J. Feldman, Ph.D., Thomas R. Trotter, and Augustus A. White III, M.D.
ITEM 6. EXHIBITS AND REPORTS
(a) Exhibit Index
See Exhibit Index following the signature page which is incorporated
herein by reference.
(b) Reports on Form 8-K
None
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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.
ORTHOLOGIC CORP.
(Registrant)
Signature Title Date
--------- ----- ----
/s/ Thomas R. Trotter President and Chief Executive
--------------------- Officer (Principal Executive August 10, 2000
Thomas R. Trotter Officer)
/s/ Terry D. Meier Sr. Vice-President and Chief
--------------------- Financial Officer (Principal
Terry D. Meier Financial and Accounting Officer) August 10, 2000
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OrthoLogic Corp.
Exhibit Index to Quarterly Report on Form 10-Q
For the Quarterly Period Ended June 30, 2000
Incorporated by Filed
Exhibit No. Description Reference to: Herewith
----------- ----------- ------------- --------
10.1 Amendment to Marketing
Distribution Agreement X
27 Financial Data Schedule X
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