In retrospect, the problems at Lumenis started from the early stages of the company when it was still ESC Medical. The problems were bad technology-engineering-support amplified by bad management. That was not my opinion at one point since I bought the stock thinking that the problems were being addressed as promised by the company. The hiring of the Chairman’s 24 year old freshly-graduated MBA as the CFO was the red flag for me. Still I was not clear about the depths of their problems especially since the creditor bank was willing to keep pouring in money. If the former Chairman wasn’t politically connected, I believe the plug would have been pulled by now. It will be interesting to see if Ariel Sharon’s bribery inquiry expands to include bank loans to companies that did not qualify for loans under normal circumstances.

To understand the early problems of the company, you need to go back to the ESC Medical SEC filings before 1999. I reviewed a few of them this morning and the signs were all there, in the numbers and in the legal sections. The management explanation of soon to end “extraordinary one time charges” to cover up the mounting problems should not have been accepted in retrospect. I accepted those explanations, and bought the stock. I sold when the excuse was used again.

Their technology-engineering-support was lacking and management was incompetent in fixing the problems. However, the uppermost managers was able to enriched themselves while this was all going on with generous compensation and bonuses. They have had a new CEO for several months now to try to refloat the ship. I hope he succeeds but the signs are not encouraging at all.

Lumenis CEO response to Nasdaq delisting:
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Letter to our Customers

February 10, 2004

Dear Customer,

I wanted to use this opportunity to provide you with additional information relating to recent events at Lumenis. We understand that, as you consider the purchase of our equipment, you may have some questions regarding the recent change in the trading venue of the Company’s stock from the Nasdaq National Market to the Pink Sheets. While we are disappointed in the decision we recently received from Nasdaq giving rise to this change, we want to reassure you that this change in trading venue should have no impact on our operations or ability to serve you, nor does it impact our financing arrangements. In short, it should have no effect on our ability to meet all of our commitments to you as a customer.

First, I would like to explain why the change occurred, what it means and, hopefully, dispel some unfounded rumors.

Why it happened:

Nasdaq delisted our stock because we were unable to file the auditor’s report for our third quarter financial statements in a timely manner, as required by Nasdaq’s rules.
We were unable to file the auditor’s report because the auditors have not performed any reviews until our Audit Committee completes an internal investigation that was requested by the auditors.
The auditors requested the review because of questions raised during the course of the previously announced SEC investigation regarding the Company’s relationship with its distributors and accounting matters relating thereto.
While the Audit Committee is continuing its efforts to complete the investigation, it, unfortunately, was not able to do so in time to retain our listing on Nasdaq.
What the change means:

Our shares will now trade on the Pink Sheets. The Pink Sheets is the leading provider of pricing and financial information for the over-the-counter (OTC) securities markets. Approximately 5,000 companies trade in the OTC market.
The Company will continue its practice of issuing press releases on significant events and keeping investors informed.
What happens next:

The Audit Committee will continue its efforts to complete the investigation as promptly as practicable and, thereafter, review the results of the investigation with our auditors, in an effort to become current in our SEC filings.
In the meantime, we intend to appeal the delisting decision.
Importantly, Bank Hapoalim, our sole lender, is aware of our situation and is fully supportive of the Company and its plans. We remain in compliance with all of our covenants in our agreements with them.

We remain committed to delivering to our customers the best technology and products in the market today and to continuing to improve on the service and support that is so important to your practices. While our share price has performed very poorly recently and the delisting is a disappointment to our shareholders, and us, it is unrelated to, and should have no impact on, our ability to provide you with the best products or our financial viability for the long term.

In light of the facts highlighted above, I hope you feel more comfortable and confident about Lumenis’ future. If you have any additional questions or concerns, please contact Kevin Morano, our CFO, or myself.

In closing, I want you to know Lumenis appreciates your interest in our products and your support of our company. We look forward to serving you for many years to come.

Sincerely,

Avner Raz
President and Chief Executive Officer
Lumenis Ltd.
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Mr. Raz almost sounded proud to be delisted to the “leading provider of pricing and financial information for the over-the-counter (OTC) securities markets”. I would have preferred an action plan on the audits to get the company relisted on the regular stock exchange. This is the time to lay out the real numbers and let the chips fall on responsible parties where they may. My understanding is that important records were lost as a result of computer(s) theft from one of their major offices. I sure hope those records were backed-up.