LUMINEX CORPORATION - FORM 424B5
The
information in this preliminary prospectus supplement is not
complete and may be changed. This preliminary prospectus
supplement and the accompanying prospectus are not an offer to
sell these securities and we are not soliciting offers to buy
these securities in any state where the offer or sale is not
permitted.
|
Filed Pursuant to Rule 424(b)(5)
Registration No. 333-151691
PRELIMINARY PROSPECTUS
SUPPLEMENT (Subject to Completion, dated June 16,
2008)
(To Prospectus dated June 16, 2008)
3,500,000 Shares
Common Stock
We are offering 3,500,000 shares of our common stock. Our
common stock is listed on the NASDAQ Global Market under the
symbol LMNX. On June 13, 2008, the last
reported sale price of our common stock as reported on the
NASDAQ Global Market was $22.27 per share.
Investing in our common stock involves risks. Before buying
any shares, you should read carefully the discussion of material
risks of investing in our common stock under the heading
Risk Factors beginning on
page S-9
of this prospectus supplement and in the documents incorporated
by reference in this prospectus supplement and the accompanying
prospectus.
|
|
|
|
|
|
|
|
|
|
|
Per Share
|
|
|
Total
|
|
|
Public offering price
|
|
$
|
|
|
|
$
|
|
|
Underwriting discounts and commissions
|
|
$
|
|
|
|
$
|
|
|
Proceeds, before expenses, to us
|
|
$
|
|
|
|
$
|
|
|
We have granted to the underwriters the right to purchase up to
an additional 525,000 shares to cover any over-allotments.
The underwriters can exercise this right at any time within
30 days after this offering.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or passed upon the accuracy or adequacy of this
prospectus supplement or the accompanying prospectus. Any
representation to the contrary is a criminal offense.
The underwriters expect to deliver the shares against payment
on ,
2008.
Joint Book-Running Managers
|
|
JPMorgan
|
UBS Investment Bank |
The date of this prospectus
supplement is June , 2008
TABLE OF
CONTENTS
PROSPECTUS SUPPLEMENT
|
|
|
|
|
|
|
|
ii
|
|
|
|
|
S-1
|
|
|
|
|
S-7
|
|
|
|
|
S-9
|
|
|
|
|
S-22
|
|
|
|
|
S-22
|
|
|
|
|
S-22
|
|
|
|
|
S-23
|
|
|
|
|
S-24
|
|
|
|
|
S-25
|
|
|
|
|
S-26
|
|
|
|
|
S-47
|
|
|
|
|
S-51
|
|
|
|
|
S-53
|
|
|
|
|
S-56
|
|
|
|
|
S-60
|
|
|
|
|
S-60
|
|
|
|
|
S-60
|
|
|
|
|
S-61
|
|
PROSPECTUS
|
|
|
|
|
About This Prospectus
|
|
|
1
|
|
Forward-Looking Statements
|
|
|
1
|
|
Luminex Corporation
|
|
|
3
|
|
Risk Factors
|
|
|
4
|
|
Consolidated Ratio of Earnings to Fixed Charges
|
|
|
4
|
|
Use of Proceeds
|
|
|
4
|
|
Description of Debt Securities
|
|
|
5
|
|
Description of Capital Stock
|
|
|
13
|
|
Description of Warrants
|
|
|
15
|
|
Plan of Distribution
|
|
|
17
|
|
Legal Matters
|
|
|
18
|
|
Experts
|
|
|
18
|
|
Incorporation of Information by Reference
|
|
|
18
|
|
Where You Can Find More Information
|
|
|
19
|
|
i
You should rely only on the information contained or
incorporated by reference in this prospectus supplement, the
accompanying prospectus and any related free writing prospectus
required to be filed with the Securities and Exchange
Commission, or the SEC. We have not, and the underwriters have
not, authorized any other person to provide you with different
or additional information. If anyone provides you with different
or additional information, you should not rely on it. We are
not, and the Underwriters are not, making an offer to sell these
securities in any jurisdiction where the offer or sale is not
permitted. You should assume that the information appearing in
this prospectus supplement, the accompanying prospectus, any
such free writing prospectus and the documents incorporated by
reference therein is accurate only as of their respective dates,
regardless of the time of delivery of this prospectus supplement
and the accompanying prospectus or any sales of the shares of
common stock. Our business, financial condition, results of
operations and prospects may have changed since those dates.
ABOUT
THIS PROSPECTUS SUPPLEMENT
This document is in two parts. The first part is the prospectus
supplement, which describes the specific terms of the common
stock we are offering and certain other matters relating to us
and our financial condition. The second part, the accompanying
prospectus, gives more general information about securities we
may offer from time to time, some of which may not apply to the
common stock offered by this prospectus supplement and the
accompanying prospectus. For information about our common stock,
including the rights which accompany each outstanding share of
our common stock, see Description of Common Stock in
the accompanying prospectus.
If the description of the offering varies between this
prospectus supplement and the accompanying prospectus, you
should rely on the information in this prospectus supplement.
The information contained or incorporated by reference in this
prospectus supplement supersedes any inconsistent information
included or incorporated by reference in the accompanying
prospectus.
In various places in this prospectus supplement and the
accompanying prospectus, we refer you to other sections of such
documents for additional information by indicating the caption
heading of such other sections. The page on which each principal
caption included in this prospectus supplement and the
accompanying prospectus can be found is listed in the table of
contents above. All such cross references in this prospectus
supplement are to captions contained in this prospectus
supplement and not in the accompanying prospectus, unless
otherwise stated.
You should read both this prospectus supplement and the
accompanying prospectus together with the additional information
described under the heading Incorporation of Information
by Reference.
Unless we have indicated otherwise, all information in this
prospectus supplement assumes that the underwriters do not
exercise their option to purchase additional shares from us to
cover any over-allotments.
ii
PROSPECTUS
SUPPLEMENT SUMMARY
This summary highlights selected information about us, this
offering and other information contained in this prospectus
supplement and the accompanying prospectus and the documents
incorporated by reference. This summary is not complete and may
not contain all of the information that is important to you. We
encourage you to read this prospectus supplement and the
accompanying prospectus, including the information under the
caption Risk Factors beginning on
page S-9
of this prospectus supplement and in our annual report on
Form 10-K
and the financial statements and other information incorporated
by reference in this prospectus supplement and accompanying
prospectus, before making an investment decision. Unless we have
indicated otherwise, references in this prospectus supplement to
Luminex, the company, we,
us and our or similar terms are to
Luminex Corporation and its consolidated subsidiaries. Unless we
have indicated otherwise, or the context otherwise requires,
references in this prospectus supplement to $ or
dollar are to the lawful currency of the United
States.
Our
Business
We develop, manufacture and sell proprietary biological testing
technologies and products with applications throughout the life
sciences and diagnostics industries. These industries depend on
a broad range of tests, called bioassays, to perform diagnostic
tests, discover and develop new drugs and identify genes. Our
xMAP®
technology, an open architecture, proprietary multiplexing
technology, allows simultaneous analysis of up to 100 bioassays
from a small sample volume, typically a single drop of fluid, by
reading biological tests on the surface of microscopic
polystyrene beads called microspheres. xMAP technology combines
this miniaturized liquid array bioassay capability with small
lasers, digital signal processors and proprietary software to
create a system offering advantages in speed, precision,
flexibility and cost. Our xMAP technology is currently being
used within various segments of the life sciences industry which
includes the fields of drug discovery and development, clinical
diagnostics, genetic analysis, bio-defense, protein analysis and
biomedical research. Our business is currently organized into
two reportable segments: the technology segment and the assay
segment.
The technology segment was initially built around strategic
partnerships. As of March 31, 2008, we had over 60
strategic partners, 30 of which have developed reagent-based
products utilizing our technology, and these partners have sold
and placed 5,199 xMAP-based instruments in laboratories
worldwide as of March 31, 2008. We license our xMAP
technology to our partners, who then develop products that
incorporate the xMAP technology into products that they sell to
the end-user. We also develop and manufacture the proprietary
xMAP laboratory instrumentation and the proprietary xMAP
microspheres and sell these products to our partners. When our
partners sell xMAP-based reagent consumable products or
xMAP-based testing services, which run on the xMAP
instrumentation, to the end-user customer, such as testing
laboratories, we obtain a royalty on the sales from the partner.
Total technology segment revenue was $62.4 million for the
year ended December 31, 2007 and $18.7 million for the
three months ended March 31, 2008.
The assay segment consists of Luminex Bioscience Group, or LBG,
and Luminex Molecular Diagnostics, or LMD. This segment is
primarily involved in the development and sale of assays
utilizing xMAP technology on our installed base of systems. LBG
augments our partnership model with a distribution model,
designed to take advantage of our increasing installed base of
xMAP-based instrumentation. LBG introduced our first two assay
products in late 2006. As of March 31, 2008, there were a
total of 14 assay products in the LBG and LMD product portfolio.
LMD, which we created upon our acquisition of Tm Bioscience in
March 2007, is focused on multiplexed applications for the human
molecular clinical diagnostics market. Tm Bioscience focused on
the three segments of the genetic testing market for which it
was developing products: human genetics, personalized medicine
and infectious disease. Tm Bioscience had established a solid
position in the marketplace with their product development and
FDA-compliant manufacturing capabilities. We substantially
completed the integration of Tm Bioscience during 2007, and we
believe the combined Company is in a position to take advantage
of the complementary strengths of both companies in molecular
diagnostics. In January 2008, LMD launched
xTAGtm
Respiratory Viral Panel (RVP), which is the first Food and Drug
Administration (FDA)-cleared assay to simultaneously detect and
identify 12 viruses and viral subtypes that together are
responsible for more than 85 percent of respiratory viral
infections. Total assay segment revenue
S-1
was $12.6 million for the year ended December 31,
2007, which includes LMD results for the ten months ended
December 31, 2007, and $4.4 million for the three
months ended March 31, 2008.
On a consolidated basis, our revenues have increased at a
compound annual growth rate of 28% over the past three years
from $35.9 million in 2004 to $75.0 million in 2007.
Our gross margins increased from 41% in 2004 to 61% in 2007, an
increase of 49%.
We have established a leading position in several segments of
the life sciences industry by developing and delivering products
that meet customer and partner needs in specific market
segments, including multiplexing, accuracy, precision,
sensitivity, specificity, reduction of labor and ability to test
for proteins and nucleic acids. These needs are addressed by our
proprietary technology, xMAP Technology, which allows the
end-user in a laboratory to perform biological testing in a
multiplexed format. Multiplexing allows many different
laboratory results to be generated from one sample at one time.
This is important because our end-user customers and partners,
which include laboratory professionals performing research,
clinical laboratories performing tests on patients as ordered by
a physician and other laboratories, have a fundamental need to
perform high quality testing as efficiently as possible. Until
the availability of multiplexing technology such as xMAP, the
laboratory professional had to perform one test on one sample in
a sequential manner, and if additional testing was required on
that sample, a second procedure would be performed to generate
the second result, and so on until all the necessary tests were
performed. By using xMAP technology, these end-users have the
opportunity to become more efficient by generating multiple
simultaneous results per sample. We believe that this technology
may also offer advantages in other industries, such as food
safety/animal health, newborn screening and
bio-defense/bio-threat markets.
Our
Industry
The life sciences industry uses bioassays to detect the presence
and characteristics of certain biochemicals, proteins or nucleic
acids in a sample. Drug discovery, genetic analysis,
pharmacogenomics, clinical diagnostics and general biomedical
research all use bioassays. For example, bioassays can be used
to:
|
|
|
measure the presence and quantity of substances such as
infectious agents, antigens for histocompatibility, hormones,
cancer markers and other proteins in a patients blood,
other body fluid or tissue to assist physicians in diagnosing,
treating or monitoring disease conditions;
|
|
detect genetic variations, such as single nucleotide
polymorphisms or genetic mutations present in inherited diseases;
|
|
measure the response to a compound or dosage by measuring
cellular activity for drug discovery and development; and
|
|
assist physicians in prescribing the appropriate tailored drug
therapy based on the patients unique genetic makeup, a
process known as pharmacogenetics.
|
The life sciences customer can purchase bioassays in the form of
complete off-the-shelf kits, develop them internally or utilize
a customized service to meet their specific needs. Although it
is important to note that xMAP technology is relevant to a
subset of the total life sciences market, according to strategic
studies we first commissioned in 2003 and updated in 2006 and
2007 and our own internal analysis, we believe the total global
market for tools and consumables used in drug discovery and
development, clinical diagnostics and biomedical research
represented a market of approximately $46.0 billion in
end-user sales in 2007 growing to an estimated $65.0 billion by
2012.
S-2
The table below briefly describes the key bioassay technologies
in the life sciences industry:
|
|
|
|
|
|
Key Technologies
|
|
Description
|
|
Markets Served
|
|
|
BioChips/Microarrays
|
|
High-density arrays of DNA fragments or proteins attached to a
flat glass or silicon surface
|
|
Biomedical research and select clinical diagnostics
|
Automated Immunoassays
|
|
Automated test tube-based instruments used for detecting
antibodies, proteins and other analytes
|
|
Clinical diagnostics
|
Gels and blots
|
|
Physical separation of molecules or analytes for visualization
|
|
Clinical diagnostics and biomedical research
|
PCR methods
|
|
Tests which use polymerase chain reaction (PCR) technology to
test for DNA and RNA
|
|
Nucleic acid testing in clinical diagnostics and biomedical
research
|
Microfluidics chips
|
|
Miniaturized liquid handling system on a chip
|
|
Biomedical research
|
Microtiter-plate based assays
|
|
Plastic trays with discrete wells in which different types of
assays are performed, usually Enzyme-Linked Immuno-Sorbent Assay
(ELISA) tests
|
|
Drug discovery, clinical diagnostics and biomedical research
|
Genotyping technologies
|
|
DNA primers or probes designed to identify small differences
between DNA targets using methods such as ligation assays,
cleavage assays and hybridization assays
|
|
Drug discovery, clinical diagnostics and biomedical research
|
|
|
Based on estimates contained in the strategic studies discussed
above and our own internal estimates, we believe the potential
life sciences market directly addressed by our xMAP technology
was approximately $1.8 billion in 2007 and that it will reach
$3.0 billion by 2012. In addition, we are also focused on
other specialty markets segments, including food safety/animal
health, newborn screening and bio-defense/bio-threats. With only
limited market penetration of our multiplexing xMAP technology
thus far in the key market segments referenced above, we believe
there remain significant growth opportunities for Luminex and
our strategic partners in each of these markets.
Our
Technology
Our xMAP technology combines existing biological testing
techniques with advanced digital signal processing and
proprietary software. With our technology, discrete bioassays
are performed on the surface of color-coded microspheres. These
microspheres are read in a compact analyzer that utilizes lasers
and
high-speed
digital signal processing to simultaneously identify the
bioassay and measure the individual assay results. The key
features of xMAP technology include the following:
|
|
|
Multi-analyte/multi-format
|
|
Flexibility/scalability
|
|
Both protein and nucleic acid applications
|
|
High throughput
|
|
Ease of use
|
|
Cost effective
|
Polystyrene microspheres, approximately 5.6 microns in diameter,
are a fundamental component of the xMAP technology. We purchase
and manufacture microspheres and, in a proprietary process, dye
them with varying intensities of a red and a near infrared dye
to achieve up to 100 distinct colors. The specific dye
proportions permit each color-coded microsphere to be readily
identified based on its distinctive fluorescent signature. Our
customers create bioassays by attaching different biochemical
reactants to each distinctly
S-3
colored microsphere set. These unique reactants bind, or
capture, specific substances present in the test sample. The
microsphere sets can then be combined in test panels as required
by the user, with a current maximum of 100 tests per panel.
Customers can order either standard microspheres or magnetic
microspheres.
We have an active product development pipeline of both
instrument systems and assays. In late 2008, we expect to
commercially launch the new FlexMAP 3D instrument to our
customers and strategic partners. The FlexMAP 3D system has
twice the throughput of our LX 200 instrument and will detect,
via multiplexing, up to 500 distinct biomarkers simultaneously
in a single assay. This is a five fold increase in multiplexing
capability over our LX200 instrument. The FlexMAP 3D system,
with these enhanced capabilities, will support our market
expansion into new testing segments in both research and
clinical testing markets.
In addition to FlexMAP 3D, we have a new instrument platform
under development we refer to internally as BeadPix. BeadPix is
an innovative technology platform using our proprietary xMAP
microspheres in a new way. By virtue of its small size and ease
of use, we believe BeadPix will enhance the adoption of our xMAP
technology in our existing markets and allow us to expand xMAP
into emerging markets including research, clinical and
bio-threat testing segments.
We have multiple assay development activities ongoing at both
LMD and LBG. LMD has assay development programs primarily
focused in the areas of human genetics, pharmacogenetics and
infectious disease. In 2008, we expect to submit certain LMD
assay products to the FDA for 510(k) clearance in order to
comply with recent FDA guidance for In Vitro Diagnostics, or
IVD, products. In addition to assay products already
commercially available such as the Pneumococcal Panel and the
FlexmiR microRNA products, LBG is developing assay products in
specialty markets including newborn screening, food safety and
animal health.
To perform a bioassay using xMAP technology, a researcher
attaches biochemicals, or capture reagents, to one or more sets
of color-coded microspheres, which are then mixed with a test
sample. After the reaction is complete, this mixture is
automatically injected into the xMAP analyzer, where the
microspheres pass single-file in a fluid stream through two
laser beams. The first laser excites the internal dyes that are
used to identify the color of the microsphere and therefore the
test being performed on the surface of the microsphere. The
second laser excites a fluorescent dye captured on the surface
of the microspheres that is used to quantify the result of the
bioassay taking place. Our proprietary optics, digital signal
processors and software record the fluorescent signature of each
microsphere and compare the results to the known identity of
that color-coded microsphere set. The results are analyzed and
displayed in real-time with data stored on the computer database
for reference, evaluation and analysis.
xTAG technology developed by LMD consists of several components
including multiplexed PCR or target identification primers, DNA
Tags, xMAP microspheres and data analysis software. xTAG
technology permits the development of molecular diagnostic
assays for clinical use by hospital and reference laboratories.
xTAG technology has been applied, in particular, to human
genetic assays, pharmacogenetic assays and infectious disease
assays.
S-4
Our
Products
|
|
|
|
|
|
|
|
|
Technology Segment
|
|
Assay Segment
|
Instruments
|
|
Consumables
|
|
Software
|
|
LBG Kits
|
|
LMD Kits
|
|
|
Luminex®
100tm
and
Luminex®
200tm
Luminex®
XYPtm
(XY Platform)
and the
Luminex®
SDtm
(Luminex®
Sheath
Delivery
System)
Luminex®
HTStm
|
|
MagPlextm
Microspheres
xTAGtm
Microspheres
SeroMAPtm
Microspheres
Calibration and Control
Microspheres
|
|
LXR
xPONENT®
|
|
FlexmiRtm
MicroRNA
Labeling Kit
FlexmiRtm
MicroRNA
Human Panel
FlexmiRtm
MicroRNA
Mouse/Rat Extension
Panel
FlexmiRtm
Select
FlexmiRtm
Reagent Pak
FlexmiRtm
MicroRNA
Control Set
Pneumococcal
Assay1
|
|
xTAGtm
Respiratory Viral
Panel1
xTAGtm
Ashkenazi
Jewish
Panel2
xTAGtm
Cystic Fibrosis Kit
CF
391
xTAGtm
CFTR 70+6 Mutation Detection
Kit3
CF 973
xTAGtm
Mutation Detection
Products for
Coagulation2
xTAGtm
Mutation Detection
Kit for
P450-2C192
xTAGtm
Mutation Detection
Kit for
P450-2C92
xTAGtm
Mutation Detection
Kit for
P450-2D62
xTAGtm
Mutation Detection
Kit for P450-2C9 and
VKORCI2
|
|
|
|
|
|
1
|
|
FDA Cleared
|
2
|
|
Investigational Use Only
|
3
|
|
Analyte Specific Reagent
|
Our
Strategy
Our primary goal continues to be the establishment of Luminex as
an industry leader and xMAP technology as the industry standard
for performing bioassays by transforming Luminex from a
technology-based company to a more market-driven,
customer-focused company. To achieve this goal, we have
implemented and are pursuing the following strategies:
Focus on
key market segments
Through our strategic studies, we have identified the following
key market segments: (i) life sciences research profile
oriented screening and secondary screening, (ii) life
sciences research RNA profiling and transcriptional screening,
(iii) genetic disease and molecular infectious disease
testing, and (iv) immunodiagnostics. In addition to the
segments listed above, we have identified other potential market
opportunities in the applied markets such as bio-defense, or
bio-threat testing, and food safety and animal health testing.
We will continue to employ both a partnership driven business
model focused on selected key segments, and a product driven
business model in other key segments, working with our partners
as distributors.
Continue
to develop strategic partnerships focused on our key market
segments
Currently, 30 of our approximately 60 strategic partners have
developed reagent-based products utilizing the Luminex platform
and are submitting royalties. We also have strategic partners
who distribute Luminex products. We intend to broaden and
accelerate market acceptance of xMAP technology through
development, marketing and distribution partnerships with
leaders in the life sciences industry. By leveraging our
strategic partners market positions and utilizing their
distribution channels and marketing infrastructure, we believe
we can continue to expand our installed instrument base.
Furthermore, our partners investments in research and
development for xMAP applications provide Luminex users with
more menu options than we can presently generate ourselves.
S-5
Develop
and deliver market-leading assay products
We are focused on maximizing the value we provide our
stockholders, partners and end-user customers by developing
internally and co-developing with partners content applications
based on customers needs in key market segments. We
believe that by enhancing both our partner driven model and our
direct efforts with the delivery of value-added assay content,
Luminex should be able to gain greater control over product
development, market penetration and commercialization.
Develop
next generation products to further penetrate current markets
and facilitate entry into new and emerging segments
Our research and development group is pursuing projects such as
the development of consumables, automation, software and the
expansion and enhancement of our multiplexing capabilities to
advance our xMAP technology and its market acceptance. We are
also collaborating with industry participants, biomedical
research institutions and government entities to develop
additional xMAP products. We also continuously consider other
adjacent markets where our platform and assay offerings would be
beneficial. We believe that our design, development, and
manufacturing capabilities and FDA compliance track record,
coupled with expertise in the FDA approval process provides us a
competitive advantage over our competitors, relating to both the
commercialization of multiplex testing platforms and assay
products.
Opportunistically
pursue acquisitions that could accelerate these
strategies
We have developed analytical tools and an evaluation template to
assess potential acquisition targets to accelerate our business
strategies in the key markets described above. This approach led
to the acquisition of Tm Bioscience in 2007. We are actively
evaluating other opportunities to enhance our capabilities or
our access to markets or technologies, or provide us other
advantages in executing our business strategies in our key
markets.
Risks
Affecting Us
Our business is subject to numerous risks and you should read
and carefully consider the information set forth under the
caption Risk Factors beginning on
page S-9
of this prospectus supplement.
Company
Information
Luminex was incorporated under the laws of the State of Texas in
May 1995. We were reincorporated in the State of Delaware in
July 2000. Our shares of common stock are traded on the NASDAQ
Global Market under the symbol LMNX. Our principal
executive offices are located at 12212 Technology Blvd., Austin,
Texas 78727, and our telephone number is
(512) 219-8020.
Our web site address is www.luminexcorp.com. Please note that
our web site address is provided as an inactive textual
reference only and that the information on, or accessible
through, our website is not part of this prospectus supplement.
S-6
The
Offering
|
|
|
Common stock offered |
|
3,500,000 shares |
|
Common stock to be outstanding after this offering |
|
40,676,337
shares(1) |
|
Use of proceeds |
|
We expect to use the net proceeds from this offering for general
corporate purposes, which include research and development,
potential acquisitions of, or investments in, companies,
technologies or products that complement our business, capital
expenditures and additions to working capital. See Use of
Proceeds. |
|
Risk factors |
|
See Risk Factors beginning on
page S-9
of this prospectus supplement for a discussion of factors you
should consider carefully before deciding to invest in shares of
our common stock. |
|
NASDAQ Global Market symbol |
|
LMNX |
(1) The number of shares of common stock to be outstanding
after this offering is based on 37,176,337 shares
outstanding as of June 13, 2008 and, unless we indicate
otherwise, excludes shares of common stock reserved for issuance
under our stock option and stock incentive plans and agreements,
of which options to purchase 3,287,252 shares at an average
exercise price of $12.24 were outstanding as of June 13,
2008.
Unless otherwise indicated, all information contained in this
prospectus supplement assumes no exercise of the
underwriters over-allotment option to purchase 525,000
additional shares of our common stock.
Prior to making an investment decision, a prospective
purchaser should consider all of the information set forth in
this prospectus supplement and the accompanying prospectus or
any information incorporated by reference herein or therein and
should evaluate the statements set forth in Risk
Factors beginning on
page S-9
of this prospectus supplement.
S-7
Summary
Consolidated Financial Data
The following summary consolidated financial data should be read
in conjunction with Managements Discussion and
Analysis of Financial Condition and Results of Operations
and other financial data included elsewhere in this prospectus
supplement, as well as our historical audited financial
statements and the related notes thereto which are incorporated
by reference in this prospectus supplement. The consolidated
results of operations data for the years ended December 31,
2005, 2006 and 2007 are derived from the audited consolidated
financial statements and related notes included in our Annual
Report on
Form 10-K
for the year ended December 31, 2007. The consolidated
results of operations data for the three months ended
March 31, 2007 and 2008 and the consolidated balance sheet
data as of March 31, 2008 have been derived from our
unaudited condensed consolidated financial statements and
related notes included in our Quarterly Report on
Form 10-Q
for the quarterly period ended March 31, 2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
|
|
|
|
Ended
|
|
|
|
Year Ended December 31,
|
|
|
March 31,
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
2007
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
|
(in thousands, except per share data)
|
|
|
Consolidated Results of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
$
|
42,313
|
|
|
$
|
52,989
|
|
|
$
|
75,010
|
|
|
$
|
16,607
|
|
|
$
|
23,012
|
|
Gross profit
|
|
|
22,321
|
|
|
|
32,252
|
|
|
|
46,094
|
|
|
|
10,356
|
|
|
|
15,257
|
|
Loss from operations
|
|
|
(3,496
|
)
|
|
|
(581
|
)(1)
|
|
|
(17,418
|
)
|
|
|
(372
|
)
|
|
|
(1,268
|
)
|
Net income (loss)
|
|
|
(2,666
|
)
|
|
|
1,507
|
(1)
|
|
|
(2,711
|
)
|
|
|
136
|
|
|
|
(1,166
|
)
|
Net income (loss) per common share, basic
|
|
$
|
(.09
|
)
|
|
$
|
.05
|
(1)
|
|
$
|
(.08
|
)
|
|
$
|
.00
|
|
|
$
|
(.03
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per common share, diluted
|
|
$
|
(.09
|
)
|
|
$
|
.05
|
(1)
|
|
$
|
.(08
|
)
|
|
$
|
.00
|
|
|
$
|
(.03
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in computing net income (loss) per share, basic
|
|
|
30,990
|
|
|
|
31,434
|
|
|
|
34,361
|
|
|
|
31,970
|
|
|
|
35,422
|
|
Shares used in computing net income (loss) per share, diluted
|
|
|
30,990
|
|
|
|
32,988
|
|
|
|
34,361
|
|
|
|
33,077
|
|
|
|
35,422
|
|
(1) As discussed in Note 14 to the consolidated
financial statements contained in our Annual Report on
Form 10-K
for the year ended December 31, 2007, effective
January 1, 2006, we changed our method of accounting for
stock-based compensation to conform to Statement of Financial
Accounting Standards No. 123(R) Share-Based
Payment.
The following table shows our consolidated balance sheet as of
March 31, 2008 on a historical basis and as adjusted on a
pro forma basis to give effect to this offering (as if this
offering took place at March 31, 2008). We estimate that we
will receive net proceeds from this offering of approximately
$72.3 million (after deducting underwriting discounts and
commissions and estimated offering expenses).
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2008
|
|
|
|
Actual
|
|
|
As Adjusted
|
|
|
|
(unaudited)
|
|
|
|
(in thousands)
|
|
|
Consolidated Balance Sheet Data:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
26,360
|
|
|
$
|
98,628
|
|
Short-term investments
|
|
|
7,924
|
|
|
|
7,924
|
|
Long-term investments
|
|
|
|
|
|
|
|
|
Working capital
|
|
|
43,261
|
|
|
|
115,529
|
|
Total assets
|
|
|
124,009
|
|
|
|
196,277
|
|
Total long-term debt
|
|
|
3,566
|
|
|
|
3,566
|
|
Total stockholders equity
|
|
|
104,375
|
|
|
|
176,643
|
|
S-8
RISK
FACTORS
An investment in our common stock involves risks. The
following risk factors relate to our business and this offering.
The risks described below are not the only ones facing our
company. Additional risks not presently known to us or that we
currently deem immaterial may also impair our business
operations. Our business, financial condition, results of
operations or prospects could be materially adversely affected
by any of these risks. The trading price of our common stock
could decline due to any of these risks, and you may lose all or
part of your investment. This prospectus supplement and the
accompanying prospectus, including the documents incorporated by
reference herein or therein, also contain forward-looking
statements that involve risks and uncertainties. Our actual
results could differ materially from those anticipated in these
forward-looking statements as a result of certain factors,
including the risks faced by us described below and elsewhere in
this prospectus supplement.
Risks
Related to Our Business
We
have a limited history of profitability and had an accumulated
deficit of approximately $88.9 million as of March 31,
2008.
We have incurred significant net losses since our inception,
including a loss of $2.7 million for the year ended
December 31, 2007 and a loss of $1.2 million for the
quarter ended March 31, 2008. At March 31, 2008, we
had an accumulated deficit of approximately $88.9 million.
Prior to our acquisition of LMD in March 2007, LMD had an
accumulated deficit of approximately $74.6 million. In
order to become profitable, we need to generate and sustain
substantially higher revenue while achieving reasonable cost and
expense levels. If we fail to achieve operating results in line
with the expectations of securities analysts or investors, the
market price of our common stock will likely decline.
Furthermore, as we continue to utilize cash to support
operations, acquisitions and research and development efforts,
we may further decrease the cash available to us. As of
March 31, 2008, cash, cash equivalents and short-term and
long-term investments totaled $34.3 million, compared to
$34.2 million at December 31, 2007 and
$45.7 million at December 31, 2006, which decrease
since December 31, 2006 is primarily attributable to the
cash used in the acquisition of LMD.
We
expect our operating results to continue to fluctuate from
quarter to quarter.
The sale of our instrumentation and assay products typically
involves a significant technical evaluation and commitment of
capital by us, our partners and the end-user. Accordingly, the
sales cycle associated with our products typically is lengthy
and subject to a number of significant risks, all of which are
beyond our control, including partners budgetary
constraints, inventory management practices, regulatory approval
and internal acceptance reviews. As a result of this lengthy and
unpredictable sales cycle, our operating results have
historically fluctuated significantly from quarter to quarter.
We expect this trend to continue for the foreseeable future.
The vast majority of our system sales are made to our strategic
partners. Our partners typically purchase instruments in three
phases during their commercialization cycle: first, instruments
necessary to support internal assay development; second,
instruments for sales force demonstrations; and finally,
instruments for resale to their customers. As a result, most of
our system placements are highly dependent on the continued
commercial success of our strategic partners and can fluctuate
from quarter to quarter as our strategic partners move from
phase to phase. We expect this trend to continue for the
foreseeable future.
Our assay products are sometimes sold to large customers. The
ordering and consumption patterns of these customers can
fluctuate, affecting the timing or shipments and revenue
recognition. In addition, certain products assist in the
diagnosis of illnesses that are seasonal, and customer orders
can fluctuate for this reason.
Because of the effect of bulk purchases and the introduction of
seasonal components to our assay menus, we experience
fluctuations in the percentage of our quarterly revenues derived
from our highest margin items, consumables, royalties and
assays. Our gross margin percentage is highly dependent upon the
mix of revenue components each quarter. These fluctuations
contribute to the variability and lack of predictability of both
gross margin percentage and total gross profit from quarter to
quarter. We expect this trend to continue for the foreseeable
future.
S-9
Due to the early stage of the market for molecular tests,
projected growth scenarios for LMD are highly volatile and are
based on a number of underlying assumptions that may or may not
prove to be valid, including the performance of strategic
partners that distribute LMD products.
Our
success depends significantly on the establishment and
maintenance of successful relationships with our strategic
partners. Currently, a limited number of strategic partners
constitute a majority of our revenue and the loss of any one of
these partners could have a material adverse effect on our
business, financial condition and results of
operations.
The development and commercialization of our xMAP technology is
highly dependent on our ability to establish successful
strategic relationships with a number of partners. For the three
months ended March 31, 2008, we had 31 strategic partners
submitting royalties as compared to 32 for the three months
ended March 31, 2007. Two customers, Bio-Rad Laboratories,
Inc. and One Lambda, Inc., accounted for 32% of consolidated
total revenue in the first quarter of 2008 (17% and 15%,
respectively). For comparative purposes, these same two
customers accounted for 35% of total revenue (23% and 12%,
respectively) in the three months ended March 31, 2007. No
other customer accounted for more than 10% of total revenue
during the three months ended March 31, 2008. As of
December 31, 2007, we had 30 strategic partners who were
paying royalties and had either developed products using the
Luminex platform or were reselling our products. Furthermore,
for the year ended December 31, 2007, two partners
collectively represented 35% of total revenue (Bio-Rad
Laboratories, Inc. - 20%; One Lambda,
Inc. - 15%). We had two additional partners who
individually represented 5% or more of our total revenue and
collectively represented 13% of our revenue for the year ended
December 31, 2007. In total, for the year ended
December 31, 2007, we had five partners who represented 52%
of our total revenue. For comparative purposes for the year
ended December 31, 2006, two partners individually
represented greater than 10% of our revenue and collectively
represented 34% of our total revenue. We had four additional
partners who individually represented 5% or more of our total
revenue and collectively represented 27% of our revenue for the
year ended December 31, 2006. In total, for the year ended
December 31, 2006, we had six partners who represented 61%
of our total revenue. The loss of any of our significant
strategic partners, or any of our significant customers, could
have a material adverse effect on our growth and future results
of operations. LMD is dependent on a few significant customers
with respect to sales of its genetic test kits. If any
significant customer discontinues its relationship with LMD for
any reason, or reduces or postpones current or expected purchase
commitments for LMDs products, LMDs results from
operations could be materially adversely affected.
Delays in implementation, delays in obtaining regulatory
approval, changes in strategy or the financial difficulty of our
strategic partners for any reason could have a material adverse
effect on our business, financial condition and results of
operations.
Our ability to enter into agreements with additional strategic
partners depends in part on convincing them that our technology
can help achieve and accelerate their goals or efforts. We will
expend substantial funds and management efforts, including
through LBG and LMD, with no assurance that any additional
strategic relationships will result. We cannot assure you that
we will be able to negotiate additional strategic agreements in
the future on acceptable terms, if at all, or that current or
future strategic partners will not pursue or develop alternative
technologies either on their own or in collaboration with
others. Some of the companies we are targeting as strategic
partners offer products competitive with our xMAP technology,
which may hinder or prevent strategic relationships. Termination
of strategic relationships, or the failure to enter into a
sufficient number of additional agreements on favorable terms,
could reduce sales of our products, lower margins on our
products and limit the creation of market demand and acceptance.
In addition, we have entered into non-exclusive relationships
with most of our existing strategic partners. The lack of
exclusivity could deter existing strategic partners from
commercializing xMAP technology and may deter new strategic
partners from entering into agreements with us.
A significant portion of our future revenues will come from
sales of our systems and the development and sale of bioassay
kits utilizing our technology by our strategic partners and from
use of our technology by our strategic partners in performing
services offered to third parties. We believe that our strategic
partners will
S-10
have economic incentives to develop and market these products,
but we cannot accurately predict future sales and royalty
revenues because most of our existing strategic partner
agreements do not include minimum purchase requirements or
royalty commitments. In addition, we have no control with
respect to our strategic partners sales personnel and how
they prioritize products based on xMAP technology nor can we
control the timing of the release of products by our strategic
partners. The amount of these revenues depends on a variety of
factors that are outside our control, including the amount and
timing of resources that current and future strategic partners
devote to develop and market products incorporating our
technology. Further, the development and marketing of certain
bioassay kits will require our strategic partners to obtain
governmental approvals, which could delay or prevent their
commercialization efforts. If our current or future strategic
partners do not successfully develop and market products based
on our technology and obtain necessary government approvals, our
revenues from product sales and royalties will be significantly
reduced.
If the
FDA or other governmental laws and regulations change in ways
that we do not anticipate and we fail to comply with those
regulations that affect our business, we could be subject to
enforcement actions, injunctions and civil and criminal
penalties or otherwise be subject to increased costs that could
delay or prevent marketing of our products.
The production, testing, labeling, marketing and distribution of
our products for some purposes and products based on our
technology are subject to governmental regulation by the United
States Food and Drug Administration (FDA) and by similar
agencies in other countries. Some of our products and products
based on our technology for in vitro diagnostic purposes
are subject to clearance by the FDA prior to marketing for
commercial use. To date, eight strategic partners have obtained
such clearances. Others are anticipated. The process of
obtaining necessary FDA clearances can be time-consuming,
expensive and uncertain. Further, clearance may place
substantial restrictions on the indications for which the
product may be marketed or to whom it may be marketed. In
addition, because some of our products employ laser technology,
we are also required to comply with FDA requirements relating to
radiation performance safety standards (21 CFR 1040.1 and
1040.11).
Periodically the FDA issues guidance documents that represent
the FDAs current thinking on a topic. These issues are
initially issued in draft form prior to final rule generally
with enforcement discretion for some grace period of time.
Changes made through this process may impact the release status
of products offered and our ability to market those products
affected by the change.
For example, the FDA released on September 14, 2007 the
final document Guidance for Industry and FDA Staff
Commercially Distributed Analyte Specific Reagents (ASRs):
Frequently Asked Questions. This guidance may limit or
delay distribution of assays on our platform, including assays
developed and distributed by LMD, to the extent additional
regulatory clearance is required prior to distribution. The
final document was released with an enforcement discretion
period of one year from date of issue.
Cleared medical device products are subject to continuing FDA
requirements relating to, among others, manufacturing quality
control and quality assurance, maintenance of records and
documentation, registration and listing, import/export, adverse
event and other reporting, distribution, labeling and promotion
and advertising of medical devices. Our inability, or the
inability of our strategic partners, to obtain required
regulatory approval or clearance on a timely or acceptable basis
could harm our business. In addition, failure to comply with
applicable regulatory requirements could subject us or our
strategic partners to regulatory enforcement action, including
warning letters, product seizures, recalls, withdrawal of
clearances, restrictions on or injunctions against marketing our
products or products based on our technology, and civil and
criminal penalties.
Medical device laws and regulations are in effect within the
United States and also in many countries outside the United
States. These range from comprehensive device clearance
requirements for some or all of our medical device products to
requests for product data or certifications to the hazardous
material content of our products. As part of the European
Council Directive 2002/96 of February 13, 2003 (WEEE), we
are expected to comply with certain requirements regarding the
collection, recycling and labeling of our products containing
electronic devices beginning on August 13, 2005 in each of
the European Union, or EU, member states where our regulated
products are distributed. While we are taking steps to comply
with the requirements of WEEE, we cannot be certain that we will
comply with the national stage implementation of WEEE in all
S-11
member states. Our products are currently exempt from the
European Council Directive 2002/95 of January 27, 2003,
Restriction of the Use of Certain Hazardous Substances in
Electrical and Electronic Equipment (RoHS), which requires the
removal of certain specified hazardous substances from certain
products beginning July 1, 2006 in each of the member
states. However, the EU has indicated that it may, and it is
generally expected it will, include medical devices, including
some of our products, under the jurisdiction of RoHS. If this
exemption is revoked, it could result in increased costs to us
and we cannot assure you we will ultimately be able to comply
with RoHS or related requirements in other jurisdictions. In
addition, the State of California adopted the Electronic Waste
Recycling Act, effective January 1, 2007, which requires
the California Department of Toxic Substances Control to adopt
regulations to prohibit the sale of electronic devices in
California if they are also prohibited from sale in the EU under
the RoHS directive because they contain certain heavy metals.
The number and scope of these requirements are increasing and we
will likely become subject to further similar laws in other
jurisdictions. Failure to comply with applicable federal, state
and foreign medical device laws and regulations may harm our
business, financial condition and results of operations. We are
also subject to a variety of other laws and regulations relating
to, among other things, environmental protection and workplace
health and safety.
Our strategic partners and customers expect our organization to
operate on an established quality management system compliant
with FDA Quality System Regulations and industry standards, the
In Vitro Diagnostic Directive 98/79/EC of 27 October 1998
(Directive) as implemented nationally in the EU
member states and industry standards, such as ISO 9000. We
became ISO 9001:2000 certified in March 2002 and
self-declared
our Luminex 100 and Luminex 200 devices are in conformity with
Article 1, Article 9, Annex I (Essential
Requirements), and Annex III, and the additional provisions
of the Directive as of December 7, 2003. Subsequent audits
are carried out annually to ensure we maintain our system in
substantial compliance with ISO and other applicable regulations
and industry standards. We became ISO 13485:2003 and Canadian
Medical Device Conformity Assessment System (CMDCAS) certified
in July 2005. In August 2006 a Level II QSIT contract
inspection was conducted in accordance with CPGM 7382.845,
Inspection of Medical Device Manufacturers, PAC 82845B, Medical
Device Level II Inspections pursuant to the FDA Dallas
District Office FY 06 Workplan and the DSHS Drugs &
Medical Device Group FY 06 Workplan. The inspection is
closed under 21 C.F.R. 20.64 (d) (3) and
the Establishment Inspection Report No. 3002524000 provided
in accordance with the FOIA and 21 C.F.R. Part 20. No
DSHS
form E-14
or FDA form 483 was issued. Failure to maintain compliance
with FDA, CMDCAS and EU regulations and other medical device
laws, or to obtain applicable registrations where required,
could reduce our competitive advantage in the markets in which
we compete and also decrease satisfaction and confidence levels
with our partners.
If our
technology and products do not become widely used in the life
sciences industry, it is unlikely that we can maintain or
increase profitability.
Life sciences companies have historically conducted biological
tests using a variety of technologies, including bead-based
analysis. In certain testing areas, our xMAP technology is
relatively new and unproven, and the use of our technology by
life sciences companies is limited. The commercial success of
our technology depends upon its widespread adoption as a method
to perform bioassays. In order to be successful, we must
convince potential partners to utilize our system instead of
competing technologies. Market acceptance depends on many
factors, including our ability to:
|
|
-
|
convince prospective strategic partners and customers that our
technology is an attractive alternative to other technologies
for pharmaceutical, research, clinical, biomedical and genetic
testing and analysis;
|
|
-
|
encourage these partners to develop and market products using
our technology;
|
|
-
|
manufacture products in sufficient quantities with acceptable
quality and at an acceptable cost;
|
|
-
|
obtain and maintain sufficient pricing and royalties from
partners on such Luminex products; and
|
|
-
|
place and service sufficient quantities of our products,
including the ability to provide the level of service required
in the mainstream clinical diagnostics market segment.
|
S-12
Because of these and other factors, our products may not gain or
sustain sufficient market acceptance to again achieve, maintain
or increase profitability.
Our
reliance on strategic partners to market our products makes
forecasting difficult.
Primarily as a result of our reliance on partner performance, it
is difficult to accurately forecast future operating results.
Our operating expenses are largely based on anticipated revenue
trends, and a high percentage of our expenses are, and will
continue to be, fixed in the short-term. The level of our
revenues depends upon the rate and timing of the adoption of our
technology as a method to perform bioassays. In addition, we
currently anticipate that the vast majority of future sales of
our products and products incorporating our technology will be
made by our strategic partners. For the following reasons,
estimating the timing and amount of sales of these products that
may be made by our strategic partners is particularly difficult:
|
|
-
|
We have no control over the timing or extent of product
development, marketing or sale of our products by our strategic
partners.
|
|
-
|
Most of our strategic partners are not committed to minimum
purchase commitments, and we do not control the incentives
provided by our strategic partners to their sales personnel.
|
|
-
|
A significant number of our strategic partners intend to produce
clinical diagnostic applications that may need to be approved by
the FDA, or other regulatory bodies in jurisdictions outside of
the United States.
|
|
-
|
Certain strategic partners may have unique requirements for
their applications and systems. Assisting the various strategic
partners may strain our research and development and
manufacturing resources. To the extent that we are not able to
timely assist our strategic partners, the commercialization of
their products will likely be delayed.
|
|
-
|
Certain strategic partners may fail to deliver products that
satisfy market requirements, or such products may fail to
perform properly.
|
|
-
|
We have limited access to partner confidential corporate
information. A sudden unexpected change in ownership, strategy
or other material event could adversely impact partner purchases
of our products.
|
The
life sciences industry is highly competitive and subject to
rapid technological change, and we may not have the resources
necessary to compete successfully.
We compete with companies in the United States and abroad that
are engaged in the development and production of similar
products. We will continue to face intense competition from
existing competitors and other companies seeking to develop new
technologies. Many of our competitors have access to greater
financial, technical, scientific, research, marketing, sales,
distribution, service and other resources than we do. These
companies may develop technologies that are superior
alternatives to our technologies or may be more effective at
commercializing their technologies in products.
The life sciences industry is characterized by rapid and
continuous technological innovation. We may need to develop new
technologies for our products to remain competitive. One or more
of our current or future competitors could render our present or
future products obsolete or uneconomical by technological
advances. In addition, the introduction or announcement of new
products by us or others could result in a delay of or decrease
in sales of existing products, as we await regulatory approvals
and as customers evaluate these new products. We may also
encounter other problems in the process of delivering new
products to the marketplace, including products from LBG and
LMD, such as problems related to design, development or
manufacturing of such products, and as a result we may be
unsuccessful in selling such products. Our future success
depends on our ability to compete effectively against current
technologies, as well as to respond effectively to technological
advances by developing and marketing products that are
competitive in the continually changing technological landscape.
S-13
Our
success depends on our ability to service and support our
products directly or in collaboration with our strategic
partners.
To the extent that we or our strategic partners fail to maintain
a high quality level of service and support for xMAP technology
products, there is a risk that the perceived quality of our xMAP
technology products will be diminished in the marketplace.
Likewise, we may fail to provide the level, quantity or quality
of service expected by the marketplace. This could result in
slower adoption rates and lower than anticipated utilization of
xMAP products which could have a material adverse affect on our
business, financial condition and results of operations.
The
property rights we rely upon to protect the technology
underlying our products may not be adequate to maintain market
exclusivity. Inadequate intellectual property protection could
enable third parties to exploit our technology or use very
similar technology and could reduce our ability to distinguish
our products in the market.
Our success depends, in part, on our ability to obtain, protect
and enforce patents on our technology and products and to
protect our trade secrets, including the intellectual property
of entities we may acquire. Any patents we own may not afford
full protection for our technology and products. Others may
challenge our patents and, as a result, our patents could be
narrowed or invalidated. In addition, our current and future
patent applications may not result in the issuance of patents in
the United States or foreign countries. Competitors may develop
products that are not covered by our patents. Further, there is
a substantial backlog of patent applications at the
U.S. Patent and Trademark Office and certain patent offices
in foreign jurisdictions, and the approval or rejection of
patent applications may take several years.
We have obtained 62 patents in the United States and foreign
jurisdictions directed to various aspects and applications of
our products and technology. We have 196 pending applications in
the United States and foreign jurisdictions. In Japan, due to a
procedural omission, we are unable to obtain patent protection
for our method of real time detection and
quantification of multiple analytes from a single sample on our
platform technology similar to the protection we have obtained
in the United States. Although we are pursuing patent protection
in Japan for other aspects of our technology and products, we
may not be able to prevent competitors from developing and
marketing technologies and products similar to our xMAP
technology in Japan. We also have patents covering key aspects
of
xTAGtm
technology utilized in LMDs assay products.
We require our employees, consultants, strategic partners and
other third parties to execute confidentiality agreements. Our
employees and third-party consultants also sign agreements
requiring that they assign to us their interests in inventions
and original expressions and any corresponding patents and
copyrights arising from their work for us. In addition, we have
implemented a patent process to file patent applications on our
key technology. However, we cannot guarantee that these
agreements or this patent process will provide us with adequate
protection against improper use of our intellectual property or
disclosure of confidential information. In addition, in some
situations, these agreements may conflict with, or be subject
to, the rights of third parties with whom our employees,
consultants or advisors have prior employment or consulting
relationships. Further, others may independently develop
substantially equivalent proprietary technology, techniques and
products or otherwise gain access to our trade secrets. Our
failure to protect our proprietary information and techniques
may inhibit or limit our ability to exclude certain competitors
from the market.
In order to protect or enforce our patent rights, we may have to
initiate legal proceedings against third parties, such as
infringement suits or interference proceedings. These legal
proceedings could be expensive, take significant time
and/or
divert managements attention from other business concerns.
These proceedings may cause us to lose the benefit of some of
our intellectual property rights, the loss of which may inhibit
or preclude our ability to exclude certain competitors from the
market. We also may provoke these third parties to assert claims
against us. The patent position of companies like ours generally
is highly uncertain, involves complex legal and factual
questions and has recently been the subject of much litigation.
No consistent policy has emerged from the U.S. Patent and
Trademark Office or the courts regarding the breadth of claims
allowed or the degree of protection afforded under patents like
ours.
S-14
Our
success depends partly on our ability to operate without
infringing on or misappropriating the proprietary rights of
others.
We have been (and from time to time we may be) notified that
third parties consider their patents or other intellectual
property relevant to our products. We may be sued for infringing
the intellectual property rights of others, including claims
with respect to intellectual property of entities we may
acquire. We are currently party to such a suit with The Research
Foundation of the State University of New York as described in
our Quarterly Report on
Form 10-Q
for the period ended March 31, 2008 incorporated by
reference in this prospectus supplement. In addition, we may
find it necessary, if threatened, to initiate a lawsuit seeking
a declaration from a court that we do not infringe on the
proprietary rights of others or that their rights are invalid or
unenforceable. Intellectual property litigation is costly, and,
even if we prevail, the cost of such litigation could affect our
profitability. Furthermore, litigation is time consuming and
could divert managements attention and resources away from
our business. If we do not prevail in any litigation, we may
have to pay damages and could be required to stop the infringing
activity or obtain a license. Any required license may not be
available to us on acceptable terms, if at all. Moreover, some
licenses may be nonexclusive, and therefore, our competitors may
have access to the same technology licensed to us. If we fail to
obtain a required license or are unable to design around a
patent, we may be unable to sell some of our products, which
could have a material adverse affect on our business, financial
condition and results of operations.
We require collaboration with other organizations in obtaining
relevant biomarkers, access to oligonucleotides and enzymes that
are patented or controlled by others. If we cannot continue to
obtain access to these areas or identify freedom to operate
opportunities this could affect our future sales and profits.
We
have only produced our products in limited quantities, and we
may experience problems in scaling our manufacturing operations
or delays or component shortages that could limit the growth of
our revenue.
To date, we have produced our products in limited quantities
relative to the quantities necessary to achieve desired revenue
growth. We may not be able to produce sufficient quantities or
maintain consistency between differing lots of consumables. If
we encounter difficulties in scaling our manufacturing
operations as a result of, among other things, quality control
and quality assurance and availability of component and raw
material supplies, we will likely experience reduced sales of
our products, increased repair or re-engineering costs due to
product returns and defects and increased expenses due to
switching to alternate suppliers, any of which would reduce our
revenues and gross margins.
We presently outsource certain aspects of the assembly of our
systems to contract manufacturers. Because of a long lead-time
to delivery, we are required to place orders for a variety of
items well in advance of scheduled production runs. We recently
increased our flexibility to purchase strategic components
within shorter lead times by entering into supply agreements
with the suppliers of these components. Although we attempt to
match our parts inventory and production capabilities to
estimates of marketplace demand, to the extent system orders
materially vary from our estimates, we may experience continued
constraints in our systems production and delivery capacity,
which could adversely impact revenue in a given fiscal period.
Should our need for raw materials and components used in
production continue to fluctuate, we could incur additional
costs associated with either expediting or postponing delivery
of those materials. In an effort to control costs, during the
last quarter of 2005 we implemented a lean production system.
Managing the change from discrete to continuous flow production
requires time and management commitment. Lean initiatives and
limitations in our supply chain capabilities may result in part
shortages that delay shipments and cause fluctuations in revenue
in a given period.
We currently purchase certain key components of our product line
from a limited number of outside sources and may only be
available through a limited number of providers. We do not have
agreements with all of our suppliers. Our reliance on our
suppliers and contract manufacturers exposes us to risks
including:
|
|
-
|
the possibility that one or more of our suppliers or our
assemblers that do not have supply agreements with us could
terminate their services at any time without penalty;
|
|
-
|
the potential obsolescence
and/or
inability of our suppliers to obtain required components;
|
S-15
|
|
-
|
the potential delays and expenses of seeking alternate sources
of supply or manufacturing services;
|
|
-
|
the inability to qualify alternate sources without impacting
performance claims of our products;
|
|
-
|
reduced control over pricing, quality and timely delivery due to
the difficulties in switching to alternate suppliers or
assemblers; and
|
|
-
|
increases in prices of raw materials and key components.
|
Consequently, in the event that supplies of components or work
performed by any of our assemblers are delayed or interrupted
for any reason, our ability to produce and supply our products
could be impaired.
The
capital spending policies of our customers has a significant
effect on the demand for our products.
Our customers include clinical diagnostic, pharmaceutical,
biotechnological, chemical and industrial companies, and the
capital spending policies of these companies can have a
significant effect on the demand for our products. These
policies are based on a wide variety of factors, including
governmental regulation or price controls, the resources
available for purchasing research equipment, the spending
priorities among various types of analytical equipment and the
policies regarding capital expenditures during recessionary
periods. Any decrease in capital spending by life sciences
companies could cause our revenues to decline. As a result, we
are subject to significant volatility in revenue. Therefore, our
operating results can be materially affected (negatively and
positively) by the spending policies and priorities of our
customers.
If we
become subject to product liability claims, we may be required
to pay damages that exceed our insurance coverage.
Our business exposes us to potential product liability claims
that are inherent in the testing, production, marketing and sale
of biotechnological, human (including genetic) diagnostic and
therapeutic products. Although we believe that we are reasonably
insured against these risks and we generally have limited
indemnity protections in our supplier agreements, there can be
no assurance that we will be able to obtain insurance in amounts
or scope sufficient to provide us with adequate coverage against
all potential liabilities. A product liability claim in excess
of our insurance coverage or claim that is outside or exceeds
our indemnity protections in our supplier agreements or a recall
of one of our products would have to be paid out of our cash
reserves.
If
third-party payors increasingly restrict payments for healthcare
expenses or fail to adequately pay for multi-analyte testing, we
may experience reduced sales which would hurt our business and
our business prospects.
Third-party payors, such as government entities and healthcare
programs, health maintenance organizations and private insurers,
are continually seeking to reduce healthcare expenses. The
federal government has also recently reduced the funding for
certain government sponsored healthcare programs which has
caused these third party payors to seek further reduction in
medical expenses. These reductions may decrease demand for our
products and the price we can charge. Increasingly, Medicaid and
other third-party payors are challenging the prices charged for
medical services, including clinical diagnostic tests. They are
also attempting to contain costs by limiting coverage and the
reimbursement level of tests and other healthcare products. In
addition, cost containment initiatives by governmental or
educational entities or programs may reduce funding for genetic
research and development activities and retard the growth of the
genetic testing marketing. Without adequate coverage and
reimbursement, consumer demand for tests will decrease.
Decreased demand could cause sales of our products, and sales
and services by our strategic partners, to fall. In addition,
decreased demand could place pressure on us, or our strategic
partners, to lower prices on these products or services,
resulting in lower margins. Reduced sales or margins by us, or
our strategic partners, would hurt our business, profitability
and business prospects.
S-16
We may
in the future incur substantial debt that could restrict our
operations.
We may incur indebtedness in the future for, among other
purposes, funding operating expenses
and/or costs
related to future expansions and acquisitions. This indebtedness
could have adverse consequences on us, including:
|
|
-
|
limiting our ability to compete and our flexibility in planning
for, or reacting to, changes in our business and the industry in
which we operate;
|
|
-
|
limiting our ability to borrow additional funds for working
capital, capital and research and development expenditures,
acquisitions and general corporate or other purposes; and
|
|
-
|
exposing us to interest rate risk.
|
To the extent incurred, our debt service obligations will
require us to use a portion of our operating cash flow to pay
interest and principal on indebtedness instead of for other
corporate purposes, including funding future expansion of our
business and ongoing capital expenditures. Our ability to repay
or refinance our debt depends on our successful financial and
operating performance. Our financial and operating performance
depends upon a number of factors, many of which are beyond our
control, as further described in these Risk Factors.
We may
be unsuccessful in implementing our acquisition strategy. We may
face difficulties integrating acquired entities with our
existing businesses.
Acquisitions of assets or entities designed to accelerate the
implementation of our strategic plan are an element of our
long-term strategy. We may be unable to identify and complete
appropriate future acquisitions in a timely manner and no
assurance can be provided that the market price of potential
business acquisitions will be acceptable. In addition, many of
our competitors have greater financial resources than we have
and may be willing to pay more for these businesses or selected
assets. In the future, should we identify suitable acquisition
targets, we may be unable to complete acquisitions or obtain the
financing, if necessary, for these acquisitions on terms
favorable to us. Generally, potential acquisitions pose a number
of risks, including, among others, that:
|
|
-
|
we may not be able to accurately estimate the financial effect
of acquisitions on our business;
|
|
-
|
future acquisitions may require us to assume liabilities, incur
large and immediate write-offs, issue capital stock potentially
dilutive to our stockholders or spend significant cash or may
result in a decrease in our future operating income or operating
margins;
|
|
-
|
we may be unable to realize the anticipated benefits and
synergies from acquisitions as a result of inherent risks and
uncertainties, including difficulties integrating acquired
businesses or retaining their key personnel, partners, customers
or other key relationships, entering market segments in which we
have no or limited experience, and risks that acquired entities
may not operate profitably or that acquisitions may not result
in improved operating performance; and
|
|
-
|
acquisitions and subsequent integration of these companies may
disrupt our business and distract our management from other
responsibilities.
|
Other risks of integration include:
|
|
-
|
disparate information technology, internal control, financial
reporting and record-keeping systems;
|
|
-
|
differences in accounting policies, including those requiring
judgment or complex estimation processes;
|
|
-
|
new partners or customers who may operate on terms and programs
different than ours;
|
|
-
|
additional employees not familiar with our operations;
|
|
-
|
facilities or operations in remote locations or potentially
foreign jurisdictions and the inherent risks of operating in
unfamiliar legal and regulatory environments; and
|
S-17
|
|
- |
new products, including the risk that any underlying
intellectual property associated with such products may not have
been adequately protected or that such products may infringe on
the proprietary rights of others.
|
We
rely on the innovation and resources of larger industry
participants and public programs to advance genomic research and
educate physicians/clinicians on genetic
diagnostics.
The linkages between genetic anomalies that our products detect
and the underlying disease states are not always fully medically
correlated. Additionally, the availability of correlated genetic
markers is dependent on significant investment in genomic
research, often funded through public programs for which there
are no assurances of on-going support. Should any government
limit patent rights to specific genetic materials, private
investment in this area could also be significantly curtailed.
In addition, the adoption of genetic diagnostics is dependent to
a great extent on the education and training of physicians and
clinicians. We do not have the resources to undertake such
training, and are relying on larger industry participants and
professional medical colleges to establish, communicate and
educate physicians and clinicians on best practices related to
genetic diagnostics.
We are
subject to evolving legislative, judicial and ethical standards
on use of technology and biotechnology.
The adoption of genetic testing is occurring within the broader
context of a myriad of decisions related to genetic patenting
and genotyping. Issues associated with health insurance, data
access, intellectual property protection, national and
international legislative initiatives and other variables may
have a significant impact on the wide spread adoption of genetic
testing or on specific segments or tests within the genetic
testing market.
Our
operating results may be affected by current economic and
political conditions.
The ongoing uncertainty in the domestic and global finance
markets and events in the Middle East and concern for future
terrorist attacks leave many economic and political
uncertainties. Furthermore, foreign stock markets have been
volatile and equally sensitive to global geopolitical concerns
and terrorist threats. These uncertainties could adversely
affect our business and revenues in the short or long term in
ways that cannot presently be predicted.
International
business operations create additional operational and legal
risk.
Our operations outside the United States are subject to
additional risks, including:
|
|
-
|
changes in or interpretations of foreign law that may adversely
affect our ability to sell our products, perform services or
repatriate profits to the United States;
|
|
-
|
the imposition of tariffs;
|
|
-
|
hyperinflation or economic or political instability in foreign
countries;
|
|
-
|
imposition of limitations on or increase of withholding and
other taxes on remittances and other payments by foreign
subsidiaries;
|
|
-
|
conducting business in places where business practices and
customs are unfamiliar and unknown;
|
|
-
|
the imposition of restrictive trade policies, including export
restrictions;
|
|
-
|
worldwide political conditions;
|
|
-
|
the imposition of inconsistent laws or regulations;
|
|
-
|
the imposition or increase of investment requirements and other
restrictions by foreign governments;
|
|
-
|
longer collection cycles for account receivables;
|
S-18
|
|
-
|
uncertainties relating to foreign laws, including labor laws,
and legal proceedings;
|
|
-
|
currency exchange rate risks;
|
|
-
|
having to comply with a variety of U.S. laws, including the
Foreign Corrupt Practices Act; and
|
|
-
|
having to comply with U.S. export control regulations and
policies that restrict our ability to communicate with
non-U.S. employees
and supply foreign affiliates, partners and customers.
|
Our
success depends on our ability to attract and retain our
management and staff.
We depend on the principal members of our management and
scientific staff, including our chief executive officer, Patrick
Balthrop, and our operations, marketing, research and
development, technical support, technical service and sales
staff. The loss of services of key members of management could
delay or reduce our product development, marketing and sales and
technical support efforts. In addition, recruiting and retaining
qualified scientific and other personnel to perform research and
development, technical support, technical service and marketing
and sales work will be critical to our success. There is a
shortage in our industry of qualified management and scientific
personnel, and competition for these individuals is intense.
There can be no assurance that we will be able to attract
additional and retain existing personnel necessary to achieve
our business objectives.
Risks
Related to This Offering
Sales
of a significant number of shares of our common stock in the
public markets, or the perception of such sales, could depress
the market price of our common stock.
Sales of a substantial number of shares of our common stock in
the public markets and the availability of those shares for sale
could adversely affect the market price of our common stock. In
addition, future issuances of equity securities, including
pursuant to outstanding options, could dilute the interests of
our existing stockholders, including you, and could cause the
market price of our common stock to decline. We may issue equity
securities in the future for a number of reasons, including to
finance our operations and business strategy, to adjust our
ratio of debt to equity, to satisfy our obligations upon the
exercise of outstanding warrants or options or for other
reasons. We cannot predict the effect that future sales of our
common stock would have on the market price of our common stock.
Our
stock price has been and is likely to continue to be volatile,
which could cause the value of your investment to
decline.
The trading price of our common stock has been and is likely to
continue to be highly volatile and subject to wide fluctuations
in price. This volatility is in response to various factors,
many of which are beyond our control, including:
|
|
-
|
actual or anticipated variations in quarterly operating results
from historical results or estimates of results prepared by
securities analysts;
|
|
-
|
announcements of technological innovations or new products or
services by us or our competitors;
|
|
-
|
announcements by us of significant acquisitions, strategic
partnerships, joint ventures or capital commitments;
|
|
-
|
conditions or trends in the life science, biotechnology and
pharmaceutical industries;
|
|
-
|
additions or departures of key personnel;
|
|
-
|
changes in financial estimates by securities analysts;
|
S-19
|
|
-
|
general economic conditions and interest rates;
|
|
-
|
instability in the United States and other financial markets and
the ongoing and possible escalation of unrest in the Middle
East, other armed hostilities or further acts or threats of
terrorism in the United States or elsewhere;
|
|
-
|
sales of our common stock; and
|
|
-
|
the potential adverse impact of the secondary trading of our
stock on foreign exchanges which are subject to less regulatory
oversight than the NASDAQ Global Market, without our permission,
and the activity of the market makers of our stock on such
exchanges, including the risk that such market makers may engage
in naked short sales
and/or other
deceptive trading practices which may artificially depress or
otherwise affect the price of our common stock on the NASDAQ
Global Market.
|
In addition, the stock market in general, and the NASDAQ Global
Market and the market for technology companies in particular,
has experienced significant price and volume fluctuations that
have often been unrelated or disproportionate to the operating
performance of those companies. Further, there has been
particular volatility in the market prices of securities of life
sciences companies. These broad market and industry factors may
seriously harm the market price of our common stock, regardless
of our operating performance. In the past, following periods of
volatility in the market price of a companys securities,
securities class action litigation has often been instituted. A
securities class action suit against us could result in
substantial costs, potential liabilities and the diversion of
managements attention and resources. As a result of these
factors, among others, the value of your investment may decline,
and you may be unable to sell your shares of our common stock at
or above the offering price.
We do
not pay dividends on our common stock and do not intend to pay
cash dividends on our common stock in the foreseeable
future.
We have never declared or paid any cash dividend on our capital
stock. We currently intend to retain any future earnings and do
not expect to pay any dividends in the foreseeable future. Our
ability to declare dividends may also from time to time be
limited by the terms of our credit facility. Because we do not
anticipate paying cash dividends for the foreseeable future,
holders of our common stock will not realize a return on their
investment unless the trading price of our common stock
appreciates, which we cannot assure.
Anti-takeover
provisions in our restated certificate of incorporation, bylaws
and stockholder rights plan and Delaware law could make a third
party acquisition of us difficult.
Our restated certificate of incorporation, bylaws and
stockholder rights plan contain provisions that could make it
more difficult for a third party to acquire us (even if doing so
would be beneficial to our stockholders) and for holders of our
securities to receive any related takeover premium for their
securities. We are also subject to certain provisions of
Delaware law that could delay, deter or prevent a change in
control of us. These provisions could limit the price that
investors might be willing to pay in the future for shares of
our common stock. See Description of Common Stock in
the accompanying prospectus.
We may
invest or spend the proceeds in this offering in ways with which
you may not agree and in ways that may not earn a
profit.
We intend to use the net proceeds of this offering for general
corporate purposes, which include research and development,
potential acquisitions of, or investments in companies and
technologies that complement our business, capital expenditures
and additions to working capital. However, we will retain broad
discretion over the use of the proceeds from this offering and
may use them for purposes other than those contemplated at the
time of this offering. You may not agree with the ways we decide
to use these proceeds, and our use of the proceeds may not yield
any profits.
S-20
If you
purchase our common stock in this offering, you may incur
immediate and substantial dilution in the book value of your
shares.
If you purchase shares in this offering, the value of your
shares based on our actual book value will immediately be less
than the offering price you paid. This reduction in the value of
your equity is known as dilution. This dilution occurs in large
part because many of our earlier investors paid less than the
current offering price when they purchased their shares.
Investors purchasing common stock in this offering will incur
immediate dilution of $ per share
of common stock. As a result of this dilution, investors
purchasing stock in this offering may receive significantly less
than the purchase price paid in this offering in the event of
liquidation. Investors will incur additional dilution upon the
exercise of stock options or other equity-based awards under our
equity incentive plans. In addition, if we issue additional
shares, including options, warrants, preferred stock or other
convertible securities, in the future to acquired entities and
their equityholders, our business associates, or other strategic
partners or in follow-on public and private offerings, the newly
issued shares will further dilute your percentage ownership of
our company.
S-21
USE OF
PROCEEDS
We estimate that the net proceeds from the sale of the 3,500,000
shares of common stock by us will be approximately $72.3
million, or approximately $83.3 million if the underwriters
exercise their over-allotment option in full, based on an
assumed offering price of $22.27 per share and after deducting
the underwriting discounts and commissions and the estimated
offering expenses payable by us.
We intend to use the net proceeds of this offering for general
corporate purposes, which include research and development,
potential acquisitions of, or investments in, companies and
technologies that complement our business, capital expenditures
and additions to working capital. Pending the application of
funds as described above, we will invest the net proceeds from
this offering in U.S. government obligations, bank deposits
or other secure, short-term investments.
PRICE
RANGE OF COMMON STOCK
Our common stock is traded on the NASDAQ Global Market under the
symbol LMNX. The following table sets forth the high
and low sales prices of the common stock for the periods
indicated, as reported by the NASDAQ Global Market.
|
|
|
|
|
|
|
|
|
2006
|
|
High
|
|
|
Low
|
|
|
|
|
|
|
First Quarter
|
|
$
|
15.48
|
|
|
$
|
11.55
|
|
Second Quarter
|
|
$
|
18.03
|
|
|
$
|
12.83
|
|
Third Quarter
|
|
$
|
20.19
|
|
|
$
|
14.41
|
|
Fourth Quarter
|
|
$
|
20.75
|
|
|
$
|
11.82
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
High
|
|
|
Low
|
|
|
|
|
|
|
First Quarter
|
|
$
|
16.82
|
|
|
$
|
12.08
|
|
Second Quarter
|
|
$
|
14.71
|
|
|
$
|
11.44
|
|
Third Quarter
|
|
$
|
17.30
|
|
|
$
|
11.62
|
|
Fourth Quarter
|
|
$
|
17.77
|
|
|
$
|
14.11
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
High
|
|
|
Low
|
|
|
|
|
|
|
First Quarter
|
|
$
|
20.48
|
|
|
$
|
14.75
|
|
Second Quarter (through June 13, 2008)
|
|
$
|
23.09
|
|
|
$
|
18.00
|
|
On June 13, 2008, the closing price of our common stock, as
reported by the NASDAQ Global Market, was $22.27 per share. On
that date, there were approximately 618 holders of record
of our common stock.
DIVIDEND
POLICY
We have never declared or paid cash dividends on our common
stock and, while this policy is subject to periodic review by
our board of directors, we currently intend to retain any
earnings for use in our business and do not anticipate paying
cash dividends in the foreseeable future. Our ability to declare
dividends may also from time to time be limited by the terms of
our existing or future credit facilities.
S-22
CAPITALIZATION
You should read this table in conjunction with our historical
financial statements, and the notes thereto contained in this
prospectus supplement or incorporated herein by reference.
The following table sets forth our capitalization as of
March 31, 2008:
on an actual basis; and
on an as adjusted basis to reflect the issuance and
sale of 3,500,000 shares of our common stock by us in this
offering at an assumed public offering price of $22.27 per
share, less estimated underwriting discounts and commissions and
offering expenses payable by us and assuming no exercise of the
underwriters over-allotment option.
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
|
March 31, 2008
|
|
|
|
Actual
|
|
|
As Adjusted
|
|
|
|
(unaudited)
|
|
|
|
(in thousands)
|
|
|
Cash and cash equivalents
|
|
$
|
26,360
|
|
|
$
|
98,628
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
3,566
|
|
|
|
3,566
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity:
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
35
|
|
|
|
39
|
|
Additional paid-in capital
|
|
|
193,223
|
|
|
|
265,487
|
|
Accumulated other comprehensive gain
|
|
|
48
|
|
|
|
48
|
|
Accumulated deficit
|
|
|
(88,931
|
)
|
|
|
(88,931
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
104,375
|
|
|
|
176,643
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capitalization
|
|
$
|
107,941
|
|
|
$
|
180,209
|
|
|
|
|
|
|
|
|
|
|
S-23
SELECTED
CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data should be
read in conjunction with Managements Discussion and
Analysis of Financial Condition and Results of Operations
and other financial data included elsewhere in this prospectus
supplement, as well as our historical audited financial
statements and the related notes thereto which are incorporated
by reference in this prospectus supplement. The consolidated
results of operations data for the years ended December 31,
2005, 2006 and 2007 and the consolidated balance sheet data as
of December 31, 2006 and 2007 are derived from the audited
consolidated financial statements and related notes included in
our Annual Report on
Form 10-K
for the year ended December 31, 2007 and incorporated by
reference in this prospectus supplement. The consolidated
results of operations data for the three months ended
March 31, 2007 and 2008 and the consolidated balance sheet
data as of March 31, 2008 have been derived from our
unaudited condensed consolidated financial statements and
related notes included in our Quarterly Report on
Form 10-Q
for the quarterly period ended March 31, 2008 and
incorporated by reference in this prospectus supplement. The
consolidated results of operations data for the years ended
December 31, 2003 and 2004 and the consolidated balance
sheet data as of December 31, 2003, 2004 and 2005 is
derived from the audited consolidated financial statements for
these years which are not included or incorporated by reference
herein.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ended
|
|
|
|
Year Ended December 31,
|
|
|
March 31,
|
|
|
|
2003
|
|
|
2004
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
2007
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
|
(in thousands, except per share data)
|
|
|
Consolidated Results of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
$
|
26,292
|
|
|
$
|
35,880
|
|
|
$
|
42,313
|
|
|
$
|
52,989
|
|
|
$
|
75,010
|
|
|
$
|
16,607
|
|
|
$
|
23,012
|
|
Cost of revenue
|
|
|
16,462
|
|
|
|
21,158
|
|
|
|
19,992
|
|
|
|
20,737
|
|
|
|
28,916
|
|
|
|
6,251
|
|
|
|
7,755
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
9,830
|
|
|
|
14,722
|
|
|
|
22,321
|
|
|
|
32,252
|
|
|
|
46,094
|
|
|
|
10,356
|
|
|
|
15,257
|
|
Research and development expense
|
|
|
3,207
|
|
|
|
3,802
|
|
|
|
5,600
|
|
|
|
8,673
|
|
|
|
15,383
|
|
|
|
2,705
|
|
|
|
4,431
|
|
Selling, general and administrative expense
|
|
|
13,098
|
|
|
|
15,084
|
|
|
|
20,217
|
|
|
|
24,160
|
|
|
|
40,729
|
|
|
|
8,023
|
|
|
|
12,094
|
|
In-process research and development expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
16,305
|
|
|
|
18,886
|
|
|
|
25,817
|
|
|
|
32,833
|
|
|
|
63,512
|
|
|
|
10,728
|
|
|
|
16,525
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(6,475
|
)
|
|
|
(4,164
|
)
|
|
|
(3,496
|
)
|
|
|
(581
|
)(1)
|
|
|
(17,418
|
)
|
|
|
(372
|
)
|
|
|
(1,268
|
)
|
Interest expense from long-term debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(513
|
)
|
|
|
(84
|
)
|
|
|
(135
|
)
|
Other income, net
|
|
|
426
|
|
|
|
572
|
|
|
|
1,174
|
|
|
|
2,108
|
|
|
|
1,665
|
|
|
|
606
|
|
|
|
320
|
|
Settlement of litigation
|
|
|
1,840
|
|
|
|
|
|
|
|
(322
|
)
|
|
|
|
|
|
|
11,500
|
|
|
|
|
|
|
|
|
|
Gain on settlement of liability
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,345
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
(4,209
|
)
|
|
|
(3,592
|
)
|
|
|
(2,644
|
)
|
|
|
1,527
|
|
|
|
(2,421
|
)
|
|
|
150
|
|
|
|
(1,083
|
)
|
Income taxes
|
|
|
|
|
|
|
(13
|
)
|
|
|
(22
|
)
|
|
|
(20
|
)
|
|
|
(290
|
)
|
|
|
(14
|
)
|
|
|
(83
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
(4,209
|
)
|
|
|
(3,605
|
)
|
|
|
(2,666
|
)
|
|
|
1,507
|
(1)
|
|
|
(2,711
|
)
|
|
|
136
|
|
|
|
(1,166
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per common share, basic
|
|
$
|
(.14
|
)
|
|
$
|
(.12
|
)
|
|
$
|
(.09
|
)
|
|
$
|
.05
|
(1)
|
|
$
|
(.08
|
)
|
|
$
|
.00
|
|
|
$
|
(.03
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per common share, diluted
|
|
$
|
(.14
|
)
|
|
$
|
(.12
|
)
|
|
$
|
(.09
|
)
|
|
$
|
.05
|
(1)
|
|
$
|
.(08
|
)
|
|
$
|
.00
|
|
|
$
|
(.03
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in computing net income (loss) per share, basic
|
|
|
29,814
|
|
|
|
30,698
|
|
|
|
30,990
|
|
|
|
31,434
|
|
|
|
34,361
|
|
|
|
31,970
|
|
|
|
35,422
|
|
Shares used in computing net income (loss) per share, diluted
|
|
|
29,814
|
|
|
|
30,698
|
|
|
|
30,990
|
|
|
|
32,988
|
|
|
|
34,361
|
|
|
|
33,077
|
|
|
|
35,422
|
|
(1) As discussed in Note 14 to the consolidated
financial statements contained in our Annual Report on
Form 10-K
for the year ended December 31, 2007, effective
January 1, 2006, we changed our method of accounting for
stock-based compensation to conform to Statement of Financial
Accounting Standards No. 123(R) Share-Based
Payment.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
As of December 31,
|
|
March 31,
|
|
|
2003
|
|
2004
|
|
2005
|
|
2006
|
|
2007
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
(in thousands)
|
|
Consolidated Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
39,480
|
|
$
|
19,238
|
|
$
|
25,206
|
|
$
|
27,414
|
|
$
|
27,233
|
|
$
|
26,360
|
Short-term investments
|
|
|
|
|
|
12,891
|
|
|
10,947
|
|
|
10,956
|
|
|
6,944
|
|
|
7,924
|
Long-term investments
|
|
|
|
|
|
3,991
|
|
|
5,466
|
|
|
7,346
|
|
|
|
|
|
|
Working capital
|
|
|
45,522
|
|
|
40,823
|
|
|
39,364
|
|
|
44,179
|
|
|
40,801
|
|
|
43,261
|
Total assets
|
|
|
53,294
|
|
|
53,175
|
|
|
58,035
|
|
|
66,696
|
|
|
123,559
|
|
|
124,009
|
Total long-term debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,976
|
|
|
3,566
|
Total stockholders equity
|
|
|
44,835
|
|
|
44,546
|
|
|
44,710
|
|
|
54,159
|
|
|
103,480
|
|
|
104,375
|
S-24
FORWARD-LOOKING
STATEMENTS
This prospectus supplement, including the accompanying
prospectus and the documents incorporated by reference herein
and therein, contains statements that are forward-looking
statements as defined within the meaning of Section 21E of
the Securities Exchange Act of 1934, as amended (the
Exchange Act), and Section 27A of the
Securities Act of 1933, as amended (the Securities
Act). Forward-looking statements give our current
expectations or forecasts of future events. All statements other
than statements of current or historical fact contained in this
prospectus supplement or the accompanying prospectus, including
statements regarding our future financial position, business
strategy, budgets, projected costs, and plans and objectives of
management for future operations, are forward-looking
statements. The words anticipate,
believe, continue, estimate,
expect, intend, may,
plan, projects, will, and
similar expressions, as they relate to us, are intended to
identify forward-looking statements. These statements are not
guarantees of future performance and are based on our current
plans and actual future activities, and our results of
operations may be materially different from those set forth in
the forward-looking statements as a result of known or unknown
risks and uncertainties, including, among other things:
|
|
|
|
|
risks and uncertainties relating to market demand and acceptance
of our products and technology,
|
|
|
|
dependence on strategic partners for development,
commercialization and distribution of products,
|
|
|
|
concentration of our revenue in a limited number of strategic
partners,
|
|
|
|
fluctuations in quarterly results due to a lengthy and
unpredictable sales cycle and bulk purchases of consumables,
|
|
|
|
our ability to scale manufacturing operations and manage
operating expenses, gross margins and inventory levels,
|
|
|
|
potential shortages of components,
|
|
|
|
competition,
|
|
|
|
our ability to successfully launch new products,
|
|
|
|
the timing of regulatory approvals,
|
|
|
|
the implementation, including any modification, of our strategic
operating plans,
|
|
|
|
the uncertainty regarding the outcome or expense of any
litigation brought against us,
|
|
|
|
risks relating to our foreign operations, and
|
|
|
|
risks and uncertainties associated with implementing our
acquisition strategy and the ability to integrate acquired
companies, including Luminex Molecular Diagnostics, or selected
assets into our consolidated business operations, including the
ability to recognize the benefits of our acquisitions.
|
Many of these risks, uncertainties and other factors are beyond
our control and are difficult to predict. New factors may also
emerge from time to time that could adversely affect our
business. It is not possible for us to predict all of the
factors that may from time to time affect our business or to
assess the potential impact of each such factor. We caution
readers not to place undue reliance on any such forward-looking
statements, which speak only as of the date on which they are
made, and, except to fulfill our obligations under the United
States securities laws, we undertake no obligation to update any
such statement to reflect events or circumstances after the date
on which it is made. We qualify all of the information presented
in this prospectus supplement and the accompanying prospectus
(and the information incorporated by reference herein or
therein) and particularly our forward-looking statements, by the
cautionary statements described above and in the section of this
prospectus supplement entitled Risk Factors.
S-25
MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following information should be read in conjunction with
the financial information contained in this prospectus
supplement, any free writing prospectus and the financial
information, including the notes thereto, incorporated herein by
reference. Additionally, the following information should be
read in conjunction with Risk Factors contained in
this prospectus supplement.
Overview
We develop, manufacture and sell proprietary biological testing
technologies and products with applications throughout the life
sciences and diagnostics industries. These industries depend on
a broad range of tests, called bioassays, to perform diagnostic
tests, discover and develop new drugs and identify genes. Our
xMAP®
technology, an open architecture, proprietary multiplexing
technology, allows simultaneous analysis of up to 100 bioassays
from a small sample volume, typically a single drop of fluid, by
reading biological tests on the surface of microscopic
polystyrene beads called microspheres. xMAP technology combines
this miniaturized liquid array bioassay capability with small
lasers, digital signal processors and proprietary software to
create a system offering advantages in speed, precision,
flexibility and cost. Our xMAP technology is currently being
used within various segments of the life sciences industry which
includes the fields of drug discovery and development, clinical
diagnostics, genetic analysis, bio-defense, protein analysis and
biomedical research.
Our end-user customers and partners, which include laboratory
professionals performing research, clinical laboratories
performing tests on patients as ordered by a physician and other
laboratories, have a fundamental need to perform high quality
testing as efficiently as possible. We have adopted a business
model built around strategic partnerships. We have licensed our
xMAP technology to companies, who then develop products that
incorporate the xMAP technology into products that they sell to
the end-user. We develop and manufacture the proprietary xMAP
laboratory instrumentation and the proprietary xMAP microspheres
and sell these products to our partners. Our partners then sell
xMAP instrumentation and xMAP-based reagent consumable products,
which run on the instrumentation, to the end-user. We earn a
contractually-determined royalty on the sales of these
xMAP-based reagent consumable products. We were founded on this
model, and much of our success to date has been due to this
model. As of March 31, 2008, we had over 60 strategic
partners, 30 of which have developed reagent-based products
using our technology, and these partners had sold and placed
5,199 xMAP-based instruments in laboratories worldwide.
Beginning in 2006, we began developing proprietary assays
through LBG. This development was supplemented by our
March 1, 2007 acquisition of Tm Bioscience Corporation,
which we refer to as Luminex Molecular Diagnostics, or LMD. Our
newly formed Assay Segment is focusing on the molecular
diagnostics market through LMD and in certain specialty markets
through LBG.
We have several forms of revenue that result from this partner
model:
|
|
|
|
|
System revenue is generated from the sale of our xMAP systems
and peripherals. Currently, system revenue is derived from the
sale of the Luminex 100 and 200 analyzers often coupled with an
optional XY Platform
and/or
Sheath Delivery System. We currently expect the average system
price to be between $25,000 and $30,000 in a given reporting
period. This metric includes all configurations of our xMAP
systems including refurbished systems, demonstration systems and
modular components.
|
|
|
Consumable revenue is generated from the sale of our dyed
polystyrene microspheres and sheath fluid. Our larger commercial
and development partners often purchase these consumables in
bulk to minimize the number of incoming qualification events and
to allow for longer development and production runs.
|
|
|
Royalty revenue is generated when a partner sells a kit
incorporating our proprietary microspheres to an end-user or
when a partner utilizes a kit to provide a testing result to a
user. End-users can include facilities such as testing labs,
development facilities and research facilities that purchase
prepared kits and have specific testing needs or testing service
companies that provide assay results to pharmaceutical research
companies or physicians.
|
S-26
|
|
|
|
|
Assay revenue is generated from the sale of our kits which are a
combination of chemical and biological reagents and our
proprietary bead technology used to perform diagnostic and
research assays on samples. For the year ended December 31,
2007, assay revenue includes LMD revenue since March 1,
2007 as a result of our acquisition of LMD which was effective
March 1, 2007. Assay revenue generated from LBG is also
classified here. Previously, assay revenue generated from LBG
was recorded in other revenue as it did not constitute a
material amount of total revenue.
|
|
|
Service revenue is generated when a partner or other owner of a
system purchases a service contract from us after the warranty
has expired. Service contract revenue is amortized over the life
of the contract and the costs associated with those contracts
are recognized as incurred.
|
|
|
Other revenue consists of items such as training, shipping,
parts sales, license revenue, grant revenue, contract research
and development fees and milestone revenue and other items that
individually amount to less than 5% of total revenue.
|
Acquisition
of LMD
On March 1, 2007, we completed our acquisition of LMD for
$49.4 million. Upon closing the acquisition, we exchanged
0.06 shares of our common stock for each outstanding share
of common stock of Tm Bioscience, which resulted in the issuance
of approximately 3.2 million shares of our common stock
valued at $41.8 million. We retired debt of
$13.2 million and incurred approximately $5.6 million
of expense associated with advisors, consultants, and other
transaction related costs.
First
Quarter of 2008 Highlights
|
|
|
|
|
Consolidated revenue of over $23.0 million, representing a
39% increase over revenue for the first quarter of 2007,
including the effects of the acquisition of LMD, and a 7%
increase over revenue for the fourth quarter of 2007
|
|
|
Consolidated gross margin percentage of 66% for the quarter
ended March 31, 2008
|
|
|
Cumulative worldwide system sales of 5,199 systems through
March 31, 2008
|
|
|
FDA clearance of
xTAGtm
Respiratory Viral Panel, as of January 3, 2008
|
|
|
FDA clearance of the Luminex LX100/200 Instrument, as of
March 7, 2008
|
|
|
Our partners reported over $53 million of royalty bearing
end user sales on xMAP technology for the quarter ended
March 31, 2008; this represents over $215 million on
an annualized basis
|
2007
Highlights
|
|
|
|
|
We grew total revenue by approximately 42% over 2006 revenue of
$53.0 million
|
|
|
Consolidated gross margin percentage of 61% for the year ended
December 31, 2007, consistent with 2006
|
|
|
Record system shipments of 862 for the year ended
December 31, 2007
|
|
|
Completion of the LMD acquisition
|
|
|
Settlement of Rules Based Medicine, Inc. (RBM) litigation
for total proceeds to us of $12.5 million
|
Segment
Information
We have two reportable segments: The Technology Segment and the
Assay Segment. The Technology Segment, which is our base
business, consists of system sales to partners, raw bead sales,
royalties, service and support of the technology, and other
miscellaneous items. The Assay Segment consists of LBG and LMD.
This segment is primarily involved in the development and sale
of assays on xMAP technology for use on our installed base of
systems.
Future
Operations
We expect 2008 revenue growth will be driven by continued
adoption of our core technology coupled with assay introduction
and commercialization by the Assay Segment. The anticipated
continued shift in revenue concentration towards higher margin
items, such as assays, consumables and royalties should provide
S-27
favorable gross margins. Additionally, we believe that a
sustained investment in R&D is necessary to meet the needs
of our marketplace; however, we estimate that R&D
expenditures for 2008 will decline as a percentage of revenue
from 2007 towards our long term target of 15% of revenue.
Finally, we believe our partner model allows us to leverage our
operating expenses which, assuming revenue increases and
R&D expense described above, should allow us to generate
increased operating income for 2008 as a percentage of total
revenue of our core business.
We expect our primary challenges will be increasing traction of
partner products incorporating Luminex technology, capitalizing
on the realized synergies of the LMD acquisition,
commercialization and market adoption of output from the Assay
Segment and expanding our footprint and reputation within our
identified target market segments.
Critical
Accounting Policies
The discussion and analysis of our financial condition and
results of operations are based upon our consolidated financial
statements, which have been prepared in accordance with United
States generally accepted accounting principles. The preparation
of these financial statements requires us to make estimates and
judgments that affect the reported amounts of assets,
liabilities, revenues and expenses, and related disclosure of
contingent assets and liabilities. We base our estimates on
historical experience and on various other assumptions that are
believed to be reasonable under the circumstances, the results
of which form the basis for making judgments about the carrying
values of assets and liabilities that are not readily apparent
from other sources. A summary of our significant accounting
policies is described in Note 1 of our consolidated
financial statements contained in our Annual Report on
Form 10-K
for the year ended December 31, 2007. Estimates and
assumptions are reviewed periodically. Actual results may differ
from these estimates under different assumptions or conditions.
Revenue Recognition. Revenue on sales of our
products is recognized when persuasive evidence of an agreement
exists, delivery has occurred, the fee is fixed and determinable
and collectability is probable. Generally, these criteria are
met at the time our product is shipped. If the criteria for
revenue recognition are not met at the time of shipment, the
revenue is deferred until all criteria are met. Royalty revenue
is generated when a partner sells products incorporating our
technology, provides testing services to third parties using our
technology or resells our consumables. Royalty revenue is
recognized as it is reported to us by our partners; therefore,
the underlying end-user sales may be related to prior periods.
We also sell extended service contracts for maintenance and
support of our products. Revenue for service contracts is
recognized ratably over the term of the agreement.
Upfront payments from our strategic partners are nonrefundable
and will be recognized as revenue as our strategic partners
purchase products or applied against royalty payments.
Nonrefundable license fees are amortized into revenue over the
estimated life of the license agreements.
Grant revenue consists of amounts earned under research
agreements with government grants, which is recognized in the
period during which the related costs are incurred.
Inventory Valuation. Inventories are valued at the
lower of cost or market value and have been reduced by an
allowance for excess and obsolete inventories. The two major
components of the allowance for excess and obsolete inventory
are (i) a specific reserve for inventory items that we no
longer use in manufacturing our products or that no longer meet
our specifications and (ii) a reserve against slow moving
items for potential obsolescence. The total estimated allowance
is reviewed on a regular basis and adjusted based on
managements review of inventories on hand compared to
estimated future usage and sales. While management believes that
adequate write-downs for inventory obsolescence have been made
in the consolidated financial statements, scientific and
technological advances will continue and we could experience
additional inventory write-downs in the future. However, we do
not believe this estimate is subject to significant variability.
Warranties. We provide for the estimated cost of
product warranties at the time revenue is recognized. While we
engage in product quality programs and processes, our warranty
obligation is affected by product failure rates, material usage
and service delivery costs incurred in correcting a product
failure. If actual
S-28
product failure rates, material usage or service delivery costs
differ from our estimates, revisions to the estimated warranty
liability would be required. However, we do not believe this
estimate is subject to significant variability.
Accounts Receivable and Allowance for Doubtful
Accounts. We continuously monitor collections and
payments from our customers and maintain allowances for doubtful
accounts based upon our historical experience and any specific
customer collection issues that we have identified. While such
credit losses historically have been within our expectations,
there can be no assurance that we will continue to experience
the same level of credit losses that we have in the past. A
significant change in the liquidity or financial position of any
one of our significant customers, or a deterioration in the
economic environment, in general, could have a material adverse
impact on the collectability of our accounts receivable and our
future operating results, including a reduction in future
revenues and additional allowances for doubtful accounts.
However, we do not believe this estimate is subject to
significant variability.
Purchase Price Allocation, Intangibles and
Goodwill. The purchase price allocation for
acquisitions requires extensive use of accounting estimates and
judgments to allocate the purchase price to the identifiable
tangible and intangible assets acquired, including in-process
research and development, or IPR&D, and liabilities assumed
based on their respective fair values. Intangible assets with
definite lives are amortized over the assets estimated
useful lives using the straight-line method. We periodically
review the estimated useful lives of our identifiable intangible
assets, taking into consideration any events or circumstances
that might result in a diminished fair value or revised useful
life.
On March 1, 2007, we acquired LMD for an aggregate purchase
price of approximately $49.4 million. The purchase price
for the acquisition was allocated to tangible and intangible
assets acquired and liabilities assumed based on their estimated
fair values at the acquisition date. We completed the process of
determining the estimated fair values of IPR&D,
identifiable intangible assets and certain tangible assets. Such
a valuation required significant estimates and assumptions,
including but not limited to, determining the timing and
estimated costs to complete the in-process projects, projecting
regulatory approvals, estimating future cash flows and
developing appropriate discount rates. We believe the estimated
fair values assigned to the assets acquired and liabilities
assumed were based on reasonable assumptions.
IPR&D represents the value, on closing of a business
combination, of acquired research and development projects which
were not technologically feasible as of the acquisition date and
had no alternative future use. Projects with a value of
$7.4 million that were in process at LMD prior to the
acquisition were deemed not technologically feasible and were
charged to net loss during the twelve months ended
December 31, 2007 as IPR&D expense.
SFAS No. 142 Goodwill and Other Intangible
Assets requires that goodwill and certain intangible
assets be assessed for impairment at a reporting unit level at
least annually. We evaluate the carrying value of goodwill and
other intangible assets annually or more frequently if there is
evidence that certain events or changes in circumstances
indicate that the carrying amount of these assets may not be
recoverable. If the carrying amount of a reporting unit exceeds
its fair value, then a goodwill impairment test is performed to
measure the amount of the impairment loss, if any. We would
recognize an impairment charge for any amount by which the
carrying amount of goodwill exceeds its fair value. Determining
the fair value of goodwill is judgmental in nature and often
involves the use of estimates and assumptions. Estimates of fair
value are primarily determined using discounted cash flows and
market comparisons. As of March 31, 2008, we had
$39.6 million of goodwill, which has been allocated to the
Assay Segment which includes LMD. We performed our annual test
of goodwill and determined that there had been no impairment of
goodwill as of December 31, 2007.
S-29
The following discussion of our financial performance should be
read in conjunction with financial data included elsewhere in
this prospectus supplement, as well as our historical audited
financial statements and the related notes thereto which are
incorporated by reference in this prospectus supplement.
Percentage
of Total Revenue of Certain Items in the Consolidated Results of
Operations
The following table sets forth the percentage of total revenue
of certain items in the Consolidated Results of Operations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
Three Months Ended March 31,
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
2007
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
Revenue
|
|
|
100%
|
|
|
|
100%
|
|
|
|
100%
|
|
|
|
100%
|
|
|
|
100%
|
|
Cost of revenue
|
|
|
47%
|
|
|
|
39%
|
|
|
|
39%
|
|
|
|
38%
|
|
|
|
34%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
53%
|
|
|
|
61%
|
|
|
|
61%
|
|
|
|
62%
|
|
|
|
66%
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
13%
|
|
|
|
16%
|
|
|
|
21%
|
|
|
|
16%
|
|
|
|
19%
|
|
Selling, general and administrative
|
|
|
48%
|
|
|
|
46%
|
|
|
|
54%
|
|
|
|
48%
|
|
|
|
53%
|
|
In-process research and development expense
|
|
|
0%
|
|
|
|
0%
|
|
|
|
10%
|
|
|
|
0%
|
|
|
|
0%
|
|
Total operating expenses
|
|
|
61%
|
|
|
|
62%
|
|
|
|
85%
|
|
|
|
64%
|
|
|
|
72%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(8%
|
)
|
|
|
(1%
|
)
|
|
|
(23%
|
)
|
|
|
(2%
|
)
|
|
|
(6%
|
)
|
Interest expense from long-term debt
|
|
|
-
|
|
|
|
-
|
|
|
|
(1%
|
)
|
|
|
(.6%
|
)
|
|
|
(.5%
|
)
|
Other income, net
|
|
|
3%
|
|
|
|
4%
|
|
|
|
2%
|
|
|
|
4%
|
|
|
|
1%
|
|
Settlement of litigation
|
|
|
(1%
|
)
|
|
|
-
|
|
|
|
15%
|
|
|
|
-
|
|
|
|
-
|
|
Gain on settlement of liability
|
|
|
-
|
|
|
|
-
|
|
|
|
3%
|
|
|
|
-
|
|
|
|
-
|
|
Income taxes
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
(6%
|
)
|
|
|
3%
|
|
|
|
(4%
|
)
|
|
|
1%
|
|
|
|
(5%
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
Results of Operations
Three
Months Ended March 31, 2007 Compared to Three Months Ended
March 31, 2008
Selected consolidated financial data for the three months ended
March 31, 2007 and 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
|
2007
|
|
|
2008
|
|
|
|
(unaudited)
|
|
|
|
(dollars in thousands)
|
|
|
Revenue
|
|
$
|
16,607
|
|
|
$
|
23,012
|
|
Gross profit
|
|
|
10,356
|
|
|
|
15,257
|
|
Gross margin percentage
|
|
|
62%
|
|
|
|
66%
|
|
Operating expenses
|
|
|
10,728
|
|
|
|
16,525
|
|
Net operating loss
|
|
|
(372
|
)
|
|
|
(1,268)
|
|
Total revenue increased by 39% to $23.0 million for the
three months ended March 31, 2008 from $16.6 million
for the comparable period in 2007. The increase in revenue was
attributable to growth in the Assay Segment, including the
effects of the acquisition of LMD, which contributed
$3.2 million of the overall increase, and an increase of
$2.7 million in consumable and royalty revenues in the
Technology Segment. In addition, system sales for the first
quarter of 2008 increased to 220 LX Systems from 205 LX Systems
for the comparable period in 2007 bringing total system sales
since our inception to 5,199 as of March 31, 2008.
S-30
We continued to experience revenue concentration in a limited
number of strategic partners. Two customers accounted for 32% of
consolidated total revenue in the first quarter of 2008 (17% and
15%, respectively). For comparative purposes, these same two
customers accounted for 35% of total revenue (23% and 12%,
respectively) in the first quarter of 2007. No other customer
accounted for more than 10% of total revenue in the first
quarter of 2008.
Gross profit margin percentage increased to 66% for the three
months ended March 31, 2008 from 62% for the comparable
period in 2007 due to the continued shift in revenue
concentration towards higher margin items such as assays,
consumables and royalties. The increase in operating expenses
from $10.7 million for the first quarter of 2007 to
$16.5 million for the three months ended March 31,
2008 reflects growth in the Assay Segment including the
incorporation of the results of LMD for the full quarter in 2008
compared to the inclusion of only one month of operating results
of LMD in the quarter ended March 31, 2007 as the
acquisition was consummated on March 1, 2007. The increase
in operating expenses also resulted from additional personnel
costs associated with the increase in research and development
and selling, general, and administrative employees to 230 at
March 31, 2008 from 204 at March 31, 2007. Net
operating income decreased due to the dilutive effect of the LMD
acquisition. See additional discussions by segment below.
Segment
Results of Operations for the Three Months Ended March 31,
2007 and 2008
Technology
Segment
Selected financial data for our Technology Segment for the three
months ended March 31, 2007 and 2008:
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
March 31,
|
|
|
2007
|
|
2008
|
|
|
(unaudited)
|
|
|
(dollars in thousands)
|
|
Revenue
|
|
$
|
15,415
|
|
$
|
18,656
|
Gross profit
|
|
|
9,702
|
|
|
11,989
|
Gross margin percentage
|
|
|
63%
|
|
|
64%
|
Operating expenses
|
|
|
8,869
|
|
|
11,090
|
Net operating income
|
|
|
833
|
|
|
899
|
Revenue. Total revenue for our Technology Segment
increased by 21% to $18.7 million for the three months
ended March 31, 2008 from $15.4 million for the
comparable period in 2007. The increase in revenue was primarily
attributable to an increase in consumable and royalty revenue
due to the continued acceptance and utilization of our
technology in the marketplace. Two customers accounted for 40%
of total Technology Segment revenue in the first quarter of 2008
(21% and 19%, respectively). For comparative purposes, these
same two customers accounted for 35% of total Technology Segment
revenue (12% and 23%, respectively) in the first quarter of 2007.
S-31
A breakdown of revenue in the Technology Segment for the three
months ended March 31, 2007 and 2008 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
March 31,
|
|
|
2007
|
|
2008
|
|
|
(unaudited)
|
|
|
(in thousands)
|
|
System sales
|
|
$
|
5,692
|
|
$
|
6,163
|
Consumable sales
|
|
|
4,811
|
|
|
6,545
|
Royalty revenue
|
|
|
2,532
|
|
|
3,518
|
Service contracts
|
|
|
1,003
|
|
|
1,219
|
Other revenue
|
|
|
1,377
|
|
|
1,211
|
|
|
|
|
|
|
|
|
|
$
|
15,415
|
|
$
|
18,656
|
|
|
|
|
|
|
|
System and peripheral component sales increased by 8% to
$6.2 million for the three months ended March 31, 2008
from $5.7 million for the comparable period of 2007. The
Technology Segment sold 210 of the 220 total system sales in the
three months ended March 31, 2008. For the three months
ended March 31, 2008, five of our partners accounted for
162, or 74%, of total Technology Segment system sales for the
period. These five partners purchased 170, or 81%, of total
technology segment system sales in the three months ended
March 31, 2007.
Consumable sales increased by 36% to $6.5 million for the
three months ended March 31, 2008 from $4.8 million
for the three months ended March 31, 2007. This is
primarily the result of an increase in bulk purchases due to
increased commercial activity by our partners. A bulk purchase
is defined as the purchase of $100,000 or more of consumables in
a quarter. During the three months ended March 31, 2008, we
had 11 bulk purchases of consumables totaling approximately
$5.2 million as compared with 11 bulk purchases totaling
approximately $3.4 million in the three months ended
March 31, 2007. Partners who reported royalty bearing sales
accounted for $6.1 million, or 93%, of total consumable
sales for the three months ended March 31, 2008. As the
number of applications available on our platform expands, we
anticipate that the overall level of consumable sales, and
related bulk purchases, will continue to fluctuate.
Royalty revenue increased by 39% to $3.5 million for the
three months ended March 31, 2008 compared with
$2.5 million for the three months ended March 31,
2007. We believe this is primarily the result of the increased
use and acceptance of our technology. We expect modest
fluctuations in the number of commercial partners submitting
royalties quarter to quarter based upon the varying contractual
terms, consolidations among partners, differing reporting and
payment requirements and the addition of new partners. For the
three months ended March 31, 2008, we had 31 commercial
partners submitting royalties as compared to 32 for the three
months ended March 31, 2007. One of our partners reported
royalties totaling approximately $950,000, or 25% of total
royalties for the three months ended March 31, 2008. Two
other customers reported royalties totaling approximately
$807,000 or 21% (11% and 10%, respectively) of total royalties
for the three months ended March 31, 2008. No other
customer accounted for more than 10% of total royalty revenue
for the three months ended March 31, 2008. Total royalty
bearing sales reported to us by our partners were over
$53 million for the quarter ended March 31, 2008 or
over $215 million on an annualized basis, compared with
over $41 million for the quarter ended March 31, 2007
and over $167 million for the year ended December 31,
2007.
Service contracts revenue increased by 21% to $1.2 million
for the three months ended March 31, 2008 from
$1.0 million for the three months ended March 31,
2007. This increase is attributable to increased sales of
extended service agreements, which are primarily a result of the
increase in the commercial base of Luminex systems as compared
to the prior year period. At March 31, 2008, we had 841
Luminex systems covered under extended service agreements and
$2.3 million in deferred revenue related to those
contracts. At March 31, 2007, we had 747 Luminex systems
covered under extended service agreements and $2.2 million
in deferred revenue related to those contracts.
S-32
Other revenues decreased by 12% to $1.2 million for the
three months ended March 31, 2008 from $1.4 million
for the three months ended March 31, 2007. This decrease is
primarily the result of a decrease in part sales and a decrease
in grant revenue.
Gross profit. The gross profit margin percentage
(gross profit as a percentage of total revenue) for the
Technology Segment increased to 64% for the three months ended
March 31, 2008 from 63% for the three months ended
March 31, 2007. Gross profit for the Technology Segment
increased to $12.0 million for the three months ended
March 31, 2008, as compared to $9.7 million for the
three months ended March 31, 2007. The increase in gross
profit margin percentage was primarily attributable to changes
in revenue mix between our higher and lower gross margin items.
The increase in gross profit was primarily attributable to the
overall increase in revenue coupled with the increase in gross
margin. Consumables and royalties, two of our higher margin
items, comprised $10.1 million, or 54%, of Technology
Segment revenue for the current quarter and $7.3 million,
or 47%, of Technology Segment revenue for the quarter ended
March 31, 2007. We anticipate continued fluctuation in
gross margin rate and related gross profit for the Technology
Segment primarily as a result of variability in partner bulk
purchases and absolute number of quarterly system sales.
Research and development expense. Research and
development expenses for the Technology Segment increased to
$2.7 million for the three months ended March 31, 2008
from $2.0 million for the comparable period in 2007. The
increase was primarily related to an increase in materials and
supplies and additional personnel costs associated with the
addition of employees and contract employees in the Technology
Segment to 69 at March 31, 2008 from 60 at March 31,
2007. The increase in materials and supplies and the number of
employees has allowed us to enhance our focus on development of
our system, consumable and software products and the expansion
of applications for use on our platforms.
Selling, general and administrative
expense. Selling, general and administrative expense
for the Technology Segment increased to $8.4 million for
the three months ended March 31, 2008 from
$6.8 million for the comparable period in 2007. The
increase was primarily related to additional personnel costs and
the related stock compensation and travel costs associated with
the increase in employees and contract employees of the
Technology Segment to 84 at March 31, 2008 from 75 at
March 31, 2007 and higher legal and professional fees.
Other income, net. Other income, net decreased to
$320,000 for the three months ended March 31, 2008 from
$521,000 for the comparable period in 2007. The average rate
earned on current invested balances decreased to 3.7% at
March 31, 2008 from 5.0% at March 31, 2007. This
decrease in the average rate earned is the result of an overall
decrease in market rates compared to the prior year period.
Assay
Segment
Selected financial data for our Assay Segment for the three
months ended March 31, 2007 and 2008:
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
March 31,
|
|
|
2007
|
|
2008
|
|
|
(unaudited)
|
|
|
(dollars in thousands)
|
|
Revenue
|
|
$
|
1,192
|
|
$
|
4,356
|
Gross profit
|
|
|
654
|
|
|
3,268
|
Gross margin percentage
|
|
|
55%
|
|
|
75%
|
Operating expenses
|
|
|
1,859
|
|
|
5,435
|
Net operating loss
|
|
|
(1,205)
|
|
|
(2,167)
|
S-33
A breakdown of revenue in the Assay Segment for the three months
ended March 31, 2007 and 2008 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
March 31,
|
|
|
2007
|
|
2008
|
|
|
(unaudited)
|
|
|
(in thousands)
|
|
System sales
|
|
$
|
40
|
|
$
|
464
|
Consumable sales
|
|
|
|
|
|
9
|
Service contracts
|
|
|
|
|
|
1
|
Assay revenue
|
|
|
1,143
|
|
|
3,845
|
Other revenue
|
|
|
9
|
|
|
37
|
|
|
|
|
|
|
|
|
|
$
|
1,192
|
|
$
|
4,356
|
|
|
|
|
|
|
|
Revenue. Revenues for our Assay Segment for the
three months ended March 31, 2008 include three months of
revenues from LMD and LBG. Revenues for the three months ended
March 31, 2007 include three months of LBG, but only one
month of revenues from LMD, as the LMD acquisition was
consummated on March 1, 2007. The majority of our Assay
Segment revenues are generated from the sales of kits, most of
which are from our Cystic Fibrosis product line. The top five
customers, by revenue, accounted for 66% of total Assay Segment
revenue for the three months ended March 31, 2008. In
particular, three customers accounted for 44% of total Assay
Segment revenue (20%, 19%, and 14% respectively) for the three
months ended March 31, 2008. No other customer accounted
for more than 10% of total Assay Segment revenue. During the
three months ended March 31, 2008, our Assay Segment sold
10 LX Systems. Other revenue includes shipping revenue and
training revenue.
Gross profit. The gross margin rate (gross profit as
a percentage of total revenue) for the Assay Segment increased
to 75% for the three months ended March 31, 2008 from 55%
for the three months ended March 31, 2007. Gross profit for
the Assay Segment increased to $3.3 million for the three
months ended March 31, 2008, as compared to
$0.6 million for the three months ended March 31,
2007. The increase in gross margin rate was primarily
attributable to increased utilization and capacity at LMD,
increased sales of higher gross margin assays, and changes in
revenue mix between our higher and lower gross margin items. The
increase in gross profit was primarily attributable to the
overall increase in revenue coupled with the increase in gross
margin.
Research and development expense. Research and
development expenses for our Assay Segment were
$1.7 million and $0.7 million for the three months
ended March 31, 2008 and 2007, respectively. The increase
in research and development expenses was primarily due to
incorporation of the results of LMD for the full quarter in 2008
compared to the inclusion of only one month of operating results
of LMD in the quarter ended March 31, 2007 as the
acquisition was consummated on March 1, 2007, and to a
lesser extent, to increased activity by LBG related to product
development.
Selling, general and administrative
expense. Selling, general and administrative expenses
for the Assay Segment were $3.2 million and
$1.2 million for the three months ended March 31, 2008
and 2007, respectively. The overall increase in selling,
general, and administrative expenses is primarily due to the
addition of costs associated with LMD. As previously discussed,
the expenses for the three months ended March 31, 2007
include expenses related to LBG for the entire three months and
expenses related to LMD for the month of March only. In
addition, the increase is due to the impact of foreign exchange
on foreign denominated balances of approximately
$0.6 million for the three months ended March 31, 2008
compared to $15,000 for the three months ended March 31,
2007.
Cash provided by operations was $52,000 for the three months
ended March 31, 2008, compared with cash used in operations
of $2.9 million for the three months ended March 31,
2007. Significant items affecting operating cash flows for the
three months ended March 31, 2008 were our net loss of
$1.2 million,
S-34
depreciation and amortization of $1.7 million and stock
compensation of $1.7 million, offset by a decrease in
accrued liabilities of $2.4 million as a result of payments
of bonuses and commissions related to 2007 activity.
Our operating expenses during the three months ended
March 31, 2008 were $16.5 million, of which
$4.4 million was research and development expense and
$12.1 million was selling, general and administrative
expense. We expect research and development expense as a percent
of revenue to be between 15% and 20% of total revenue for the
remainder of 2008. While research and development expense as a
percentage of revenue is expected to decrease, we expect the
absolute dollars of research and development expense to scale
with our revenue growth as a result of our continuing investment
in the research and development pipeline to support our strategy
and expanded focus on product and platform development. We do
not currently expect selling, general, and administrative
expenses in 2008, excluding the impact of foreign exchange on
foreign denominated balances, to increase at the same rate as in
prior years.
Year
Ended December 31, 2006 Compared to Year Ended
December 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
|
|
|
|
|
Variance
|
|
|
Variance
|
|
|
|
2006
|
|
|
2007
|
|
|
($)
|
|
|
(%)
|
|
|
|
(dollars in thousands)
|
|
|
Revenue
|
|
$
|
52,989
|
|
|
$
|
75,010
|
|
|
$
|
22,021
|
|
|
|
42%
|
|
Gross profit
|
|
$
|
32,252
|
|
|
$
|
46,094
|
|
|
$
|
13,842
|
|
|
|
43%
|
|
Gross margin percentage
|
|
|
61%
|
|
|
|
61%
|
|
|
|
0%
|
|
|
|
N/A
|
|
Operating expenses
|
|
$
|
32,833
|
|
|
$
|
63,512
|
|
|
$
|
30,679
|
|
|
|
93%
|
|
Net (loss) income
|
|
$
|
1,507
|
|
|
$
|
(2,711)
|
|
|
$
|
(4,218)
|
|
|
|
280%
|
|
Revenue. Total revenue increased to
$75.0 million for the year ended December 31, 2007
from $53.0 million in 2006. The increase in revenue was
primarily attributable to the Assay Segment (including the
acquisition of LMD and increased activity by LBG) and, in
addition, to a lesser extent increases in consumable and royalty
revenues and system sales in the Technology Segment.
A breakdown of consolidated revenue for the years ended
December 31, 2006 and 2007 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
December 31,
|
|
|
2006
|
|
2007
|
|
|
(in thousands)
|
|
System sales
|
|
$
|
20,644
|
|
$
|
24,428
|
Consumable sales
|
|
|
15,676
|
|
|
19,199
|
Royalty revenue
|
|
|
8,228
|
|
|
10,244
|
Assay revenue
|
|
|
19
|
|
|
11,323
|
Service contracts
|
|
|
3,450
|
|
|
4,431
|
Other revenue
|
|
|
4,972
|
|
|
5,385
|
|
|
|
|
|
|
|
|
|
$
|
52,989
|
|
$
|
75,010
|
|
|
|
|
|
|
|
We continued to have revenue concentration in a limited number
of strategic partners, as the top five customers, by revenue,
accounted for 52% of total revenue in 2007. In particular, two
customers accounted for 35% of 2007 total revenue (20% and 15%,
respectively). No other customer accounted for more than 10% of
total revenue. See the segment discussions that follow on
page S-
of this prospectus supplement for additional revenue discussion.
Gross profit. Gross profit increased to
$46.1 million for the year ended December 31, 2007, as
compared to $32.3 million for the year ended
December 31, 2006. The gross profit margin rate (gross
profit as a percentage of total revenue) was 61% for the year
ended December 31, 2007, consistent with the year ended
December 31, 2006. The flat gross margin rate was primarily
attributable to the acquisition of a company with
S-35
lower gross margins offset by an increase in high margin
consumables and royalty revenue. The increase in gross profit,
in dollar amount was primarily attributable to the overall
increase in revenue.
Research and development expense. Research and
development expenses increased to $15.4 million for the
year ended December 31, 2007 from $8.7 million for the
year ended December 31, 2006. The increase was primarily
attributable to increases in personnel costs associated with the
addition of employees in 2007 related to the LMD acquisition.
Research and development headcount at December 31, 2007 was
111 as compared to 61 at December 31, 2006. The increase in
the number of employees has allowed us to increase our focus on
development of our system, consumable and software products and
the expansion of applications for use on our platforms. As a
percentage of revenue, research and development expense
increased to 21% in 2007 as compared with 16% in 2006. Our
current expectation is for research and development expenses to
be between 15% and 20% of total revenue for 2008.
Selling, general and administrative
expense. Selling, general and administrative expenses
increased to $40.7 million for the year ended
December 31, 2007 from $24.2 million for the
comparable period in 2006. The increase was primarily
attributable to the acquisition of the LMD and to a lesser
extent an increase in stock compensation expense and the impact
of foreign exchange transaction losses related to foreign
currency denominated balances. As a percentage of revenue,
selling, general and administrative expenses were 54% in 2007
and 46% in 2006. We intend to manage our 2008 quarterly
operational expenses towards the same amount that we reported
for the fourth quarter of 2007, excluding the impact of foreign
exchange transaction losses related to foreign currency
denominated balances.
Other Income, net. Other income, consisting
primarily of interest in our cash and investment balances,
decreased to $1.7 million for the year ended
December 31, 2007 from $2.1 million for the year ended
December 31, 2006.
Settlement of litigation. We settled our pending
litigation with RBM on October 15, 2007. As part of the
settlement, We received a cash payment of $12.5 million.
$11.5 million was recognized as part of net income, while
$1.0 million was deferred for licensing rights granted to
RBM from us.
Gain on settlement of liability. $2.3 million
was recognized in the year ended December 31, 2007 related
to the settlement of a liability related to the renegotiation of
a contract acquired as part of the acquisition of LMD.
Segment
Results of Operations for the year ended December 31, 2006
and 2007
Technology
Segment
Selected financial data for the year ended December 31,
2006 and 2007 of our Technology Segment is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
|
|
|
|
Variance
|
|
|
Variance
|
|
|
2006
|
|
|
2007
|
|
|
($)
|
|
|
(%)
|
|
|
(dollars in thousands)
|
|
Revenue
|
|
$
|
52,970
|
|
|
$
|
62,436
|
|
|
$
|
9,466
|
|
|
18%
|
Gross profit
|
|
$
|
32,243
|
|
|
$
|
37,864
|
|
|
$
|
5,621
|
|
|
17%
|
Gross margin percentage
|
|
|
61%
|
|
|
|
61%
|
|
|
|
0%
|
|
|
N/A
|
Operating expenses
|
|
$
|
30,793
|
|
|
$
|
38,391
|
|
|
$
|
7,598
|
|
|
25%
|
Net income
|
|
$
|
3,538
|
|
|
$
|
12,330
|
|
|
$
|
8,792
|
|
|
249%
|
Revenue. Total revenue increased 18% to
$62.4 million for the year ended December 31, 2007
from $53.0 million in 2006. The increase in revenue was
primarily attributable to an increase in system sales and
consumable revenue as will as the continued acceptance and
utilization of our technology in the marketplace as evidenced by
our continued increase in royalty revenue.
S-36
A breakdown of revenue in the Technology Segment for the years
ended December 31, 2006 and 2007 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2006
|
|
2007
|
|
|
(in thousands)
|
|
System sales
|
|
$
|
20,644
|
|
$
|
23,320
|
Consumable sales
|
|
|
15,676
|
|
|
19,197
|
Royalty revenue
|
|
|
8,228
|
|
|
10,213
|
Service contracts
|
|
|
3,450
|
|
|
4,431
|
Assay revenue
|
|
|
|
|
|
|
Other revenue
|
|
|
4,972
|
|
|
5,275
|
|
|
|
|
|
|
|
|
|
$
|
52,970
|
|
$
|
62,436
|
|
|
|
|
|
|
|
The top five customers, by revenue, accounted for 61% of total
revenue in 2007. In particular, two customers accounted for 42%
of 2007 total technology segment revenue (24% and 18%,
respectively). No other customer accounted for more than 10% of
total technology segment revenue.
System and peripheral component sales increased 13% to
$23.3 million for the year ended December 31, 2007
from $20.6 million for the year ended December 31,
2006. System sales increased to 838 LX systems for 2007 as
compared to 718 (717 LX systems and 1 HTS) in the prior year,
bringing total system sales to 4,979 as of December 31,
2007.
Consumable sales, comprised of microspheres and sheath fluid,
increased 22% to $19.2 million during 2007 from
$15.7 million in 2006. We believe the increase was
primarily the result of the increased use and acceptance of our
technology and the increased installed base of our systems.
Partners who reported royalty bearing sales accounted for
$16.1 million, or 84%, of total consumable sales for the
year ended December 31, 2007. In addition, during 2007 we
had 41 bulk purchases of consumables totaling approximately
$14.3 million as compared with 31 bulk purchases totaling
approximately $10.4 million in the prior year.
Royalty revenue increased 24% to $10.2 million for the year
ended December 31, 2007 from $8.2 million for the year
ended December 31, 2006. We believe this increase is
primarily the result of the increased use and acceptance of our
technology. For the year ended December 31, 2007, we had 30
commercial partners submit royalties as compared with 32 for the
year ended December 31, 2006. Additionally, the 30 partners
from whom we recognized $8.2 million in royalties in 2006
represented approximately $9.9 million of the total
royalties in 2007, an increase of approximately 21% over their
prior year payments. Total royalty bearing sales reported to us
by our partners were approximately $167 million for the
year ended December 31, 2007 as compared to
$132.0 million for the year ended December 31, 2006.
Service contracts, comprised of extended warranty contracts
earned ratably over the term of a contract, increased to
$4.4 million during 2007 from $3.5 million in 2006.
This increase was attributable to increased sales of extended
service contracts, which are primarily a result of the increase
in the commercial base of Luminex systems as compared to the
prior year period. At December 31, 2007, we had 799 Luminex
systems covered under extended service agreements and
$1.8 million in deferred revenue related to those
contracts. At December 31, 2006, we had 651 Luminex systems
covered under extended service agreements and $1.8 million
in deferred revenue related to those contracts.
Other revenue, comprised of training revenue, shipping revenue,
miscellaneous part sales, amortized license fees, reagent sales
and grant revenue, increased to $5.3 million for the year
ended December 31, 2007 from $5.0 million for the year
ended December 31, 2006. The increase was primarily
attributable to an increase in grant revenue. Grant revenue
increased to $932,000 for the year ended December 31, 2007
from $352,000 for the year ended December 31, 2006. During
2007, we were awarded an additional government grant from the
Defense Advanced Research Projects Agency (DARPA) in
addition to successfully completing grants from DARPA and the
Homeland Security Advance Research Projects Agency that we were
awarded in 2006. The additional grant from DARPA awarded in 2007
is to develop a multiplex assay system platform
S-37
which can be employed to quickly determine clinically relevant
biological exposure and accurately identify biological agents in
the environment. This platform could lead to a high-performance,
low-cost and portable instrument with applications in biological
agent sensing and military diagnostics. This grant will allow us
to accelerate our product development of related commercial
products (such as a point-of-care diagnostic instrument) and is
specifically designed to shrink both the cost and size of our
current instrument. We believe government grants are significant
because they help support our R&D efforts, establish our
footprint in the Bio-Defense sector and open the door for future
grants.
Gross profit. The gross profit margin rate (gross
profit as a percentage of total revenue) was flat at 61% for the
year ended December 31, 2007 and 2006. Gross profit, in
dollar amount, increased to $37.9 million for the year
ended December 31, 2007, as compared to $32.2 million
for the year ended December 31, 2006. The flat gross margin
rate was primarily attributable to a similar product mix in the
year ended December 31, 2007 as compared to the year ended
December 31, 2006. The increase in gross profit, in dollar
amount, was primarily attributable to the overall increase in
revenue. Consumables and royalties comprised $29.4 million,
or 47%, of revenue for the year ended December 31, 2007 and
$23.9 million, or 45%, for the year ended December 31,
2006.
Operating expenses. Research and development
expenses increased to $8.9 million for the year ended
December 31, 2007 from $7.5 million for the year ended
December 31, 2006. The increase was primarily attributable
to increases in personnel costs associated with the addition of
employees in 2007. Research and development headcount at
December 31, 2007 was 70 as compared to 57 at
December 31, 2006. This increase was partially offset by a
decrease in costs related to direct materials and consumables
utilized in the research and development process. The increase
in the number of employees has allowed us to increase our focus
on development of our system, consumable and software products
and the expansion of applications for use on our platforms. As a
percentage of revenue, research and development expense remained
flat at 14% in 2007 as compared with 2006.
Selling, general and administrative
expenses. Selling, general and administrative expenses
increased to $29.4 million for the year ended
December 31, 2007 from $23.5 million for the
comparable period in 2006. The increase was primarily
attributable to additional personnel cost associated with the
increase in employees to 81 at December 31, 2007 from 70 at
December 31, 2006 and to a lesser extent, an increase in
stock compensation expense. As a percentage of revenue, selling,
general and administrative expenses were 47% in 2007 and 44% in
2006.
Settlement of litigation. We settled our pending
litigation with RBM on October 15, 2007. As part of the
settlement, we received a cash payment of $12.5 million.
$11.5 million was recognized as part of net income, while
$1.0 million was deferred for licensing rights granted to
RBM from us.
Assay
Segment
Selected financial data for the year ended December 31,
2006 and 2007 of our Assay Segment is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
|
|
|
|
|
Variance
|
|
|
Variance
|
|
|
|
2006
|
|
|
2007
|
|
|
($)
|
|
|
(%)
|
|
|
|
(dollars in thousands)
|
|
|
Revenue
|
|
$
|
19
|
|
|
$
|
12,574
|
|
|
$
|
12,555
|
|
|
|
66,079%
|
|
Gross profit
|
|
$
|
9
|
|
|
$
|
8,230
|
|
|
$
|
8,221
|
|
|
|
91,344%
|
|
Gross margin percentage
|
|
|
47%
|
|
|
|
65%
|
|
|
|
18%
|
|
|
|
N/A
|
|
Operating expenses
|
|
$
|
2,040
|
|
|
$
|
25,121
|
|
|
$
|
23,081
|
|
|
|
1,131%
|
|
Net loss
|
|
$
|
(2,031
|
)
|
|
$
|
(15,041
|
)
|
|
$
|
(13,010
|
)
|
|
|
641%
|
|
Revenue. Revenues were derived from LBG for the
twelve months ended December 31, 2006 and 2007 and also
from LMD from March 1, 2007 through December 31, 2007.
S-38
A breakdown of revenue in the Assay Segment for the years ended
December 31, 2006 and 2007 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2006
|
|
2007
|
|
|
(in thousands)
|
|
System sales
|
|
$
|
|
|
$
|
1,108
|
Consumable sales
|
|
|
|
|
|
2
|
Royalty revenue
|
|
|
|
|
|
31
|
Service contracts
|
|
|
|
|
|
|
Assay revenue
|
|
|
19
|
|
|
11,323
|
Other revenue
|
|
|
|
|
|
110
|
|
|
|
|
|
|
|
|
|
$
|
19
|
|
$
|
12,574
|
|
|
|
|
|
|
|
The top five customers, by revenue, accounted for 64% of total
revenue in 2007. In particular, two customers accounted for 46%
of 2007 total revenue (33% and 13%, respectively). No other
customer accounted for more than 10% of total revenue. Assay
revenue consists primarily of kits of which the majority relates
to our Cystic Fibrosis products. System sales during the twelve
months ended 2007 in the Assay Segment were 24 LX Systems. Other
revenue includes contract research and development fees and
commercial milestone revenue.
Operating expenses. Research and development
expenses increased to $6.4 million for the year ended
December 31, 2007 from $1.2 million for the year ended
December 31, 2006. The increase in research and development
expenses can be primarily attributed to the addition of the
acquisition of LMD. LMD contributed approximately 60% of all
research and development expenses. The LBG division contributed
the remaining 40%. The LBG division research and development
expenses increased 117% to $2.6 million primarily as a
result of increased activity related to product development.
Selling, general and administrative
expenses. Selling, general and administrative expenses
increased to $9.6 million for the year ended
December 31, 2007 from $863,000 for the comparable period
in 2006. As previously discussed, the expenses for the twelve
months ended December 31, 2007 include expenses related to
LBG for the entire twelve months and expenses related to LMD
from March 1, 2007, the date of acquisition, to
December 31, 2007. The overall increase in selling, general
and administrative expenses was primarily attributable to the
addition of the LMD division and to a lesser extent increased
activity by the LBG and the impact of foreign exchange
transaction losses related to foreign currency denominated
balances. The LMD division contributed $8.5 million of
selling, general and administrative expenses, or 89%. The LBG
division contributed the remaining 11%. The LBG division
selling, general and administrative expenses increased 36% to
$1.1 million primarily as a result of increased headcount.
Gain on settlement of liability. $2.3 million
was recognized in the year ended December 31, 2007 related
to the settlement of a liability related to the renegotiation of
a contract acquired as part of the acquisition of LMD.
S-39
Year
Ended December 31, 2005 Compared to Year Ended
December 31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2005
|
|
|
2006
|
|
|
Variance
|
|
|
Variance
|
|
|
|
|
|
|
|
|
|
($)
|
|
|
(%)
|
|
|
|
(dollars in thousands)
|
|
|
Revenue
|
|
$
|
42,313
|
|
|
$
|
52,989
|
|
|
$
|
10,676
|
|
|
|
25%
|
|
Gross profit
|
|
$
|
22,321
|
|
|
$
|
32,252
|
|
|
$
|
9,931
|
|
|
|
44%
|
|
Gross margin percentage
|
|
|
53%
|
|
|
|
61%
|
|
|
|
8%
|
|
|
|
N/A
|
|
Operating expenses
|
|
$
|
25,817
|
|
|
$
|
32,833
|
|
|
$
|
7,016
|
|
|
|
27%
|
|
Net income (loss)
|
|
$
|
(2,666)
|
|
|
$
|
1,507
|
|
|
$
|
4,173
|
|
|
|
157%
|
|
Revenue. Total revenue increased to
$53.0 million for the year ended December 31, 2006
from $42.3 million in 2005. The increase in revenue was
primarily attributable to our continued increase in royalty
revenue, an indicator of increased acceptance and utilization of
our technology in the marketplace.
A breakdown of revenue for the years ended December 31,
2005 and 2006 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
December 31,
|
|
|
2005
|
|
2006
|
|
|
(in thousands)
|
|
System sales
|
|
$
|
18,812
|
|
$
|
20,644
|
Consumable sales
|
|
|
13,084
|
|
|
15,676
|
Royalty revenue
|
|
|
5,255
|
|
|
8,228
|
Assay revenue
|
|
|
|
|
|
19
|
Service contracts
|
|
|
2,444
|
|
|
3,450
|
Other revenue
|
|
|
2,718
|
|
|
4,972
|
|
|
|
|
|
|
|
|
|
$
|
42,313
|
|
$
|
52,989
|
|
|
|
|
|
|
|
In 2006, we continued to have revenue concentration in a limited
number of strategic partners, as the top five customers, by
revenue, accounted for 56% of total revenue in 2006. In
particular, two customers accounted for 34% of 2006 total
revenue (19% and 15%, respectively). No other customer accounted
for more than 10% of total revenue.
System and peripheral component sales increased to
$20.6 million for the year ended December 31, 2006.
System sales increased to 718 (717 LX systems and 1 HTS) for
2006 as compared to 698 (693 LX systems and 5 HTS) in the prior
year.
Consumable sales comprised of microspheres and sheath fluid,
increased 20% to $15.7 million during 2006 from
$13.1 million in 2005. We believe this increase was
primarily the result of the increased use and acceptance of our
technology and the increased installed base of our systems.
Partners who reported royalty bearing sales accounted for
$11.8 million, or 75%, of total consumable sales for the
year ended December 31, 2006. In addition, during 2006, we
had 31 bulk purchases of consumables totaling approximately
$10.4 million as compared with 28 bulk purchases totaling
approximately $9.2 million in the prior year.
Royalty revenue increased 57% to $8.2 million for the year
ended December 31, 2006 from $5.3 million for the year
ended December 31, 2005. We believe this increase was also
primarily the result of the increased use and acceptance of our
technology. For the year ended December 31, 2006, we had 32
commercial partners submit royalties as compared with 24 for the
year ended December 31, 2005. Additionally, the 24 partners
from whom we recognized $5.3 million in royalties in 2005
represented approximately $7.6 million of the total
royalties in 2006, an increase of approximately 45% over their
prior year payments. Total royalty bearing sales reported to us
by our partners were approximately $132 million for the
year ended December 31, 2006.
S-40
Service contracts, comprised of extended warranty contracts
earned ratably over the term of a contract, increased to
$3.5 million during 2006 from $2.4 million in 2005.
This increase was attributable to increased sales of extended
service contracts, which is a direct result of the increase in
the commercial base of Luminex systems as compared to the prior
year period.
Other revenue, comprised of training revenue, shipping revenue,
miscellaneous part sales, amortized license fees, reagent sales
and grant revenue, increased to $5.0 million for the year
ended December 31, 2006 from $2.7 million for the year
ended December 31, 2005. The increase was primarily
attributable to an increase in miscellaneous part sales, license
fees and grant revenue. For the year ended December 31,
2006, we had $2.5 million of part sales, $552,000 of
shipping revenue, $861,000 in amortized license fees, $352,000
in grant revenue, a $300,000 milestone payment from a
partner, $256,000 in training revenue and $138,000 of other
miscellaneous revenue.
Gross profit. Gross profit increased to
$32.3 million for the year ended December 31, 2006, as
compared to $22.3 million for the year ended
December 31, 2005. The gross margin percentage increased to
61% for the year ended December 31, 2006 from 53% for the
year ended December 31, 2005. The increase in gross margin
was primarily attributable to the increase in royalties as a
percentage of total revenue, an increase in the average system
sales price which is a result of partner mix and system
configuration fluctuations and to a lesser extent the $352,000
of grant revenue and a $300,000 milestone payment from a
partner.
Research and development expense. Research and
development expenses increased to $8.7 million for the year
ended December 31, 2006 from $5.6 million for the year
ended December 31, 2005. The increase was primarily
attributable to increases in personnel costs associated with the
addition of employees in 2006 and to a lesser extent increased
costs related to direct materials and consumable supplies
utilized in the research and development process and increased
stock compensation expense resulting from the adoption of
SFAS 123(R). Research and development headcount at
December 31, 2006 was 61 as compared to 42 at
December 31, 2005. As a percentage of revenue, research and
development expense increased to 16% in 2006 as compared with
13% in 2005.
Selling, general and administrative
expense. Selling, general and administrative expenses
increased to $24.2 million for the year ended
December 31, 2006 from $20.2 million for the
comparable period in 2005. The increase was primarily
attributable to increased stock compensation expense resulting
from the adoption of SFAS 123(R). Stock compensation
increased to $4.6 million for the year ended
December 31, 2006 from $1.5 million for fiscal 2005.
To a lesser extent, the increase in selling, general and
administrative expenses was a result of additional personnel
cost associated with the increase in employees to 73 at
December 31, 2006 from 70 at December 31, 2005. As a
percentage of revenue, selling, general and administrative
expenses were 46% in 2006 and 48% in 2005.
Other income, net. Other income, consisting
primarily of interest in our cash and investment balances,
increased to $2.1 million for the year ended
December 31, 2006 from $1.2 million for the year ended
December 31, 2005.
We operated under one segment through the end of 2006. As such,
we have not included a 2006 to 2005 comparison by segment.
Liquidity
and Capital Resources
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dec. 31,
|
|
Dec. 31,
|
|
March 31,
|
|
|
2006
|
|
2007
|
|
2008
|
|
|
|
|
|
|
(unaudited)
|
|
|
(in thousands)
|
|
Cash and cash equivalents
|
|
$
|
27,414
|
|
$
|
27,233
|
|
$
|
26,360
|
Short-term investments
|
|
|
10,956
|
|
|
6,944
|
|
|
7,924
|
Long-term investments
|
|
|
7,346
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
45,716
|
|
$
|
34,177
|
|
$
|
34,284
|
|
|
|
|
|
|
S-41
At March 31, 2008, December 31, 2007 and
December 31, 2006, we had working capital of
$43.3 million, $40.8 million and $44.2 million,
respectively. The purchase price of the LMD acquisition was
approximately $49.4 million, including common stock valued
at $41.8 million. In connection with closing the
acquisition, we paid off $13.2 million of LMDs debt
and related fees and paid transaction expenses of approximately
$5.6 million (including $3.6 million of transaction
costs included as part of the purchase price and approximately
$2.0 million of LMD transaction costs incurred prior to
March 1, 2007). Our cash, cash equivalents and investments
were reduced by approximately $11.5 million during the year
ended December 31, 2007 due primarily to the
$18.9 million of specifically indentified costs associated
with the acquisition, our purchase of property, plant and
equipment of $6.7 million primarily for our manufacturing
expansion in preparation for new product offers and expansion of
capacity and facility expansion to accommodate our growth, all
of which were partially offset by the receipt of
$12.5 million in the RBM settlement in the fourth quarter
of 2007. During the three months ended March 31, 2008, our
total cash, cash equivalents and investments balance remained
essentially unchanged as a result of our modest loss of
$1.2 million, which contained non-cash charges of
approximately $3.4 million, which was offset by accrued
liability reductions of approximately $2.4 million.
We have funded our operations to date primarily through the
issuance of equity securities (in conjunction with an initial
public offering in 2000 and subsequent option exercises) and
cash generated from operations. Our cash reserves are held
directly or indirectly in a variety of short-term,
interest-bearing instruments, including obligations of the
United States government or agencies thereof. We do not have any
investments in asset-backed commercial paper.
Cash provided by operations was $52,000 for the three months
ended March 31, 2008, compared with cash used in operations
of $2.9 million for the three months ended March 31,
2007. Significant items affecting operating cash flows for the
three months ended March 31, 2008 were our net loss of
$1.2 million, depreciation and amortization of
$1.7 million and stock compensation of $1.7 million,
offset by a decrease in accrued liabilities of $2.4 million
as a result of payments of bonuses and commissions related to
2007 activity. Cash provided by operations was $8.4 million
for the year ended December 31, 2007. Significant items
affecting operating cash flows for the period were our net loss
of $2.7 million and adjustments for depreciation and
amortization of $5.1 million, the write-off of in-process
research and development of $7.4 million, and stock
compensation of $6.6 million, offset by an increase in
accounts receivable of $3.3 million and a gain on
settlement of liability of $2.3 million.
Our operating expenses during the three months ended
March 31, 2008 were $16.5 million, of which
$4.4 million was research and development expense and
$12.1 million was selling, general and administrative
expense. We expect research and development expense as a
percentage of revenue to be between 15% and 20% of total revenue
for the remainder of 2008. While research and development
expense as a percentage of revenue is expected to decrease, we
expect the absolute dollars of research and development expense
to scale with our revenue growth as a result of our continuing
investment in the research and development pipeline to support
our strategy and expanded focus on product and platform
development. We do not currently expect selling, general, and
administrative expenses in 2008, excluding the impact of the
foreign exchange on foreign denominated balances, to increase at
the same rate as in prior years.
Cash used in investing was $1.8 million for the three
months ended March 31, 2008 as compared with cash provided
by investing of $3.9 million for the three months ended
March 31, 2007. Cash provided by investing was
$1.8 million for the year ended December 31, 2007 as
compared with cash used in investing of $4.5 million for
the year ended December 31, 2006. In 2007, our capital
expenditures for property, plant and equipment increased
significantly to $6.7 million from $2.6 million in
2006, primarily as a result our manufacturing expansion in
preparation for the introduction of new products, expansion of
capacity, and facility and ERP expansion to accommodate our
growth and LMD. Currently, exclusive of changes in investments,
we expect cash used in investing activities to be primarily for
purchases of property, plant and equipment and for it to
decrease towards historical levels.
Cash provided by financing activities was $.8 million for
the quarter ended March 31, 2008 as compared with cash used
in financing activities of $12.2 million for the quarter
ended March 31, 2007. Cash used in
S-42
financing activities was $10.5 million for the year ended
December 31, 2007 as compared with cash provided by
financing activities of $2.6 million for the year ended
December 31, 2006. In 2007, our payments on debt were
$12.3 million for LMD debt retired in connection with the
acquisition.
Our future capital requirements depend on a number of factors,
including our success in developing and expanding markets for
our products, payments under possible future strategic
arrangements, continued progress of our research and development
of potential products, the timing and outcome of regulatory
approvals, the need to acquire licenses to new technology, costs
associated with strategic acquisitions including integration
costs and assumed liabilities, litigation expenses, the status
of competitive products and potential cost associated with both
protecting and defending our intellectual property.
Additionally, actions taken as a result of the ongoing internal
evaluation of our business could result in expenditures not
currently contemplated in our estimates for 2008. We believe,
however, that our existing cash and cash equivalents together
with availability under our revolving credit facility as
described below are sufficient to fund our operating expenses,
capital equipment requirements and other expected liquidity
requirements for the coming twelve months. Based upon our
current operating plan and structure, and excluding the effect
of this offering, management anticipates the total cash, cash
equivalents and investment balance to remain substantially
equivalent to March 31, 2008 levels, in the aggregate,
giving us an anticipated balance in cash, cash equivalents,
short-term and long-term investments at December 31, 2008
of approximately $35.0 million, without giving effect to
this offering. Factors that could affect this estimate, in
addition to those listed above, include: (i) continued
collections of accounts receivable consistent with our
historical experience, (ii) our ability to manage our
inventory levels consistent with past practices,
(iii) signing of partnership agreements which include
significant up front license fees, and (iv) unanticipated
costs associated with, and the negative operating cash flows
resulting from, the LMD acquisition.
On March 1, 2007, we entered into a senior revolving credit
facility with JPMorgan Chase Bank, N.A., which provides
borrowings of up to a maximum aggregate principal amount
outstanding of $15.0 million based on availability under a
borrowing base consisting of eligible accounts and inventory.
The obligations under the senior revolving credit facility are
guaranteed by our wholly-owned domestic subsidiaries and secured
by all of our accounts, equipment inventory and general
intangibles (excluding intellectual property) and those of the
guarantors including the pledge of an intercompany note from LMD
and payable to us. Loans under the senior credit facility accrue
interest on the basis of either a base rate or a LIBOR rate. The
base rate is calculated daily and is the greater of
(i) prime minus 1.00% and (ii) federal funds rate plus
.50%. Borrowings at the LIBOR rate are based on one, two or
three month periods and interest is calculated by taking the sum
of (i) the product of LIBOR for such period and statutory
reserves plus (ii) 1.75%. We pay a fee of 0.125% per annum
on the unfunded portion of the lenders aggregate
commitment under the facility. Approximately, $9.8 million
was available for borrowing at March 31, 2008. This credit
facility currently has a maturity of February 26, 2009.
The senior credit facility contains conditions to making loans,
representations, warranties and covenants, including financial
covenants customary for a transaction of this type. Financial
covenants include (i) a tangible net worth covenant of
$35.0 million and (ii) a liquidity requirement of
availability not less than the funded debt of us and our
subsidiaries (including LMD) calculated using the
unencumbered cash, cash equivalents and marketable securities of
us and our guarantors. The senior credit facility also contains
customary events of default as well as restrictions on
undertaking certain specified corporate actions, including,
among others, asset dispositions, acquisitions and other
investments, dividends, fundamental corporate changes such as
mergers and consolidations, incurrence of additional
indebtedness, creation of liens and negative pledges,
transactions with affiliates and agreements as to certain
subsidiary restrictions and the creation of additional
subsidiaries. If an event of default occurs that is not
otherwise waived or cured, the lender may terminate its
obligations to make loans under the senior credit facility and
may declare the loans then outstanding under the senior credit
facility to be due and payable. We believe we are currently in
compliance with our financial and other covenants under the
senior credit facility. As of June 13, 2008, no amounts
were outstanding under the senior revolving credit facility.
To the extent capital resources are insufficient to meet future
capital requirements, we will have to raise additional funds to
continue the development and deployment of our technologies.
There can be no assurance
S-43
that debt or equity funds will be available on favorable terms,
if at all. To the extent that additional capital is raised
through the sale of equity or convertible debt securities, the
issuance of those securities could result in dilution to our
stockholders. Moreover, incurring debt financing (under our new
credit facility or otherwise) could result in a substantial
portion of our operating cash flow being dedicated to the
payment of principal and interest on such indebtedness, could
render us more vulnerable to competitive pressures and economic
downturns and could impose restrictions on our operations. If
adequate funds are not available, we may be required to curtail
operations significantly or to obtain funds through entering
into agreements on unattractive terms.
Contractual
Obligations
As of March 31, 2008, we had approximately
$7.0 million in non-cancellable obligations for the next
12 months. These obligations are included in our estimated
cash usage described herein.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payment Due By Period
|
|
|
|
|
|
|
Less than 1
|
|
|
|
|
|
|
|
|
More than 5
|
|
Contractual Obligations (unaudited)
|
|
Total
|
|
|
Year
|
|
|
1-3 Years
|
|
|
3-5 Years
|
|
|
Years
|
|
|
|
(in thousands)
|
|
|
Non-cancelable rental obligations
|
|
$
|
4,304
|
|
|
$
|
2,326
|
|
|
$
|
1,816
|
|
|
$
|
162
|
|
|
$
|
-
|
|
Non-cancelable purchase
obligations(1)
|
|
|
9,021
|
|
|
|
4,551
|
|
|
|
851
|
|
|
|
999
|
|
|
|
2,620
|
|
Long-term debt
obligations(2)
|
|
|
5,495
|
|
|
|
129
|
|
|
|
1,318
|
|
|
|
4,048
|
|
|
|
-
|
|
Capital lease obligations
|
|
|
83
|
|
|
|
35
|
|
|
|
48
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
18,903
|
|
|
$
|
7,041
|
|
|
$
|
4,033
|
|
|
$
|
5,209
|
|
|
$
|
2,620
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Purchase obligations include
contractual arrangements in the form of purchase orders
primarily resulting from normal inventory purchases or minimum
payments due resulting when minimum purchase commitments are not
met and annual minimum purchase requirements in supply
agreements. Purchase obligations relating to purchase orders do
not extend beyond a year; however, we would expect future years
to have these purchase commitments that will arise in the
ordinary course of business and will generally increase or
decrease according to fluctuations in overall sales volume.
Annual minimum purchase requirements in supply agreements extend
up to ten years.
|
|
(2)
|
|
In 2003, Tm Bioscience entered into
an agreement with the Ministry of Industry of the Government of
Canada under which the Government agreed to invest up to
Canadian (Cdn) 7.3 million relating to the
development of several genetic tests. Funds were advanced from
Technology Partnerships Canada (TPC), a special
operating program. We assumed this agreement upon acquisition of
Tm Bioscience, now LMD. LMD has received $4.3 million from
TPC which is expected to be repaid along with approximately
$1.4 million of imputed interest for a total of
approximately $5.7 million. LMD has agreed to repay the TPC
funding through a royalty on assay revenue related to the funded
product development. Royalty payments commenced in 2007 at a
rate of 1% of assay revenue and at a rate of 2.5% for 2008 and
thereafter. Aggregate royalty repayment will continue until
total advances plus imputed interest has been repaid or until
April 30, 2015, whichever is earlier. The repayment
obligation expires on April 30, 2015 and any unpaid balance
will be cancelled and forgiven on that date. Should the term of
repayment be shorter than we expect due to higher than expected
assay revenue, the effective interest rate would decrease as
repayment is accelerated. Repayments denominated in U.S. Dollars
are currently projected to be as shown in the table above, but
actual future sales generating a repayment obligation will vary
from this projection and are subject to the risks and
uncertainties described elsewhere in this prospectus supplement,
including under Risk Factors and
Forward-Looking Statements. Furthermore, payment
reflected in U.S. Dollars is subject to adjustment based upon
applicable exchange rates as of the reporting date.
|
Inflation
We do not believe that inflation has had a direct adverse effect
on our operations through March 31, 2008. However, a
substantial increase in product and manufacturing costs and
personnel related expenses could have an adverse impact on our
results of operations in the event these expenses increase at a
faster pace than we can increase our system, consumable and
royalty rates.
Recent
Accounting Pronouncements
In September 2006, the Financial Accounting Standards Board
(FASB) issued FAS No. 157, Fair
Value Measurements (FAS 157). FAS 157 provides
enhanced guidance for using fair value to measure assets and
liabilities. It does not require any new fair value
measurements, but does require expanded disclosures to provide
information about the extent to which fair value is used to
measure assets and liabilities, the methods and assumptions used
to measure fair value, and the effect of fair value measures on
earnings. FAS 157 is
S-44
effective for financial assets and financial liabilities for
fiscal years beginning after November 15, 2007. In February
2008, the FASB issued FASB Staff Position
FAS 157-2,
Effective Date of FASB Statement No. 157 (the
FSP). The FSP delayed, for one year, the effective
date of FAS 157 for all nonfinancial assets and
liabilities, except those that are recognized or disclosed in
the financial statements on at least an annual basis. The
implementation of SFAS No. 157 for financial assets
and financial liabilities, effective January 1, 2008, did
not have a material impact on our consolidated financial
position and results of operations for the first quarter. We
will disclose the fair value of our debt in our Annual Report on
Form 10-K
for the year ended December 31, 2008. We are currently
assessing the impact of SFAS No. 157 for nonfinancial
assets and nonfinancial liabilities on its consolidated
financial position and results of operations.
In February 2007, the FASB issued FAS No. 159,
The Fair Value Option for Financial Assets and Financial
Liabilities Including an amendment of FASB Statement
No. 115 (FAS 159). FAS No. 159 permits
entities to choose to measure many financial assets and
financial liabilities at fair value. Unrealized gains and losses
on items for which the fair value option has been elected are
reported in earnings. FAS No. 159 is effective for
fiscal years beginning after November 15, 2007. The
implementation of this standard did not have a material impact
on our consolidated financial position and results of operations.
In December 2007, the FASB issued FAS No. 141 (Revised
2007), Business Combinations (FAS 141R) which
replaces FAS No. 141, Business
Combinations and FAS No. 160,
Noncontrolling Interests in Consolidated Financial
Statements (FAS 160). FAS 141R establishes
principles and requirements for how an acquirer recognizes and
measures in its financial statements the identifiable assets
acquired, the liabilities assumed, any noncontrolling interest
in the acquiree and the goodwill acquired. FAS 141R also
establishes disclosure requirements that will enable users to
evaluate the nature and financial effects of the business
combination. FAS 160 clarifies the classification of
noncontrolling interests in the financial statements and the
accounting for and reporting of transactions between the
reporting entity and holders of such noncontrolling interests.
FAS 141R and FAS 160 are effective for our fiscal year
2009 and must be applied prospectively to all new acquisitions
closing on or after January 1, 2009. We are currently
evaluating the potential impact, if any, of FAS 141R and
FAS 160 on our consolidated financial position and results
of operations.
In April 2008, the FASB issued FSP
No. FAS 142-3,
Determination of the Useful Life of Intangible
Assets (FSP
FAS 142-3).
FSP
FAS 142-3
amends the factors that should be considered in developing
renewal or extension assumptions used to determine the useful
life of a recognized intangible asset under
FAS No. 142, Goodwill and Other Intangible
Assets (FAS 142). The intent of the position is to
improve the consistency between the useful life of a recognized
intangible asset under FAS 142 and the period of expected
cash flows used to measure the fair value of the asset under
FAS 141R, and other U.S. generally accepted accounting
principles. The provisions of FSP
FAS 142-3
are effective for fiscal years beginning after December 15,
2008. FSP
FAS 142-3
is effective for the Companys fiscal year ending
December 31, 2009. We will evaluate the impact, if any,
that the adoption of FSP
FAS 142-3
could have on our consolidated financial statements.
Quantitative
and Qualitative Disclosure about Market Risk
Interest Rate Risk. Our interest income is sensitive to
changes in the general level of domestic interest rates,
particularly since our investments are in short-term and
long-term instruments held to maturity. A 50 basis point
fluctuation from average investment returns at March 31,
2008 would yield an approximate 7% variance in overall
investment return. Due to our intention to hold our investments
to maturity, we have concluded that there is no material market
risk exposure.
Our revolving credit facility also will be affected by
fluctuations in interest rates as it is based on LIBOR, prime
minus 1% or the Federal Funds Effective Rate in effect plus
0.50%. As of March 31, 2008, we had not drawn on this
facility.
Foreign currency risk. As of March 31, 2008, as
a result of our foreign operations, we have costs, assets and
liabilities that are denominated in foreign currencies,
primarily Canadian dollars and to a lesser extent the Euro. For
example, some fixed asset purchases, certain expenses, and the
TPC debt of our Canadian subsidiary, LMD, are denominated in
Canadian dollars, while sales of products are primarily
denominated in U.S. dollars. All transactions in our
Netherlands subsidiary are denominated in Euros. As a
consequence, movements in
S-45
exchange rates could cause our foreign currency denominated
expenses to fluctuate as a percentage of net revenue, affecting
our profitability and cash flows. A significant majority of our
revenues are denominated in U.S. dollars. The impact of
foreign exchange on foreign denominated balances will vary in
relation to changes between the U.S. and Canadian dollar
exchange rates. A 10% change in the Canadian dollar in relation
to the U.S. dollar could result in a foreign exchange
impact of approximately $410,000 dollars for the three months
ended March 31, 2008.
In addition, the indirect effect of fluctuations in interest
rates and foreign currency exchange rates could have a material
adverse effect on our business financial condition and results
of operations. For example currency exchange rate fluctuations
could affect international demand for our products. In addition,
interest rates fluctuations could affect our customers
buying patterns. Furthermore, interest rate and currency
exchange rate fluctuations may broadly influence the United
States and foreign economies resulting in a material adverse
effect on our business, financial condition and results of
operations. As a result, we cannot give any assurance as to the
effect that future changes in foreign currency rates will have
on our consolidated financial position, results of operations or
cash flows. Our aggregate foreign currency transaction loss of
$574,000 was included in determining our consolidated results of
operations for the three months ended March 31, 2008.
S-46
MANAGEMENT
|
|
|
|
|
|
|
Name
|
|
Age
|
|
Position
|
|
G. Walter Loewenbaum II
|
|
|
63
|
|
|
Director and Chairman
|
Patrick J. Balthrop, Sr.
|
|
|
51
|
|
|
President, Chief Executive Officer and Director
|
Robert J. Cresci
|
|
|
64
|
|
|
Director
|
Thomas W. Erickson
|
|
|
57
|
|
|
Director
|
Fred C. Goad, Jr.
|
|
|
67
|
|
|
Director
|
Jay B. Johnston
|
|
|
65
|
|
|
Director
|
Jim D. Kever
|
|
|
55
|
|
|
Director
|
Kevin M. McNamara
|
|
|
52
|
|
|
Director
|
J. Stark Thompson
|
|
|
67
|
|
|
Director
|
Gerard Vaillant
|
|
|
66
|
|
|
Director
|
Douglas C. Bryant
|
|
|
51
|
|
|
Executive Vice President and Chief Operating Officer
|
Russell W. Bradley
|
|
|
44
|
|
|
Vice President, Business Development and Strategic Planning
|
Jeremy Bridge-Cook, P.h.D
|
|
|
39
|
|
|
Vice President, Luminex Molecular Diagnostics
|
John C. Carrano, P.h.D
|
|
|
49
|
|
|
Vice President, Research and Development
|
Harriss T. Currie
|
|
|
46
|
|
|
Chief Financial Officer, Vice President, Finance and Treasurer
|
Gregory J. Gosch
|
|
|
45
|
|
|
Vice President, Luminex Bioscience Group
|
David S. Reiter
|
|
|
41
|
|
|
Vice President, General Counsel and Corporate Secretary
|
G. Walter Loewenbaum II. Mr. Loewenbaum has
served as a member of the board of directors since May 1995 and
as Chairman of the board of directors since September 2002. He
served as Vice Chairman of the board of directors from April
1998 until January 2000. Mr. Loewenbaum currently serves as
Chairman and Chief Executive Officer of Mumboe Corp. (f/k/a
Finetooth Corp.), a provider of contract management solutions.
Additionally, from July 1999 through 2003, he served as a Member
of LeCorgne Loewenbaum & Co., LLC, an investment
banking firm. From April 1990 until June 1999, he served as the
President, Chairman and Chief Executive Officer of
Loewenbaum & Company, Inc. (f/k/a Southcoast Capital),
an investment banking company. Mr. Loewenbaum also has
served as Chairman of the board of directors of 3D Systems
Corporation, a global provider of solid imaging solutions, since
September 1999, and was previously Chairman of the board of
directors of Envoy Corporation (Envoy), a
provider of electronic transaction processing services for the
healthcare industry. He received a B.A. from the University of
North Carolina.
Patrick J. Balthrop, Sr. Mr. Balthrop
has served as our President and Chief Executive Officer since
May 2004 and has served as a member of the board of
directors and the Executive Committee since September 2004.
Prior to joining us, he was employed by Fisher Scientific
International Inc. where, since 2002, he served as President of
Fisher Healthcare, a Fisher Scientific company that focuses on
diagnostic testing needs in the healthcare industry. Prior to
Fisher Scientific International, Mr. Balthrop served in a
number of leadership positions for over 20 years with
Abbott Laboratories, a global, broad-based healthcare company,
primarily in Abbotts Diagnostics Division.
Mr. Balthrops most recent positions at Abbott were as
head of worldwide commercial diagnostics operations and as head
of Abbott Vascular. His experience at Abbott and Fisher included
sales, marketing, manufacturing operations, international
experience, research and development and senior management.
Mr. Balthrop holds an M.B.A. from the Kellogg Graduate
School of Management of Northwestern University, and a B.S. in
Biology from Spring Hill College.
Robert J. Cresci. Mr. Cresci has served as a
member of the board of directors since December 1996. He has
been a Managing Director of Pecks Management Partners Ltd., an
investment management firm, since September 1990.
Mr. Cresci currently serves on the boards of directors of
Sepracor Inc., a research-based pharmaceutical company, j2
Global Communications, Inc., a global provider of outsourced
value-added messaging and communications services, and
ContinuCare Corporation, a provider of primary care physician
S-47
services. Mr. Cresci received his undergraduate degree from
the United States Military Academy at West Point and received
his M.B.A. in Finance from the Columbia University Graduate
School of Business.
Thomas W. Erickson. Mr. Erickson has served as
a member of the board of directors since May 2004.
Mr. Erickson served as our Interim President and Chief
Executive Officer from September 2002 until our hiring of
Mr. Balthrop in May 2004. He is currently a Senior Advisor
to New Mountain Capital, LLC, a private equity firm. Previously,
he served as Chairman of the board and Interim Chief Executive
Officer of National Medical Health Card Systems, Inc., a
pharmacy benefits manager, Chairman of the board of PATHCare,
Inc., an operator of long term care facilities, Chairman of the
board of TransHealthcare, Inc., an operator of nursing homes,
skilled nursing facilities and long term care facilities,
Chairman and Interim President and CEO of LifeCare Holdings,
Inc., an operator of long-term acute care hospitals, and Interim
President and CEO of Omega Healthcare Investors, Inc., a
healthcare focused real estate investment trust.
Mr. Erickson was also co-founder, President and CEO of
CareSelect Group, Inc., a physician practice management company.
Earlier in his career, he held several management positions at
American Hospital Supply Corporation. Mr. Erickson holds a
Bachelors degree from University of Iowa and an M.B.A. from
Southern Methodist University.
Fred C. Goad, Jr. Mr. Goad has served as a
member of the board of directors since September 1997. Since
August 2001, he has been a member in Voyent Partners, L.L.C., a
private investment company. Mr. Goad served as Co-Chief
Executive Officer of the transaction services division of WebMD
Corporation (WebMD), a provider of healthcare
transaction, information and technology services, from June 2000
through March 2001. From March 1999 through May 2000,
Mr. Goad served as Senior Advisor to the Office of the
President of the transaction services division of Quintiles
Transnational Corporation (Quintiles), a provider of
integrated product and commercial development solutions to the
pharmaceutical, biotechnology and medical device industries.
Mr. Goad served as Co-Chief Executive Officer and Chairman
of Envoy from June 1996 until Envoy was acquired by Quintiles in
March 1999. From 1985 to June 1996, Mr. Goad served as
President and Chief Executive Officer of Envoy. Mr. Goad
serves on the boards of directors of Performance Food Group
Company, Emageon Inc. and several private companies.
Jay B. Johnston. Mr. Johnston has served as a
member of the board of directors since February 2005.
Mr. Johnston currently serves as Chairman of QuesTek
Innovations, LLC, a privately-held company that designs and
markets high tech materials. From
1975-1999,
he held numerous positions at Abbott Laboratories, most recently
Corporate Vice President for Diagnostic Assays and Systems. He
held numerous other positions with Abbott Laboratories,
including President of Dainabot Co. Ltd. and Vice President Asia
Pacific. Mr. Johnston has experience in general management,
product development, technology management, strategic marketing
and business development. He holds an M.B.A. in General
Management from the Amos Tuck School of Business Administration
and a B.A. degree in Public Administration from Dartmouth
College.
Jim D. Kever. Mr. Kever has served as a member
of the board of directors since December 1996. He has been a
member in Voyent Partners, L.L.C. since August 2001.
Mr. Kever served as Co-Chief Executive Officer of the
transaction services division of WebMD from June 2000 to March
2001. From March 1999 through May 2000, Mr. Kever served as
Chief Executive Officer of the transaction services division of
Quintiles. From August 1995 through March 1999, Mr. Kever
was the President and Co-Chief Executive Officer of Envoy.
Mr. Kever joined Envoy as Treasurer and General Counsel in
October 1981. Mr. Kever serves on the boards of directors
of 3D Systems Corporation, Transaction Systems Architects, Inc.,
a provider of electronic software and services payment, and
Tyson Foods, Inc., a leading food production company.
Mr. Kever received a B.S. in business and administration
from the University of Arkansas in 1974 and a J.D. from the
Vanderbilt University School of Law in 1977.
Kevin M. McNamara. Mr. McNamara has served as a
member of the board of directors since May 2003. In addition, he
provided financial and strategic consulting services to us from
October 2001 through December 2002. Mr. McNamara has
served as Executive Vice President, Chief Financial Officer and
Treasurer of HealthSpring, Inc., a managed care company, since
April 2005. Mr. McNamara also served as non-executive
chairman from April 2005 through January 2006 of MedAvant
Healthcare Solutions (f/k/a ProxyMed, Inc.), a provider of
automated healthcare business and cost containment solutions for
financial, administrative and
S-48
clinical transactions in the healthcare payments marketplace,
and served as Interim Chief Executive Officer of ProxyMed, Inc.
from December 2004 through June 2005. Mr. McNamara
previously served as Chief Financial Officer of HCCA
International, Inc., a healthcare management and recruitment
company from October 2002 to April 2005. Mr. McNamara
serves on the board of directors of Tyson Foods, Inc.
Mr. McNamara is a Certified Public Accountant (inactive)
and holds a B.S. in Accounting from Virginia Commonwealth
University and a M.B.A. from the University of Richmond.
J. Stark Thompson. Mr. Thompson has served as a
member of the board of directors since June 2005.
Mr. Thompson has served as Non-Executive Chairman of the
board of directors of Ore Pharmaceuticals Inc. (f/k/a Gene
Logic, Inc.), a commercial drug development company, since
November 2004 and as a director since February 2002.
Mr. Thompson is the sole proprietor of Black Horse Yachts,
LLC, a manufacturer of semi-custom yachts. Mr. Thompson
most recently served as President, Chief Executive Officer and
Director of Life Technologies, Inc., a developer, manufacturer
and supplier of products and services for life science
researchers and biotechnology companies, from 1988 until his
retirement in 2000. He previously held a number of research,
sales, product development, operations and other positions over
a 21 year career with the E. I. du Pont de Nemours and
Company. He serves on the board of various private and civic
organizations. Mr. Thompson has a Bachelor of Science
degree from Muskingum College and a Masters of Science and Ph.D.
in Physiological Chemistry from the Ohio State University.
Gerard Vaillant. Mr. Vaillant has served as a
member of the board of directors since February 2005.
Mr. Vaillant held a number of positions within
Johnson & Johnson, a manufacturer of health care
products, from 1981 through 2004. Most recently,
Mr. Vaillant served as Company Group Chairman until he
retired. He also served as Chairman for Ortho-Clinical
Diagnostics, Inc., Veridex LLC and Therakos, Inc, and as a
member of several other operating committees within
Johnson & Johnson during that period. In addition,
from
1992-1995,
he was the Worldwide President of LifeScan, a company dedicated
to improving the quality of life for people with diabetes by
developing, manufacturing and marketing a wide range of blood
glucose monitoring systems and software. He currently serves on
the board of directors of Sensors for Medicine and Science,
Inc., a development stage biotechnology company, and Tecan AG, a
global provider storage and logistics systems to the life
science supply industry. He holds a Masters Degree &
Superior Certificate in Biochemistry & Industrial
Chemistry from Paris University of Sciences and a Degree in
Marketing from Ecole Superieure de Commerce de Paris.
Douglas C. Bryant. Mr. Bryant has served as
Executive Vice President and Chief Operating Officer since July
2007. Previously, Mr. Bryant served as Vice President,
Abbott Vascular, Asia and Japan, a division of Abbott
Laboratories. Mr. Bryant previously served as Vice
President, Global Commercial Operations for Abbott Diagnostics
and Abbott Molecular and also ran Abbotts Diagnostics
Operations in Asia Pacific and Europe Africa and the Middle
East. Mr. Bryant has over 23 years of industry
experience in sales and marketing, product development,
manufacturing and service and support in both the life sciences
and diagnostics markets. Mr. Bryant has a Bachelor of Arts
in Economics from the University of California, Davis.
Russell W. Bradley. Mr. Bradley has served as
Vice President of Business Development and Strategic Planning
since May 2005. Previously, Mr. Bradley spent 17 years
at Beckman Coulter Corp. where he served as the Director of the
Beckman Coulter CARES initiative, involved in the companys
clinical HIV/AIDS monitoring business in developing regions
around the globe. During his tenure at Beckman Coulter,
Mr. Bradley was involved in the evaluation, market
assessment and successful commercial launch of multiple life
science technologies and applications. Mr. Bradley holds a
B.S. in Immunology and Biochemistry from Monash University,
Melbourne, Australia.
Jeremy Bridge-Cook, Ph.D. Dr. Bridge-Cook
has served as Vice President of Luminex Molecular Diagnostics
since March 2007. Previously, Dr. Bridge-Cook served as Sr.
Vice President, Corporate Development of Tm Bioscience
Corporation. Dr. Bridge-Cook joined Tm Bioscience in July
2000 as Director of Business Development and served in various
capacities thereafter, including Vice President of Business
Development, Vice President of Marketing & Business
Development, and finally Sr. Vice President, Corporate
Development. Prior to joining Tm Bioscience,
Dr. Bridge-Cook worked for three years as an Investment
S-49
Analyst at MDS Capital Corp. and University Medical Discoveries
Inc. Dr. Bridge-Cook has a Ph.D. in immunology from the
University of Toronto.
John C. Carrano, Ph.D. Dr. Carrano has
served as Vice President, Research and Development since July
2006 and joined Luminex in July 2005. Dr. Carrano formerly
served as Executive Director, Research and Development. Prior to
joining Luminex, Dr. Carrano was a program manager at the
Defense Advance Research Projects Agency where he led several
major Defense Department programs related to biological and
chemical sensing. His other recent positions include Assistant
Professor of Electrical Engineering, Department of Electrical
Engineering and Computer Science, United States Military
Academy, and Research Scientist, U.S. Army Research
Laboratory, Adelphi MD. In June 2005, Dr. Carrano retired
from the military as a Lieutenant Colonel after 24 years of
service. Dr. Carrano received his B.S., from the United
States Military Academy, West Point, in 1981, and received his
M.S. and Ph.D. in Electrical Engineering from the University of
Texas at Austin. Dr. Carrano is also a graduate of the
U.S. Army Command and General Staff College.
Harriss T. Currie. Mr. Currie has served as
Vice President, Finance, Treasurer and Chief Financial Officer
since October 2003. Since joining us in November of 1998,
Mr. Currie previously served in the capacities of
Controller, Treasurer and Acting Chief Financial Officer. Prior
to joining us, he was employed as the Chief Financial Officer,
Secretary and Treasurer of SpectraCell Laboratories, a
specialized clinical testing laboratory company, from 1993 to
1998 where he also served as Vice President of Finance for two
subsidiary companies. Mr. Currie earned his B.B.A. from
Southwestern University and his M.B.A. in Finance and Marketing
from The University of Texas at Austin. Prior to returning to
graduate school for his M.B.A., Mr. Currie was a certified
public accountant with Deloitte & Touche LLP.
Gregory J. Gosch. Mr. Gosch has served as Vice
President, Luminex Bioscience Group since March 2008.
Mr. Gosch previously served in the capacity of Vice
President, Marketing and Sales and joined us in October 2004.
Before joining Luminex, Mr. Gosch served as Senior Director
of Sales and Marketing for Nanogen, a provider of advanced
diagnostic products, from 1999 to 2004 where he was responsible
for worldwide marketing and U.S. sales. From 1997 to 1999,
he served as Market Development Manager for Chiron Corporation,
a global biopharmaceutical company. In addition, Mr. Gosch
has held various sales and marketing positions at Meridian
Diagnostics and Bio-Rad Laboratories, Inc. Mr. Gosch holds
an M.B.A. from the Carlson School of Management, a Masters of
Health Care Administration from the School of Public Health,
both of the University of Minnesota, and a B.A. in Molecular,
Cellular and Developmental Biology from the University of
Colorado.
David S. Reiter. Mr. Reiter has served as Vice
President, General Counsel and Corporate Secretary since October
2003. Prior to becoming General Counsel, Mr. Reiter was in
private practice with the firm of Phillips & Reiter,
PLLC, which provides outsourced general counsel services for
technology companies. Before co-founding the firm,
Mr. Reiter was Vice President and General Counsel for 724
Solutions Inc., a provider of mobile commerce software solutions
and applications (NASDAQ: SVNX). Earlier in his career,
Mr. Reiter served as senior counsel for Compaq Computer
Corporation, supporting the Worldwide Sales &
Services, Supply Chain Management and Consumer Products Group.
Mr. Reiter is a graduate of the University of Southern
California (Juris Doctorate/Master of International Relations),
holds an M.B.A. from the University of Sheffield, UK and a B.A.
in Government from the University of Notre Dame. Mr. Reiter
is a member of the Texas Bar and the American Bar Association
and is on the Board of Directors for the Austin Chamber of
Commerce.
S-50
PRINCIPAL
STOCKHOLDERS
The following table sets forth certain information known to us
regarding the ownership of our common stock as of May 31,
2008 (except as otherwise indicated below) by (i) each
director, (ii) each executive officer, (iii) all
directors and executive officers as a group and (iv) each
person known to us to own beneficially 5% or more of our
outstanding common stock.
The information set forth below includes shares of common stock
directly and indirectly owned and shares of common stock
underlying currently exercisable options, as well as those
options which will become exercisable within 60 days of
May 31, 2008. Except as otherwise indicated, the named
persons below have sole voting and dispositive power with
respect to beneficially owned shares.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock Beneficially Owned
|
|
|
|
Number of
|
|
Total as a Percentage of Shares Outstanding
|
|
Beneficial Owner
|
|
Shares Owned (1)
|
|
Before Offering
|
|
|
After Offering (2)
|
|
|
|
|
|
Directors and Executive Officers (3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
G. Walter Loewenbaum II (4)
|
|
|
1,756,000
|
|
|
4.7
|
%
|
|
|
|
|
Patrick J. Balthrop, Sr.
|
|
|
866,942
|
|
|
2.3
|
%
|
|
|
|
|
Robert J. Cresci (5)
|
|
|
232,396
|
|
|
*
|
|
|
|
*
|
|
Thomas W. Erickson
|
|
|
298,157
|
|
|
*
|
|
|
|
*
|
|
Fred C. Goad, Jr. (6)
|
|
|
296,555
|
|
|
*
|
|
|
|
*
|
|
Jay B. Johnston (7)
|
|
|
74,883
|
|
|
*
|
|
|
|
*
|
|
Jim D. Kever (8)
|
|
|
170,911
|
|
|
*
|
|
|
|
*
|
|
Kevin M. McNamara
|
|
|
125,404
|
|
|
*
|
|
|
|
*
|
|
J. Stark Thompson
|
|
|
22,289
|
|
|
*
|
|
|
|
*
|
|
Gerard Vaillant
|
|
|
39,878
|
|
|
*
|
|
|
|
*
|
|
Douglas C. Bryant
|
|
|
79,261
|
|
|
*
|
|
|
|
*
|
|
Russell W. Bradley
|
|
|
69,845
|
|
|
*
|
|
|
|
*
|
|
Jeremy Bridge-Cook, Ph.D.
|
|
|
18,276
|
|
|
*
|
|
|
|
*
|
|
John C. Carrano, Ph.D.
|
|
|
53,845
|
|
|
*
|
|
|
|
*
|
|
Harriss T. Currie
|
|
|
279,062
|
|
|
*
|
|
|
|
*
|
|
Gregory J. Gosch
|
|
|
120,172
|
|
|
*
|
|
|
|
*
|
|
David S. Reiter
|
|
|
169,938
|
|
|
*
|
|
|
|
*
|
|
All directors and executive officers as a group (17 persons)
|
|
|
4,673,814
|
|
|
12.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other 5% Stockholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
St. Denis J. Villere & Company, LLC (9)
210 Baronne Street, Suite 808
New Orleans, LA 70112
|
|
|
5,215,278
|
|
|
14.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Barclays Global Investors, N.A. (10)
45 Fremont Street
San Francisco, CA 94105
|
|
|
1,517,204
|
|
|
4.1
|
%
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes shares attributable to shares of common stock not
outstanding but subject to currently exercisable options (as
well as those options which will become exercisable within
60 days of May 31, 2008) as follows:
Mr. Loewenbaum-100,000 shares;
Mr. Balthrop-509,844 shares;
Mr. Cresci-45,200 shares;
Mr. Erickson-262,500 shares;
Mr. Goad-10,000 shares;
Mr. Johnston-15,000 shares;
Mr. Kever-45,200 shares;
Mr. McNamara-95,000 shares;
Mr. Thompson-0 shares;
Mr. Vaillant-15,000 shares;
Mr. Currie-212,474 shares;
Mr. Reiter-122,605 shares;
|
S-51
|
|
|
|
|
Dr. Bridge-Cook-9,218 shares;
Mr. Gosch-73,786 shares;
Mr. Bradley-2,171 shares;
Dr. Carrano-4,343 shares;
Mr. Bryant-10,833 shares;
and all directors and executive officers as a
group-1,533,174 shares. |
|
(2) |
|
Does not reflect exercise of underwriters over-allotment
option. |
|
(3) |
|
The applicable address for all directors and named executive
officers is
c/o Luminex
Corporation, 12212 Technology Boulevard, Austin, Texas
78727. |
|
(4) |
|
Does not include 1,236,508 shares held by
Mr. Loewenbaums wife, Lillian Loewenbaum;
10,014 shares held by a trust for the benefit of Lillian
Loewenbaum of which Lillian Loewenbaum is the trustee; and
127,472 shares held by a trust for the benefit of
Mr. Loewenbaums descendants which has an independent
trustee and over which Mr. Loewenbaum neither has nor
shares investment or voting power. |
|
(5) |
|
Mr. Cresci has granted a security interest in
160,650 shares directly owned by him as collateral for a
loan. |
|
(6) |
|
Includes 4,810 shares held by a trust of which
Mr. Goad is the trustee. Mr. Goad disclaims beneficial
ownership of the shares held by the trust. |
|
(7) |
|
Includes 8,000 shares held by JK Investments II, a limited
partnership managed by Mr. Johnston and his wife and of
which a trust for the benefit of Mr. Johnstons
children is the limited partner. |
|
(8) |
|
Does not include 51,212 shares held by a trust for the
benefit of Mr. Kevers children. Mr. Kever
disclaims beneficial ownership of the shares held by the trust. |
|
(9) |
|
This information is as of December 31, 2007, and is based
solely on a Schedule 13G/A filed by St. Denis J.
Villere & Company on January 15, 2008. St. Denis
J. Villere & Company is an investment advisor
registered under Section 203 of the Investment Advisors Act
of 1940 and reports sole voting and dispositive power as to
808,973 shares and shared voting and dispositive power as
to 4,406,305 shares. |
|
(10) |
|
This information is as of December 31, 2007, and is based
solely on a Schedule 13G filed by Barclays Global
Investors, N.A. on January 22, 2008. Barclays Global
Investors, N.A. is a Bank as defined in Section 3(a)(6) of
the Securities Exchange Act of 1934 and reports sole voting
power as to 1,401,793 shares and sole dispositive power as
to 1,517,204 shares. |
S-52
MATERIAL
TAX CONSEQUENCES TO
NON-UNITED
STATES HOLDERS
The following is a general discussion of the material United
States federal income and estate tax considerations applicable
to a
non-U.S. holder
(as defined below) with respect to the acquisition, ownership
and disposition of our common stock as of the date hereof. This
discussion is for general information only and is not tax
advice. As used in this discussion, the term
non-U.S. holder
means a beneficial owner of our common stock that is, for United
States federal income tax purposes, neither a partnership nor
any of the following:
|
|
|
|
|
an individual who is a citizen or resident of the United States;
|
|
|
|
a corporation created or organized in or under the laws of the
United States or any political subdivision of the United States;
|
|
|
|
an estate whose income is includible in gross income for United
States federal income tax purposes regardless of its
source; or
|
|
|
|
a trust, in general, if (a) a United States court is able
to exercise primary supervision over the administration of the
trust, and one or more United States persons have the authority
to control all substantial decisions of the trust, or
(b) the trust has a valid election in effect under
applicable United States Treasury Regulations to be treated as a
United States person.
|
If an entity classified as a partnership for United States
federal income tax purposes holds our common stock, the tax
treatment of a partner in such partnership generally depends on
the status of the partner and the activities of the partnership.
If you are a partnership holding our common stock, or a partner
in such a partnership, you should consult your tax advisers.
An individual may be treated as a resident of the United States
in any calendar year for United States Federal income tax
purposes, instead of a nonresident, by, among other ways, being
present in the United States on at least 31 days in that
calendar year and for an aggregate of at least 183 days
during the current calendar year and the two immediately
preceding calendar years. For purposes of this calculation, you
would count all of the days present in the current year,
one-third of the days present in the immediately preceding year
and one-sixth of the days present in the second preceding year.
Residents are taxed for United States federal income purposes as
if they were United States citizens.
This discussion does not consider:
|
|
|
|
|
United States state and local or
non-United
States tax consequences;
|
|
|
|
specific facts and circumstances that may be relevant to a
particular
non-U.S. holders
tax position, including, if the
non-U.S. holder
is a partnership, that the United States tax consequences of
holding and disposing of our common stock may be affected by
certain determinations made at the partner level;
|
|
|
|
the tax consequences to the stockholders or beneficiaries of a
non-U.S. holder;
|
|
|
|
special tax rules that may apply to controlled foreign
corporations, passive foreign investment companies and
corporations that accumulate earnings to avoid United States
federal income tax;
|
|
|
|
special tax rules that may apply to particular
non-U.S. holders,
including financial institutions, insurance companies,
tax-exempt organizations, United States expatriates,
broker-dealers and traders in securities; or
|
|
|
|
special tax rules that may apply to a
non-U.S. holder
that holds our common stock as part of a straddle,
hedge, conversion transaction or other
integrated investment.
|
The following discussion is based on provisions of the United
States Internal Revenue Code of 1986, as amended, applicable
United States Treasury Regulations promulgated thereunder and
administrative and judicial interpretations, all as in effect on
the date of this prospectus supplement, and all of which are
subject to change, retroactively or prospectively. Any changes
could alter the tax consequences to
non-U.S. holders
described in this
S-53
prospectus supplement. The following discussion also assumes
that a
non-U.S. holder
holds our common stock as a capital asset.
EACH
NON-U.S. HOLDER
IS URGED TO CONSULT ITS TAX ADVISER REGARDING THE UNITED STATES
FEDERAL, STATE, LOCAL, AND
NON-UNITED
STATES INCOME AND OTHER TAX CONSEQUENCES OF ACQUIRING, HOLDING
AND DISPOSING OF SHARES OF OUR COMMON STOCK.
Distributions
on Our Common Stock
Distributions on our common stock generally will constitute
dividends for United States federal income tax purposes to the
extent paid from our current or accumulated earnings and
profits, as determined under United States federal income tax
principles. If a distribution exceeds our current and
accumulated earnings and profits as determined under United
States federal income tax principles, the excess will be treated
first as a tax-free return of your adjusted tax basis in our
common stock and thereafter as capital gain, subject to the tax
treatment described below in Sale, Exchange or Other
Disposition of Our Common Stock.
The gross amount of dividends paid to a
non-U.S. holder
of our common stock ordinarily will be subject to withholding of
United States federal income tax at a 30% rate, or at a lower
rate if an applicable income tax treaty so provides and we have
received proper certification of the application of that treaty.
If you are a
non-U.S. holder
and conduct a trade or business within the United States, you
generally will be taxed at ordinary United States federal income
tax rates (on a net income basis) on dividends that are
effectively connected with the conduct of such trade or business
or, if certain tax treaties apply, on dividends that are
attributable to your permanent establishment in the United
States, and such dividends will not be subject to the
withholding described above. If you are a
non-United
States corporation, you may also be subject to a 30%
branch profits tax unless you qualify for a lower
rate under an applicable United States income tax treaty.
Generally, to claim the benefit of any applicable United States
tax treaty or an exemption from withholding because the income
is effectively connected with the conduct of a trade or business
in the United States, you must provide a properly executed IRS
Form W-8BEN
for treaty benefits or IRS
Form W-8ECI
for effectively connected income (or such successor form as the
IRS designates), before the distributions are made. These forms
must be periodically updated. If you are a
non-U.S. holder,
you may obtain a refund of any excess amounts withheld by timely
filing an appropriate claim for refund with the IRS.
Non-U.S. holders
should consult their tax advisers regarding their entitlement to
benefits under an applicable income tax treaty and the specific
manner of claiming the benefits of the treaty.
Sale,
Exchange or Other Disposition of Our Common Stock
A
non-U.S. holder
generally will not be taxed on gain recognized on a disposition
of our common stock unless:
|
|
|
|
|
the
non-U.S. holder
is an individual who is present in the United States for
183 days or more during the taxable year of the disposition
and meets certain other conditions;
|
|
|
|
the gain is effectively connected with the
non-U.S. holders
conduct of trade or business in the United States and, in some
instances if an income tax treaty applies, is attributable to a
permanent establishment or fixed base maintained by the
non-U.S. holder
in the United States; or
|
|
|
|
we are or have been a United States real property holding
corporation for U.S. Federal income tax purposes at
any time during the shorter of the five-year period ending on
the date of disposition and the period that the
non-U.S. holder
held our common stock.
|
We have determined that we are not, and we believe we will not
become, a United States real property holding corporation.
An individual
non-U.S. holder
described in the first bullet point immediately above is taxed
on the
non-U.S. holders
gains (including gain from the sale of our common stock, net of
applicable United States source losses incurred on sales or
exchanges of other capital assets during the year) at a flat
rate of 30%.
S-54
Other
non-U.S. holders
who may be subject to United States federal income tax on the
disposition of our common stock will be taxed on the disposition
in the same manner in which citizens or residents of the United
States would be taxed.
Federal
Estate Tax
Common stock owned or treated as owned by an individual who is
not a citizen or resident of the United States will be included
in the individuals gross estate for United States federal
estate tax purposes. Such shares, therefore, may be subject to
United States federal estate tax unless an applicable estate tax
or other treaty provides otherwise.
Information
Reporting and Backup Withholding
United States backup withholding and information reporting
requirements generally apply to certain payments to certain
noncorporate holders of stock. Information reporting generally
will apply to payments of dividends on, and to proceeds from the
sale or redemption of, common stock within the United States, or
by a United States payor or United States middleman, to a holder
of common stock, that is not an exempt recipient (which includes
a corporation, a payee that is not a United States person that
provides an appropriate certification and certain other
persons). A payor will be required to withhold backup
withholding from such payments of dividends or proceeds, if such
holder fails to furnish its correct taxpayer identification
number or otherwise fails to comply with, or establish an
exemption from, such backup withholding requirements. The backup
withholding rate currently is 28%.
Backup withholding is not an additional tax. Any amounts
withheld under the backup withholding rules from a payment to a
non-U.S. holder
can be refunded or credited against the
non-U.S. holders
United States federal income tax liability, if any, provided
that the required information is furnished to the IRS in a
timely manner.
NON-U.S. HOLDERS
ARE URGED TO CONSULT THEIR OWN TAX ADVISERS REGARDING THE
APPLICATION OF THE INFORMATION REPORTING AND BACKUP WITHHOLDING
RULES TO THEM.
S-55
UNDERWRITING
We are offering the shares of common stock described in this
prospectus supplement through a number of underwriters.
J.P. Morgan Securities Inc. and UBS Securities LLC are
acting as joint book-running managers of the offering and as
representatives of the underwriters. We have entered into an
underwriting agreement with the underwriters. Subject to the
terms and conditions of the underwriting agreement, we have
agreed to sell to the underwriters, and each underwriter has
severally agreed to purchase, at the public offering price less
the underwriting discounts and commissions set forth on the
cover page of this prospectus supplement, the number of shares
of common stock listed next to its name in the following table:
|
|
|
|
Underwriter
|
|
Number of Shares
|
|
J.P. Morgan Securities Inc.
|
|
|
|
UBS Securities LLC
|
|
|
|
|
|
|
|
Total
|
|
|
3,500,000
|
|
|
|
|
The underwriters are committed to purchase all the common shares
offered by us if they purchase any shares. The underwriting
agreement also provides that if an underwriter defaults, the
purchase commitments of non-defaulting underwriters may also be
increased or the offering may be terminated.
The underwriters propose to offer the shares of common stock
directly to the public at the public offering price set forth on
the cover page of this prospectus supplement and to certain
dealers at that price less a concession not in excess of
$ per share. Any such dealers may
resell shares to certain other brokers or dealers at a discount
of up to $ per share from the
public offering price. After the public offering of the shares,
the offering price and other selling terms may be changed by the
underwriters.
The underwriters have an option to buy up to
525,000 additional shares of common stock from us to cover
sales of shares by the underwriters which exceed the number of
shares specified in the table above. The underwriters have
30 days from the date of this prospectus supplement to
exercise this over-allotment option. If any shares are purchased
with this over-allotment option, the underwriters will purchase
shares in approximately the same proportion as shown in the
table above. If any additional shares of common stock are
purchased, the underwriters will offer the additional shares on
the same terms as those on which the shares are being offered.
The underwriting fee is equal to the public offering price per
share of common stock less the amount paid by the underwriters
to us per share of common stock. The underwriting fee is
$ per share. The following table
shows the per share and total underwriting discounts and
commissions we will pay to the underwriters assuming both no
exercise and full exercise of the underwriters option to
purchase additional shares.
|
|
|
|
|
|
|
|
|
No Exercise
|
|
Full Exercise
|
|
Per share
|
|
$
|
|
|
$
|
|
Total to be paid by us
|
|
$
|
|
|
$
|
|
We estimate that the total expenses of this offering, including
registration, filing and listing fees, printing fees and legal
and accounting expenses, but excluding the underwriting
discounts and commissions, will be approximately
$ .
We, our directors and executive officers have entered into
lock-up
agreements with the underwriters prior to the commencement of
this offering pursuant to which we and each of these persons or
entities, with limited exceptions, for a period of 90 days
after the date of this prospectus, may not, without the prior
written consent of J.P. Morgan Securities Inc. and UBS
Securities LLC, (1) offer, pledge, announce the intention
to sell, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any
option, right or warrant to purchase, or otherwise transfer or
dispose of, directly or indirectly, any shares of our common
stock or any securities convertible into or exercisable or
exchangeable for our common stock (including, without
limitation, common stock which may be deemed to be beneficially
owned by such
S-56
directors, executive officers, managers and members in
accordance with the rules and regulations of the SEC and
securities which may be issued upon exercise of a stock option
or warrant) or (2) enter into any swap or other agreement
that transfers, in whole or in part, any of the economic
consequences of ownership of the common stock, whether any such
transaction described in clause (1) or (2) above is to
be settled by delivery of common stock or such other securities,
in cash or otherwise. The restrictions described in this
paragraph do not apply to:
|
|
|
the sale of shares to the underwriters;
|
|
|
any shares of common stock issued by us upon the exercise of
options granted under existing employee stock option
plans; or
|
|
|
with respect to our directors and executive officers:
|
|
|
|
|
|
transfers of shares of common stock as a bona fide gift or gifts;
|
|
|
|
transfers of shares of common stock either during the director
or executive officers lifetime or upon death by will or
intestacy to an immediate family or to a trust, the
beneficiaries of which are the director or executive officer and
a member or members of their immediate family;
|
|
|
|
transfers of shares of common stock to an affiliate (as that
term is defined in Rule 405 under the Securities Act of
1933, as amended) of the director or executive officer or as a
transfer or distribution to their partners, members or
stockholders; or
|
|
|
|
transfers of shares of common stock pursuant to any contract,
instruction or plan complying with
Rule 10b5-1
of the Regulations of the Securities Exchange Act of 1934, as
amended (the Exchange Act), that has been entered
into by the undersigned prior to the date of this Agreement;
|
provided that, in the case of the first three bullets above,
(i) the recipient of such gift, transfer or distribution
thereof agrees to be bound in writing by the restrictions set
forth herein, and (ii) no filing under Section 16(a) of the
Exchange Act reporting a reduction in beneficial ownership of
shares of Common Stock shall be required or shall be voluntarily
made during the restricted period referred to in the foregoing
sentence.
Notwithstanding the foregoing, if (1) during the last
17 days of the
90-day
restricted period, we issue an earnings release or material news
or a material event relating to our company occurs; or
(2) prior to the expiration of the
90-day
restricted period, we announce that we will release earnings
results during the
16-day
period beginning on the last day of the
90-day
period, the restrictions described above shall continue to apply
until the expiration of the
18-day
period beginning on the issuance of the earnings release or the
occurrence of the material news or material event.
We have agreed to indemnify the underwriters against certain
liabilities, including liabilities under the Securities Act.
Our common stock is listed on the NASDAQ Global Market under the
symbol LMNX.
In connection with this offering, the underwriters may engage in
stabilizing transactions, which involves making bids for,
purchasing and selling shares of common stock in the open market
for the purpose of preventing or retarding a decline in the
market price of the common stock while this offering is in
progress. These stabilizing transactions may include making
short sales of the common stock, which involves the sale by the
underwriters of a greater number of shares of common stock than
they are required to purchase in this offering, and purchasing
shares of common stock on the open market to cover positions
created by short sales. Short sales may be covered
shorts, which are short positions in an amount not greater than
the underwriters over-allotment option referred to above,
or may be naked shorts, which are short positions in
excess of that amount. The underwriters may close out any
covered short position either by exercising their over-allotment
option, in whole or in part, or by purchasing shares in the open
market. In making this determination, the underwriters will
consider, among other things, the price of shares available for
purchase in the open market compared to the price at which the
underwriters may purchase shares through the over-allotment
option. A naked short position is more likely to be created if
the underwriters are concerned that there may be downward
pressure on the price of the common stock in the open market
that could adversely affect investors who
S-57
purchase in this offering. To the extent that the underwriters
create a naked short position, they will purchase shares in the
open market to cover the position.
The underwriters have advised us that, pursuant to
Regulation M of the Securities Act, they may also engage in
other activities that stabilize, maintain or otherwise affect
the price of the common stock, including the imposition of
penalty bids. This means that if the representatives of the
underwriters purchase common stock in the open market in
stabilizing transactions or to cover short sales, the
representatives can require the underwriters that sold those
shares as part of this offering to repay the underwriting
discount received by them.
These activities may have the effect of raising or maintaining
the market price of the common stock or preventing or retarding
a decline in the market price of the common stock, and, as a
result, the price of the common stock may be higher than the
price that otherwise might exist in the open market. If the
underwriters commence these activities, they may discontinue
them at any time. The underwriters may carry out these
transactions on the NASDAQ Global Market, in the
over-the-counter market or otherwise.
In addition, in connection with this offering certain of the
underwriters (and selling group members) may engage in passive
market making transactions in our common stock on the NASDAQ
Global Market prior to the pricing and completion of this
offering. Passive market making consists of displaying bids on
the NASDAQ Global Market no higher than the bid prices of
independent market makers and making purchases at prices no
higher than these independent bids and effected in response to
order flow. Net purchases by a passive market maker on each day
are generally limited to a specified percentage of the passive
market makers average daily trading volume in the common
stock during a specified period and must be discontinued when
such limit is reached. Passive market making may cause the price
of our common stock to be higher than the price that otherwise
would exist in the open market in the absence of these
transactions. If passive market making is commenced, it may be
discontinued at any time.
A prospectus in electronic format may be made available on the
web sites maintained by one or more underwriters, or selling
group members, if any, participating in the offering. The
underwriters may agree to allocate a number of shares to
underwriters and selling group members for sale to their online
brokerage account holders. Internet distributions will be
allocated by the representatives to underwriters and selling
group members that may make Internet distributions on the same
basis as other allocations.
Each underwriter has represented that (i) it has only
communicated or caused to be communicated and will only
communicate or cause to be communicated any invitation or
inducement to engage in investment activity (within the meaning
of Section 21 of the FSMA) received by it in connection
with the issue or sale of any common stock in circumstances in
which Section 21(1) of the FSMA does not apply to us and
(ii) it has complied and will comply with all applicable
provisions of the FSMA with respect to anything done by it in
relation to the shares in, from or otherwise involving the
United Kingdom.
In relation to each Member State of the European Economic Area
which has implemented the Prospectus Directive (each, a
Relevant Member State), each underwriter has
represented and agreed that with effect from and including the
date on which the European Union Prospectus Directive (the
EU Prospectus Directive) is implemented in that
Relevant Member State (the Relevant Implementation
Date) it has not made and will not make an offer of common
stock to the public in that Relevant Member State prior to the
publication of a prospectus in relation to the shares which has
been approved by the competent authority in that Relevant Member
State or, where appropriate, approved in another Relevant Member
State and notified to the competent authority in that Relevant
Member State, all in accordance with the EU Prospectus
Directive, except that it may, with effect from and including
the Relevant Implementation Date, make an offer of shares to the
public in that Relevant Member State at any time:
|
|
|
to legal entities which are authorized or regulated to operate
in the financial markets or, if not so authorized or regulated,
whose corporate purpose is solely to invest in securities;
|
S-58
|
|
|
to any legal entity which has two or more of (1) an average
of at least 250 employees during the last financial year;
(2) a total balance sheet of more
than 43,000,000 and (3) an annual net turnover
of more than 50,000,000, as shown in its last annual
or consolidated accounts;
|
|
|
to fewer than 100 natural or legal persons (other than qualified
investors as defined in the EU Prospectus Directive) subject to
obtaining the prior consent of the book-running managers for any
such offer; or
|
|
|
in any other circumstances which do not require the publication
by the Issuer of a prospectus pursuant to Article 3 of the
Prospectus Directive.
|
For the purposes of this provision, the expression an
offer of shares to the public in relation to any
shares in any Relevant Member State means the communication in
any form and by any means of sufficient information on the terms
of the offer and the shares to be offered so as to enable an
investor to decide to purchase or subscribe the shares, as the
same may be varied in that Member State by any measure
implementing the EU Prospectus Directive in that Member State
and the expression EU Prospectus Directive means Directive
2003/71/EC and includes any relevant implementing measure in
each Relevant Member State.
Certain of the underwriters and their affiliates have provided
in the past to us and our affiliates and may provide from time
to time in the future certain commercial banking, financial
advisory, investment banking and other services for us and such
affiliates in the ordinary course of their business, for which
they have received and may continue to receive customary fees
and commissions. In addition, from time to time, certain of the
underwriters and their affiliates may effect transactions for
their own account or the account of customers, and hold on
behalf of themselves or their customers, long or short positions
in our debt or equity securities or loans, and may do so in the
future.
S-59
LEGAL
MATTERS
Certain legal matters will be passed upon for Luminex by Bass,
Berry & Sims PLC, Nashville, Tennessee. The
underwriters are being represented by Davis Polk &
Wardwell, New York, New York.
EXPERTS
The audited consolidated financial statements of our company and
the effectiveness of internal control over financial reporting
incorporated in this prospectus supplement by reference to our
Annual Report on
Form 10-K
for the year ended December 31, 2007 have been so
incorporated in reliance on the reports of Ernst &
Young LLP, an independent registered public accounting firm,
given on the authority of said firm as experts in auditing and
accounting. The audited consolidated financial statements of Tm
Bioscience Corporation for the years ended December 31,
2006 and 2005, included as Exhibit 99.2 of our
Form 8-K
filed on March 1, 2007, as amended on May 9, 2007 and
incorporated by reference in this prospectus supplement, have
been audited by Ernst & Young LLP, an independent
registered public accounting firm, as set forth in their report
and related Comments by Auditors for U.S. Readers on
Canada U.S. Reporting Difference thereon
incorporated by reference elsewhere herein and are incorporated
by reference in reliance upon such reports given on the
authority of such firm as experts in accounting and auditing.
INCORPORATION
OF INFORMATION BY REFERENCE
The SEC allows us to incorporate by reference the
information we file with them, which means that we can disclose
important information to you by referring you to those
documents. The information incorporated by reference is
considered to be part of this prospectus supplement, and
information that we file later with the SEC will automatically
update and supersede this information. We incorporate by
reference the documents listed below (except the information
contained in such documents to the extent that it is
furnished and not filed):
|
|
|
|
1.
|
Annual Report on
Form 10-K
for the year ended December 31, 2007 filed on
March 14, 2008.
|
|
|
2.
|
All information in our proxy statement filed with the SEC on
April 21, 2008 to the extent incorporated by reference in
our Annual Report on
Form 10-K
for the year ended December 31, 2007.
|
|
|
3.
|
Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2008 filed on May 9,
2008.
|
|
|
4.
|
Exhibit 99.2 to our
Form 8-K
filed on March 1, 2007 and as amended on May 9, 2007.
|
|
|
5.
|
Current Reports, filed on
Form 8-K
on March 5, 2008, March 28, 2008 and May 29, 2008.
|
|
|
6.
|
The description of the Registrants Common Stock, par value
$0.001 per share, contained in our Registration Statement on
Form 8-A,
filed with the SEC on March 27, 2000, and the description
of the Stock Rights contained in our Registration Statement on
Form 8-A,
filed with the SEC on June 21, 2001, and including all
other amendments and reports filed for the purpose of updating
such descriptions.
|
|
|
7.
|
All documents filed pursuant to Sections 13(a), 13(c), 14
or 15(d) of the Exchange Act after the date of this prospectus
supplement and prior to the termination of the offering.
|
Notwithstanding the foregoing, we are not incorporating by
reference any information furnished under Item 2.02 or
Item 7.01 of any Current Report on
Form 8-K
(including financial statements or exhibits relating thereto
furnished pursuant to Item 9.01).
Any statement contained in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be
modified or superseded for purposes of this prospectus
supplement to the extent that a statement contained herein or in
any other subsequently filed document which also is or is deemed
to be incorporated by reference herein or in any other
prospectus supplement modifies or supersedes such statement.
S-60
Any statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of
this prospectus supplement.
You may request, and we will provide, a copy of our filings
incorporated by reference at no cost, by writing or telephoning
us at the following address:
Luminex Corporation
12212 Technology Boulevard
Austin, Texas 78727
Attn: Corporate Secretary
Telephone:
(512) 219-8020
This prospectus supplement is part of a registration statement
that we have filed with the SEC relating to the securities to be
offered. This prospectus supplement does not contain all of the
information we have included in the registration statement and
the accompanying exhibits and schedules in accordance with the
rules and regulations of the SEC and we refer you to the omitted
information. You should rely only on the information contained
in this prospectus supplement, the accompanying prospectus, any
other prospectus supplement or free writing prospectus or any
document to which we have referred you. We have not authorized
anyone else to provide you with information that is different.
This prospectus supplement and the accompanying prospectus and
any other prospectus supplement or free writing prospectus may
be used only where it is legal to sell these securities. The
information in this prospectus supplement and the accompanying
prospectus or any other prospectus supplement or free writing
prospectus is current only as of the date on the front of these
documents.
WHERE YOU
CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements
and other information with the SEC. Our SEC filings are also
available over the Internet at the SECs web site at
http://www.sec.gov.
You may also read and copy any document we file at the
SECs public reference room at 100 F Street,
N.E., Room 1580, Washington, D.C. 20549. Please call
the SEC at
1-800-SEC-0330
to obtain information on the operation of the public reference
room. Our web site address is www.luminexcorp.com. Please note
that our web site address is provided as an inactive textual
reference only. The information provided on our web site is not
part of this prospectus supplement or the accompanying
prospectus, and is therefore not incorporated by reference
unless such information is otherwise specifically referenced
elsewhere in this prospectus supplement or the accompanying
prospectus. We make available free of charge through our web
site our Annual Report on
Form 10-K,
Quarterly Reports on
Form 10-Q,
Current Reports on
Form 8-K,
Proxy Statement on Schedule 14A and all amendments to those
reports as soon as reasonably practicable after such material is
electronically filed with or furnished to the SEC.
S-61
PROSPECTUS
Debt
Securities
Common Stock
Preferred Stock
Warrants
From time to time, we may offer to sell debt securities, common
stock, preferred stock or warrants under this prospectus. This
prospectus describes some of the general terms that may apply to
these securities. The specific terms of any securities to be
offered will be described in supplements to this prospectus that
contain specific information about the offering and the terms of
the securities.
We may offer and sell these securities to or through one or more
underwriters, dealers and agents, or directly to purchasers.
These securities may also be resold by securities holders. An
accompanying prospectus supplement will set forth the names of
any underwriters or agents involved in the sale of securities in
respect of which this prospectus is being delivered, the
principal amounts, if any, to be purchased by underwriters and
the compensation, if any, of such underwriters or agents.
Our common stock is traded on the NASDAQ Global Market under the
symbol LMNX.
Our principal executive offices are located at 12212 Technology
Boulevard, Austin, Texas 78727. Our telephone number is
(512) 219-8020.
This prospectus may not be used to offer or consummate sales
of these securities unless accompanied by a prospectus
supplement.
Investing in our securities involves a high degree of risk.
You should consider carefully the risks under the caption
Risk Factors on page 4 of this prospectus and
included in our most recent Annual Report on
Form 10-K
filed with the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as amended, as supplemented or
revised by our subsequent Quarterly Reports on
Form 10-Q
and under the caption Risk Factors in any applicable
prospectus supplement, before you invest in any of our
securities.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or passed upon the adequacy or accuracy of this
prospectus. Any representation to the contrary is a criminal
offense.
The date of this prospectus is June 16, 2008.
TABLE OF
CONTENTS
|
|
|
|
|
|
|
|
1
|
|
|
|
|
1
|
|
|
|
|
3
|
|
|
|
|
4
|
|
|
|
|
4
|
|
|
|
|
4
|
|
|
|
|
5
|
|
|
|
|
13
|
|
|
|
|
15
|
|
|
|
|
17
|
|
|
|
|
18
|
|
|
|
|
18
|
|
|
|
|
18
|
|
|
|
|
19
|
|
YOU SHOULD ONLY RELY ON THE INFORMATION CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS AND IN A PROSPECTUS
SUPPLEMENT. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
DIFFERENT INFORMATION. IF ANYONE PROVIDES YOU WITH DIFFERENT OR
INCONSISTENT INFORMATION, YOU SHOULD NOT RELY ON IT. WE WILL NOT
MAKE AN OFFER TO SELL THESE SECURITIES IN ANY JURISDICTION WHERE
THE OFFER AND SALE IS NOT PERMITTED. YOU SHOULD ASSUME THAT THE
INFORMATION APPEARING IN THIS PROSPECTUS, AS WELL AS INFORMATION
WE PREVIOUSLY FILED WITH THE SEC AND INCORPORATED BY REFERENCE,
IS ACCURATE ONLY AS OF ITS DATE. OUR BUSINESS, FINANCIAL
CONDITION, RESULTS OF OPERATIONS AND PROSPECTS MAY HAVE CHANGED
SINCE THOSE DATES.
i
ABOUT
THIS PROSPECTUS
This prospectus is a part of a registration statement that we
filed with the Securities and Exchange Commission, or the SEC,
utilizing a shelf registration process. Under this
shelf process, we may sell any combination of the securities
registered in one or more offerings from time to time. Each time
we sell securities, we will provide a prospectus supplement and
may provide other offering materials that will contain specific
information about the terms of that offering. The prospectus
supplement or other offering materials may also add, update or
change information contained in this prospectus. Before
purchasing any securities, you should read both this prospectus
and any prospectus supplement or other offering materials,
together with the additional information described under the
headings Where You Can Find More Information and
Incorporation of Information by Reference in this
prospectus.
This prospectus and any accompanying prospectus supplement do
not contain all of the information included in the registration
statement. We have omitted parts of the registration statement
in accordance with the rules and regulations of the SEC. For
further information, we refer you to the registration statement
on
Form S-3
of which this prospectus is a part, including its exhibits.
Statements contained in this prospectus and any accompanying
prospectus supplement about the provisions or contents of any
agreement or other document are not necessarily complete. If the
SECs rules and regulations require that an agreement or
document be filed as an exhibit to the registration statement,
please see that agreement or document for a complete description
of these matters.
Unless expressly stated or the context otherwise requires, the
terms we, our, us, the
company and Luminex refer to Luminex
Corporation, a Delaware corporation, and its consolidated
subsidiaries.
FORWARD-LOOKING
STATEMENTS
This prospectus, including any accompanying prospectus
supplement and the documents incorporated by reference herein
and therein, contains statements that are forward-looking
statements as defined within the meaning of Section 21E of
the Securities Exchange Act of 1934, as amended (the
Exchange Act), and Section 27A of the
Securities Act of 1933, as amended (the Securities
Act). Forward-looking statements give our current
expectations or forecasts of future events. All statements other
than statements of current or historical fact contained in this
prospectus or any accompanying prospectus supplement, including
statements regarding our future financial position, business
strategy, budgets, projected costs, and plans and objectives of
management for future operations, are forward-looking
statements. The words anticipate,
believe, continue, estimate,
expect, intend, may,
plan, projects, will, and
similar expressions, as they relate to us, are intended to
identify forward-looking statements. These statements are not
guarantees of future performance and are based on our current
plans and actual future activities, and our results of
operations may be materially different from those set forth in
the forward-looking statements as a result of known or unknown
risks and uncertainties, including, among other things:
|
|
|
|
|
risks and uncertainties relating to market demand and acceptance
of our products and technology,
|
|
|
|
dependence on strategic partners for development,
commercialization and distribution of products,
|
|
|
|
concentration of our revenue in a limited number of strategic
partners,
|
|
|
|
fluctuations in quarterly results due to a lengthy and
unpredictable sales cycle and bulk purchases of consumables,
|
|
|
|
our ability to scale manufacturing operations and manage
operating expenses, gross margins and inventory levels,
|
|
|
|
potential shortages of components,
|
|
|
|
competition,
|
|
|
|
our ability to successfully launch new products,
|
|
|
|
the timing of regulatory approvals,
|
1
|
|
|
|
|
the implementation, including any modification, of our strategic
operating plans,
|
|
|
|
the uncertainty regarding the outcome or expense of any
litigation brought against us,
|
|
|
|
risks relating to our foreign operations, and
|
|
|
|
risks and uncertainties associated with implementing our
acquisition strategy and the ability to integrate acquired
companies, including Luminex Molecular Diagnostics, or selected
assets into our consolidated business operations, including the
ability to recognize the benefits of our acquisitions.
|
Many of these risks, uncertainties and other factors are beyond
our control and are difficult to predict. New factors may also
emerge from time to time that could adversely affect our
business. It is not possible for us to predict all of the
factors that may from time to time affect our business or to
assess the potential impact of each such factor. We caution
readers not to place undue reliance on any such forward-looking
statements, which speak only as of the date on which they are
made, and, except to fulfill our obligations under the United
States securities laws, we undertake no obligation to update any
such statement to reflect events or circumstances after the date
on which it is made. We qualify all of the information presented
in this prospectus and any accompanying prospectus supplement
(and the information incorporated by reference herein and
therein), and particularly our forward-looking statements, by
the cautionary statements described above and in the section of
this prospectus entitled Risk Factors.
2
LUMINEX
CORPORATION
We develop, manufacture and sell proprietary biological testing
technologies and products with applications throughout the life
sciences industry. The life sciences industry depends on a broad
range of tests, called bioassays, to perform diagnostic tests,
discover and develop new drugs and identify genes. Our
xMAP®
technology, an open architecture, proprietary multiplexing
technology, allows simultaneous analysis of multiple bioassays
from a small sample volume, typically a single drop of fluid, by
reading biological tests on the surface of microscopic
polystyrene beads called microspheres. xMAP technology combines
this miniaturized liquid array bioassay capability with small
lasers, digital signal processors and proprietary software to
create a system offering advantages in speed, precision,
flexibility and cost. Our xMAP technology is currently being
used within various segments of the life sciences industry which
includes the fields of drug discovery and development, clinical
diagnostics, genetic analysis, bio-defense, protein analysis and
biomedical research.
We have established a position in the life sciences industry by
developing and delivering products that meet customer and
partner needs in specific market segments. These needs are
addressed by our proprietary technology, xMAP Technology, which
allows the end-user in a laboratory to perform biological
testing in a multiplexed format. Multiplexing allows many
different laboratory results to be generated from a single
sample at one time. This is important because our end-user
customers and partners, which include laboratory professionals
performing research, clinical laboratories performing tests on
patients as ordered by a physician and other laboratories, have
a fundamental need to perform high quality testing as
efficiently as possible. Until the availability of multiplexing
technology such as xMAP, the laboratory professional had to
perform one test on one sample in a sequential manner, and if
additional testing was required on that sample, a second
procedure would be performed to generate the second result, and
so on until all the necessary tests were performed. By using
xMAP technology, these end-users have the opportunity to become
more efficient by generating multiple simultaneous results per
sample. We are currently developing next generation systems with
significantly higher multiplexing capabilities that will provide
us with the ability to address unmet customer and partner needs
in existing and new market segments.
We have adopted a business model built around strategic
partnerships. We have licensed our xMAP technology to other
companies, who then develop products that incorporate the xMAP
technology into products that they sell to the end-user. We
develop and manufacture the proprietary xMAP laboratory
instrumentation and the proprietary xMAP microspheres and sell
these products to our partners. Our partners sell xMAP
instrumentation, xMAP-based reagent consumable products or
xMAP-based testing services, which run on the xMAP
instrumentation, to the end-user customer, typically a testing
laboratory. When our partners sell an xMAP-based consumable
product or xMAP based testing service to their customer, we earn
a royalty on the sale from the partner.
A fundamental component of our strategy over the past two years
has been to augment the partnership model with a distribution
model, designed to take advantage of our increasing installed
base of xMAP-based instrumentation. We established the Luminex
Bioscience Group, which we refer to as LBG, in 2005, with the
charter of developing products that would be complementary to
our partners products, that we would take responsibility
for manufacturing on their behalf and that our partners would
then sell to the end-user, thereby leveraging both our existing
distribution channels and our existing installed base of
instrumentation. LBG introduced their first two products in late
2006 and launched several assay products in 2007.
On March 1, 2007, we completed our acquisition of Tm
Bioscience, now a wholly-owned subsidiary of the Company and
known as Luminex Molecular Diagnostics, or LMD, of Toronto,
Canada. LMD is a molecular diagnostics company and focuses its
resources on building a commercialization engine for the design,
development, manufacture, marketing and selling of genetic
tests, also referred to as DNA-based tests,
nucleic acid tests or molecular
diagnostics. LMD focuses on leveraging this engine in
order to become a market leader in at least one of the three
segments of the genetic testing market for which it was
developing products: human genetics, personalized medicine and
infectious disease. We completed the integration of LMD during
2007, and we believe the combined company is in a position to
take advantage of the complementary strengths of both companies
in molecular diagnostics.
3
Luminex was incorporated under the laws of the State of Texas in
May 1995 and began commercial production of our Luminex 100
System in 1999. We were reincorporated in the State of Delaware
in July 2000. Our shares of common stock are traded on the
NASDAQ Global Market under the symbol LMNX. Our
principal executive offices are located at 12212 Technology
Blvd., Austin, Texas 78727, and our telephone number is
(512) 219-8020.
Our web site address is www.luminexcorp.com. Please note that
our web site address is provided as an inactive textual
reference only. The information provided on our web site is not
part of this prospectus and is therefore not incorporated by
reference unless such information is otherwise specifically
referenced elsewhere in this prospectus.
RISK
FACTORS
Investing in our securities involves risks. You are advised to
read carefully the information under the caption
Item 1A. Risk Factors in our most recent annual
report filed on
Form 10-K
and under Item 1A. Risk Factors in our
quarterly reports on
Form 10-Q,
and in documents we file with the SEC after the date of this
prospectus and which are incorporated by reference into this
prospectus, as described below under the heading
Incorporation of Information by Reference. Before
making an investment decision, you should carefully consider
these risks as well as other information we incorporate by
reference in this prospectus. The risks and uncertainties that
we have described are not the only ones facing us. The
prospectus supplement applicable to each offering of securities
will contain additional information about risks applicable to an
investment in us and our securities.
CONSOLIDATED
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth our ratios of earnings to fixed
charges for each of the periods indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Quarter
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ended
|
|
|
Fiscal Year Ended December 31,
|
|
|
|
March 31, 2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
Ratio of earnings to fixed charges(1)
|
|
|
|
|
|
|
|
|
|
|
45,340
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio of earnings to combined fixed charges and preferred
security dividends(1)(2)
|
|
|
|
|
|
|
|
|
|
|
45,340
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
For purposes of computing the ratio of earnings to fixed charges
and the ratio of our combined fixed charges and preferred
security dividends to earnings, earnings consist of consolidated
pretax income from continuing operations plus fixed charges.
Fixed charges consist of interest expense, net amortization of
debt premium, and the interest portion of rental expense.
Earnings were insufficient to cover fixed charges by
$4.9 million in 2003, $3.6 million in 2004,
$2.6 million in 2005, $1.8 million in 2007, and
$996,000 in the three months ended March 31, 2008. For the
years ended December 31, 2003, 2004, 2005 and 2007, and the
three months ended March 31, 2008 set forth in the table
above, we had no earnings and are therefore unable to calculate
the ratio of combined fixed charges and preference dividends to
earnings. |
|
(2) |
|
During each of these periods, the company had no preferred
securities outstanding. |
USE OF
PROCEEDS
Unless otherwise specified in an applicable prospectus
supplement, we currently intend to use the proceeds we receive
from the offered securities for general corporate purposes,
which include potential acquisitions of, or investments in,
companies and technologies that complement our business,
research and development, capital expenditures, additions to
working capital and any other purpose specified in any
prospectus supplement. The amount of securities offered from
time to time pursuant to this prospectus or any prospectus
supplement, and the precise amounts and timing of the
application of net proceeds from the sale of these securities,
will depend on our funding requirements, whether related to
acquisitions or general corporate purposes. If at the time of an
issuance of securities we elect to make different or more
specific use of proceeds than described in this prospectus, such
use will be described in the prospectus supplement relating to
those securities. We will not receive the net proceeds of sales
by selling securities holders, if any.
4
DESCRIPTION
OF DEBT SECURITIES
This prospectus describes certain general terms and provisions
of the debt securities. The debt securities will be issued under
an indenture between us and The Bank of New York
Trust Company, N.A., as trustee. When we offer to sell a
particular series of debt securities, we will describe the
specific terms for the securities in a supplement to this
prospectus. The prospectus supplement will also indicate whether
the general terms and provisions described in this prospectus
apply to a particular series of debt securities.
We have summarized herein certain terms and provisions of the
indenture. The summary is not complete and is qualified in its
entirety by reference to the actual text of the indenture. The
indenture is incorporated by reference as an exhibit to the
registration statement of which this prospectus is a part. You
should read the indenture for the provisions which may be
important to you. The indenture is subject to and governed by
the Trust Indenture Act of 1939, as amended.
The indenture does not limit the amount of debt securities which
we may issue. We may issue debt securities up to an aggregate
principal amount as we may authorize from time to time. The
prospectus supplement will describe the terms of any debt
securities being offered, including:
|
|
|
|
|
classification as senior or subordinated debt securities;
|
|
|
|
ranking of the specific series of debt securities relative to
other outstanding indebtedness, including subsidiaries
debt;
|
|
|
|
if the debt securities are subordinated, the aggregate amount of
outstanding indebtedness, as of a recent date, that is senior to
the subordinated securities, and any limitation on the issuance
of additional senior indebtedness;
|
|
|
|
the designation, aggregate principal amount and authorized
denominations;
|
|
|
|
the maturity date;
|
|
|
|
the interest rate, if any, and the method for calculating the
interest rate;
|
|
|
|
the interest payment dates and the record dates for the interest
payments;
|
|
|
|
any mandatory or optional redemption terms or prepayment,
conversion, sinking fund or exchangeability or convertibility
provisions;
|
|
|
|
the place where we will pay principal and interest;
|
|
|
|
if other than denominations of $1,000 or multiples of $1,000,
the denominations the debt securities will be issued in;
|
|
|
|
whether the debt securities will be issued in the form of global
securities or certificates;
|
|
|
|
the applicability of and additional provisions, if any, relating
to the defeasance of the debt securities;
|
|
|
|
the currency or currencies, if other than the currency of the
United States, in which principal and interest will be paid;
|
|
|
|
the dates on which premium, if any, will be paid;
|
|
|
|
our right, if any, to defer payment of interest and the maximum
length of this deferral period; and
|
|
|
|
other specific terms, including any additional events of default
or covenants.
|
Senior
Debt
Senior debt securities will rank equally and pari passu with all
of our other unsecured and unsubordinated debt from time to time
outstanding.
5
Subordinated
Debt
Subordinated debt securities will be subordinate and junior in
right of payment, to the extent and in the manner set forth in
the indenture, to all of our senior indebtedness
from time to time outstanding. The indenture defines
senior indebtedness as obligations or indebtedness
of, or guaranteed or assumed by, us for borrowed money, whether
or not represented by bonds, debentures, notes or similar
instruments and amendments, renewals, extensions, modifications
and refundings of any such obligations or indebtedness.
Senior indebtedness does not include any
indebtedness or other obligations specifically designated as not
being senior indebtedness.
In general, the holders of all senior indebtedness are first
entitled to receive payment of the full amount unpaid on senior
indebtedness before the holders of any of the subordinated debt
securities or coupons are entitled to receive a payment on
account of the principal or interest on the indebtedness
evidenced by the subordinated debt securities in certain events.
These events include:
|
|
|
|
|
any insolvency or bankruptcy proceedings, or any receivership,
liquidation, reorganization or other similar proceedings which
concern us or a substantial part of our property;
|
|
|
|
a default having occurred for the payment of principal, premium,
if any, or interest on or other monetary amounts due and payable
on any senior indebtedness or any other default having occurred
concerning any senior indebtedness, which permits the holder or
holders of any senior indebtedness to accelerate the maturity of
any senior indebtedness with notice or lapse of time, or both.
Such an event of default must have continued beyond the period
of grace, if any, provided for such event of default, and such
an event of default shall not have been cured or waived or shall
not have ceased to exist; or
|
|
|
|
the principal of, and accrued interest on, any series of the
subordinated debt securities having been declared due and
payable upon an event of default pursuant to section 5.02
of the indenture. This declaration must not have been rescinded
and annulled as provided in the indenture.
|
If this prospectus is being delivered in connection with a
series of subordinated debt securities, the accompanying
prospectus supplement or the information incorporated by
reference in this prospectus will set forth the approximate
amount of senior indebtedness outstanding as of the end of the
most recent fiscal quarter.
Merger,
Consolidation or Sale of Assets
The indenture prohibits us from merging into or consolidating
with any other person or selling, leasing or conveying
substantially all of our assets and the assets of our
Subsidiaries, taken as a whole, to any person, unless:
|
|
|
|
|
either we are the continuing corporation or the successor
corporation or the person which acquires by sale, lease or
conveyance substantially all our or our Subsidiaries
assets is a corporation organized under the laws of the United
States, any state thereof, or the District of Columbia, and
expressly assumes the due and punctual payment of the principal
of, and premium, if any, and interest on all the debt securities
and the due and punctual performance and observance of every
covenant of the indenture to be performed or observed by us, by
supplemental indenture satisfactory to the trustee, executed and
delivered to the trustee by such corporation;
|
|
|
|
no Event of Default described under the caption Events of
Default and Remedies or event which, after notice or lapse
of time or both would become an Event of Default, has happened
and is continuing; and
|
|
|
|
we have delivered to the trustee an officers certificate
and an opinion of counsel each stating that such transaction and
such supplemental indenture comply with the indenture provisions
relating to merger, consolidation and sale of assets.
|
Upon any consolidation or merger with or into any other person
or any sale, conveyance, lease, or other transfer of all or
substantially all of our or our Subsidiaries assets to any
person, the successor person shall
6
succeed, and be substituted for, us under the indenture and each
series of outstanding debt securities, and we shall be relieved
of all obligations and covenants under the indenture and each
series of outstanding debt securities to the extent we were the
predecessor person.
Events of
Default and Remedies
When we use the term Event of Default in the
indenture with respect to the debt securities of any series, we
mean:
(1) default in paying interest on the debt securities when
it becomes due and the default continues for a period of
30 days or more;
(2) default in paying principal, or premium, if any, on the
debt securities when due;
(3) default is made in the payment of any sinking or
purchase fund or analogous obligation when the same becomes due,
and such default continues for 30 days or more;
(4) default in the performance, or breach, of any covenant
or warranty in the indenture (other than defaults specified in
clause (1), (2) or (3) above) and the default or
breach continues for a period of 60 days or more after we
receive written notice from the trustee or we and the trustee
receive notice from the holders of at least 25% in aggregate
principal amount of the outstanding debt securities of the
series;
(5) we default in the payment of any scheduled principal of
or interest on any of our Indebtedness or any Indebtedness of
any of our Subsidiaries (other than the debt securities),
aggregating more than $10 million in principal amount, when
due and payable after giving effect to any applicable grace
period;
(6) we default in the performance of any other term or
provision of any of our Indebtedness or any Indebtedness of any
of our Subsidiaries (other than the debt securities) in excess
of $10 million principal amount that results in such
Indebtedness becoming or being declared due and payable prior to
the date on which it would otherwise become due and payable, and
such acceleration shall not have been rescinded or annulled, or
such Indebtedness shall not have been discharged, within a
period of 15 days after there has been given to us by the
trustee or to us and the trustee by the holders of at least 25%
in aggregate principal amount of the debt securities then
outstanding of any series, a written notice specifying such
default or defaults;
(7) one or more judgments, decrees, or orders is entered
against us or any of our Significant Subsidiaries by a court
from which no appeal may be or is taken for the payment of
money, either individually or in the aggregate, in excess of
$10 million, and the continuance of such judgment, decree,
or order remains unsatisfied and in effect for any period of 45
consecutive days after the amount of the judgment, decree or
order is due without a stay of execution;
(8) certain events of bankruptcy, insolvency,
reorganization, administration or similar proceedings with
respect to us have occurred; and
(9) any other Events of Default set forth in a prospectus
supplement.
If an Event of Default (other than an Event of Default specified
in clause (5), (6) or (7)) under the indenture occurs with
respect to the debt securities of any series and is continuing,
then the trustee or the holders of not less than 51% of the
principal amount of the outstanding debt securities of that
series may by written notice require us to repay immediately the
entire principal amount of the outstanding debt securities of
that series (or such lesser amount as may be provided in the
terms of the securities), together with all accrued and unpaid
interest and premium, if any.
If an Event of Default under the indenture specified in clause
(5), (6) or (7) occurs and is continuing, then the
entire principal amount of the outstanding debt securities (or
such lesser amount as may be provided in the terms of the
securities) will automatically become due and payable
immediately without any declaration or other act on the part of
the trustee or any holder.
7
After a declaration of acceleration, the holders of a majority
in principal amount of outstanding debt securities of any series
may rescind this accelerated payment requirement if all existing
Events of Default, except for nonpayment of the principal on the
debt securities of that series that has become due solely as a
result of the accelerated payment requirement, have been cured
or waived and if the rescission of acceleration would not
conflict with any judgment or decree. The holders of a majority
in principal amount of the outstanding debt securities of any
series also have the right to waive past defaults, except a
default in paying principal or interest on any outstanding debt
security, or in respect of a covenant or a provision that cannot
be modified or amended without the consent of all holders of the
debt securities of that series.
Holders of not less than 51% of the principal amount of the
outstanding debt securities of a series may seek to institute a
proceeding only after they have notified the Trustee of a
continuing Event of Default in writing and made a written
request, and offered reasonable indemnity, to the trustee to
institute a proceeding and the trustee has failed to do so
within 60 days after it received this notice. In addition,
within this
60-day
period the trustee must not have received directions
inconsistent with this written request by holders of a majority
in principal amount of the outstanding debt securities of that
series. These limitations do not apply, however, to a suit
instituted by a holder of a debt security for the enforcement of
the payment of principal, interest or any premium on or after
the due dates for such payment.
During the existence of an Event of Default actually known to a
responsible officer of the trustee, the trustee is required to
exercise the rights and powers vested in it under the indenture
and use the same degree of care and skill in its exercise as a
prudent person would under the circumstances in the conduct of
that persons own affairs. If an Event of Default has
occurred and is continuing, the trustee is not under any
obligation to exercise any of its rights or powers at the
request or direction of any of the holders unless the holders
have offered to the trustee security or indemnity reasonably
satisfactory to the trustee. Subject to certain provisions, the
holders of a majority in principal amount of the outstanding
debt securities of any series have the right to direct the time,
method and place of conducting any proceeding for any remedy
available to the trustee, or exercising any trust, or power
conferred on the trustee.
The trustee will, within 90 days after receiving notice of
any default, give notice of the default to the holders of the
debt securities of that series, unless the default was already
cured or waived. Unless there is a default in paying principal,
interest or any premium when due, the trustee can withhold
giving notice to the holders if it determines in good faith that
the withholding of notice is in the interest of the holders. In
the case of a default specified in clause (4) above, no
notice of default to the holders of the debt securities of that
series will be given until 60 days after the occurrence of
the event of default.
Modification
and Waiver
The indenture may be amended or modified without the consent of
any holder of debt securities in order to:
|
|
|
|
|
evidence a successor to the trustee;
|
|
|
|
cure ambiguities, defects or inconsistencies;
|
|
|
|
provide for the assumption of our obligations in the case of a
merger or consolidation or transfer of all or substantially all
of our assets that complies with the covenant described under
Merger, Consolidation or Sale of Assets;
|
|
|
|
make any change that would provide any additional rights or
benefits to the holders of the debt securities of a series;
|
|
|
|
add guarantors or co-obligors with respect to the debt
securities of any series;
|
|
|
|
secure the debt securities of a series;
|
|
|
|
establish the form or forms of debt securities of any series;
|
|
|
|
add additional Events of Default with respect to the debt
securities of any series;
|
8
|
|
|
|
|
maintain the qualification of the indenture under the
Trust Indenture Act; or
|
|
|
|
make any change that does not adversely affect in any material
respect the interests of any holder.
|
Other amendments and modifications of the indenture or the debt
securities issued may be made with the consent of the holders of
not less than a majority of the aggregate principal amount of
the outstanding debt securities of each series affected by the
amendment or modification. However, no modification or amendment
may, without the consent of the holder of each outstanding debt
security affected:
|
|
|
|
|
reduce the principal amount, or extend the fixed maturity, of
the debt securities;
|
|
|
|
alter or waive the redemption or repayment provisions of the
debt securities;
|
|
|
|
change the currency in which principal, any premium or interest
is paid;
|
|
|
|
reduce the percentage in principal amount outstanding of debt
securities of any series which must consent to an amendment,
supplement or waiver or consent to take any action;
|
|
|
|
impair the right to institute suit for the enforcement of any
payment on the debt securities;
|
|
|
|
waive a payment default with respect to the debt securities;
|
|
|
|
reduce the interest rate or extend the time for payment of
interest on the debt securities;
|
|
|
|
adversely affect the ranking of the debt securities of any
series; or
|
|
|
|
release any guarantor or co-obligor from any of its obligations
under its guarantee or the indenture, except in compliance with
the terms of the indenture.
|
Satisfaction,
Discharge and Covenant Defeasance
We may terminate our obligations under the indenture with
respect to the outstanding debt securities of any series, when:
|
|
|
|
|
all debt securities of any series issued that have been
authenticated and delivered have been delivered to the trustee
for cancellation; or
|
|
|
|
all the debt securities of any series issued that have not been
delivered to the trustee for cancellation have become due and
payable, will become due and payable within one year, or are to
be called for redemption within one year and we have made
arrangements satisfactory to the trustee for the giving of
notice of redemption by such trustee in our name and at our
expense, and in each case, we have irrevocably deposited or
caused to be deposited with the trustee sufficient funds to pay
and discharge the entire indebtedness on the series of debt
securities; and
|
|
|
|
|
|
we have paid or caused to be paid all other sums then due and
payable under the indenture; and
|
|
|
|
we have delivered to the trustee an officers certificate
and an opinion of counsel, each stating that all conditions
precedent under the indenture relating to the satisfaction and
discharge of the indenture have been complied with.
|
We may elect to have our obligations under the indenture
discharged with respect to the outstanding debt securities of
any series (legal defeasance). Legal defeasance
means that we will be deemed to have paid and discharged the
entire indebtedness represented by the outstanding debt
securities of such series under the indenture, except for:
|
|
|
|
|
the rights of holders of the debt securities to receive
principal, interest and any premium when due;
|
|
|
|
our obligations with respect to the debt securities concerning
issuing temporary debt securities, registration of transfer of
debt securities, mutilated, destroyed, lost or stolen debt
securities and the maintenance of an office or agency for
payment for security payments held in trust;
|
9
|
|
|
|
|
the rights, powers, trusts, duties and immunities of the
trustee; and
|
|
|
|
the defeasance provisions of the indenture.
|
In addition, we may elect to have our obligations released with
respect to certain covenants in the indenture (covenant
defeasance). If we so elect, any failure to comply with
these obligations will not constitute a default or an event of
default with respect to the debt securities of any series. In
the event covenant defeasance occurs, certain events, not
including non-payment, bankruptcy and insolvency events,
described under Events of Default and Remedies will
no longer constitute an event of default for that series.
In order to exercise either legal defeasance or covenant
defeasance with respect to outstanding debt securities of any
series:
|
|
|
|
|
we must irrevocably have deposited or caused to be deposited
with the trustee as trust funds for the purpose of making the
following payments, specifically pledged as security for, and
dedicated solely to the benefits of the holders of the debt
securities of a series:
|
|
|
|
|
|
money in an amount; or
|
|
|
|
U.S. government obligations (or equivalent government
obligations in the case of debt securities denominated in other
than U.S. dollars or a specified currency) that will
provide, not later than one day before the due date of any
payment, money in an amount; or
|
|
|
|
a combination of money and U.S. government obligations (or
equivalent government obligations, as applicable),
in each case sufficient, in the written opinion (with respect to
U.S. or equivalent government obligations or a combination
of money and U.S. or equivalent government obligations, as
applicable) of a nationally recognized firm of independent
public accountants to pay and discharge, and which shall be
applied by the trustee to pay and discharge, all of the
principal (including mandatory sinking fund payments), interest
and any premium at due date or maturity;
|
|
|
|
|
|
in the case of legal defeasance, we have delivered to the
trustee an opinion of counsel stating that, under then
applicable Federal income tax law, the holders of the debt
securities of that series will not recognize income, gain or
loss for Federal income tax purposes as a result of the deposit,
defeasance and discharge to be effected and will be subject to
the same Federal income tax as would be the case if the deposit,
defeasance and discharge did not occur;
|
|
|
|
|
|
in the case of covenant defeasance, we have delivered to the
trustee an opinion of counsel to the effect that the holders of
the debt securities of that series will not recognize income,
gain or loss for Federal income tax purposes as a result of the
deposit and covenant defeasance to be effected and will be
subject to the same Federal income tax as would be the case if
the deposit and covenant defeasance did not occur;
|
|
|
|
no event of default or default with respect to the outstanding
debt securities of that series has occurred and is continuing at
the time of such deposit after giving effect to the deposit or,
in the case of legal defeasance, no default relating to
bankruptcy or insolvency has occurred and is continuing at any
time on or before the 91st day after the date of such
deposit, it being understood that this condition is not deemed
satisfied until after the 91st day;
|
|
|
|
the legal defeasance or covenant defeasance will not cause the
trustee to have a conflicting interest within the meaning of the
Trust Indenture Act, assuming all debt securities of a
series were in default within the meaning of such Act;
|
|
|
|
the legal defeasance or covenant defeasance will not result in a
breach or violation of, or constitute a default under, any other
agreement or instrument to which we are a party;
|
10
|
|
|
|
|
the legal defeasance or covenant defeasance will not result in
the trust arising from such deposit constituting an investment
company within the meaning of the Investment Company Act of
1940, as amended, unless the trust is registered under such Act
or exempt from registration; and
|
|
|
|
we have delivered to the trustee an officers certificate
and an opinion of counsel stating that all conditions precedent
with respect to the defeasance or covenant defeasance have been
complied with.
|
Certain
Definitions
Indebtedness means:
|
|
|
|
|
any liability of any person for borrowed money, or evidenced by
a bond, note, debenture, or similar instrument (including
purchase money obligations but excluding Trade Payables), or for
the payment of money relating to a lease that is required to be
classified as a capitalized lease obligation in accordance with
generally accepted accounting principles;
|
|
|
|
any of the foregoing liabilities of another that a person has
guaranteed, that is recourse to such person, or that is
otherwise its legal liability;
|
|
|
|
mandatorily redeemable preferred or preference stock of one of
our Subsidiaries held by anyone other than us or one of our
Subsidiaries; and
|
|
|
|
any amendment, supplement, modification, deferral, renewal,
extension, or refunding of any liability of the types referred
to in the foregoing clauses.
|
Subsidiary means any corporation, partnership or
other entity of which at the time of determination we own or
control directly or indirectly capital stock or equivalent
interests having more than 50% of the total voting power of the
capital stock or equivalent interests.
Trade Payables means accounts payable or any other
Indebtedness or monetary obligations to trade creditors created
or assumed in the ordinary course of business in connection with
the obtaining of materials, finished products, inventory or
services.
Paying
Agent and Registrar
The trustee will initially act as paying agent and registrar for
all debt securities. We may change the paying agent or registrar
for any series of debt securities without prior notice, and we
or any of our Subsidiaries may act as paying agent or registrar.
Forms of
Securities
Each debt security will be represented either by a certificate
issued in definitive form to a particular investor or by one or
more global securities representing the entire issuance of the
series of debt securities. Certificated securities in definitive
form and global securities will be issued in registered form.
Definitive securities name you or your nominee as the owner of
the security, and in order to transfer or exchange these
securities or to receive payments other than interest or other
interim payments, you or your nominee must physically deliver
the securities to the trustee, registrar, paying agent or other
agent, as applicable. Global securities name a depositary or its
nominee as the owner of the debt securities represented by these
global securities. The depositary maintains a computerized
system that will reflect each investors beneficial
ownership of the securities through an account maintained by the
investor with its broker/dealer, bank, trust company or other
representative, as we explain more fully below.
Global
Securities
Registered
Global Securities
We may issue the registered debt securities in the form of one
or more fully registered global securities that will be
deposited with a depositary or its custodian identified in the
applicable prospectus supplement and registered in the name of
that depositary or its nominee. In those cases, one or more
registered global
11
securities will be issued in a denomination or aggregate
denominations equal to the portion of the aggregate principal or
face amount of the securities to be represented by registered
global securities. Unless and until it is exchanged in whole for
securities in definitive registered form, a registered global
security may not be transferred except as a whole by and among
the depositary for the registered global security, the nominees
of the depositary or any successors of the depositary or those
nominees.
If not described below, any specific terms of the depositary
arrangement with respect to any securities to be represented by
a registered global security will be described in the prospectus
supplement relating to those securities. We anticipate that the
following provisions will apply to all depositary arrangements.
Ownership of beneficial interests in a registered global
security will be limited to persons, called participants, that
have accounts with the depositary or persons that may hold
interests through participants. Upon the issuance of a
registered global security, the depositary will credit, on its
book-entry registration and transfer system, the
participants accounts with the respective principal or
face amounts of the securities beneficially owned by the
participants. Any dealers, underwriters or agents participating
in the distribution of the securities will designate the
accounts to be credited. Ownership of beneficial interests in a
registered global security will be shown on, and the transfer of
ownership interests will be effected only through, records
maintained by the depositary, with respect to interests of
participants, and on the records of participants, with respect
to interests of persons holding through participants. The laws
of some states may require that some purchasers of securities
take physical delivery of these securities in definitive form.
These laws may impair your ability to own, transfer or pledge
beneficial interests in registered global securities.
So long as the depositary, or its nominee, is the registered
owner of a registered global security, that depositary or its
nominee, as the case may be, will be considered the sole owner
or holder of the securities represented by the registered global
security for all purposes under the indenture. Except as
described below, owners of beneficial interests in a registered
global security will not be entitled to have the securities
represented by the registered global security registered in
their names, will not receive or be entitled to receive physical
delivery of the securities in definitive form and will not be
considered the owners or holders of the securities under the
indenture. Accordingly, each person owning a beneficial interest
in a registered global security must rely on the procedures of
the depositary for that registered global security and, if that
person is not a participant, on the procedures of the
participant through which the person owns its interest, to
exercise any rights of a holder under the indenture. We
understand that under existing industry practices, if we request
any action of holders or if an owner of a beneficial interest in
a registered global security desires to give or take any action
that a holder is entitled to give or take under the indenture,
the depositary for the registered global security would
authorize the participants holding the relevant beneficial
interests to give or take that action, and the participants
would authorize beneficial owners owning through them to give or
take that action or would otherwise act upon the instructions of
beneficial owners holding through them.
Principal, premium, if any, and interest payments on debt
securities represented by a registered global security
registered in the name of a depositary or its nominee will be
made to the depositary or its nominee, as the case may be, as
the registered owner of the registered global security. Neither
we nor the trustee or any other agent of ours or the trustee
will have any responsibility or liability for any aspect of the
records relating to payments made on account of beneficial
ownership interests in the registered global security or for
maintaining, supervising or reviewing any records relating to
those beneficial ownership interests.
We expect that the depositary for any of the securities
represented by a registered global security, upon receipt of any
payment of principal, premium, interest or other distribution of
underlying securities or other property to holders on that
registered global security, will immediately credit
participants accounts in amounts proportionate to their
respective beneficial interests in that registered global
security as shown on the records of the depositary. We also
expect that payments by participants to owners of beneficial
interests in a registered global security held through
participants will be governed by standing customer instructions
and customary practices, as is now the case with the securities
held for the accounts of customers in bearer form or registered
in street name, and will be the responsibility of
those participants.
If the depositary for any of these securities represented by a
registered global security is at any time unwilling or unable to
continue as depositary or ceases to be a clearing agency
registered under the Exchange
12
Act, and a successor depositary registered as a clearing agency
under the Exchange Act is not appointed by us within
90 days, we will issue securities in definitive form in
exchange for the registered global security that had been held
by the depositary. Any securities issued in definitive form in
exchange for a registered global security will be registered in
the name or names that the depositary gives to the trustee or
other relevant agent of ours or theirs. It is expected that the
depositarys instructions will be based upon directions
received by the depositary from participants with respect to
ownership of beneficial interests in the registered global
security that had been held by the depositary.
Unless we state otherwise in a prospectus supplement, the
Depository Trust Company (DTC) will act as
depositary for each series of debt securities issued as global
securities. DTC has advised us that DTC is a limited-purpose
trust company created to hold securities for its participating
organizations (collectively, the Participants) and
to facilitate the clearance and settlement of transactions in
those securities between Participants through electronic
book-entry changes in accounts of its Participants. The
Participants include securities brokers and dealers, banks,
trust companies, clearing corporations and certain other
organizations. Access to DTCs system is also available to
other entities such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly
(collectively, the Indirect Participants). Persons
who are not Participants may beneficially own securities held by
or on behalf of DTC only through the Participants or the
Indirect Participants. The ownership interests in, and transfers
of ownership interests in, each security held by or on behalf of
DTC are recorded on the records of the Participants and the
Indirect Participants.
Governing
Law
The indenture and each series of debt securities are governed
by, and construed in accordance with, the laws of the State of
New York.
DESCRIPTION
OF CAPITAL STOCK
We may from time to time offer shares of our common stock or
preferred stock pursuant to this prospectus. This section
describes the general terms of our capital stock. A prospectus
supplement may provide information that is different from this
prospectus. If the information in the prospectus supplement with
respect to our capital stock being offered differs from this
prospectus, you should rely on the information in the prospectus
supplement. A copy of our restated certificate of incorporation
has been incorporated by reference from our filings with the SEC
as an exhibit to the registration statement. Our capital stock
and the rights of the holders of our capital stock are subject
to the applicable provisions of the General Corporation Law of
Delaware, our restated certificate of incorporation and our
amended and restated bylaws, each as amended, the rights of the
holders of our preferred stock, if any, with respect to common
stock, as well as the terms of our senior indebtedness and
subordinated indebtedness, if any.
The following description of our capital stock and any
description of our capital stock in a prospectus supplement may
not be complete and is subject to, and qualified in its entirety
by reference to, Delaware law and the actual terms and
provisions contained in our certificate of incorporation and
bylaws, each as amended from time to time.
General
Our restated certificate of incorporation provides that we may
issue up to 200,000,000 shares of common stock, par value
$.001 per share, and 5,000,000 shares of preferred stock,
par value $.001 per share. As of June 13, 2008, there were
37,176,337 shares of common stock outstanding and no shares
of preferred stock outstanding.
13
Common
Stock
Each share of common stock has identical rights and privileges
in every respect. The holders of our common stock are entitled
to vote upon all matters submitted to a vote of our stockholders
and are entitled to one vote for each share of common stock held.
Subject to the prior rights and preferences, if any, applicable
to shares of preferred stock or any series of preferred stock,
the holders of common stock are entitled to receive such
dividends, payable in cash, stock or otherwise, as may be
declared by our board out of any funds legally available for the
payment of dividends.
If we voluntarily or involuntarily liquidate, dissolve or
wind-up, the
holders of common stock will be entitled to receive after
distribution in full of the preferential amounts, if any, to be
distributed to the holders of preferred stock or any series of
preferred stock, all of the remaining assets available for
distribution ratably in proportion to the number of shares of
common stock held by them. Holders of common stock have no
preferences or any preemptive conversion or exchange rights. All
outstanding shares of common stock are fully paid and
nonassessable.
Preferred
Stock
Our board of directors has the authority, within the limitations
and restrictions stated in our restated certificate of
incorporation, to authorize the issuance of shares of preferred
stock, in one or more classes or series, and to fix the rights,
preferences, privileges and restrictions thereof, including
dividend rights, conversion rights, voting rights, terms of
redemption, liquidation preferences, preemptive rights and the
number of shares constituting any series or the designation of
such series. The issuance of preferred stock could have the
effect of decreasing the market price of our common stock and
could adversely affect the voting and other rights of the
holders of our common stock. Our board of directors has the
authority to issue shares of preferred stock with terms and
conditions which could have the effect of delaying, deferring or
preventing a transaction or a change of control of our company
that might involve a premium price for holders of our common
stock or otherwise be in their best interest. There are no
restrictions on the repurchase or redemption of shares by the
registrant while there is any arrearage in the payment of
dividends or sinking fund installments.
Supermajority
Vote
Our restated certificate of incorporation provides that the
affirmative vote of at least 75% of the voting power of the
outstanding shares of our capital stock outstanding and entitled
to vote is required to amend or repeal, or to adopt any
provision inconsistent with, certain provisions of our restated
certificate of incorporation, including certain provisions which
could have the effect of delaying, deferring or preventing a
transaction or a change in control of our company.
Anti-Takeover
Effects of Provisions of our Restated Certificate of
Incorporation and Amended and Restated Bylaws
Our restated certificate of incorporation and amended and
restated bylaws contain provisions which could have the effect
of delaying, deferring or preventing a transaction or a change
in control of our company. Examples of such anti-takeover
effects include the following:
|
|
|
|
|
our board of directors is divided into three classes of
directors with each class serving a staggered three-year term;
|
|
|
|
our board of directors is authorized to expand the size of the
board with the consent of 75% of the directors in office and
then fill the vacancies created by such expansion;
|
|
|
|
notice of stockholder nominations for directors and proposals
for other business must be made within a certain period prior to
an annual meeting; and
|
|
|
|
stockholder action by written consent is prohibited and
therefore the power of stockholders to call special meetings is
significantly limited.
|
14
These provisions may discourage a third party from making a
tender offer or otherwise attempting to obtain control of us, as
it generally makes it more difficult for stockholders to replace
a majority of the directors. There is no cumulative voting in
the election of directors.
Rights
Agreement
On June 20, 2001, our board of directors entered into a
rights agreement with Mellon Investor Services LLC. The rights
agreement could have the effect of delaying, deferring or
preventing a transaction or a change in control of our company.
The rights agreement provides that if a person acquires, or
commences a tender offer to acquire, 20% or more of our common
stock without the approval of our board of directors, all other
stockholders would have the right to purchase securities from us
at a price that is less than its fair market value, which would
substantially dilute and reduce the value of our common stock
owned by the acquiring person. As a result, our board of
directors has significant discretion to approve or disapprove a
persons efforts to acquire 20% or more of our common stock.
Anti-Takeover
Effects of Delaware Law
We are subject to Section 203 of the General Corporation
Law of Delaware, which regulates corporate acquisitions. In
general, Section 203 prohibits a publicly held Delaware
corporation from engaging in a business combination with an
interested stockholder for a period of three years following the
date the person became an interested stockholder, unless:
|
|
|
|
|
the board of directors approved the transaction in which the
stockholder became an interested stockholder prior to the date
the interested stockholder attained such status;
|
|
|
|
upon consummation of the transaction that resulted in the
stockholder becoming an interested stockholder, the interested
stockholders owned at least 85% of the voting stock of the
corporation outstanding at the time the transaction commenced,
excluding shares owned by persons who are directors and also
officers and employee stock plans in which employee participants
do not have the right to determine confidentially whether shares
held subject to the plan will be tendered in a tender or
exchange offer; or
|
|
|
|
the business combination is approved by a majority of the board
of directors and by the affirmative vote of at least two-thirds
of the outstanding voting stock that is not owned by the
interested stockholder.
|
Transfer
Agent and Registrar
The Transfer Agent and Registrar for our common stock is Mellon
Investor Services LLC.
DESCRIPTION
OF WARRANTS
We may issue warrants from time to time in one or more series
for the purchase of our common stock, debt securities or
preferred stock or any combination of those securities. Warrants
may be issued independently or together with any shares of
common stock, shares of preferred stock or debt securities
offered by any prospectus supplement and may be attached to or
separate from common stock, preferred stock or debt securities.
We will issue each series of warrants under a separate warrant
agreement between us and a bank or trust company as warrant
agent, as specified in the applicable prospectus supplement.
The warrant agent will act solely as our agent in connection
with the warrants and will not act for or on behalf of warrant
holders. The following sets forth certain general terms and
provisions of the warrants that may be offered under this
registration statement. Further terms of the warrants and the
applicable warrant agreement will be set forth in the applicable
prospectus supplement.
15
The applicable prospectus supplement will describe the terms of
the warrants in respect of which this prospectus is being
delivered, including, where applicable, the following:
|
|
|
|
|
the title of the warrants;
|
|
|
|
the total number of warrants;
|
|
|
|
the currency, currencies, including composite currencies or
currency units, in which the price of the warrants may be
payable;
|
|
|
|
the type and number of securities purchasable upon exercise of
such warrants;
|
|
|
|
the designation and terms of the other securities, if any, with
which such warrants are issued and the number of such warrants
issued with each such offered security;
|
|
|
|
the date, if any, on and after which the warrants and the
related securities will be separately transferable;
|
|
|
|
if applicable, the date on which the right to exercise the
warrants shall commence and the date on which this right shall
expire;
|
|
|
|
the price at which each security purchasable upon exercise of
such warrants may be purchased;
|
|
|
|
if applicable, the minimum or maximum amount of the warrants
which may be exercised at any one time;
|
|
|
|
information with respect to book-entry procedures, if any;
|
|
|
|
any anti-dilution protection;
|
|
|
|
a discussion of U.S. federal income tax considerations
relating to the warrants; and
|
|
|
|
any other terms of the warrants including terms, procedures and
limitations relating to the exchange and exercise of the
warrants.
|
Warrants may be exchanged for new warrants of different
denominations, may be presented for registration of transfer,
and may be exercised at the corporate trust office of the
warrant agent or any other office indicated in the prospectus
supplement. Before the exercise of their warrants, holders of
warrants will not have any of the rights of holders of shares of
common stock, shares of preferred stock or debt securities
purchasable upon exercise, including the right to receive
payments of principal of, any premium on, or any interest on,
the debt securities purchasable upon such exercise or to enforce
the covenants in the indenture or to receive payments of
dividends, if any, on the shares common stock or preferred stock
purchasable upon such exercise or to exercise any applicable
right to vote.
Exercise
of Warrants
Each warrant will entitle the holder to purchase a principal
amount of debt securities or a number of shares of common stock
or preferred stock at an exercise price as shall in each case be
set forth in, or calculable from, the prospectus supplement
relating to those warrants. Warrants may be exercised at the
times set forth in the prospectus supplement relating to such
warrants. After the close of business on the expiration date (or
any later date to which the expiration date may be extended by
us), unexercised warrants will become void. Subject to any
restrictions and additional requirements that may be set forth
in the prospectus supplement relating thereto, warrants may be
exercised by delivery to the warrant agent of the certificate
evidencing the warrants properly completed and duly executed and
of payment as provided in the prospectus supplement of the
amount required to purchase the debt securities or shares of
common stock or shares of preferred stock purchasable upon such
exercise. The exercise price will be the price applicable on the
date of payment in full, as set forth in the prospectus
supplement relating to the warrants. Upon receipt of the payment
and the certificate representing the warrants to be exercised
properly completed and duly executed at the corporate trust
office of the warrant agent or any other office indicated in the
prospectus supplement, we will, as soon as practicable, issue
and deliver the debt securities, shares of common stock or
shares of
16
preferred stock purchasable upon such exercise. If fewer than
all of the warrants represented by that certificate are
exercised, a new certificate will be issued for the remaining
amount of warrants.
PLAN OF
DISTRIBUTION
We may sell the securities from time to time in one or more
transactions, including block transactions and transactions on
the NASDAQ Global Market or on a delayed or continuous basis, in
each case, through agents, underwriters or dealers, directly to
one or more purchasers, through a combination of any of these
methods of sale, or in any other manner, as provided in the
applicable prospectus supplement. The securities may be sold at
a fixed price or prices, which may be changed, or at market
prices prevailing at the time of sale, at prices relating to the
prevailing market prices or at negotiated prices. The
consideration may be cash or another form negotiated by the
parties. Agents, underwriters or broker-dealers may be paid
compensation for offering and selling the securities. That
compensation may be in the form of discounts, concessions or
commissions to be received from us or from the purchasers of the
securities. We will identify the specific plan, including any
underwriters, dealers, agents or direct purchasers and their
compensation, in the applicable prospectus supplement.
Underwriters, dealers and agents participating in the
distribution of the securities may be deemed to be underwriters,
and any discounts and commissions received by them from us or
from purchasers of the securities and any profit realized by
them on resale of the securities may be deemed to be
underwriting discounts and commissions under the Securities Act.
If such dealers or agents were deemed to be underwriters, they
may be subject to statutory liabilities under the Securities
Act. Underwriters, dealers and agents may be entitled, under
agreements entered into with us, to indemnification against and
contribution toward certain civil liabilities, including
liabilities under the Securities Act.
Offers to purchase the securities may be solicited by agents
designated by us from time to time. Any such agent involved in
the offer or sale of the securities will be named, and any
commissions payable by the company to such agent will be set
forth in the prospectus supplement. Unless otherwise indicated
in the prospectus supplement, any such agent will be acting on a
best efforts basis for the period of its appointment. Any such
agent may be deemed to be an underwriter, as that term is
defined in the Securities Act, of the securities so offered and
sold.
If an underwriter or underwriters are utilized in the sale of
securities, we will execute an underwriting agreement with such
underwriter or underwriters at the time an agreement for such
sale is reached, and the names of the specific managing
underwriter or underwriters, as well as any other underwriters,
and the terms of the transactions, including compensation of the
underwriters and dealers, if any, will be set forth in the
prospectus supplement, which will be used by the underwriters to
resell the securities.
If a dealer is utilized in the sale of the securities, we will
sell such securities to the dealer, as principal. The dealer may
then resell such securities to the public at varying prices to
be determined by such dealer at the time of resale. The name of
the dealer and the terms of the transactions will be set forth
in the prospectus supplement relating thereto.
Offers to purchase the securities may be solicited directly by
us and sales thereof may be made by us directly to institutional
investors or others. The terms of any such sales, including the
terms of any bidding or auction prices, if utilized, will be
described in the prospectus supplement relating thereto.
Agents, underwriters and dealers may be entitled under
agreements that may be entered into with us to indemnification
by us against certain liabilities, including liabilities under
the Securities Act, and any such agents, underwriters or
dealers, or their affiliates may be customers of, engage in
transactions with or perform services for us in the ordinary
course of business.
If so indicated in the prospectus supplement, we will authorize
agents and underwriters to solicit offers by certain
institutions to purchase debt securities from us at the public
offering price set forth in the prospectus supplement pursuant
to delayed delivery contracts (Contracts) providing
for payment and delivery on the date stated in the prospectus
supplement. Such Contracts will be subject to only those
conditions set forth in the prospectus supplement. Each Contract
will be for an amount not less than, and the principal amount of
securities sold pursuant to Contracts shall not be less nor more
than, the respective
17
amounts stated in such prospectus supplement. Institutions with
which Contracts, when authorized, may be made include commercial
and savings banks, insurance companies, pension funds,
investment companies, educational and charitable institutions
and other institutions, but will in all cases be subject to our
approval. Contracts will not be subject to any conditions except
(i) the purchase by an institution of the securities
covered by its Contract shall not at the time of delivery be
prohibited under the laws of any jurisdiction in the United
States to which such institution is subject and (ii) we
shall have sold to such underwriters the total principal amount
of the securities less the principal amount thereof covered by
Contracts. A commission indicated in the prospectus supplement
will be paid to underwriters and agents soliciting purchases of
debt securities pursuant to Contracts accepted by us.
The securities may also be resold by security holders in the
manner provided in the applicable prospectus supplement.
LEGAL
MATTERS
Certain legal matters will be passed upon for Luminex by Bass,
Berry & Sims PLC, Nashville, Tennessee. Any
underwriters or agents will be represented by their own legal
counsel, who will be passing upon certain legal matters for the
underwriters and will be identified in the applicable prospectus
supplement.
EXPERTS
The audited consolidated financial statements of Luminex and the
effectiveness of internal control over financial reporting
incorporated in this prospectus by reference to our Annual
Report on
Form 10-K
for the year ended December 31, 2007, have been so
incorporated in reliance on the reports of Ernst &
Young LLP, an independent registered public accounting firm,
given on the authority of said firm as experts in auditing and
accounting. The audited consolidated financial statements of Tm
Bioscience Corporation for the years ended December 31,
2006 and 2005, included as Exhibit 99.2 of our
Form 8-K
filed on March 1, 2007, as amended on May 9, 2007 and
incorporated by reference in this prospectus, have been audited
by Ernst & Young LLP, an independent registered public
accounting firm, as set forth in their report and related
Comments by Auditors for U.S. Readers on Canada
U.S. Reporting Difference thereon incorporated by reference
elsewhere herein and are incorporated by reference in reliance
upon such reports given on the authority of such firm as experts
in accounting and auditing.
INCORPORATION
OF INFORMATION BY REFERENCE
The SEC allows us to incorporate by reference the
information we file with them, which means that we can disclose
important information to you by referring you to those
documents. The information incorporated by reference is
considered to be part of this prospectus, and information that
we file later with the SEC will automatically update and
supersede this information. We incorporate by reference the
documents listed below (except the information contained in such
documents to the extent that it is furnished and not
filed):
1. Annual Report on
Form 10-K
for the year ended December 31, 2007 filed on
March 14, 2008.
2. All information in our proxy statement filed with the
SEC on April 21, 2008 to the extent incorporated by
reference in our Annual Report on
Form 10-K
for the year ended December 31, 2007.
3. Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2008 filed on May 9,
2008.
4. Exhibit 99.2 to our
Form 8-K
filed on March 1, 2007 and as amended on May 9, 2007.
5. Current Reports on
Form 8-K
filed on March 5, 2008, March 28, 2008 and
May 29, 2008.
6. The description of the Registrants Common Stock,
par value $0.001 per share, contained in the Registrants
Registration Statement on
Form 8-A,
filed with the SEC on March 27, 2000, and the description
of the Stock Rights contained in the Registrants
Registration Statement on
Form 8-A,
filed
18
with the SEC on June 21, 2001, and including all other
amendments and reports filed for the purpose of updating such
descriptions.
7. All documents filed pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date of this
prospectus and prior to the termination of the offering.
Notwithstanding the foregoing, we are not incorporating by
reference any information furnished under Item 2.02 or
Item 7.01 of any Current Report on
Form 8-K
(including financial statements or exhibits relating thereto
furnished pursuant to Item 9.01).
Any statement contained in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be
modified or superseded for purposes of this prospectus to the
extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be
incorporated by reference herein or in any prospectus supplement
modifies or supersedes such statement. Any statement so modified
or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this prospectus.
You may request, and we will provide, a copy of our filings
incorporated by reference at no cost, by writing or telephoning
us at the following address:
Luminex Corporation
12212 Technology Boulevard
Austin, Texas 78727
Attn: Corporate Secretary
Telephone: (512) 219-8020
This prospectus is part of a registration statement that we have
filed with the SEC relating to the securities to be offered.
This prospectus does not contain all of the information we have
included in the registration statement and the accompanying
exhibits and schedules in accordance with the rules and
regulations of the SEC and refer you to the omitted information.
You should rely only on the information contained in this
prospectus, any prospectus supplement or free writing prospectus
or any document to which we have referred you. We have not
authorized anyone else to provide you with information that is
different. This prospectus and any prospectus supplement or free
writing prospectus may be used only where it is legal to sell
these securities. The information in this prospectus or any
prospectus supplement or free writing prospectus is current only
as of the date on the front of these documents.
WHERE YOU
CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements
and other information with the SEC. Our SEC filings are also
available over the Internet at the SECs web site at
http://www.sec.gov.
You may also read and copy any document we file at the
SECs public reference room at 100 F Street,
N.E., Room 1580, Washington, D.C. 20549. Please call
the SEC at
1-800-SEC-0330
to obtain information on the operation of the public reference
room. Our web site address is www.luminexcorp.com. Please note
that our web site address is provided as an inactive textual
reference only. The information provided on our web site is not
part of this prospectus or the prospectus supplement, and is
therefore not incorporated by reference unless such information
is otherwise specifically referenced elsewhere in this
prospectus or the prospectus supplement. We make available free
of charge through our web site our Annual Report on
Form 10-K,
Quarterly Reports on
Form 10-Q,
Current Reports on
Form 8-K,
Proxy Statement on Schedule 14A and all amendments to those
reports as soon as reasonably practicable after such material is
electronically filed with or furnished to the SEC.
19
3,500,000 Shares
COMMON STOCK
PROSPECTUS SUPPLEMENT
|
|
JPMorgan |
UBS Investment Bank |
The date of this prospectus supplement is
June , 2008