Initial Public Offering (IPO): Registration Statement (General Form) — Form S-1
Filing Table of Contents
Document/Exhibit Description Pages Size
1: S-1 Registration Statement (General Form) 94 440K
2: EX-3.1 Form of Restated Cert of Incorp. 7 38K
3: EX-3.2 Amended and Restated Bylaws 16 66K
4: EX-4.2 Warrant for the Purchase of Shares 14 62K
5: EX-10.1 1996 Stock Option Plan 5 22K
11: EX-10.10 Consulting Agreement 5 27K
12: EX-10.11 Amendment to Consulting Agreement 1 8K
13: EX-10.12 Lease Agreement 21 112K
14: EX-10.13 Sublease Lease Agreement 5 23K
15: EX-10.14 Amendment to Sublease 2± 10K
6: EX-10.2 Form of Stock Options Agreement 3 13K
7: EX-10.3 Form of Incentive Stock Option Agreement 3 12K
8: EX-10.7 Development and Supply Agreement 28 129K
9: EX-10.8 Amend to Dev and Supply Agreement 5 23K
10: EX-10.9 Agreement for Electronic Manufacturing 14 55K
16: EX-23.2 Consent of Independent Auditors 1 7K
17: EX-27.1 Financial Data Schedule 2 9K
As filed with the Securities and Exchange Commission on February 7, 2000
Registration No. 333-
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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LUMINEX CORPORATION
(Exact name of registrant as specified in its charter)
[Download Table]
Delaware 8731 74-2747608
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
12212 Technology Boulevard
Austin, Texas 78727
(512) 219-8020
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
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Mark B. Chandler, Ph.D.
Chairman and Chief Executive Officer
Luminex Corporation
12212 Technology Boulevard
Austin, Texas 78727
(512) 219-8020
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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Copies to:
[Download Table]
Michael L. Bengtson, Esq. Donald J. Murray, Esq.
Craig N. Adams, Esq. Dewey Ballantine LLP
Thompson & Knight LLP 1301 Avenue of the Americas
98 San Jacinto Boulevard, Suite 1200 New York, New York 10019
Austin, Texas 78701 (212) 259-8000
(512) 469-6100
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Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this form is a post effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
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CALCULATION OF REGISTRATION FEE
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[Download Table]
Proposed Maximum
Title of Each Class of Aggregate Offering Amount of
Securities to be Registered Price(1)(2) Registration Fee
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Common stock, par value $.001 per
share.............................. $100,000,000 $26,400
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(1) In accordance with Rule 457(o) under the Securities Act of 1933, the number
of shares being registered and the proposed maximum offering price per
share are not included in this table.
(2) Estimated solely for the purpose of calculating the registration fee.
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The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
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PRELIMINARY PROSPECTUS , 2000
Subject to completion
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++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This preliminary prospectus +
+is not an offer to sell these securities and is not soliciting an offer to +
+buy these securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Shares
[LOGO OF LUMINEX]
Common Stock
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This is our initial public offering of shares of our common stock. No public
market currently exists for our common stock. We expect the public offering
price to be between $ and $ per share.
We have applied to have our common stock listed on the Nasdaq National Market
under the symbol "LMNX."
Before buying any shares you should read the discussion of material risks of
investing in our common stock in "Risk factors" beginning on page 7.
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. Any representation to the contrary is
a criminal offense.
[Download Table]
Per Share Total
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Public offering price $ $
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Underwriting discounts and commissions $ $
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Proceeds, before expenses, to Luminex $ $
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The underwriters may also purchase up to shares of common stock from us at
the public offering price, less the underwriting discounts and commissions,
within 30 days from the date of this prospectus. This option may be exercised
only to cover over-allotments, if any. If the option is exercised in full, the
total underwriting discounts and commissions will be $ , and the total
proceeds, before expenses, to Luminex will be $ .
The underwriters are offering the common stock as set forth under
"Underwriting." Delivery of the shares will be made on or about , 2000.
Warburg Dillon Read LLC
Lehman Brothers
Dain Rauscher Wessels
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[artwork to come]
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Through and including , 2000 (the 25th day after commencement of this
offering), all dealers selling shares of our common stock, whether or not
participating in this offering, may be required to deliver a prospectus. This
delivery requirement is in addition to the obligation of dealers to deliver a
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
TABLE OF CONTENTS
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[Download Table]
Prospectus summary................... 3
The offering......................... 5
Summary financial and operating
data............................... 6
Risk factors......................... 7
Forward-looking information.......... 19
Use of proceeds...................... 20
Dividend policy...................... 20
Capitalization....................... 21
Dilution............................. 22
Selected financial data.............. 24
Management's discussion and analysis
of financial condition and results
of operations...................... 26
Business............................. 31
Management........................... 46
Related party transactions........... 53
Principal stockholders............... 55
Description of capital stock......... 57
Shares eligible for future sale...... 60
Underwriting......................... 62
Legal matters........................ 64
Experts.............................. 64
Where you can find more
information........................ 64
Index to financial statements........ F-1
Luminex(R) and LabMAP(TM) are trademarks of Luminex Corporation. This
prospectus also refers to trademarks and trade names of other organizations.
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Prospectus summary
This summary highlights information contained elsewhere in this prospectus. You
should read the entire prospectus carefully, especially the risks of investing
in our common stock discussed under "Risk factors." Our principal executive
offices are located at 12212 Technology Boulevard, Austin, Texas 78727. Our
telephone number is (512) 219-8020. Our web site is http://www.luminexcorp.com.
The information found on our web site is not a part of this prospectus.
OUR BUSINESS
Luminex Corporation has developed, manufactures and markets a proprietary
technology platform that simplifies biological testing for the life sciences
industry. This industry depends on a broad range of tests, called bioassays, to
discover new drugs, identify new genes or simply monitor blood cholesterol
levels. The LabMAP system is able to simultaneously perform up to 100 bioassays
on a single drop of fluid. This is accomplished with a compact instrument, the
Luminex 100, that reads biological tests taking place on the surface of
microscopic plastic beads called microspheres. The Luminex 100 combines this
miniaturized bioassay capability with diode lasers, digital signal processors
and proprietary software to create a system offering significant advantages in
speed, precision, flexibility and cost. We believe our LabMAP technology is
broadly applicable in the fields of drug discovery, clinical diagnostics,
genetic analysis, biomedical research and pharmacogenomics.
We began marketing the current generation of LabMAP in 1999. As of January 31,
2000, 63 life sciences customers have purchased 100 LabMAP systems. Our
customers include GlaxoWellcome plc, SmithKline Beecham Corporation, Eli Lilly
& Company, Laboratory Corporation of America, Genentech Inc., Abbott
Laboratories, Life Technologies Inc., Bio-Rad Laboratories, Inc., Lawrence
Livermore National Laboratories, Mayo Clinic, Centers for Disease Control and
Prevention and National Institutes of Health.
OUR MARKET OPPORTUNITY
Bioassays are used extensively throughout the life sciences industry to detect
the presence of certain biochemicals, proteins or genes in a sample. They are
broadly used in drug discovery, genetic analysis, pharmacogenomics, clinical
diagnostics and general biomedical research. For example, bioassays can be used
to:
.measure the affinity between a chemical compound and a disease target for drug
discovery and development;
.assist physicians in prescribing the appropriate drug therapy to match the
patient's unique genetic makeup, a process known as pharmacogenomics;
.detect genetic variations, such as single nucleotide polymorphisms or SNPs;
and
.measure the presence and quantity of biochemicals in blood to assist
physicians in diagnosing, treating and monitoring pathological conditions such
as heart attack or diabetes.
Bioassays are either developed internally to meet the specific needs of the
laboratory or purchased in the form of an off-the-shelf test kit or customized
service. According to industry reports, the global
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market for tools used to develop and perform bioassays is estimated to have
been approximately $27.5 billion in 1998 and is expected to grow at an annual
rate of 8%. There are a number of factors contributing to this increase,
including:
.increased research and development spending by pharmaceutical and biomedical
research companies;
.a shift in research and development focus from gene sequencing to functional
genomics and proteomics;
.increased demand for disease-specific diagnostic tests;
.application of disease targets from drug discovery into in vitro diagnostics;
and
.evolution of pharmacogenomics.
The differing bioassay needs of life sciences laboratories have led to the
development of specialized techniques and instrumentation. As a result, most of
these laboratories have become highly compartmentalized. For example, clinical
testing facilities are organized into functional groups, such as chemistry,
microbiology, immunology and serology. Similarly, pharmaceutical laboratories
are separated by disease target, such as cancer and hypertension, as well as by
the stages of the drug discovery process, from initial bioassay development to
toxicology. This has created inefficiencies in laboratories since they must now
purchase multiple instruments, often from different vendors, to meet their
testing needs. This limits the laboratories' ability to standardize bioassay
techniques, operator training and hardware maintenance.
THE LUMINEX SOLUTION
Our solution is to provide a single platform, the LabMAP technology, that can
perform a wide range of bioassays in a cost-effective manner. The key features
of our platform include the following:
.performs multiple tests simultaneously;
.flexible in customizing bioassays comprised of multiple tests;
.high throughput;
.ease of use; and
.low cost to purchase and operate.
OUR STRATEGY
Our goal is to establish our LabMAP system as the industry standard for
performing bioassays. To achieve this goal, we have implemented the following
strategy:
.focus on large, fast-growing segments of the life sciences industry;
.continue to develop strategic partnerships to broaden and accelerate market
acceptance of our LabMAP technology;
.provide an open platform that allows customers to design bioassays using a
single platform;
.expand the functionality of the LabMAP product line; and
.allow easy technology access to encourage rapid market adoption.
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The offering
The following information assumes that the underwriters do not exercise the
over-allotment option granted by us to purchase additional shares in the
offering.
[Download Table]
Common stock offered by us................. shares
Common stock to be outstanding after the
offering................................. shares
Proposed Nasdaq National Market symbol..... LMNX
Use of proceeds............................ To fund our operations, including
continued development and
manufacturing of existing
products and research and
development of additional
products, expanding our
facilities to be able to meet the
needs of our growing business,
and for other working capital and
general corporate purposes. See
"Use of proceeds."
Except as otherwise indicated, information in this prospectus is based on the
assumption that all outstanding shares of our preferred stock are converted
into 4,298,340 shares of our common stock upon the closing of this offering.
We are obligated to issue shares of common stock upon exercise of options and
warrants as follows:
. shares issuable if the underwriters' over-allotment option is
exercised in full, as described in "Underwriting";
.1,684,980 shares issuable upon the exercise of options at a weighted average
exercise price of $6.25 per share;
.262,500 shares issuable upon the exercise of warrants at an exercise price of
$4.00 per share; and
. additional shares made available for future grant under our 2000 Long-Term
Incentive Plan. See "Management -- Employee benefit plans -- 2000 Long-Term
Incentive Plan."
The number of shares of common stock outstanding after the offering is based on
shares outstanding as of January 31, 2000. See "Capitalization."
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Summary financial and operating data
The as adjusted balance sheet reflects the receipt of the net proceeds from the
sale of shares of our common stock in this offering at an assumed price to
the public of $ per share, after deducting the underwriting discounts and
commissions and estimated offering expenses. The pro forma net loss per share
and shares used in computing pro forma net loss per share are calculated as if
all of our convertible preferred stock was converted into shares of our common
stock on the date of their issuance.
[Download Table]
Period from
May 24, 1995
(inception) to Year Ended December 31,
December 31, 1995 1996 1997 1998 1999
Statement of operations
data (In thousands, except per share data)
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Revenue:
Product................ $-- $-- $99 $386 $2,606
Grant.................. -- -- -- -- 506
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Total revenue......... -- -- 99 386 3,112
Cost of product
revenue.............. -- -- 10 88 1,172
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Gross margin............ -- -- 89 298 1,940
Operating expenses:
Research and
development......... 58 1,036 1,594 3,611 5,741
Selling, general and
administrative...... 216 731 1,426 2,566 4,422
Amortization of
deferred stock and
stock compensation
expense............. -- -- -- -- 509
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Total operating
expenses........... 274 1,767 3,020 6,177 10,672
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Loss from operations.... (274) (1,767) (2,931) (5,879) (8,732)
Interest income......... 4 7 178 283 284
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Net loss................ $(270) $(1,760) $(2,753) $(5,596) $(8,448)
====== ======= ======= ======= =======
Net loss per share,
basic and diluted.... $(0.12) $(0.33) $(0.44) $(0.87) $(1.31)
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Shares used in computing
net loss per share,
basic and diluted.... 2,221 5,307 6,295 6,415 6,447
Pro forma net loss per
share, basic and
diluted.............. $(0.84)
=======
Shares used in computing
pro forma net loss
per share, basic and
diluted.............. 10,060
[Download Table]
As of December 31,
1999
Actual As Adjusted
Balance sheet data (In thousands)
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Cash and cash equivalents.................................. $4,083 $
Working capital............................................ 10,426
Total assets............................................... 12,566
Total stockholders' equity................................. 11,195
Please see Note 2 to our financial statements for an explanation of the method
used to calculate the net loss per share and the number of shares used in the
computation of per share amounts.
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Risk factors
You should carefully consider the risks described below together with all of
the other information included in this prospectus before making an investment
decision. If any of the following risks actually occurs, our business,
financial condition or results of operations could be harmed. In such an event,
the trading price of our common stock could decline, and you may lose all or
part of your investment.
RISKS RELATED TO OUR BUSINESS
We are at an early stage of development, and our business model is still
evolving.
We are at an early stage of development, and our business model is still
evolving. As a result, we are subject to all of the risks inherent in the
development of new commercial products, such as the need:
.to obtain substantial capital to support the expenses of developing our
technology and commercializing our products;
.to develop a market for our products; and
.to successfully transition from a company with a research focus to a company
capable of supporting commercial activities.
Since commencing operations in May 1995, we have dedicated substantially all of
our resources to the research and development of our products. Because we have
only recently begun to market our products commercially, we have generated
limited revenues from product sales. We may not be able to successfully
implement our business plan or adapt it to changes in the market.
We have a history of substantial losses and negative cash flow from operations,
and we expect to continue to incur losses and negative cash flow from
operations for the foreseeable future.
We have incurred operating losses and negative cash flow from operations since
our inception. As of December 31, 1999, we had an accumulated deficit of $18.8
million. For the years ended December 31, 1997, 1998 and 1999, we had net
losses of $2.8 million, $5.6 million and $8.4 million, respectively. We expect
to continue to incur operating and net losses and negative cash flow from
operations, which may increase, for the foreseeable future due in part to
anticipated increases in expenses for research and product development and
expansion of our facilities and sales and marketing capabilities. We anticipate
that our business will generate operating losses until we successfully
implement our commercial development strategy and generate significant
additional revenues to support our level of operating expenses. We cannot
assure you that we will ever achieve or sustain profitability or that our
operating losses will not increase in the future.
Our success depends on market acceptance of our technology, which is new and
unproven.
Life sciences companies have historically conducted screening and
identification tests using a variety of technologies, including bead-based
screening. However, compared to other technologies, the LabMAP technology is
new and unproven, and the use of our technology by life sciences companies is
limited. The commercial success of our technology will depend upon the adoption
of this technology as a method to perform bioassays. In order to be successful,
our products must meet the commercial
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requirements for bioassays within the life sciences industry, and we must
convince potential customers to utilize our system instead of competing
technologies. Market acceptance will depend 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, clinical
and biomedical testing and analysis;
.manufacture products in sufficient quantities with acceptable quality and at
an acceptable cost; and
.place and service sufficient quantities of our products.
Because of these and other factors, our products may not gain market
acceptance. If our technology platform does not become a widely used method in
the life sciences industry, demand for our products will not develop as
expected, and it is unlikely that we will ever become profitable.
Our business plan may not succeed unless we establish meaningful and successful
relationships with our strategic partners.
Our strategy for the development and commercialization of our LabMAP technology
depends in part upon our ability to establish strategic relationships with a
number of partners. Our business plan contemplates that a significant portion
of our future revenues will come from sales of our systems, the development and
sale of bioassay kits utilizing our technology and use of our technology by our
strategic partners in performing services offered to third parties. This
strategy entails a number of risks as more fully described below.
If we cannot establish and maintain sufficient effective strategic
partnerships, we will not be able to realize the goals of our business plan.
Our success depends on our ability to maintain our current strategic
partnerships and establish and maintain additional partnerships. Our ability to
enter into agreements with additional partners depends in part on convincing
them that our technology can help achieve and accelerate their goals or
efforts. This may require substantial time and effort on our part. We will
expend substantial funds and management effort with no assurance that a
strategic relationship 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 partners will not pursue or develop
alternative technologies either on their own or in collaboration with others.
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 or lower margins on our products.
If our strategic partners do not effectively develop and market products based
on our technology, our business will be adversely affected.
In return for the right to produce bioassay kits incorporating our technology,
our strategic partners will purchase our systems from us for resale to end-
users and will pay royalties to us based on revenues they generate from sales
of the kits. We expect that we will also generate revenue from royalties on
sales of diagnostic testing services by strategic partners utilizing our
technology. This strategy entails a number of risks. We believe that our
strategic partners will have economic incentives to market these products, but
we cannot predict future sales and royalty revenues. The amount of these
revenues will depend 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 market products incorporating our
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Risk factors
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technology. Some of the companies we are targeting as strategic partners offer
products competitive with our LabMAP technology. As a result, competition with
these companies may hinder or prevent strategic relationships. 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
effectively develop and market products based on our technology and obtain any
necessary government approvals, our revenues from product sales and royalties
will be significantly reduced.
We have only produced our products in limited quantities, and we may experience
difficulty expanding our manufacturing capabilities.
We currently produce products incorporating our LabMAP technology in limited
quantities. If we successfully develop and introduce these products to the
marketplace, we may not be able to produce sufficient quantities at an
acceptable cost. In addition, we may encounter difficulties expanding
production due to, among other things, quality control and assurance, component
supply and availability of qualified personnel. These difficulties could result
in reduced sales of our products, increased repair or re-engineering costs due
to product returns and defects as well as increased expenses due to switching
to alternative suppliers, all of which could damage our industry reputation and
hurt our profitability.
Because we have limited sources of production and suppliers, our ability to
produce and supply our products could be impaired.
We have limited experience producing products for commercial purposes. We
presently outsource most of the assembly of our products to contract
assemblers. In addition, certain key components of our product line are
currently purchased from a limited number of outside sources and may only be
available through a few sources. We do not have agreements with any of our
suppliers or certain of our contract assemblers.
Our reliance on our suppliers and contract assembler exposes us to risks
including:
.the possibility that one or more of our suppliers or assemblers could
terminate their services at any time without penalty;
.the potential inability of our suppliers to obtain required components;
.the potential delays and expenses of seeking alternative sources of supply or
manufacturing services; and
.reduced control over pricing, quality and timely delivery due to the
difficulties in switching to alternative suppliers or assemblers.
Consequently, in the event that components from our suppliers or work performed
by our assembler are delayed or interrupted for any reason, our ability to
produce and supply our products could be impaired.
We have limited experience in selling and marketing our products and may not be
able to develop a direct sales and marketing force that can meet our customers'
needs.
We intend to sell a portion of our products through our own sales force. We
have limited experience in direct marketing, sales and distribution. Our future
profitability will depend in part on our ability to
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further develop a direct sales and marketing force to sell our products to our
customers. Our products are technical in nature. As a result, we believe it is
necessary to develop a direct sales force that includes people with scientific
backgrounds and expertise. Competition for such employees is intense. We may
not be able to attract and retain qualified salespeople or be able to build an
efficient and effective sales and marketing force. Failure to attract or retain
qualified salespeople or to build an efficient and effective sales and
marketing force could negatively impact sales of our products, thus reducing
our revenues and profitability.
If we cannot provide quality customer service, we could lose customers and our
operating results could suffer.
Our success will depend largely on our ability to attract and retain customer
and technical support personnel. We are currently expanding these areas and
will need to increase our staff further to support expected new customers as
well as the expanding needs of existing customers. The introduction of our
products to new customers, the integration of our technology into our
customers' existing systems and the ongoing customer support can be complex.
Accordingly, we need highly trained customer support and technical personnel.
Hiring customer support and technical personnel is very competitive in our
industry due to the limited number of people available with the necessary
technical skills and understanding of our systems and services. Our inability
to attract, train or retain the number of highly qualified customer support and
technical services personnel that our business needs may cause our business and
prospects to suffer.
If we fail to manage our growth, our business could be harmed.
Our business plan contemplates a period of rapid and substantial growth that
will place a strain on our administrative and operational infrastructure. We
increased the number of our employees from 47 at December 31, 1998 to 81 at
January 31, 2000. Our product revenue increased from $386,000 in 1998 to $2.6
million in 1999. Our ability to manage effectively our operations and growth
requires us to continue to improve our operational, financial and management
controls, reporting systems and procedures and to attract and retain sufficient
numbers of talented employees. We may not successfully implement improvements
to our management information and control systems in an efficient or timely
manner and may discover deficiencies in existing systems and controls. If we
are unable to manage this growth effectively, our business, results of
operations or financial condition may be harmed.
Our research and development efforts may not produce commercially viable
products.
We intend to devote significant personnel and financial resources to research
and development activities designed to advance the capabilities of our LabMAP
technology. Some of these research and development activities will be conducted
by others. We may never realize any benefits from such research and development
activities.
If we make any acquisitions, we will incur a variety of costs and may never
realize the anticipated benefits.
If appropriate opportunities become available, we may attempt to acquire
businesses, technologies, services or products that we believe are a strategic
fit with our business. We currently have no commitments or agreements with
respect to any material acquisitions. If we do undertake any transaction of
this sort, the process of integrating an acquired business, technology, service
or product may result in operating difficulties and expenditures and may absorb
significant management attention that would otherwise be available for ongoing
development of our business. Moreover, we may never
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realize the anticipated benefits of any acquisition. Future acquisitions could
result in potentially dilutive issuances of equity securities, the incurrence
of debt, contingent liabilities and/or amortization expenses related to
goodwill and other intangible assets, which could adversely affect our results
of operations and financial condition.
Our success will depend on our ability to retain principal members of our
management and scientific staff.
We depend on the principal members of our management and scientific staff. The
loss of services of any of these persons could delay or reduce our product
development and commercialization efforts. In addition, recruiting and
retaining qualified scientific personnel to perform future research and
development work will be critical to our success. There can be no assurance
that we will be able to attract and retain our personnel.
RISKS RELATED TO OPERATING IN OUR INDUSTRY
The life sciences industry is highly competitive and subject to rapid
technological change.
The life sciences industry is highly competitive. We compete with companies in
the United States and abroad that are engaged in the development and production
of similar products. We anticipate competition primarily from the following two
sectors:
.companies marketing conventional testing products based on established
technologies; and
.companies developing their own advanced testing technologies.
Many of our competitors have access to greater financial, technical, research,
marketing, sales, distribution, service and other resources than we do. We
face, and will continue to face, intense competition from organizations serving
the life sciences industry that are pursuing competing technologies. These
organizations may develop technologies that are superior alternatives to our
technologies. Further, our competitors may be more effective at implementing
their technologies to develop commercial products.
The life sciences industry is characterized by rapid and continuous
technological innovation. We may need to develop new applications for our
products to remain competitive. Our present or future products could be
rendered obsolete or uneconomical by technological advances by one or more of
our current or future competitors. In addition, the introduction or
announcement of new products by us or by others could result in a delay of or
decrease in sales of existing products, as customers evaluate these new
products. Our future success will depend on our ability to compete effectively
against current technology as well as to respond effectively to technological
advances.
The intellectual property rights we rely upon to protect the technology
underlying our products may not be adequate, which could enable third parties
to use our technology or very similar technology and could reduce our ability
to compete in the market.
Our success will depend on our ability to obtain, protect and enforce patents
on our technology and to protect our trade secrets. Any patents we own may not
afford meaningful protection for our technology and products. Others may
challenge our patents and, as a result, our patents could be
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narrowed, invalidated or rendered unenforceable. 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 similar to
ours which are not covered by our patents. Further, there is a substantial
backlog of patent applications at the US Patent and Trademark Office, and the
approval or rejection of patent applications may take several years.
We have obtained a patent in the United States and have pending applications in
certain foreign jurisdictions, except Japan, for our method of "real time"
detection and quantification of multiple analytes from a single sample. We have
filed a lawsuit alleging that as a result of our prior patent counsel's
negligence the corresponding patent application in Japan was not obtained. We
are seeking damages caused by this negligence. We intend, however, to pursue
patent protection in Japan for other aspects of our technology. As a result, we
may not be able to prevent competitors from developing and marketing
technologies similar to our LabMAP technology in Japan and certain other
countries.
We require our employees, consultants and advisors to execute confidentiality
agreements. However, we cannot guarantee that these agreements will provide us
with adequate protection against improper use 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
information and techniques, 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.
We may be involved in lawsuits to protect or enforce our intellectual property
rights, which may be expensive. If we lose, we may lose the benefit of some of
our intellectual property rights, the loss of which may inhibit or remove 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 divert management's attention from other business concerns. We may also
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 US Patent and Trademark Office or the
courts regarding the breadth of claims allowed or the degree of protection
afforded under patents like those we own.
Our success will depend partly on our ability to operate without infringing on
or misappropriating the proprietary rights of others.
We may be sued for infringing on the intellectual property rights of others. In
addition, we may find it necessary, if threatened, to initiate a lawsuit
seeking a declaration from a court that we do not infringe the proprietary
rights of others or that these rights are invalid or unenforceable.
Intellectual property litigation is costly, and, even if we prevail, the cost
of such litigation could adversely affect our business, financial condition and
results of operations. In addition, litigation is time consuming and could
divert management attention and resources away from our business If we do not
prevail in any litigation, in addition to any damages we might have to pay, we
could be required to stop the infringing activity or obtain a license. Any
required license may not be available to us on acceptable terms, or at all. In
addition, some licenses may be nonexclusive, and therefore, our competitors may
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Risk factors
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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 are aware of a European patent granted to Dr. Ioannis Tripatzis, which
covers certain testing agents and certain methods of their use. Dr. Tripatzis
has publicly stated his belief that his patent covers aspects of our
technology. This patent expires in 2004. We cannot assure you that a dispute
with Dr. Tripatzis will not arise or that any dispute with him will be resolved
in our favor.
Our business is subject to extensive governmental regulation.
The production, labeling, distribution and marketing of our products for some
purposes and products based on our technology expected to be produced by our
strategic partners are subject to governmental regulation by the United States
Food and Drug Administration in the United States and by similar agencies in
other countries. Depending on their intended applications, some of our products
and products based on our technology expected to be produced by our strategic
partners are subject to approval or clearance by the FDA prior to marketing for
commercial use. Products using our technology for clinical diagnostic purposes
will require such approval or clearance. No such approvals or clearances have
yet been obtained. The process of obtaining necessary FDA clearances or
approvals can be time-consuming, expensive and uncertain. Further, clearance or
approval may place substantial restrictions on the indications for which the
product may be marketed or to whom it may be marketed. In addition, we are also
required to comply with FDA requirements relating to laser safety.
Approved or cleared products are subject to continuing FDA requirements
relating to quality control and quality assurance, maintenance of records and
documentation and labeling and promotion 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 enforcement action, including product
seizures, recalls, withdrawal of clearances or approvals, 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 also in effect in many countries
outside the United States. These range from comprehensive device approval
requirements for some or all of our medical device products to requests for
product data or certifications. The number and scope of these requirements are
increasing. 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 work place safety. See
"Business -- Government regulation."
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 human diagnostic and
therapeutic products. While we believe that we are reasonably insured against
these risks, 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 or recall could have a
material adverse effect on our business, financial condition and results of
operations.
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Risk factors
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Some of our programs are partially supported by government grants, which may be
withdrawn.
We have received and may continue to receive funds under United States
government research and technology development programs. Funding by the
government may be significantly reduced in the future for a number of reasons.
For example, some programs are subject to a yearly appropriations process in
Congress. Additionally, we may not receive funds under existing or future
grants because of budgeting constraints of the agency administering the
program. We cannot assure you that we will receive significant funding under
government grants.
Because our revenues are received principally from life sciences companies and
government and research institutes, the capital spending policies of these
entities have a significant effect on the demand for our products.
Our customers include pharmaceutical, biotechnology, 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 the resources available for purchasing
research equipment, the spending priorities among various types of research
equipment and the policies regarding capital expenditures during recessionary
periods. Any decrease in capital spending by life sciences companies could have
a material adverse effect on our business, financial condition and results of
operations.
A portion of our sales have been to universities, government research
laboratories, private foundations and other institutions, where funding is
dependent on grants from government agencies such as the National Institutes of
Health. The funding associated with approved NIH grants for instrumentation
generally becomes available at particular times of the year, as determined by
the government. Although research funding has increased during the past several
years, grants have, in the past, been frozen for extended periods or have
otherwise become unavailable to various institutions, sometimes without advance
notice. Furthermore, increasing political pressures in the United States to
reduce or eliminate budgetary deficits may result in reduced allocations to the
NIH and the other government agencies that fund research and development
activities. If government funding, especially NIH grants, necessary to purchase
our products were to become unavailable to researchers for any extended period
of time or if overall research funding were to decrease, our business,
financial condition and results of operations could be materially adversely
affected.
If third-party payors increasingly restrict payments for health care expenses,
we may experience reduced sales which would hurt our business and our business
prospects.
Third-party payors, such as government entities, health maintenance
organizations and private insurers, are restricting payments for health care.
These restrictions 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 health care products. 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.
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Risk factors
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RISKS RELATED TO THIS OFFERING
Our products have lengthy sales cycles, which could cause our operating results
to fluctuate significantly from quarter to quarter.
The sale of bioassay testing devices typically involves a significant technical
evaluation and commitment of capital by customers. Accordingly, the sales cycle
associated with our products is expected to be lengthy and subject to a number
of significant risks, including customers' budgetary constraints and internal
acceptance reviews that are beyond our control. Due to this lengthy and
unpredictable sales cycle, our operating results could fluctuate significantly
from quarter to quarter. We expect to continue to experience significant
fluctuations as a result of a variety of factors, many of which are outside of
our control. The following factors could affect our operating results:
.market acceptance of our products;
.the timing and willingness of strategic partners to commercialize our products
which would result in royalties;
.expiration of contracts with strategic partners or government research grants,
which may not be renewed or replaced; and
.general and industry specific economic conditions, which may affect our
collaborative partners' research and development expenditures.
A large portion of our expenses, including expenses for facilities, equipment
and personnel, are relatively fixed. Accordingly, if revenues decline or do not
grow as anticipated, we might not be able to correspondingly reduce our
operating expenses. In addition, we plan to significantly increase operating
expenses in 2000. Failure to achieve anticipated levels of revenues could
therefore significantly harm our operating results for a particular fiscal
period.
Due to the possibility of fluctuations in our revenues and expenses, we believe
that quarter-to-quarter comparisons of our operating results are not a good
indication of our future performance. Our operating results in some quarters
may not meet the expectations of stock market analysts and investors. In that
case, our stock price would probably decline.
Our stock price could be volatile, and your investment could suffer a decline
in value.
The trading price of our common stock is likely to be highly volatile and could
be subject to wide fluctuations in price in response to various factors, many
of which are beyond our control, including:
.actual or anticipated variations in quarterly operating results;
.announcements of technological innovations by us or our competitors;
.new products or services introduced or announced by us or our competitors;
.changes in financial estimates by securities analysts;
.conditions or trends in the biotechnology and pharmaceutical industries;
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Risk factors
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.announcements by us of significant acquisitions, strategic partnerships, joint
ventures or capital commitments;
.additions or departures of key personnel; and
.sales of our common stock.
In addition, the stock market in general, and the Nasdaq National 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 company's
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 management's attention and
resources, which could harm our business.
We may invest or spend the proceeds of this offering in ways with which you may
not agree.
We will retain broad discretion over the use of proceeds from this offering.
You may not agree with how we spend the proceeds, and our use of the proceeds
may not yield a significant return or any return at all. We intend to use a
majority of the proceeds from this offering to fund our operations, including
continued development and manufacturing of existing products as well as
research and development of additional products, hiring additional personnel
and expanding our facilities to be able to meet the needs of our growing
business, to acquire or invest in products, technologies or companies, and for
general corporate purposes, including working capital. Because of the number
and variability of factors that determine our use of the net proceeds from this
offering, we cannot assure you that these uses will not vary substantially from
our currently planned uses. Until we use the net proceeds of this offering for
the above purposes, we intend to invest the funds in short-term, investment
grade, interest-bearing securities.
There may not be an active, liquid trading market for our common stock.
Prior to this offering, there has been no public market for our common stock.
We cannot assure you that an active trading market for our common stock will
develop following this offering. You may not be able to sell your shares
quickly or at the market price if trading in our stock is not active. The
initial public offering price will be determined by negotiations between us and
representatives of the underwriters based upon a number of factors. The initial
public offering price may not be indicative of prices that will prevail in the
trading market. See "Underwriting" for more information regarding our
arrangement with the underwriters and the factors considered in setting the
initial public offering price.
Our principal stockholders, directors and executive officers will own
approximately % of our common stock, which may prevent new investors from
influencing corporate decisions.
After this offering, our stockholders who currently own over 5% of our common
stock, our directors and executive officers will beneficially own approximately
% of our outstanding common stock or % if the underwriters exercise their
over-allotment option in full. These stockholders will be able to exercise
significant influence over all matters requiring stockholder approval,
including the election of directors and the approval of significant corporate
transactions. This concentration of ownership may also delay or prevent a
change in control of the company even if beneficial to our stockholders. See
"Principal stockholders" for additional information on the concentration of
ownership of our common stock.
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Risk factors
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Future sales of our common stock may depress our stock price.
The market price of our common stock could decline as a result of sales of
substantial amounts of our common stock in the public market after the closing
of this offering, or the perception that these sales could occur. In addition,
these factors could make it more difficult for us to raise funds through future
offerings of common stock. There will be shares of common stock outstanding
immediately after this offering, or shares if the underwriters exercise
their over-allotment option in full. All of the shares sold in the offering
will be freely transferable without restriction or further registration under
the Securities Act, except for any shares purchased by our "affiliates," as
defined in Rule 144 of the Securities Act. The remaining 10,753,122 shares of
common stock outstanding will be "restricted securities" as defined in Rule
144. These shares may be sold in the future without registration under the
Securities Act to the extent permitted by Rule 144 or other exemptions under
the Securities Act.
After this offering, we intend to register approximately shares of common
stock which are reserved for issuance upon exercise of options granted under
our stock option plan. Once we register these shares, they can be sold in the
public market upon issuance, subject to restrictions under the securities laws
applicable to resales by affiliates. See "Shares eligible for future sale."
You will experience immediate and substantial dilution.
The initial public offering price of our common stock is expected to be
substantially higher than the net tangible book value per share of our common
stock. Therefore, if you purchase shares of our common stock in this offering,
you will incur immediate and substantial dilution of approximately $ in the
pro forma net tangible book value per share of common stock from the price per
share that you pay for the common stock (based upon an assumed initial public
offering price of $ per share). If the holders of outstanding options or
warrants exercise those options or warrants at prices below the initial public
offering price, you will incur further dilution.
We may need additional funding to support our operations.
We anticipate that our existing cash and cash equivalents, together with the
net proceeds of this offering, will be sufficient to fund our currently planned
operations through at least December 31, 2001. However, this expectation is
based on our current operating plan, which could change as a result of many
factors, and we could require additional funding sooner than anticipated. Our
requirements for additional capital may be substantial and will depend on many
factors, some of which are beyond our control, including:
.payments received or made under possible future strategic partner agreements;
.market acceptance of our products;
.continued progress of our research and development of our products;
.the cost of protection of patent and other intellectual property rights; or
.further development of production, marketing and sales capabilities.
We have no credit facility or other committed sources of capital. To the extent
capital resources are insufficient to meet future capital requirements, we will
have to raise additional funds to continue the development of our technologies.
There can be no assurance that funds will be available on favorable
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Risk factors
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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 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 collaboration agreements on unattractive terms. Our
inability to raise capital would have a material adverse effect on our
business, financial condition and results of operations.
We have never paid cash dividends.
We have never paid cash dividends on our capital stock and do not anticipate
paying any cash dividends in the foreseeable future.
Anti-takeover provisions in our charter and bylaws and Delaware law could make
a third-party acquisition of us difficult.
Our restated certificate of incorporation and bylaws 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. These provisions could limit the price
that investors might be willing to pay in the future for shares of our common
stock. We are also subject to certain provisions of Delaware law that could
delay, deter or prevent a change in control of us. See "Description of
securities -- Anti-takeover effects of provisions of the certificate of
incorporation, bylaws and Delaware law."
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Forward-looking information
Some of the statements under "Prospectus summary," "Risk factors,"
"Management's discussion and analysis of financial condition and results of
operations," "Business" and elsewhere in this prospectus constitute forward-
looking statements. These statements relate to future events or our future
financial performance and involve known and unknown risks, uncertainties and
other factors that may cause our or our industry's actual results, levels of
activity, performance or achievements to be materially different from those
expressed or implied by any forward-looking statements. Some of these factors
are listed under "Risk factors" and elsewhere in this prospectus. In some
cases, you can identify forward-looking statements by terminology such as
"may," "will," "should," "expects," "plans," "anticipates," "intends,"
"believes," "estimates," "predicts," "potential" or "continue" or the negative
of these terms or other comparable terminology. These statements are only
predictions. Actual events or results may differ materially. Moreover, neither
we nor any other person assumes responsibility for the accuracy and
completeness of those statements. We are under no duty to update any of the
forward-looking statements after the date of this prospectus to conform them to
actual results.
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Use of proceeds
We estimate that the net proceeds from the sale of the shares of common stock
we are offering will be approximately $ million at an assumed initial public
offering price of $ per share after deducting the estimated underwriting
discounts and commissions and estimated offering expenses. If the underwriters'
over-allotment option is exercised in full, we estimate that the net proceeds
will be approximately $ million.
We currently intend to use the net proceeds to fund our operations, including
continued development and manufacturing of existing products as well as
research and development of additional products. In addition, we also intend to
use a portion of the net proceeds to hire additional personnel and expand our
facilities to be able to meet the growing needs of our business. Although we
have no current plans, agreements or commitments with respect to any
acquisition, we may, if the opportunity arises, use an unspecified portion of
the net proceeds to acquire or invest in products, technologies or companies.
We intend to use the balance of the net proceeds for general corporate
purposes, including working capital. Our management may spend the proceeds from
this offering in ways which the stockholders may not deem desirable.
The timing and amount of our actual expenditures will be based on many factors,
including cash flows from operations and the growth of our business.
Until we use the net proceeds of this offering for the above purposes, we
intend to invest the funds in short-term, investment grade, interest-bearing
securities. We cannot predict whether the proceeds invested will yield a
favorable return.
Dividend policy
We have never declared or paid any cash dividends on our capital stock. We
anticipate that we will retain any earnings to support operations and to
finance the growth and development of our business. Therefore, we do not expect
to pay cash dividends in the foreseeable future. Any future determination
relating to our dividend policy will be made at the discretion of our board of
directors and will depend on a number of factors, including future earnings,
capital requirements, financial conditions and future prospects and other
factors the board of directors may deem relevant.
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Capitalization
The following table sets forth our capitalization as of December 31, 1999:
.on an actual basis;
.on a pro forma basis to give effect to the conversion of 841,359 shares of our
preferred stock outstanding as of the date this prospectus into 4,298,340
shares of common stock upon the closing of this offering; and
.on a pro forma as adjusted basis to give effect to the conversion of our
preferred stock into common stock and the receipt of the estimated net
proceeds from the sale of shares of common stock offered by this
prospectus at an assumed initial public offering price of $ per share.
[Download Table]
Pro Pro Forma
Actual Forma as adjusted
-------------------------------------------------------------------------------
(in thousands, except share
amounts)
Preferred stock, par value $0.001;
Authorized shares -- none actual, 5,000,000 pro
forma and pro forma as adjusted
Issued and outstanding shares -- none actual,
pro forma and pro forma as adjusted.......... $-- $-- $
Convertible preferred stock, par value $2.00;
Authorized shares -- 5,000,000 actual, pro forma
and pro forma as adjusted
Issued and outstanding shares -- 841,359 actual,
none pro forma and pro forma as adjusted..... 28,946 --
Common stock, par value $0.001;
Authorized shares -- 25,000,000 actual,
200,000,000 pro forma and pro forma as
adjusted
Issued and outstanding shares -- 6,454,782
actual, 10,753,122 pro forma and pro
forma as adjusted............................ 6 11
Warrants to purchase 262,500 shares of common
stock......................................... 180 180
Additional paid-in capital....................... 960 29,901
Deferred stock compensation...................... (69) (69)
Accumulated deficit.............................. (18,828) (18,828)
------- ------- --------
Total stockholders' equity...................... 11,195 11,195
------- ------- --------
Total capitalization............................ $11,195 $11,195 $
======= ======= ========
The table above does not include:
.1,684,980 shares of common stock issuable upon exercise of options outstanding
at a weighted average price of $6.25 per share; and
. additional shares of common stock made available for future issuance
under our 2000 Long-Term Incentive Plan.
To the extent that these options are exercised, there will be further dilution
to new investors. See "Management -- Employee benefit plans."
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Dilution
Our historical net tangible book value as of December 31, 1999 was
approximately $11.2 million, or $1.73 per share, based on the number of common
shares outstanding as of December 31, 1999. Historical net tangible book value
per share is equal to the amount of our total tangible assets less total
liabilities, divided by the number of shares of common stock outstanding as of
December 31, 1999.
Our pro forma net tangible book value as of December 31, 1999 was approximately
$11.2 million, or $1.04 per share, based on the pro forma number of shares
outstanding as of December 31, 1999 of 10,753,122, calculated after giving
effect to the automatic conversion of 841,359 shares of our preferred stock
outstanding as of December 31, 1999 into 4,298,340 shares of our common stock.
Dilution in pro forma net tangible book value per share represents the
difference between the amount per share paid by purchasers of shares of our
common stock in this offering and the net tangible book value per share of our
common stock immediately afterwards, after giving effect to the sale of
shares in this offering. This represents an immediate increase in
pro forma net tangible book value of $ per share to existing stockholders
and an immediate dilution in pro forma net tangible book value of $ per
share to new investors. The following table illustrates this per share
dilution:
[Download Table]
Assumed initial public offering price per share................. $
Historical net tangible book value per share as of December 31,
1999........................................................ $1.73
Decrease attributable to conversion of preferred stock......... (0.69)
-----
Pro forma net tangible book value per share as of December 31,
1999........................................................ 1.04
Increase attributable to the offering..........................
-----
Net tangible book value per share after the offering............
-------
Dilution per share to new investors............................. $
=======
The following table summarizes, on a pro forma basis as of December 31, 1999,
after giving effect to this offering, the total number of shares of common
stock purchased from us and the total consideration and the average price per
share paid by existing stockholders and by new investors:
[Download Table]
Shares purchased Total consideration Average price
Number Percent Amount Percent per share
--------------------------------------------------------------------------------
Existing stockholders.... 10,753,122 % $30,562,740 % $2.84
New investors............ $
---------- ----- ----------- -----
Total.................... 100% $ 100%
========== ===== =========== =====
The tables and calculations above assume no exercise of outstanding options or
warrants. As of December 31, 1999, there were:
.1,684,980 shares issuable upon the exercise of options outstanding as of a
weighted average exercise price of $6.25 per share;
.262,500 shares issuable upon the exercise of warrants outstanding as of
December 31, 1999 at a weighted average exercise price of $4.00 per share; and
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Dilution
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. additional shares available for future grant under our 2000 Long-Term
Incentive Plan.
To the extent that these options or warrants are exercised, there will be
further dilution to new investors. See "Management -- Employee benefit plans"
for further information regarding our stock option plan and stock purchase
plan.
If the underwriters exercise their over-allotment option in full, the following
will occur:
.the percentage of shares of our common stock held by existing stockholders
will decrease to approximately % of the total number of shares of our
common stock outstanding after this offering;
.the number of shares of our common stock held by new public investors will
increase to , or approximately % of the total number of shares
of our common stock outstanding after this offering; and
.our pro forma net tangible book value will increase to $ per share to
existing stockholders and our pro forma net tangible book value will be
diluted by $ per share to new investors.
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Selected financial data
The following selected financial data should be read in conjunction with the
financial statements and the notes to such statements and "Management's
discussion and analysis of financial condition and results of operations"
included elsewhere in this prospectus. The statement of operations data for the
years ended December 31, 1997, 1998 and 1999, and the balance sheet data as of
December 31, 1998 and 1999, are derived from our financial statements which
have been audited by Ernst & Young LLP, independent auditors, and are included
elsewhere in this prospectus. The statement of operations data for the period
from May 24, 1995 (inception) to December 31, 1995 and for the year ended
December 31, 1996 and the balance sheet data as of December 31, 1995, 1996 and
1997 are derived from audited financial statements not included in this
prospectus. Historical results are not necessarily indicative of the results to
be expected in the future.
The pro forma net loss per share and shares used in computing pro forma net
loss per share are calculated as if all of our convertible preferred stock was
converted into shares of our common stock on the date of their issuance.
[Download Table]
Period from
May 24, 1995
(inception) to
December 31, Year Ended December 31,
1995 1996 1997 1998 1999
Statement of operations
data (In thousands, except per share data)
-------------------------------------------------------------------------------
Revenue:
Product ................. $-- $-- $99 $386 $2,606
Grant ................... -- -- -- -- 506
------ ------- ------- ------- -------
Total revenue........... -- -- 99 386 3,112
Costs of product revenue.. -- -- 10 88 1,172
------ ------- ------- ------- -------
Gross margin.............. -- -- 89 298 1,940
Operating expenses:
Research and
development........... 58 1,036 1,594 3,611 5,741
Selling, general and
administrative........ 216 731 1,426 2,566 4,422
Amortization of deferred
stock and stock
compensation expense.. -- -- -- -- 509
------ ------- ------- ------- -------
Total operating
expenses............. 274 1,767 3,020 6,177 10,672
------ ------- ------- ------- -------
Loss from operations...... (274) (1,767) (2,931) (5,879) (8,732)
Interest income........... 4 7 178 283 284
------ ------- ------- ------- -------
Net loss.................. $(270) $(1,760) $(2,753) $(5,596) $(8,448)
====== ======= ======= ======= =======
Net loss per share, basic
and diluted............ $(0.12) $(0.33) $(0.44) $(0.87) $(1.31)
====== ======= ======= ======= =======
Shares used in computing
net loss per share,
basic and diluted...... 2,221 5,307 6,295 6,415 6,447
Pro forma net loss per
share, basic and
diluted................ $(0.84)
=======
Shares used in computing
pro forma net loss per
share, basic and
diluted................ 10,060
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24
Selected financial data
--------------------------------------------------------------------------------
[Download Table]
As of December 31,
1995 1996 1997 1998 1999
Balance sheet data (In thousands)
-------------------------------------------------------------------------------
Cash and cash equivalents.................... $229 $14 $2,821 $8,537 $4,083
Working capital (deficit).................... 138 (249) 2,761 8,391 10,426
Total assets................................. 286 154 3,119 9,590 12,566
Total stockholders' equity (deficit)......... 196 (110) 2,964 9,190 11,195
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25
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Management's discussion and analysis of financial condition and results of
operations
The following discussion of our financial condition and results of operations
should be read in conjunction with the financial statements and the notes to
those statements included elsewhere in this prospectus. This discussion may
contain forward-looking statements that involve risks and uncertainties. As a
result of many factors, such as those set forth under "Risk factors" and
elsewhere in this prospectus, our actual results may differ materially from
those anticipated in these forward-looking statements.
Since our inception, we have incurred significant losses and, as of December
31, 1999, we had an accumulated deficit of $18.8 million. We anticipate
incurring additional losses, which may increase, for the foreseeable future.
Prior to 1999, we were considered a development stage company.
We commenced marketing our first generation system, the Luminex R/O system, in
1997 and our second generation technology, the LabMAP system, in 1999. 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
collectibility is probable. We expect that each system will generate a
recurring revenue stream from the sale of consumable products. Grant revenue is
recorded as the research expenses relating to the grant are incurred, provided
that the amounts received are not refundable if the research is not successful.
In addition, we may generate royalty revenue from some of our strategic
partners as they sell products incorporating our technology or provide services
to third parties using our technology.
Our expenses have consisted primarily of costs incurred in research and
development, manufacturing scale-up and business development and from general
and administrative costs associated with our operations. We expect our research
and development expenses to increase in the future as we continue to develop
our products. Also, our selling and marketing expenses will increase as we
commercialize our products, and general and administrative expenses will
increase as we expand our facilities and assume the obligations of a public
reporting company.
We have a limited history of operations. We anticipate that our quarterly
results of operations will fluctuate for the foreseeable future due to several
factors, including market evaluation and acceptance of current or new products,
which may result in a lengthy sales cycle, patent conflicts, the introduction
of new products by our competitors, the timing and extent of our research and
development efforts, and the timing of significant orders. Our limited
operating history makes accurate predictions of future operations difficult or
impossible.
RESULTS OF OPERATIONS
Years ended December 31, 1999 and 1998
Revenue
Revenue increased to $3.1 million in 1999 from $386,000 in 1998. The increase
was primarily attributable to the sale of Luminex 100 systems, which were
introduced in the first quarter of 1999, and Luminex XY Platforms, which were
introduced in the fourth quarter of 1999. Revenue from the sale of microspheres
increased $314,000 in conjunction with sales of the Luminex 100 and the
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26
Management's discussion and analysis of financial condition and results of
operation
--------------------------------------------------------------------------------
development of additional applications. Offsetting this increase was a decrease
in sales of the Luminex R/O system of $221,000 in 1999, which is consistent
with the phase-out of the Luminex R/O system and the introduction of the
higher-priced Luminex 100.
Also included in 1999 revenue was $506,000 associated with a government grant
that commenced on January 1, 1999. The grant was suspended as of September 30,
1999 when our joint venture partner withdrew due to a change in its business
strategy. We are in the process of evaluating the work plan and budget and may
resume the project with a new partner. We had no grant revenue in 1998.
Cost of product revenue
Cost of product revenue increased to $1.2 million in 1999 from $88,000 in 1998.
The increase was primarily attributable to the increase in the number of units
of the Luminex 100 sold in 1999 and the higher per unit cost of the Luminex
100, relative to the Luminex R/O system.
Research and development expenses
Research and development expenses increased to $5.7 million in 1999 from $3.6
million in 1998. These expenses include salaries and related costs of research
and development personnel as well as the costs of consultants, parts and
supplies associated with research and development projects. The increase was
primarily attributable to an increase of $1.0 million in salaries and related
personnel costs from the addition of employees during the year as well as
additional costs to complete the development of the Luminex 100 system. Also,
included in 1999 were costs of $607,000 associated with a government grant.
Selling, general and administrative expenses
Selling, general and administrative expenses increased to $4.4 million in 1999
from $2.6 million in 1998. These expenses consist primarily of salaries and
related costs for executive, sales and marketing, finance and other
administrative personnel as well as the costs of facilities, insurance, trade
shows and legal support. The increase was attributable to consulting and
professional fees primarily related to the filing of patent applications that
were $244,000 higher than in 1998, a $662,000 increase in salary costs and a
$262,000 increase in facilities costs due to the leasing of additional
manufacturing space early in 1999.
Amortization of deferred stock and stock compensation expense
Amortization of deferred stock and stock compensation expense was $509,000 in
1999. Deferred stock compensation represents the difference between the deemed
fair value of our common stock and the exercise price of options at the date of
grant. These amounts are being amortized ratably over the vesting periods. The
increase was primarily attributable to the issuance of stock options to our
consultants.
Interest income
Interest income remained relatively unchanged between 1998 and 1999.
Income taxes
As of December 31, 1999, we had federal net operating loss carryforwards of
$17.1 million. As of December 31, 1999, we have recorded a full valuation
allowance for our existing net deferred tax assets due to uncertainties
regarding their realization. We also have federal research tax credit
carryforwards of $536,000. The federal net operating loss and credit
carryforwards begin to expire in 2010, if not utilized. Utilization of the
federal net operating losses and credit carryforwards may be limited by the
change of ownership provisions contained in Section 382 of the Internal Revenue
Code. However, we do not believe these limitations will materially impact their
use.
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Management's discussion and analysis of financial condition and results of
operation
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Years ended December 31, 1998 and 1997
Revenue
Revenue increased to $386,000 in 1998 from $99,000 in 1997. The increase was
primarily attributable to higher unit sales of Luminex R/O systems in 1998
compared with 1997.
Cost of product revenue
Cost of product revenue increased to $88,000 in 1998 from $10,000 in 1997. The
increase was primarily attributable to increased unit sales of Luminex R/O
systems in 1998 compared to 1997.
Research and development expenses
Research and development expenses increased to $3.6 million in 1998 from $1.6
million in 1997. The increase was primarily attributable to higher staffing
levels, consulting and professional fees and usage of parts and supplies for
the development purposes.
Selling, general and administrative expenses
Selling, general and administrative expenses increased to $2.6 million in 1998
from $1.4 million in 1997 primarily attributable to an increase in facilities
costs, consulting and professional fees and depreciation and amortization.
Interest income
Interest income increased to $283,000 in 1998 from $178,000 in 1997. The
increase was attributable to the higher average cash and cash equivalent
balances resulting from the $11.3 million net proceeds from the sale of our
Series C preferred stock, in mid 1998.
LIQUIDITY AND CAPITAL RESOURCES
We have funded our operations principally with $30.6 million of private equity
financings, $28.9 million of which came from a series of five preferred stock
offerings over the period 1996 through 1999 as follows:
Preferred stock transactions
[Download Table]
No. of
Year Shares Amount
(dollar amounts in
Issue millions)
-------------------------------------------------------------------------------
Preferred Stock, Series A.................................. 1996 457,250 $0.9
Preferred Stock, Series B.................................. 1997 150,000 6.0
Preferred Stock, Series C.................................. 1998 151,571 12.1
Preferred Stock, Series D.................................. 1999 57,538 6.9
Preferred Stock, Series E.................................. 1999 25,000 3.0
-----
$28.9
=====
Each share of Series A Preferred Stock is convertible into one share of our
common stock. Each share of our Series B, C, D and E Preferred Stock is
convertible into ten shares of our common stock.
At December 31, 1999, cash, cash equivalents and short-term investments totaled
$9.0 million compared to $8.5 million and $2.8 million at December 31, 1998 and
1997, respectively. Our cash reserves are held in a variety of short term,
interest-bearing instruments including high-grade corporate bonds, commercial
paper, US government backed securities and money market accounts.
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Management's discussion and analysis of financial condition and results of
operation
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Cash used in operations was $8.4 million for the year ended December 31, 1999
compared with $5.1 million and $2.9 million for the years ended December 31,
1998 and 1997, respectively. The net loss for 1999 of $8.4 million was
partially offset by non-cash charges for depreciation, amortization and stock
compensation of $1.0 million and an increase in deferred revenue of $646,000.
Other factors contributing to the increase in operating cash used were an
increase in accounts receivable of $1.2 million and inventory increases of
$616,000.
Our purchases of property and equipment increased to $1.1 million in 1999, from
$399,000 in 1998. The increase was related to machinery, equipment and computer
equipment purchased to meet our operating equipment requirements, to provide
computer equipment for our new employees and to upgrade our network to
accommodate the increased rate of activity.
We expect to have negative cash flow from operations through at least 2000. We
expect to incur increasing research and development expenses, including
expenses related to additions to personnel and production and commercialization
efforts. Our future capital requirements will depend on a number of factors,
including our success in developing markets for our products, payments received
or made under possible future strategic agreements, the availability of
government research grants, continued progress of our research and development
of potential products, the timing and outcome of regulatory approvals, the
costs involved in preparing, filing, prosecuting, maintaining, defending and
enforcing patent claims and other intellectual property rights, the need to
acquire licenses to new technology, the status of competitive products and the
availability of other financing. We believe our existing cash, cash equivalents
and short-term investments, together with the net proceeds of this offering,
will be sufficient to fund our operating expenses and capital equipment
requirements through at least December 31, 2001.
We have no credit facility or other committed sources of capital. To the extent
our capital resources are insufficient to meet future capital requirements, we
will need to raise additional capital or incur indebtedness to fund our
operations. There can be no assurance that additional debt or equity financing
will be available on acceptable terms, if at all. If adequate funds are not
available, we may be required to delay, reduce the scope of or eliminate our
research and development programs, reduce our commercialization efforts or
obtain funds through arrangements with collaborative partners or others that
may require us to relinquish rights to certain technologies or products that we
might otherwise seek to develop or commercialize.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our interest income is sensitive to changes in the general level of US interest
rates, particularly since the majority of our investments are in short-term
instruments. Due to the nature of our short-term investments, we have concluded
that there is no material market risk exposure.
Inflation
We do not believe that inflation has had a material adverse impact on our
business or operating results during the periods presented.
Recent accounting pronouncements
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities. SFAS No. 133 is
effective for fiscal years beginning after June 15, 2000. SFAS No. 133 requires
that all derivative instruments be recorded on the balance sheet
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Management's discussion and analysis of financial condition and results of
operation
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at their fair value. Changes in the fair value of derivatives are recorded each
period in current earnings or other comprehensive income. We do not expect that
the adoption of SFAS No. 133 will have a material impact on our financial
statements because we do not currently hold any derivative instruments.
On March 31, 1999, the FASB issued an exposure draft entitled "Accounting for
Certain Transactions Involving Stock Compensation," which is a proposed
interpretation of APB Opinion No. 25 which has an effective date for certain
transactions of December 15, 1998. However, the exposure draft has not been
finalized. Once finalized and issued, the current accounting practices for
transactions involving stock compensation may need to change and such changes
could effect our future earnings.
In December 1999, the Securities and Exchange Commission released Staff
Accounting Bulletin No. 101, Revenue Recognition in Financial Statements, which
provides guidance on the recognition, presentation and disclosure of revenue in
financial statements. The application of SAB No. 101 did not have a material
impact on our financial statements.
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Business
OVERVIEW
Luminex Corporation has developed, manufactures and markets a proprietary
technology platform that simplifies biological testing for the life sciences
industry. This industry depends on a broad range of tests, called bioassays, to
discover new drugs, identify new genes or simply monitor blood cholesterol
levels. The LabMAP system is able to simultaneously perform up to 100 bioassays
on a single drop of fluid. This is accomplished with a compact instrument, the
Luminex 100, that reads biological tests taking place on the surface of
microscopic plastic beads called microspheres. The Luminex 100 combines this
miniaturized bioassay capability with diode lasers, digital signal processors
and proprietary software to create a system offering significant advantages in
speed, precision, flexibility and cost. We believe our LabMAP technology is
broadly applicable in the fields of drug discovery, clinical diagnostics,
genetic analysis, biomedical research and pharmacogenomics.
We began marketing the current generation of LabMAP in 1999. As of January 31,
2000, 63 life sciences customers have purchased 100 LabMAP systems. Our
customers include GlaxoWellcome plc, SmithKline Beecham Corporation, Eli Lilly
& Company, Laboratory Corporation of America, Genentech Inc., Abbott
Laboratories, Life Technologies Inc., Bio-Rad Laboratories, Inc., Lawrence
Livermore National Laboratories, Mayo Clinic, Centers for Disease Control and
Prevention and National Institutes of Health.
MARKET OPPORTUNITY
Background
Bioassays are used extensively throughout the life sciences industry to detect
the presence of certain biochemicals, proteins or genes in a sample. They are
broadly used in drug discovery, genetic analysis, pharmacogenomics, clinical
diagnostics and general biomedical research. For example, bioassays can be used
to:
.measure the affinity between a chemical compound and a disease target for drug
discovery and development;
.assist physicians in prescribing the appropriate drug therapy to match the
patient's unique genetic makeup, a process known as pharmacogenomics;
.detect genetic variations, such as single nucleotide polymorphisms or SNPs;
and
.measure the presence and quantity of biochemicals in blood to assist
physicians in diagnosing, treating and monitoring pathological conditions such
as heart attack or diabetes.
Bioassays are either developed internally to meet the specific needs of the
laboratory or purchased in the form of an off-the-shelf test kit or customized
service. According to industry reports, the global market for tools used to
develop and perform bioassays is estimated to have been approximately $27.5
billion in 1998 and is expected to grow at an annual rate of 8%.
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Markets description
Drug discovery and development
The bioassays employed by the pharmaceutical industry vary in design and
complexity throughout the drug discovery and development process. Simple
bioassays are used to screen a pharmaceutical company's library of chemical
compounds against disease targets. More complex ones are then used in
confirmatory testing as well as in lead optimization. Finally, predictive
toxicity bioassays are used to test the safety of the potential drug.
According to industry reports, the global market for tools to develop and
perform bioassays for the drug discovery and development industry is estimated
to have been approximately $7.2 billion in 1998 and is expected to continue to
grow at an annual rate of 14%. There are a number of factors driving this
growth, including:
.Increased research and development spending. According to industry reports,
pharmaceutical and biotechnology companies spent in excess of $48 billion
worldwide in 1998 on drug discovery and development and are expected to
increase spending at an annual rate of 15%. This is the result of increasing
pressure to expand the product pipeline, find new applications for existing or
failed drugs and shorten the drug discovery process in order to maximize the
benefits of the patent protection period. As a result, we believe the number
of identified disease targets for drug discovery will rise. According to
industry reports, each pharmaceutical and biotechnology company expects to
screen, on average, 27 targets in 2001, up from 17 in 1999.
.A shift in research and development focus from gene sequencing to functional
genomics and proteomics. Recently, pharmaceutical companies have focused on
the sequence of the human genome, driven by the objectives of the Human Genome
Project and the activities of such companies as Celera Genomics Group and
Incyte Pharmaceuticals. Pharmaceutical and biotechnology companies are now
focusing a major part of their research and development efforts on identifying
the role those genes serve in biological processes and how variations in gene
sequences may result in a predisposition for a disease or an adverse reaction
to a drug. These activities are referred to as functional genomics. Since
proteins serve as the mechanism through which genes control cellular
activities, the study of proteins, or proteomics, is expected to intensify. We
expect this shift in focus to lead to a dramatic rise in the number of
identified disease targets and related bioassays.
Clinical diagnostics
Bioassays are broadly used in the clinical diagnostics market. These bioassays
are commonly referred to as in vitro diagnostics, or IVD, and are used to
detect the presence and quantity of certain substances in body fluids, such as
whole blood, plasma, serum, urine and saliva, as well as cells and tissues.
Applications range from the simple detection of illegal drugs in urine to the
screening and diagnosis of genetic diseases, infectious diseases and cancer.
These applications are performed in a number of different clinical settings,
including hospital laboratories, commercial laboratories and physicians'
offices/ambulatory care centers. There are more than 150,000 hospital,
commercial clinical and physician office laboratories registered with the
Health Care Financing Administration (HCFA) in the United States.
According to an industry report, the global market for IVD products is
estimated to have been approximately $18 billion in 1998 and growing at an
annual rate of 4%. We believe a number of industry trends exist that will drive
this growth, including:
.An increase in disease targets from the success of drug discovery efforts. We
believe the rise in research and development spending by pharmaceutical and
biotechnology companies will lead to the
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identification of a greater number of disease targets. These targets may be
assayed during drug discovery and later developed as IVD products for disease
diagnosis and monitoring. For example, the HIV viral load bioassay was
originally used to evaluate potential drug candidates and is now the primary
tool for patient monitoring.
.Evolution of pharmacogenomics. There are many studies investigating genetic
variation among individuals, including SNPs, and their linkage to disease.
These studies are principally funded by a consortium of pharmaceutical
companies seeking to correlate the results of an individual's SNP profile with
drug response. In doing so, pharmaceutical companies are attempting to
discover new drugs and revive such potential blockbuster drugs as Rezulin, an
extremely powerful anti-diabetic with dangerous side effects in a small
fraction of users. Pharmacogenomics will allow a physician to tailor a
diabetic patient's drug therapy after bioassay of his or her genetic make-up.
.Consolidation among the clinical diagnostic companies. As a result of industry
consolidation, clinical diagnostic companies have been re-engineering the
laboratory in order to streamline processes, improve productivity and lower
costs. Attempts to integrate the many instruments employed by these
laboratories have been part of this process. We believe, however, that
clinical laboratories will ultimately prefer a single instrument that can
perform the required bioassays.
.Evolution of disease-specific test panels. Traditionally, health care
providers have focused on a single target of a particular disease. Rarely,
though, are diseases confined to a single, isolated molecular abnormality. For
example, the predictive value of a cholesterol test is increased significantly
when the HDL and LDL levels are determined. More recently, physicians have
added homocysteine and C-reactive protein levels to the risk profile for heart
disease. We believe clinical laboratories will demand a system that can
perform all of these tests simultaneously from a single sample in a simple,
cost effective format.
Biomedical research
Biomedical research is focused on understanding biological processes at the
molecular level. Through an understanding of such processes, scientists can
better characterize disease, a critical first step in designing drug therapies.
The National Institutes of Health provides over $12 billion annually in funding
to more than 50,000 scientists. These scientists work in the laboratories of
universities and other not-for-profit research institutions. The pharmaceutical
and biotechnology industries also fund significant research.
According to industry reports, the global market for bioassays in biomedical
research is estimated to have been approximately $2.3 billion in 1998 and
growing at an annual rate of 13%. We believe there are a number of industry
trends that will drive this growth, including:
.Increased research and development spending by pharmaceutical
companies. Pharmaceutical companies have a long history of collaborating with
academic institutions to study biological processes at the molecular and
cellular level. As these collaborations increase and diversify in focus, we
believe the number of bioassays performed will rise.
.Increased demand for SNP studies. Academic and not-for-profit institutions
have played a major role in studying SNPs in the population. The SNP
consortium, a collaboration of academic, not-for-profit research institutions
and pharmaceutical companies, has announced an effort to identify over 300,000
SNPs, some of which may be correlated with disease. As a result, we anticipate
that demand for SNP detection bioassays will increase.
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Current assay development technologies and their limitations
The differing bioassay needs of life sciences laboratories have led to the
development of specialized techniques and instrumentation. As a result, most of
these laboratories have become highly compartmentalized. For example, clinical
testing facilities are organized into functional groups, such as chemistry,
microbiology, immunology and serology. Similarly, pharmaceutical laboratories
are separated by disease target, such as cancer and hypertension, as well as by
the stages of the drug discovery process, from initial bioassay development to
toxicology. This has created inefficiencies in laboratories since they must now
purchase multiple instruments, often from different vendors, to meet their
testing needs. This limits the laboratories' ability to standardize bioassay
techniques, operator training and hardware maintenance.
While advances in bioassay technologies have delivered new capabilities, most
remain highly specialized and reinforce the problems associated with
compartmentalization.
The table below briefly describes the key bioassay technologies in the life
sciences industry and what we consider to be their comparative advantages and
disadvantages.
[Enlarge/Download Table]
Key technologies Description Markets served Advantages Disadvantages
-----------------------------------------------------------------------------------------------------------------
BioChips High-density arrays Biomedical .Performs multiple .High equipment cost
of DNA fragments research tests on a single .High cost per test
attached to a flat platform .Fixed
glass or silicon surface .High throughput configuration/inflexible
.Limited format--can
only perform genetic
bioassays
-----------------------------------------------------------------------------------------------------------------
Clinical Automated test-tube Clinical .High throughput .High equipment cost-
Immuno-analyzers based platform diagnostics .Reproducible .High cost per test
.Perform large number .Requires large sample
of individual tests volume
.High maintenance costs
.Limited format -- can
only perform
immunologic bioassays
-----------------------------------------------------------------------------------------------------------------
Gels and Blots Physical separation of Clinical .Low equipment cost . Labor intensive
analytes for diagnostics .Performs multiple .Low throughput
visualization and biomedical bioassays .Cannot perform
research simultaneously enzymatic assays
-----------------------------------------------------------------------------------------------------------------
Microarrays Low-density arrays Biomedical .Performs multiple . High equipment cost
of DNA fragments research bioassays .Low throughput
attached to a flat simultaneously .Limited format--can
glass or silicon surface .Flexible only perform genetic
configuration bioassays
-----------------------------------------------------------------------------------------------------------------
Microfluidics chips Miniaturized liquid Biomedical .Low sample volume .High cost per test
handling system research .Low reagent volume .Fixed
on a chip .Performs multiple configuration/Inflexible
tests
simultaneously
-----------------------------------------------------------------------------------------------------------------
Microtiter based assays Plastic trays with Drug discovery, .Ease of use .High sample volume
discrete wells in which clinical .High throughput .Fixed configuration
assays are fixed diagnostics and .Reproducible .High reagent costs
biomedical .Broad formats .Single test per well
research
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THE LUMINEX SOLUTION
Our solution is to provide a single platform, the LabMAP technology, that can
perform a wide range of bioassays in a cost-effective manner. Many technologies
are available to perform bioassays in the niche markets that comprise the life
sciences industry, all of which are accurate, sensitive and reliable. The
LabMAP system meets these requirements while also providing the following key
features critical to its function as a universal bioassay platform:
Multi-analyte/multi-format
LabMAP technology is designed to simultaneously perform from one to 100
distinct bioassays on a single sample. Unlike existing technologies that are
capable of performing only one type of bioassay, LabMAP can perform a broad
range of enzymatic, genetic and immunologic tests on a single instrumentation
platform. For example, the system could perform 100 immunologic allergy tests
using a single blood sample, while the next bioassay tested by the instrument
could be a complex genetic SNP panel.
Flexibility/scalability
LabMAP technology allows flexibility in customizing test panels. These panels
can be modified to include new bioassays simply by adding additional
microsphere sets. It is also scalable. Whether producing one million or just 10
microsphere-based tests, there is no change in the manufacturing process or the
required labor. The system remains cost-effective for the smallest and largest
laboratories.
Throughput
Our technology's current ability to perform up to 100 tests on a single sample
permits efficient use for high throughput applications. Throughput can be
further enhanced using the Luminex XY Platform, which permits 9,600 unattended
tests to be performed in less than an hour. A high throughput version of the
Luminex 100 being developed, the Luminex HTS, can be interfaced with automated
liquid handling equipment offered by several manufacturers to perform over
15,000 bioassays per hour.
Ease of use
Most LabMAP bioassays are simple to perform. A test sample, such as a drop of
blood, is added to a reagent solution containing microspheres and then
analyzed. Our LabMAP technology incorporates proprietary software to automate
all aspects of data acquisition and analysis in real-time. Results are provided
without the need for sophisticated data interpretation and can be directly
downloaded into a user's laboratory information system. The Luminex XY Platform
further simplifies use by enabling walk-away capability through automated
sample handling.
Low cost
We have designed the LabMAP system to be relatively inexpensive to manufacture
and utilize. Because the Luminex 100 is manufactured using many off-the-shelf
electronic components, such as diode lasers and digital signal processors, our
products have a comparatively low acquisition cost. In addition, microsphere-
based bioassays are inexpensive compared to test tubes, microtiter wells or
biochips.
STRATEGY
Our goal is to establish LabMAP technology as the industry standard for
performing bioassays. To achieve this goal, we have implemented the following
strategy:
Focus on large, fast-growing sectors -- We will continue to focus our
commercialization efforts on large and fast-growing sectors of the life
sciences industry. We have targeted major pharmaceutical companies,
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large clinical laboratories, in vitro diagnostic manufacturers and major
medical institutions for our principal marketing efforts. We believe these
customers provide the greatest opportunity for maximizing the use of LabMAP
technology and that early adoption by these industry leaders will promote wider
market acceptance.
Continue to develop strategic partnerships -- We intend to broaden and
accelerate market acceptance of LabMAP technology by continuing to enter into
development, marketing and distribution partnerships with those leaders in the
life sciences industry that we believe could convert core product lines to the
Luminex platform. They may also develop new applications that take advantage of
unique LabMAP capabilities. By leveraging our partners' strong market positions
and utilizing their distribution channels and marketing infrastructure, we
believe we can expand our installed base.
Provide an open platform -- The LabMAP system allows end users to configure
their own tests without complex and expensive equipment. This open platform
encourages the development of a wide range of bioassays and enables our
strategic partners to deliver a variety of applications to end-users. The value
of LabMAP technology to our customers increases with each new application.
Develop next generation products -- We are committed to expanding the LabMAP
product line. Our research and development group is pursuing a number of
projects, including expanding the number of tests that can be performed on a
given sample and increasing the LabMAP system's throughput. We are also
collaborating with leading industry participants and major medical institutions
to develop additional LabMAP products.
Allow easy technology access -- We do not impose access fees on users of our
technology. We believe maximum value is derived from the recurring revenue
stream generated by widespread and frequent use. This is encouraged by a
pricing structure that combines a low system acquisition cost with inexpensive
consumables.
OUR LABMAP TECHNOLOGY
Our LabMAP technology combines several proven technologies 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 its result.
Polystyrene microspheres, approximately the size of a biological cell, are a
fundamental component of LabMAP technology. We purchase raw, undyed
microspheres and, in a proprietary process, dye them in sets with varying
intensities of red and infrared fluorescent dyes to achieve up to 100 distinct
colors. The specific dye proportions permit each color-coded microsphere to be
readily identified based on its fluorescent signature. Our customers create
bioassays by attaching different biochemical reactants to each distinct
microsphere set. The microsphere sets can then be combined in test panels as
required by the user, with a current maximum of 100 tests per panel.
To conduct a bioassay, microspheres with attached reagents are mixed with a
test sample. This mixture is then passed through the Luminex 100 instrument.
The microspheres travel single file in a fluid stream through two laser beams.
The first laser excites the internal dyes that are used to identify the
microsphere set. The second laser excites a third fluorescent dye that is used
to quantitate the result of the bioassay taking place on the surface of each
individual microsphere. Our proprietary optics, digital signal processors and
software record the fluorescent signature of each microsphere and compare the
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results to the known identity of each color-coded microsphere set.
Simultaneously, the test is analyzed and the result displayed in real-time.
PRODUCTS
We generally sell our products as a system comprised of one or more instruments
that use LabMAP consumables.
Instruments
Luminex 100
The Luminex 100 is a compact analyzer that integrates fluidics, optics and
digital signal processing to perform up to 100 bioassays simultaneously with a
single drop of fluid. By combining small diode lasers with digital signal
processors and microcontrollers, the Luminex 100 performs rapid, multi-analyte
profiles under the control of a Windows-based personal computer. The Luminex
100 analyzer is sold with a personal computer, LabMAP software and a starter
supply of microspheres for bioassay development. From market introduction
through January 31, 2000, we had sold 100 systems.
Luminex XY Platform
We also offer the Luminex XY Platform, which complements the Luminex 100 by
automating the sequential positioning of each well of a microtiter plate. This
permits a total of up to 9,600 unattended tests per plate to be performed in
less than an hour. It is designed to interface with robotic systems that
deliver these plates to the Luminex 100, allowing integration into fully
automated test centers. From market introduction through January 31, 2000, we
had sold 40 Luminex XY platforms.
Consumables
We use polystyrene microspheres in our LabMAP technology that are approximately
5.6 microns in size. We dye them using our proprietary method in up to 100
distinctly colored microsphere sets. Each can carry the reagents of an
enzymatic, genetic or immunologic bioassay. Consumables also include sheath
fluid and other relevant spare parts.
RESEARCH AND DEVELOPMENT
Our research and development program is devoted to advancing the capabilities
of our LabMAP technology and expanding the number of its applications. As of
January 31, 2000, we had approximately 45 engineers, scientists and technicians
dedicated to research and development. In addition, we are collaborating with
academic institutions and other companies to increase the breadth of LabMAP
applications.
Our current projects include:
.expanding our multiple testing capabilities This effort is primarily driven by
the pharmaceutical industry's demand for advanced genetic testing. In order to
expand the number of tests per sample to 1,000, a more complex instrument will
be required incorporating three lasers instead of the two contained in the
Luminex 100. In addition, a third dye must be incorporated into the
microspheres for classification purposes.
.developing a point-of-care version of LabMAP This version of the LabMAP system
would be designed for the small clinic, ambulance and other non-laboratory
environments where bringing
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testing closer to the patient delivers significant medical benefits. For
example, an ambulance-based instrument could evaluate the multiple indicators
of heart attack and forward this information to the hospital prior to patient
arrival.
.developing a high throughput screening version of LabMAP The Luminex HTS is
being developed to meet the ultra-high-throughput demands of some laboratories.
This instrument is being designed to generate up to 400,000 individual bioassay
results per day and will readily interface with a number of existing liquid
handling systems.
Our current research collaborations include:
.major manufacturers of liquid handling robotic systems The goal of some
laboratories in the pharmaceutical industry is to perform up to a million
bioassays per day. We believe this could be achieved in a cost-effective
manner by integrating existing high-throughput liquid handlers with three
Luminex HTS systems. We are collaborating with major manufacturers of
sophisticated liquid handling equipment to develop the interface with the
Luminex HTS.
SALES AND MARKETING
Our sales and marketing strategy is designed to expand the installed base of
LabMAP systems and generate recurring, high-margin revenues from royalties on
bioassay kits and testing services that use our technology, as well as from the
sale of microspheres. The key elements of our strategy include:
.a strategic partner program with leading life sciences companies to act as
resellers of our products to facilitate rapid adoption;
.a direct sales effort to complement the strategic partner program; and
.an extensive customer service program.
Our marketing efforts are divided between identifying leading life sciences
companies and internally generating new leads. We intend to utilize outside
public relations and advertising firms to increase market awareness.
Strategic partner program
We intend to use strategic partners as our primary distribution channel in
order to achieve broad market acceptance of our LabMAP technology. We believe
our strategic partners will provide us with complementary capabilities in
product development, regulatory expertise and sales and marketing. We intend to
target leading life sciences companies with established bioassays that we
believe could be converted onto our LabMAP platform. By leveraging our
partners' customer relationships and distribution channels, we believe that we
can achieve rapid market penetration without a large direct sales force. As a
result, we can utilize our internal resources for technology development and
customer support.
We have agreements with partners that contemplate the incorporation of LabMAP
technology in their application-specific bioassay kits and services. Our
partners sell these kits to medical laboratories, hospitals and other end-users
that use standardized sample analysis and screening products and services. Our
strategic partners also use our technology in performing services for third
parties. Under
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these agreements, we have agreed to supply our partners with Luminex 100
systems and microspheres in amounts and at prices that are determined by mutual
agreement. While our strategic partners are not required to purchase any
minimum number of our systems or microspheres, the agreements obligate them to
pay us specified transfer fees, as well as royalties based on revenues
generated by kits and services using our technology. These agreements also
include cross indemnities by our strategic partners and us for infringement of
third party intellectual property rights and other specified costs and
liabilities.
Direct sales
Direct sales are supported by a team of scientists with expertise in the
pharmaceutical industry, clinical diagnostics and biomedical research. We
intend to expand our direct and field sales staff in selected geographic
locations as required by market demand.
Customer service
Customer service supports users through a comprehensive training program and a
toll-free customer support hotline. If a system requires an upgrade or on-site
repair, customer service will dispatch one of our field service technicians.
Our customer service team assists our strategic partners with the development
of their bioassays. This value-added service is designed to facilitate and
expedite the development of applications based on the LabMAP technology.
CUSTOMERS
Our customers consist of a broad range of participants in the life sciences
industry. As of January 31, 2000, our customers included the following:
[Enlarge/Download Table]
Customer Market Application
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Bio-Rad Laboratories, Inc. In vitro diagnostics, Kits
biomedical
research and drug
discovery
Eli Lilly & Company Drug discovery Protein analysis
GlaxoWellcome PLC Drug discovery SNP detection
Laboratory Corporation of America Commercial clinical Clinical testing
laboratory
Life Technologies, Inc. Biomedical research and Kits
drug discovery
Novartis Pharma AG Drug discovery Genetic testing
Quest Diagnostics Incorporated Commercial clinical Clinical testing
laboratory
RW Johnson/Pharmaceutical Drug discovery High throughput screening
Research Institute
SmithKline Beecham Corporation Drug discovery Protein analysis
In 1999, Bio-Rad Laboratories, Inc. accounted for approximately 10% of our
total net revenue. No other customer accounted for more than 10% of our
revenues in 1999.
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MANUFACTURING OPERATIONS
Luminex 100
The basic components of the Luminex 100 are assembled by an ISO 9002 contract
manufacturer. This manufacturer purchases the required system components and
parts for the Luminex 100 from an approved supplier list. Once the manufacturer
has completed its portion of the assembly process, the system is shipped to our
facility in Austin, Texas, where our employees install and align the
optical/laser assembly. At this point, a personal computer with our proprietary
software is added and each unit is run through a quality control protocol.
Parts and component assemblies that comprise the Luminex 100 are obtained from
a number of sources. We intend to develop multiple sources for as many of the
component parts and assemblies as possible.
XY Platform
We purchase the principal components of the XY Platform from several
manufacturers. Final assembly and quality control occurs at our facility in
Austin, Texas.
Microspheres
We buy generic, undyed polystyrene microspheres from any one of three
suppliers. We then dye the microspheres using a proprietary method in our
manufacturing facility in large lots with ten intensities each of red and
infrared dyes to produce 100 distinctly colored microsphere sets. The dyed
microspheres are then repackaged for sale.
INTELLECTUAL PROPERTY
To establish and protect our proprietary technologies and products, we rely on
a combination of patent, copyright, trademark and trade secrets laws, as well
as confidentiality provisions in our contracts.
We have implemented an aggressive patent strategy designed to maximize our
intellectual property rights. We are pursuing patent coverage in the United
States and those foreign countries which correspond to the majority of our
anticipated customer base. We currently own two issued patents in the United
States and have received notices of allowances for two additional patent
applications. In addition, our patent portfolio includes pending patent
applications in the United States and corresponding international and foreign
filings in major industrial nations. One of our patents provides protection for
systems and technology that allows "real time" techniques for the detection and
quantification of many analytes from a single sample. As a result of a
procedural omission, we are unable to obtain comparable patent protection in
Japan.
The issued patents and allowed or pending patent applications claim proprietary
methods for the detection and quantification of analytes from a single sample
in a "real time" format as well as specific aspects and applications of the
LabMAP technology to molecular research.
Generally, United States patents issued from applications filed on or after
June 8, 1995 have a term of 20 years from the application filing date or
earlier claimed priority. Patents in most other countries have a term of 20
years from the date of filing the patent application. All of our patent
applications, including the applications from which both of our issued patents
were derived, were filed after June 8,
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1995. Because the time from filing to issuance of patent applications in the
life sciences industry is often several years, this process may result in a
shortened period of patent protection, which may adversely affect our ability
to exclude competitors from our markets. Our issued United States patents will
expire in 2015. Our success depends to a significant degree upon our ability to
develop proprietary products and technologies and to obtain patent coverage for
the products and technologies. We intend to continue to file patent
applications covering any newly-developed products and technologies.
Patents provide some degree of protection for our proprietary technology.
However, the pursuit and assertion of patent rights, particularly in areas like
medical device development, pharmaceuticals and biotechnology, involve complex
legal and factual determinations and, therefore, are characterized by some
uncertainty. In addition, the laws governing patentability and the scope of
patent coverage continue to evolve, particularly in life sciences. As a result,
we cannot assure you that patents will issue from any of our patent
applications or from applications licensed to us. The scope of any of our
issued patents may not be sufficiently broad to offer meaningful protection. In
addition, our issued patents or patents licensed to us may be successfully
challenged, invalidated, circumvented or rendered unenforceable so that our
patent rights might not create an effective competitive barrier. Moreover, the
laws of some foreign countries may not protect our proprietary rights to the
same extent as do the laws of the United States. There can be no assurance that
any patents issued to us or our strategic partners will provide a legal basis
for establishing an exclusive market for our products or provide us with any
competitive advantages or that the patents of others will not have an adverse
effect on our ability to do business or to continue to use our technologies
freely. In view of these factors, our intellectual property positions bear some
degree of uncertainty.
The source code for our proprietary software is protected both as a trade
secret and as a copyrighted work.
We also rely in part on trade secret protection of our intellectual property.
We attempt to protect our trade secrets by entering into confidentiality
agreements with third parties, employees and consultants. Our employees 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. However, it is possible that these agreements may be
breached, invalidated or rendered unenforceable and if so, there may not be an
adequate corrective remedy available. Despite the measures we have taken to
protect our intellectual property, we cannot assure you that parties to our
agreements will not breach the confidentiality provisions in our contracts or
infringe or misappropriate our patents, copyrights, trademarks, trade secrets
and other proprietary rights. In addition, we cannot assure you that third
parties will not independently discover or invent competing technologies or
reverse engineer our trade secrets, or other technology. Therefore, the
measures we are taking to protect our proprietary technology may not be
adequate.
Although we are not a party to any legal proceedings, in the future, third
parties may file claims asserting that our technologies or products infringe on
their intellectual property. We cannot predict whether third parties will
assert such claims against us or our licensees or against the licensors of
technology licensed to us, or whether those claims will harm our business. If
we are forced to defend against such claims, whether they are with or without
any merit, whether they are resolved in favor of or against us, our licensees
or our licensors, we may face costly litigation and diversion of management's
attention and resources. As a result of such disputes, we may have to develop
at a substantial cost non-infringing technology, or enter into licensing
agreements. These agreements, if necessary, may be unavailable on terms
acceptable to us, or at all, which could seriously harm our business or
financial condition.
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In particular, we are aware of a European patent granted to Dr. Ioannis
Tripatzis, which covers certain testing agents useful for the determination of
antigens and/or antibodies as well as for methods of their use. Dr. Tripatzis
has publicly stated his belief that his patent covers aspects of our bead
technology in Europe. Counterparts of Dr. Tripatzis' European patent exist in
Japan and Canada. While we believe that the overall impact, if any, of Dr.
Tripatzis' patent, which expires in 2004, is limited, we cannot assure you that
any disputes that may arise ultimately will be resolved in our favor or that
the cost of litigating or otherwise resolving any disputes will not materially
adversely affect us.
COMPETITION
Our LabMAP technology can perform many different kinds of tests in many
different fields, including pharmaceutical and biomedical research, clinical
laboratory testing and many other segments of the life sciences industry. For
this reason, the competition we will encounter will necessarily be fragmented
based on the market. There are competitors in every field. Our competition
includes companies marketing conventional testing products based on established
technologies as well as companies developing their own advanced testing
technologies. Most of our competitors are larger than we are and can commit
significantly greater resources to competitive efforts. We cannot assure you
that the LabMAP system will be widely adopted in one or more markets or that we
will be able to compete effectively.
The pharmaceutical industry is the single biggest market for the genomic and
high throughput screening applications of the LabMAP technology. In each
application, Luminex faces a different set of competitors. Genomic testing for
variability in DNA can also be performed by products available from Affymetrix
Inc., Aclara Biosciences, Inc., Clontech Laboratories, Inc., a wholly-owned
subsidiary of Becton Dickinson & Company, and Sequenom, Inc., among others. In
high throughput screening, LJL BioSystems Inc. and Aurora BioSciences
Corporation offer products competitive with ours.
The clinical laboratory market is dominated by several very large competitors.
These include Abbott Laboratories, Bayer Corporation, Bio-Rad, Dade Behring
Inc., a wholly-owned subsidiary of Aventis, and Roche Bioscience, among others.
None currently offer multi-analyte testing systems, but it should be presumed
that programs are underway within at least some of these companies to develop
this capability.
Competition within the biomedical research market is even more fragmented than
that within the pharmaceutical industry. There are hundreds of suppliers to
this market including Amersham Pharmacia Biotech, Molecular Devices
Corporation, PerkinElmer, Inc. and Stratagene Cloning Systems, Inc. Any company
in this field could be a potential competitor with us.
GOVERNMENT REGULATION
We are regulated by the Food and Drug Administration within the framework of
medical devices, pursuant to various statutes including the Federal Food, Drug
and Cosmetic Act as amended and supplemented by the Medical Device Amendments
of 1976, the Safe Medical Devices Act of 1990, the Medical Device Amendments of
1992 and the FDA Modernization Act of 1997. The FDA classifies medical devices
intended for human use into three classes, Class I, Class II and Class III. The
controls applied to the different classifications are those the FDA believes
are necessary to provide reasonable assurance that a device is safe and
effective. Class I devices are noncritical products that can be adequately
regulated by "general controls," including provisions related to labeling,
producer registration, defect notification, records and reports and CGMP
(Current Good Manufacturing
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Practices) requirements. CGMP requirements govern the methods used in, and the
facilities and controls used for, the design, manufacture, packaging and
servicing of all finished medical devices intended for human use. Class II
devices are products for which the general controls of Class I devices alone
are not sufficient to assure the safety and effectiveness of the device and
require special controls. The additional special controls for Class II devices
include performance standards, post-market surveillance patient registries and
the use of FDA guidelines. Standards may include both design and performance
requirements. Class III devices have the most restrictive controls and require
pre-market approval by the FDA. Class III devices include life-sustaining,
life-supporting or implantable devices. The FDA inspects medical device
manufacturers and distributors and has broad authority to order recalls of
medical devices, to seize noncomplying medical devices, to enjoin and/or impose
civil penalties on manufacturers and distributors marketing noncomplying
medical devices and to prosecute criminal violators.
Federal law requires individuals or companies manufacturing most medical
devices intended for human use to file a notice, which is known as a 510(k),
with the FDA at least 90 days before introducing the product into the
marketplace. The 510(k) notice must identify the type of classified device into
which the product falls, the class of that type and the specific marketed
product to which the product claims to be "substantially equivalent." In some
cases the notification must include data from human clinical studies in order
to establish "substantial equivalence." If the registrant states the device is
unclassified, but nonetheless claims substantial equivalence to a marketed
device or recognized diagnostic procedure, it must explain the basis for that
determination. The FDA must affirmatively agree with the claim of substantial
equivalence before the device may be marketed.
The hardware portion of the Luminex 100 is a Class I medical device of a
particular type, which is exempt from the 510(k) notice requirements. Depending
on their intended applications, some of our products and products based on our
technology expected to be produced by our strategic partners are subject to
approval or clearance by the FDA prior to marketing for commercial use.
Products using our technology for clinical diagnostic purposes will require
such approval or clearance. We will assist our strategic partners in filing
their own 510(k)s for their bioassays that will be run on our LabMAP
technology, including providing the verification and validation of our LabMAP
system.
If a product does not qualify for the 510(k) notice procedure (either because
it is not substantially equivalent to a legally marketed device or because it
is a Class III device), the FDA must approve a pre-market approval application
before marketing can begin. Obtaining approval can take several years.
Clearance pursuant to notification can be obtained in less time. In general,
clearance of a 510(k) notification for a device is obtained by the registrant
establishing that the new device is "substantially equivalent" to another
device of such class that is already on the market. This requires the new
device to have the same intended use as a legally marketed predicate device and
have the same technological characteristics as the predicate device. If the
technological characteristics are different, the new device can still be found
to be "substantially equivalent" if information submitted by the applicant
(including clinical data if requested) supports a finding that the new device
is as safe and effective as a legally marketed device and does not raise
questions of safety and efficacy that are different from the predicate device.
There can be no assurance that we will not be required to obtain 510(k)
clearance or pre-market approval prior to commercial distribution of future
products or future applications of current products.
We are registered with the FDA as a device manufacturer. We are subject to
periodic inspection by the FDA for compliance with the FDA's CGMP and other
regulations. These regulations require that we manufacture our products and
maintain our documents in a prescribed manner with respect to manufacturing,
testing and control activities. Further, we are required to comply with various
FDA requirements for labeling. The Medical Device Reporting regulation requires
that a company provide
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information to the FDA whenever there is evidence to reasonably suggest that
one of its devices may have caused or contributed to a death or serious injury,
or a device malfunction would be likely to cause or contribute to a death or
serious injury if the malfunction were to recur. In addition, the FDA prohibits
a company from marketing approved devices for unapproved indications. If the
FDA believes that a company is not in compliance with applicable regulations,
it can institute proceedings to detain or seize products, issue a recall,
impose operating restrictions, enjoin future violations and assess civil and
criminal penalties against the company, its officers or its employees and can
recommend criminal prosecution to the Department of Justice. Other regulatory
agencies may have similar powers. Our strategic partners are subject to the
same requirements and enforcement.
Medical device laws are also in effect in many countries outside of the United
States. These range from comprehensive device approval requirements for some or
all of our medical device products to simpler requests for product data or
certification. The number and scope of these requirements are increasing. In
addition to the requirements relating to medical devices, we will also have to
comply with FDA regulations on the performance of laser products because our
Luminex 100 utilizes lasers in order to identify the bioassays and measure
their result. These regulations are intended to ensure the safety of laser
products by establishing standards to prevent exposure to excess levels of
laser radiation.
Failure to comply with applicable federal, state and foreign medical device
laws and regulations would likely have a material adverse effect on the our
business. In addition, federal, state and foreign regulations regarding the
manufacture and sale of medical devices are subject to future changes. We
cannot predict what impact, if any, such changes might have on our business,
but such change could have a material impact.
We are subject to various federal, state and local laws and regulations
relating to the protection of the environment. In the course of our business,
we are involved in the handling, storage and disposal of certain chemicals. The
laws and regulations applicable to our operations include provisions that
regulate the discharge of materials into the environment. Usually these
environmental laws and regulations impose "strict liability," rendering a
person liable without regard to negligence or fault on the part of such person.
Such environmental laws and regulations may expose us to liability for the
conduct of, or conditions caused by, others, or for acts that were in
compliance with all applicable laws at the time the checks were performed. We
do not believe that we have been required to expend material amounts in
connection with our efforts to comply with environmental requirements or that
compliance with such requirements will have a material adverse effect upon our
capital expenditures, results of operations or competitive position. Because
the requirements imposed by such laws and regulations are frequently changed,
we are unable to predict the cost of compliance with such requirements in the
future, or the effect of such laws on our capital expenditures, results of
operations or competitive position.
EMPLOYEES
As of January 31, 2000, we had 81 employees. None of our employees are covered
by a collective bargaining agreement. We believe that our relations with our
employees are good.
FACILITIES
We occupy approximately 36,000 combined square feet of leased and sub-leased
office space and other facilities in Austin, Texas for our headquarters and as
the base for our marketing and product support
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operations, research and development and manufacturing activities. The monthly
rent on the combined space is approximately $35,000. Substantially all of our
space is leased through early 2002. We intend to use a portion of the proceeds
of this offering to expand our current facilities.
LEGAL PROCEEDINGS
As a result of a procedural omission, we are unable to pursue a patent in Japan
and certain other countries, which corresponds to our issued US patent directed
to our method of "real time" detection and quantification of multiple analytes
from a single sample. We have filed a lawsuit alleging negligence on the part
of our prior patent counsel in this matter and seeking to recover the damages
we believe will result from any gaps in our patent protection in Japan and
certain other countries as a result of this omission. At this time, we cannot
predict whether this lawsuit will be successful and, if so, the amount of any
damages we may recover.
From time to time, we may be involved in litigation that arises through the
normal course of business. As of the date of this prospectus, we are not a
party to any litigation we believe could reasonably be expected to have a
material adverse effect on our business or results of operations.
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Management
EXECUTIVE OFFICERS AND DIRECTORS
Set forth below is the name, age, position and a brief account of the business
experience of each of our executive officers and directors.
[Download Table]
Name Age Position
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Chairman of the Board, President and Chief
Mark B. Chandler, PhD (1).... 46 Executive Officer
Van S. Chandler.............. 49 Vice President of Instruments
Ralph L. McDade, PhD......... 45 Vice President of Scientific Affairs
Michael D. Spain, MD......... 47 Vice President of Clinical Affairs
Vice President, Treasurer and Chief
James L. Persky.............. 51 Financial Officer
Randel S. Marfin............. 43 Vice President of Business Development
G. Walter Loewenbaum (1)..... 55 Director
A. Sidney Alpert............. 61 Director
Robert J. Cresci (2)......... 56 Director
Laurence E. Hirsch (1)(2).... 54 Director
Jim D. Kever (2)(3).......... 47 Director
Fred C. Goad, Jr. (3)........ 59 Director
John E. Koerner, III (2)(3).. 57 Director
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(1) Member of the executive committee
(2) Member of the audit committee
(3) Member of the compensation and stock option committee
Mark B. Chandler, PhD Dr. Chandler founded our company with his brother Van S.
Chandler, in May 1995, and has served as Chairman of the Board and Chief
Executive Officer since that date and as President since June 1999. He also has
served as a member of the executive committee of our board of directors since
its formation in July 1997. In 1982, he founded Inland Laboratories, Inc.,
which provides plant and bacterial toxins to the medical research community. As
the President and CEO of Inland, Dr. Chandler received the KPMG Peat Marwick,
High Technology Entrepreneur of the Year award in 1987. He received his PhD in
Immunology from the University of Texas Southwestern Medical School in Dallas
in 1981.
Van S. Chandler Mr. Chandler, our co-founder, has served as Vice President of
Instruments since January 1998. In addition, Mr. Chandler served as a director
from May 1995 to February 2000 and as an independent contractor from 1995 to
1998. Since 1995, he has led the design and development of the digital signal
processing hardware and data analysis software for the Luminex 100 and Luminex
R/O Systems. In 1990, Mr. Chandler founded Sigma Logic Corp., and while serving
as its President and CEO from 1990 to 1995, he developed an array of law
enforcement technologies, including wireless police data networks and imaging
systems for the FBI. Mr. Chandler founded Concept Communications, Inc. and
served as its President and CEO from 1985 to 1990. He graduated from the
University of Texas at Arlington in 1972 with a BBA in Statistics.
Ralph L. McDade, PhD Dr. McDade has served as Vice President of Scientific
Affairs since June 1999. From January 1996 to June 1999 he served as Vice
President of Development. From 1988 until 1996, he served as Director of
Research and Development for Inland Laboratories. After post-doctoral training
at The University of Connecticut Health Center in Farmington, he held faculty
positions at The Rockefeller University in New York and at Louisiana State
University Medical Center in New Orleans. Dr. McDade received his PhD in
Microbiology from the University of Texas Southwestern Medical School in 1980.
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Michael D. Spain, MD Dr. Spain has served as Vice President of Clinical Affairs
of Luminex since March 1997. From 1994 until joining us, he served as Medical
Director of Laboratory Corporation of America in San Antonio, Texas. From 1984
to 1994, he served as Medical Director of Quest Laboratory in Dallas (formerly
Damon Clinical Laboratory). Following a four year residency in pathology at
Baylor University Medical Center in Dallas, he became board certified in 1984.
Dr. Spain received his MD from the University of Texas Southwestern Medical
School in Dallas in 1980.
James L. Persky Mr. Persky joined our company in March 1998 and has served as
Vice President, Treasurer and Chief Financial Officer since that date. Prior to
joining us, he was Executive Vice President-Finance and Administration and
Chief Financial Officer for Southdown, Inc., a publicly-traded cement
manufacturing company where he served for 13 years. Mr. Persky also spent over
thirteen years in the oil and gas industry in various finance and accounting
positions. Mr. Persky received a BBA from the University of Texas in 1971 and
an MS in Accounting from the University of Houston in 1983. He has been a
Certified Public Accountant since 1979.
Randel S. Marfin Mr. Marfin has served as Vice President of Business
Development, since joining our company in June 1999 and has over thirteen years
of clinical laboratory management experience. Prior to joining us, he worked
for three years at SpectraCell Laboratories, Inc., most recently as Vice
President of Sales and Marketing where he was responsible for business
development, acquisitions, strategic planning and sales and marketing. From
1990 to 1998, he served as General Manager of Texas for both Damon Clinical
Laboratories and Nichols Institute. In addition, Mr. Marfin held sales
management and business development positions for Damon Clinical Laboratories
and MPC Labs. Mr. Marfin has a BS in Biochemistry and Biophysics from the
University of Houston and served in the United States Air Force.
G. Walter Loewenbaum Mr. Loewenbaum has served as a member of our board of
directors since May 1995 and served as Vice Chairman of the Board from April
1998 until January 2000. He also has served as a member of the executive
committee of our board of directors since its formation in July 1997. Since
April 1990, he has served as the President, Chairman and CEO of Loewenbaum &
Company Inc. He received a BA from the University of North Carolina.
Mr. Loewenbaum is also Chairman of 3D Systems Corporation.
A. Sidney Alpert Mr. Alpert has served as a member of our board of directors
since December 1996 and as a member of the audit committee of our board of
directors since its formation in July 1997. Since June 1999, he has served as a
legal consultant to Luminex as well as 3D Systems. From January 1996 to June
1999, Mr. Alpert served as Vice President and General Counsel of 3D Systems
where he was also a director from August 1993 to May 1996. From January 1994
through December 1995, he was an independent intellectual property consultant.
From late 1988 through December 1993, Mr. Alpert served as Chairman of the
Board and CEO of Competitive Technologies Inc.
Robert J. Cresci Mr. Cresci has served as a member of our board of directors
since December 1996 and has served as a member of the compensation and stock
option committee of our board of directors since its formation in July 1997. 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 Sepracor Inc., Arcadia Financial Ltd., Aviva Petroleum Inc., Quest
Education Corporation, Castle Dental Centers, Inc., Candlewood Hotel Co., Inc.,
SeraCare, Inc., E-Stamp Corporation and Film Roman, Inc.
Laurence E. Hirsch Mr. Hirsch has served as a member of our board of directors
since December 1996 and has served as a member of the executive committee of
our board of directors since its formation in July 1997. He is currently the
Chairman of the Board and CEO of Centex Corporation.
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He has served in these positions since July 1991 and July 1988, respectively.
He joined Centex as President and Chief Operating Officer and became a member
of their board of directors in 1985. Mr. Hirsch received a BS in Economics from
the Wharton School at the University of Pennsylvania and a JD from the
Villanova University School of Law. He also serves as a director of Centex
Construction Products, Inc. and A.H. Belo Corporation.
Jim D. Kever Mr. Kever has served as a member of our board of directors since
December 1996 and has served as a member of the audit committee of our board of
directors since its formation in July 1997. He is currently the President and
CEO of Envoy Corporation, a wholly-owned subsidiary of Quintiles Corporation.
Mr. Kever joined Envoy Corporation as Treasurer and General Counsel in October
1981. Prior to joining Envoy (and its predecessor) in 1981, Mr. Kever was
employed by Datanet, a pharmaceutical software company. Mr. Kever received a BS
in business and administration from the University of Arkansas in 1974 and JD
from Vanderbilt University School of Law in 1977.
Fred C. Goad, Jr. Mr. Goad has served as a member of our board of directors
since September 1997 and has served as a member of the compensation and stock
option committee of our board of directors since April 1998. He is Senior
Advisor to the Office of the President of Envoy Corporation. He became a
director and President of Envoy Corporation in August 1984 and served as
Chairman of the Board of Directors and co-CEO of Envoy from August 1995 to
March 1999. Mr. Goad spent ten years with IBM, where he contributed in both
staff and line responsibilities. Mr. Goad also serves on the Board of Directors
for Performance Food Group Company and Quintiles Corporation.
John E. Koerner, III Mr. Koerner has served as a member of our board of
directors since September 1997 and has served as a member of the compensation
and stock option committee of our board of directors since April 1998. He has
been President of Koerner Capital Corporation since 1995 and also serves as a
director on the board of Legg Mason, Inc. He earned a BS in 1965, a JD in 1969
and an MBA in 1971, all from Tulane University.
BOARD COMPOSITION
We currently have nine authorized directors. We intend to fill the vacancy
prior to the consummation of this offering. In accordance with the terms of our
restated certificate of incorporation, the terms of office of the directors are
divided into three classes:
.Class I, whose term will expire at the annual meeting of stockholders to be
held in 2001;
.Class II, whose term will expire at the annual meeting of stockholders to be
held in 2002; and
.Class III, whose term will expire at the annual meeting of stockholders to be
held in 2003.
The Class I directors are A. Sidney Alpert and Robert J. Cresci, the Class II
directors are Laurence E. Hirsch, Jim D. Kever and Fred C. Goad, Jr., and the
Class III directors are Mark B. Chandler, G. Walter Loewenbaum and John E.
Koerner, III. At each annual meeting of stockholders after the initial
classification or special meeting in lieu thereof, the successors to directors
whose terms will then expire will be elected to serve from the time of election
and qualification until the third annual meeting following election or special
meeting held in lieu thereof. The authorized number of directors may be changed
only by resolution of the board of directors or a super-majority vote of the
stockholders. Any additional directorships resulting from an increase in the
number of directors will be distributed among the three classes so that, as
nearly as possible, each class will consist of one third of the directors. This
classification of the board of directors may have the effect of delaying or
preventing changes in control or management of Luminex.
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Management
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BOARD COMMITTEES
The executive committee of the board of directors was established in July 1997.
The members of our executive committee are Mark B. Chandler, G. Walter
Loewenbaum and Laurence E. Hirsch. The executive committee has broad powers as
delegated by the board of directors.
The audit committee of the board of directors was established in July 1997 and
reviews, acts on and reports to the board of directors on various auditing and
accounting matters, including the recommendation of our independent auditors,
the scope of the annual audits, fees to be paid to the independent auditors,
the performance of our independent auditors and our accounting practices. The
members of our audit committee are Robert J. Cresci, Laurence E. Hirsch, Jim D.
Kever and John E. Koerner, III, each of whom is an independent director.
The compensation and stock option committee of the board of directors was
established in July 1997 and determines the salaries and benefits for our
employees, consultants, directors and other individuals compensated by us. The
compensation and stock option committee also administers our stock option
plans, including determining the stock option grants for our employees,
consultants, directors and other individuals. The members of the compensation
and stock option committee are Jim D. Kever, Fred C. Goad, Jr. and John E.
Koerner, III.
DIRECTOR COMPENSATION
We reimburse our non-employee directors for expenses incurred in connection
with attending board and committee meetings but do not compensate them for
their services as board or committee members. We have in the past granted non-
employee directors options to purchase our common stock pursuant to the terms
of our 1996 Stock Option Plan, and our board continues to have discretion to
grant options to new non-employee directors. We anticipate that we will
continue to grant options from time to time under the 2000 Long-Term Incentive
Plan to our non-employee directors. In 1997, seven nonemployee directors were
granted fully vested options to purchase 5,000 shares of common stock and one
additional director was granted fully vested options to purchase 30,000 shares
of common stock. In 1999, six non-employee directors were granted a fully
vested option to purchase 15,000 shares of common stock.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Our compensation and stock option committee currently consists of Messrs.
Kever, Goad and Koerner. No member of the compensation and stock option
committee has been an officer or employee of ours at any time. None of our
executive officers serves as a member of the board of directors or compensation
committee of any other company that has one or more executive officers serving
as a member of our board of directors or compensation and stock option
committee. Prior to the formation of the compensation and stock option
committee in July 1997, the board of directors as a whole made decisions
relating to compensation of our executive officers.
LIMITATION OF LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS
Our restated certificate of incorporation and our amended and restated bylaws
provide that our directors and officers shall be indemnified by us to the
fullest extent authorized by Delaware law, as it now exists or may in the
future be amended, against all expenses and liabilities reasonably incurred in
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Management
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connection with their service for or on our behalf. In addition, the restated
certificate of incorporation provides that our directors will not be personally
liable for monetary damages to us for breaches of their fiduciary duty as
directors, unless they violated their duty of loyalty to us or our
stockholders, acted in bad faith, knowingly or intentionally violated the law,
authorized illegal dividends or redemptions or derived an improper personal
benefit from their action as directors. We have obtained insurance which
insures our directors and officers against specified losses and which insures
us against specific obligations to indemnify our directors and officers.
EXECUTIVE COMPENSATION
Summary of cash and other compensation
The following table shows all compensation received during the year ended
December 31, 1999 by our Chief Executive Officer and our four other highest-
paid executive officers, collectively referred to as the Named Executive
Officers. Other compensaton consists of matching payments made under our
Savings Incentive Match Plan for Employees under Section 408(p) of the Internal
Revenue Code.
Summary compensation
[Download Table]
--------------------------------------------------------------------------------
Annual Long-term
compensation compensation awards
Securities
Other annual underlying Other
Name and principal position Salary Bonus compensation options compensation
--------------------------------------------------------------------------------
Mark B. Chandler........... $225,000 $ -- $ -- 250,000 $--
Chairman and Chief
Executive Officer
Van S. Chandler............ 175,000 -- -- 75,000 5,250
Vice President of
Instruments
Ralph L. McDade............ 175,000 -- -- -- 5,250
Vice President of
Scientific Affairs
Michael D. Spain........... 160,000 -- -- 25,000 4,800
Vice President of Clinical
Affairs
James L. Persky............ 150,000 -- -- -- 4,500
Vice President, Treasurer
and Chief Financial
Officer
Options
The following table shows information regarding options granted to the
executive officers listed in the summary compensation table above during the
fiscal year ended December 31, 1999. We have not granted any stock appreciation
rights.
Each option represents the right to purchase one share of our common stock. The
options generally become vested over three years. See "Management--Employee
benefit plans" for more details regarding these options. In the year ended
December 31, 1999, we granted options to purchase an aggregate of 817,100
shares of common stock to various officers, employees, directors and
consultants.
The potential realizable value at assumed annual rates of stock price
appreciation for the option term represents hypothetical gains that could be
achieved for the respective options if exercised at the end of the option term.
The 5% and 10% assumed annual rates of compounded stock price appreciation are
required by rules of the SEC and do not represent our estimate or projection of
our future common
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Management
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stock prices. These amounts represent assumed rates of appreciation in the
value of our common stock from the fair market value on the date of grant.
Actual gains, if any, on stock option exercises are dependent on the future
performance of our common stock and overall stock market conditions. The
amounts reflected in the table may not necessarily be achieved.
Option grants in last fiscal year
--------------------------------------------------------------------------------
[Download Table]
Individual grants
Potential
realizable
value at assumed
% of annual rates of
Number of total appreciation of
securities options Exercise stock
underlying granted price price for option
options to per Expiration term
Name granted employees share date 5% 10%
--------------------------------------------------------------------------------
Mark B.
Chandler...... 250,000 40% $8 5/20/04 $552,563 $1,221,020
Van S. Chandler.. 75,000 12 8 5/20/04 165,769 366,306
Ralph L. McDade.. -- -- -- -- -- --
Michael D.
Spain......... 25,000 4 8 5/20/04 55,256 122,102
James L. Persky.. -- -- -- -- -- --
The following table shows information as of December 31, 1999 concerning the
number and value of unexercised options held by each of the executive officers
listed in the summary compensation table above. Options shown as exercisable in
the table below are immediately exercisable. However, we have rights to
repurchase shares of the common stock underlying some of these options upon
termination of the holder's employment with us. There was no public trading
market for the common stock as of December 31, 1999. Accordingly, the value of
unexercised in-the-money options listed below has been calculated on the basis
of the assumed initial public offering price of $ per share, less the
applicable exercise price per share, multiplied by the number of shares
underlying such options.
Aggregated option exercises in the year ended December 31, 1999 and year-end
option values
--------------------------------------------------------------------------------
[Enlarge/Download Table]
Number of securities
Shares underlying unexercised Value of unexercised
acquired options at December 31, in-the-money options
upon Value 1999 at December 31, 1999
Name exercise realized Exercisable Unexercisable Exercisable Unexercisable
----------------------------------------------------------------------------------------------
Mark B. Chandler........ -- $ -- -- 250,000 $--
Van S. Chandler......... -- -- -- 75,000 --
Ralph L. McDade......... -- -- 69,999 55,001
Michael D. Spain........ -- -- 33,332 41,668
James L. Persky......... -- -- 33,333 66,667
EMPLOYMENT AGREEMENTS
We intend to enter into employment agreements with certain of our executive
officers prior to the completion of this offering.
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Management
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EMPLOYEE BENEFIT PLANS
1996 Stock Option Plan
Our 1996 Stock Option Plan was approved by our board of directors in March 1996
and subsequently amended by our stockholders on May 11, 1998. Our 1996 plan
authorizes the issuance of up to 2,000,000 shares of our common stock as either
incentive stock options within the meaning of Section 422 of the Internal
Revenue Code of 1986 or nonqualified stock options. As of January 31, 2000, we
had 1,667,100 options to purchase common stock under this plan outstanding to
employees, directors and consultants with a weighted average exercise price of
$6.31 per share. After the completion of this offering, no further options will
be granted under this plan.
The board of directors, or a board committee, has the power to determine the
terms of the options, including the exercise price of the options, the number
of shares subject to each option, the exercisability thereof, and the form of
consideration payable on such exercise, provided that the exercise price for
incentive stock options must be at least 100% of fair market value. Incentive
stock options granted to any holder of 10% or more of the combined voting power
of all classes of stock must have an exercise price of not less than 110% of
fair market value and be exercisable for a term of no more than five years.
2000 Long-Term Incentive Plan
Our 2000 Long-Term Incentive Plan was adopted by our board of directors and
will be submitted to our stockholders for approval in February 2000 as a
successor equity plan to our 1996 plan. Up to shares of common stock may be
issued under the 2000 plan.
The 2000 plan provides for the discretionary grant of incentive stock options,
within the meaning of Section 422 of the Internal Revenue Code of 1986, to
employees and for the grant of nonqualified stock options, stock appreciation
rights, dividend equivalents, restricted stock and other incentive awards to
employees, outside directors and consultants. The 2000 plan provides that we
cannot issue incentive stock options after January 2010.
The 2000 plan is administered by the board of directors or a board committee.
The administrator has the power to determine the terms of the options or other
awards granted, including the exercise price of the options or other awards,
the number of shares subject to each option or other award (up to per year
per participant), the exercisability thereof and the form of consideration
payable upon exercise. In addition, the administrator has the authority to
amend, suspend or terminate the 2000 plan, provided that no such action may
affect any share of common stock previously issued and sold or any option
previously granted under the 2000 plan without the consent of the holder.
The exercise price of all incentive stock options granted under the 2000 plan
must be at least equal to 100% of the fair market value of the common stock on
the date of grant. The exercise price of nonqualified stock options and other
awards granted under the 2000 plan is determined by the administrator, but the
exercise price must be at least 50% of the fair market value of the common
stock on the date of grant. The term of all options granted under the 2000 plan
may not exceed ten years.
Each option and other award is exercisable during the lifetime of the optionee
only by such optionee. Options granted under the 2000 plan must generally be
exercised within 60 days after the end of optionee's status as an employee,
director or consultant, or within one year after such optionee's termination by
disability or death, respectively, but in no event later than the expiration of
the option's term.
The 2000 plan provides that in the event of a merger of our company all options
and other awards shall be assumed or a substitute option or award issued by the
acquiring company unless the board determines in its sole discretion to
accelerate vesting or remove any restrictions.
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Related party transactions
SALES OF SECURITIES
Since January 1, 1997 through January 31, 2000, we have issued the following
securities in private placement transactions:
.150,000 shares of our Series B convertible preferred stock, at a purchase
price of $40.00 per share, for an aggregate purchase price of $6,000,000
between February and April 1997;
.151,571 shares of our Series C convertible preferred stock, at a purchase
price of $80.00 per share, for an aggregate purchase price of $12,125,680 in
June and July 1998;
.57,538 shares of our Series D convertible preferred stock, at a purchase price
of $120.00 per share, for an aggregate purchase price of $6,904,560 between
August and December 1999; and
.25,000 shares of our Series E convertible preferred stock, at a purchase price
of $120.00 per share, for an aggregate purchase price of $3,000,000 in
December 1999.
All preferred stock was issued to accredited investors in reliance upon
exemption from registration under Regulation D of the Securities Act.
The purchasers of more than $60,000 of these securities include, among others,
the following directors of Luminex:
[Download Table]
Shares of preferred stock
-------------------------------------------------------------------------------
Total
Series B Series C Series D Series E consideration
-------------------------------------------------------------------------------
Robert J. Cresci............. 1,875 1,500 -- -- $195,000
Laurence E. Hirsch........... 5,000 6,250 -- -- 700,000
Jim D. Kever(1).............. 5,000 2,000 -- -- 360,000
Fred C. Goad, Jr. ........... 3,750 6,000 300 -- 666,000
John E. Koerner, III(2)...... 25,000 12,500 -- 25,000 5,000,000
--------
(1) Includes 3,621 shares of Series B preferred stock held by a trust in which
Mr. Kever is the trustee. Mr. Kever disclaims beneficial ownership of the
shares held by the trust.
(2) These shares are held by Koerner Capital Corporation of which Mr. Koerner
is the sole stockholder.
For additional information regarding the ownership of securities by executive
officers, directors and stockholders who beneficially own 5% or more of our
outstanding common stock, please see "Principal stockholders."
CONSULTING AGREEMENT
On June 1, 1999 we entered into a consulting agreement with A. Sidney Alpert, a
director of Luminex, whereby Mr. Alpert agreed to provide us with consulting
services one day per week. In consideration for those services, we paid Mr.
Alpert $5,833 per month and granted him options to purchase 25,000
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Related party transactions
--------------------------------------------------------------------------------
shares of our common stock at an exercise price of $8.00 per share. The options
vest on June 1, 2000. On November 1, 1999, we amended that agreement to
increase the number of days to two per week and to increase the consulting fee
to be paid to Mr. Alpert to $11,666 per month.
OTHER TRANSACTIONS
In April 1997, we paid Southcoast Capital Corporation $228,000 in cash and
issued warrants to Southcoast to purchase 262,500 shares of our common stock at
an exercise price of $4.00 per share for acting as placement agent for the sale
of our Series B convertible preferred stock. The warrants may be exercised in
whole or in part at any time prior to April 3, 2002. At the time of the
transaction, G. Walter Loewenbaum was the chairman and chief executive officer
of Southcoast.
During 1997, we paid Van Chandler, a director of Luminex, $136,000 for
consulting services.
On January 1, 1998, we purchased office and laboratory equipment from Inland
Laboratories, Inc. for $208,782 in cash and 140,246 shares of our common stock.
Mark B. Chandler, our chairman, president and chief executive officer, is the
sole stockholder of Inland.
In July 1998, we paid Loewenbaum & Company $849,000 for acting as placement
agent for the sale of our Series C convertible preferred stock. At the time of
the transaction, G. Walter Loewenbaum was the majority stockholder of
Loewenbaum & Company.
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Principal stockholders
The following table shows information known to us with respect to the
beneficial ownership of our common stock as of January 31, 2000, and as
adjusted to reflect the sale of the shares of common stock offered under this
prospectus by:
.each person or group of affiliated persons who is known by us to own
beneficially 5% or more of our common stock;
.each of our directors;
.each executive officer listed in the "Summary compensation" table above; and
.all of our directors and executive officers as a group.
Except as indicated in the footnotes to this table and subject to community
property laws where applicable, the persons named in the table have sole voting
and investment power with respect to all shares of our common stock shown as
beneficially owned by them. Beneficial ownership and percentage ownership are
determined in accordance with the rules of the SEC. The table below includes
the number of shares underlying options and warrants which are exercisable
within 60 days from January 31, 2000 and assumes the conversion of all shares
of our preferred stock into shares of our common stock prior to this offering.
It is therefore based on 11,804,070 shares of our common stock outstanding
prior to this offering and shares outstanding immediately after this
offering. The address for those individuals for which an address is not
otherwise indicated is: 12212 Technology Boulevard, Austin, Texas 78727.
[Enlarge/Download Table]
Number of Number of Percent owned
shares shares underlying before this Percent owned
Beneficial Owner outstanding options or warrants offering after this offering
---------------------------------------------------------------------------------------------------------
Directors and named executive officers
Mark B. Chandler, Ph.D. ............ 1,830,246 -- 15.5
Van S. Chandler..................... 939,667 -- 8.0
Ralph L. McDade, Ph.D. ............. -- 93,332 *
Michael D. Spain, M.D. ............. -- 33,332 *
James L. Persky..................... -- 66,667 *
G. Walter Loewenbaum (1)(2)......... 1,690,000 203,876 16.0
A. Sidney Alpert.................... 100,000 5,000 *
Robert J. Cresci.................... 58,750 20,000 *
Laurence E. Hirsch.................. 142,500 20,000 1.4
Fred C. Goad, Jr. (3)............... 120,500 20,000 1.2
Jim D. Kever (4).................... 100,000 37,500 1.2
John E. Koerner, III (5)............ 699,000 20,000 6.1
All directors and executive officers
as a group (13 persons).......... 5,681,997 529,207 52.6
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Principal stockholders
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[Download Table]
Number of Number of
shares shares underlying Percent owned
Beneficial Owner outstanding options or warrants Percent after this offering
------------------------------------------------------------------------------------
Five percent
stockholders
R. Jerrold Fulton (6)... 820,000 -- 6.9
305 Evergreen Trail
Cedar Hill, Texas 75104
John R. Kettman......... 668,166 -- 5.7
3119 Barton Road
Carrollton, Texas 75007
--------
* Less than 1.0%.
(1) Consists of 1,390,000 shares held by Mr. Loewenbaum and 300,000 shares of
held by a partnership in which Mr. Loewenbaum is the general partner. Mr.
Loewenbaum disclaims beneficial ownership of the shares held by the
partnership.
(2) Includes 203,876 shares issuable upon the exercise of a warrant, 131,376 of
which are held by Mr. Loewenbaum and 72,000 of which are held by a trust
for the benefit of Mr. Loewenbaum's children.
(3) Includes 300 shares held by a trust of which Mr. Goad is the trustee. Mr.
Goad disclaims beneficial ownership of the shares held by the trust.
(4) Consists of 42,064 shares held by Mr. Kever and 57,936 shares held by a
trust of which Mr. Kever is the trustee. Mr. Kever disclaims beneficial
ownership of the shares held by the trust.
(5) Includes 625,000 shares held by Koerner Capital Corporation of which Mr.
Koerner is the sole stockholder and 74,000 shares held by two trusts for
the benefit of his children. Mr Koerner disclaims beneficial ownership of
the shares held by the trusts.
(6) Consists of 220,000 shares held by Dr. Fulton and 600,000 shares held by a
partnership in which Dr. Fulton is the general partner. Dr. Fulton
disclaims beneficial ownership of the shares held by the partnership.
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Description of capital stock
The following information describes our common stock and preferred stock, as
well as options and warrants to purchase our common stock, and provisions of
our restated certificate of incorporation and our amended and restated bylaws,
all as will be in effect upon the closing of this offering. This description
is only a summary. You should also refer to the certificate and bylaws which
have been filed with the SEC as exhibits to our registration statement, of
which this prospectus forms a part. The descriptions of the common stock and
preferred stock, as well as options and warrants to purchase our common stock,
reflect changes to our capital structure that will occur upon the closing of
this offering in accordance with the terms of the certificate.
Upon completion of this offering, our authorized capital stock will consist of
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.
COMMON STOCK
As of January 31, 2000, there were 6,472,662 shares of common stock
outstanding and held of record by 296 stockholders. There will be shares
of common stock outstanding upon the closing of this offering, which gives
effect to the issuance of shares of common stock offered by us under this
prospectus and the conversion of preferred stock discussed below.
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.
PREFERRED STOCK
As of January 31, 2000, there were 841,359 shares of convertible preferred
stock outstanding. All outstanding shares of convertible preferred stock will
be converted into 4,298,340 shares of our common stock upon the closing of
this offering and these shares of convertible preferred stock will no longer
be authorized, issued or outstanding. Our restated certificate of
incorporation authorizes the issuance of 5,000,000 shares of preferred stock,
par value $.001 per share.
Our board is authorized to provide for the issuance of shares of preferred
stock in one or more series, and to fix for each series voting rights, if any,
designations, preferences and relative, participating, optional or other
special rights and such qualifications, limitations or restrictions as
provided in a
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57
Description of capital stock
--------------------------------------------------------------------------------
resolution or resolutions adopted by the board. The board may authorize the
issuance of shares of preferred stock with terms and conditions which could
discourage a takeover or other transaction that holders of some or a majority
of shares of common stock might believe to be in their best interests or in
which holders of common stock might receive a premium for their shares over the
then market price.
WARRANTS
As of January 31, 2000, warrants to purchase a total of 262,500 shares of our
common stock, at an exercise price of $4.00 per share, were outstanding. The
warrants contain anti-dilution provisions providing for adjustments of the
exercise price and the number of shares underlying the warrants upon the
occurrence of certain events, including any recapitalization, reclassification,
stock dividend, stock split, stock combination or similar transaction. The
warrants expire April 2, 2002. The warrants grant to the holders registration
rights with respect to the common stock issuable upon their exercise, which are
described below. All of these warrants will be exercisable immediately before
this offering.
REGISTRATION RIGHTS
At any time six months following the effective date of this offering, the
holders of warrants to purchase 262,500 shares of common stock will be entitled
to demand the registration of their shares under the Securities Act of 1933. We
are not required to effect more than one registration for such holders pursuant
to these demand registration rights, which expire on April 2, 2002. In
addition, after the closing of this offering these holders will be entitled to
piggyback registration rights with respect to the registration of the shares of
common stock underlying their warrants. If we propose to register any shares of
common stock either for our account or for the account of other security
holders, the holders of shares having piggyback rights are entitled to receive
notice of the registration and are entitled to include their shares in the
registration. These registration rights are subject to conditions and
limitations, among which is the right of the underwriters of an offering to
limit the number of shares of common stock held by security holders with
registration rights to be included in such registration. We are generally
required to bear all of the expenses of all these registrations, including the
reasonable fees of a single counsel acting on behalf of all selling
stockholders, except underwriting discounts and selling commissions.
Registration of any of the shares of our common stock held by security holders
with registration rights would result in such shares becoming freely tradable
without restriction under the Securities Act of 1933 immediately upon
effectiveness of such registration.
ANTI-TAKEOVER EFFECTS OF PROVISIONS OF THE CERTIFICATE OF INCORPORATION, BYLAWS
AND DELAWARE LAW
We are subject to Section 203 of the Delaware General Corporation Law, or DGCL
Section 203, which regulates corporate acquisitions. DGCL Section 203 prevents
certain Delaware corporations, including those whose securities are listed for
trading on the Nasdaq National Market, from engaging, under certain
circumstances in a "business combination" with any "interested stockholder" for
three years following the date that such stockholder became an interested
stockholder. For purposes of DGCL Section 203, a "business combination"
includes, among other things, a merger or consolidation involving Luminex and
the interested stockholder and the sale of more than ten percent (10%) of
Luminex's assets. In general, DGCL Section 203 defines an "interested
stockholder" as any entity or person beneficially owning 15% or more of the
outstanding voting stock of Luminex and any entity or person affiliated with or
controlling or controlled by such entity or person. A Delaware corporation may
"opt out" of DGCL Section 203 with an express provision in its original
certificate of
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58
Description of capital stock
--------------------------------------------------------------------------------
incorporation or an express provision in its certificate of incorporation or
bylaws resulting from amendments approved by the holders of at least a majority
of the corporation's outstanding voting shares. We have not "opted out" of the
provisions of DGCL Section 203.
Our restated certificate of incorporation provides that the board of directors
is divided into three classes of directors, with each class serving a staggered
three-year term. The classification system of electing directors may tend to
discourage a third party from making a tender offer or otherwise attempting to
obtain control of Luminex and may maintain the incumbency of the board of
directors, as the classification of the board of directors generally increases
the difficulty of replacing a majority of the directors. The restated
certificate of incorporation also provides that all stockholder actions must be
effected at a duly called meeting and not by a consent in writing. Further,
certain provisions of our restated certificate of incorporation provide that
the stockholders may amend the bylaws or certain provisions of the restated
certificate of incorporation only with the affirmative vote of 75% of our
capital stock. These provisions of the restated certificate of incorporation
and amended and restated bylaws could discourage potential acquisition
proposals and could delay or prevent a change in control of Luminex. These
provisions are intended to enhance the likelihood of continuity and stability
in the composition of the board of directors and in the policies formulated by
the board of directors and to discourage certain types of transactions that may
involve an actual or threatened change of control of Luminex. These provisions
are designed to reduce our vulnerability to an unsolicited acquisition
proposal. The provisions also are intended to discourage certain tactics that
may be used in proxy fights. However, such provisions could have the effect of
discouraging others from making tender offers for our shares and, as a
consequence, they also may inhibit fluctuations in the market price of our
shares that could result from actual or rumored takeover attempts. Such
provisions also may have the effect of preventing changes in our management.
Our bylaws provide that any action required or permitted to be taken by our
stockholders at an annual meeting or special meeting of stockholders may only
be taken if each stockholder is given proper advance notice of the action. The
amended and restated bylaws further provide that special meetings of
stockholders may only be called by a majority of our board of directors, our
chairman of the board of directors or our president. The foregoing provisions
could have the effect of delaying until the next stockholders meeting
stockholder actions which are favored by the holders of a majority of our
outstanding voting securities.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is .
--------------------------------------------------------------------------------
59
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Shares eligible for future sale
Prior to this offering, there has been no public market for our common stock.
The market price of our common stock after this offering could decline as a
result of the sale of a large number of shares of our common stock in the
market, or the perception that such sales could occur. Such sales also could
make it more difficult for us to sell equity securities in the future at a time
and price that we deem appropriate. After this offering, we will have
outstanding shares of common stock. Of these shares, the shares being offered
hereby are freely tradable. This leaves 10,753,122 shares eligible for sale in
the public market as follows:
[Download Table]
Number
of Shares Date
----------------------------------------------------------------------------
-- After the date of this prospectus
At various times after 90 days from the date of this prospectus
469,739 under Rules 701 and 144
At various times after 180 days from the date of this prospectus,
subject, in some cases, to volume limitations under Rule 144
Our directors and officers and all of our stockholders, together with the
holders of options to purchase shares of common stock and the holders of
warrants to purchase shares of common stock, have entered into lock-up
agreements under which they have agreed with the underwriters not to offer,
sell, contract to sell, hedge or otherwise dispose of, directly or indirectly,
or file with the SEC a registration statement under the Securities Act relating
to, any of its common stock or securities convertible into or exchangeable for
shares of common stock during the period from the date of this prospectus
continuing through the date 180 days after the date of this prospectus, without
the prior written consent of Warburg Dillon Read LLC.
In general, under Rule 144 of the Securities Act of 1933, a person or persons
whose shares are required to be aggregated, including an affiliate, whose
shares have been owned for at least one year is entitled to sell, within any
three-month period after the date of this prospectus, a number of shares that
does not exceed the greater of 1% of the then outstanding shares of common
stock -- approximately shares immediately after this offering -- or
the average weekly trading volume in our common stock during the four calendar
weeks preceding the date on which notice of such sale is filed, subject to
certain restrictions. In addition, a person who is not deemed to have been an
affiliate of ours at any time during the 90 days preceding a sale and whose
shares have been beneficially owned by nonaffiliates for at least two years
would be entitled to sell such shares under Rule 144(k) without regard to the
requirements described above. To the extent that shares were acquired from one
of our affiliates, such person's holding period for the purpose of effecting a
sale under Rule 144 commences on the date of transfer from the affiliate.
Following 90 days after the date of this prospectus, shares issued upon
exercise of options that we granted prior to the date of this offering will
also be available for sale in the public market pursuant to Rule 701 under the
Securities Act of 1933. Rule 701 permits resales of such shares in reliance
upon Rule 144 under the Securities Act of 1933 but without compliance with the
restrictions, including the holding-period requirement, imposed under Rule 144.
As of January 31, 2000, options to purchase a total of 1,667,100 shares of
common stock were outstanding, 688,906 of which were currently exercisable, and
all of which are subject to repurchase by us. Of these 1,667,100 shares,
469,739 shares may be eligible for sale in the public market at various times
after 90 days from the date of this prospectus.
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60
Shares eligible for future sale
--------------------------------------------------------------------------------
Upon the closing of this offering, we intend to file a registration statement
to register for resale the shares of common stock reserved for
issuance under our stock option plans. We expect the registration statement to
become effective immediately upon filing. Shares issued upon the exercise of
stock options granted under our stock option plans will be eligible for resale
in the public market from time to time subject to vesting and, in the case of
certain options, the expiration of the lock-up agreements referred to above.
Stockholders holding warrants to purchase 262,500 shares of common stock have
the right, subject to various conditions and limitations, to include their
shares in registration statements relating to our securities. By exercising
their registration rights and causing a large number of shares to be registered
and sold in the public market, these holders may cause the price of the common
stock to fall. In addition, any demand to include such shares in our
registration statements could have a material adverse effect on our ability to
raise needed capital. See "Management -- Benefit plans," "Principal
stockholders," "Shares eligible for future sale" and "Underwriting."
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61
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Underwriting
Luminex and the underwriters for the offering named below have entered into an
underwriting agreement concerning the shares being offered. Subject to
conditions, each underwriter has severally agreed to purchase the number of
shares indicated in the following table. Warburg Dillon Read LLC, Lehman
Brothers Inc. and Dain Rauscher Incorporated are the representatives of the
underwriters.
[Download Table]
Number
Underwriters of shares
--------------------------------------------------------------------------------
Warburg Dillon Read LLC..............................................
Lehman Brothers Inc..................................................
Dain Rauscher Incorporated...........................................
-----
Total..............................................................
=====
If the underwriters sell more shares than the total number set forth in the
table above, the underwriters have a 30-day option to buy from us up to an
additional shares at the initial public offering price less the
underwriting discounts and commissions to cover these sales. If any shares are
purchased under this option, the underwriters will severally purchase shares in
approximately the same proportion as set forth in the table above.
The following table shows the per share and total underwriting discounts and
commissions we will pay to the underwriters. These amounts are shown assuming
both no exercise and full exercise of the underwriters' option to purchase up
to an additional shares.
[Download Table]
No exercise Full exercise
--------------------------------------------------------------------------------
Per share............................................ $ $
Total.............................................. $ $
We estimate that the total expenses of the offering payable by us, excluding
underwriting discounts and commissions, will be approximately $ .
Shares sold by the underwriters to the public will initially be offered at the
initial public offering price set forth on the cover of this prospectus. Any
shares sold by the underwriters to securities dealers may be sold at a discount
of up to $ per share from the initial public offering price. Any of
these securities dealers may resell any shares purchased from the underwriters
to other brokers or dealers at a discount of up to $ per share from
the initial public offering price. If all the shares are not sold at the
initial public offering price, the representatives may change the offering
price and the other selling terms.
The underwriters have informed us that they do not expect discretionary sales
to exceed 5% of the shares of common stock to be offered.
Luminex, its directors, officers and certain of its stockholders have agreed
with the underwriters not to offer, sell, contract to sell, hedge or otherwise
dispose of, directly or indirectly, or file with the SEC a registration
statement under the Securities Act relating to, any of its common stock or
securities convertible into or exchangeable for shares of common stock during
the period from the date of this prospectus continuing through the date 180
days after the date of this prospectus, without the prior written consent of
Warburg Dillon Read LLC.
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62
Underwriting
--------------------------------------------------------------------------------
The underwriters have reserved for sale, at the initial public offering price,
up to shares of our common stock being offered for sale to our
customers and business partners. At the discretion of our management, other
parties, including our employees, may participate in the reserve shares
program. The number of shares available for sale to the general public in the
offering will be reduced to the extent these persons purchase reserved shares.
Any reserved shares not so purchased will be offered by the underwriters to the
general public on the same terms as the other shares in this offering.
Prior to this offering, there has been no public market for our common stock.
The initial public offering price will be negotiated by us and the
representatives. The principal factors to be considered in determining the
initial public offering price include:
.the information set forth in this prospectus and otherwise available to the
representatives;
.the history and the prospects for the industry in which we compete;
.the ability of our management;
.our prospects for future earnings, the present state of our development, and
our current financial position;
.the general condition of the securities markets at the time of this offering;
and
.the recent market prices of, and the demand for, publicly traded common stock
of generally comparable companies.
In connection with the offering, the underwriters may purchase and sell shares
of common stock in the open market. These transactions may include short sales,
stabilizing transactions and purchases to cover positions created by short
sales. Short sales involve the sale by the underwriters of a greater number of
shares than they are required to purchase in the offering. Stabilizing
transactions consist of bids or purchases made for the purpose of preventing or
retarding a decline in the market price of the common stock while the offering
is in progress.
The underwriters also may impose a penalty bid. This occurs when a particular
underwriter repays to the underwriters a portion of the underwriting discount
received by it because the representatives have repurchased shares sold by or
for the account of that underwriter in stabilizing or short covering
transactions.
These activities by the underwriters may stabilize, maintain or otherwise
affect the market price of the common stock. As a result, the price of the
common stock may be higher than the price that otherwise might exist in the
open market. If these activities are commenced, they may be discontinued by the
underwriters at any time. These transactions may be effected on the Nasdaq
National Market, in the over-the-counter market or otherwise.
We have agreed to indemnify the several underwriters against some liabilities,
including liabilities under the Securities Act of 1933 and to contribute to
payments that the underwriters may be required to make in respect thereof.
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63
--------------------------------------------------------------------------------
Legal matters
The validity of the shares of common stock offered hereby will be passed upon
for Luminex Corporation by Thompson & Knight LLP, Austin, Texas. Certain
partners of Thompson & Knight LLP maintain beneficial ownership of shares
of our common stock. Dewey Ballantine LLP, New York, New York, is acting as
counsel for the underwriters in connection with various legal matters relating
to the shares of common stock offered by this prospectus.
Experts
Ernst & Young LLP, independent auditors, have audited our financial statements
at December 31, 1998 and 1999, and for each of the three years in the period
ended December 31, 1999 as set forth in their report. We have included our
financial statements in this prospectus in reliance on Ernst & Young LLP's
report given on their authority as experts in accounting and auditing.
Where you can find more information
We have filed with the SEC a registration statement on Form S-1 (including
exhibits, schedules and amendments) under the Securities Act with respect to
the shares of common stock to be sold in this offering. This prospectus does
not contain all the information set forth in the registration statement. For
further information with respect to us and the shares of common stock to be
sold in this offering, reference is made to the registration statement.
Statements contained in this prospectus as to the contents of any contract,
agreement or other document referred to are not necessarily complete. Whenever
a reference is made in this prospectus to any contract or other document of
ours, the reference may not be complete, and you should refer to the exhibits
that are apart of the registration statement for a copy of the contract or
document.
You may read and copy all or any portion of the registration statement or any
other information Luminex files at the SEC's public reference room at 450 Fifth
Street, N.W., Washington, D.C. 20549. You can request copies of these
documents, upon payment of a duplicating fee, by writing to the SEC. Please
call the SEC at 1-800-SEC-0330 for further information on the operation of the
public reference rooms. Our SEC filings, including the registration statement,
are also available to you on the SEC's web site (http://www.sec.gov).
As a result of this offering, we will become subject to the information and
reporting requirements of the Securities Exchange Act, and, in accordance with
those requirements, will file periodic reports, proxy statements and other
information with the SEC.
This prospectus includes statistical data that were obtained from industry
publications. These industry publications generally indicate that the authors
of these publications have obtained information from sources believed to be
reliable, but do not guarantee the accuracy and completeness of their
information. While we believe these industry publications to be reliable, we
have not independently verified their data.
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64
Luminex Corporation
--------------------------------------------------------------------------------
INDEX TO FINANCIAL STATEMENTS
[Download Table]
Page
--------------------------------------------------------------------------------
Report of Independent Auditors............................................. F-2
Balance Sheets............................................................. F-3
Statements of Operations................................................... F-4
Statements of Changes in Stockholders' Equity.............................. F-5
Statements of Cash Flows................................................... F-6
Notes to Financial Statements.............................................. F-7
--------------------------------------------------------------------------------
F-1
Luminex Corporation
--------------------------------------------------------------------------------
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Luminex Corporation
We have audited the accompanying balance sheets of Luminex Corporation as of
December 31, 1998 and 1999, and the related statements of operations, changes
in stockholders' equity and cash flows for each of the three years in the
period ended December 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Luminex Corporation at
December 31, 1998 and 1999, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1999, in
conformity with accounting principles generally accepted in the United States.
/s/ Ernst & Young LLP
Austin, Texas
January 28, 2000
--------------------------------------------------------------------------------
F-2
Luminex Corporation
--------------------------------------------------------------------------------
BALANCE SHEETS
(in thousands, except share and per share amounts)
[Download Table]
Pro Forma
Stockholders'
Equity
December 31, December 31,
1998 1999 1999
-------------------------------------------------------------------------------
(unaudited)
Assets
Current assets:
Cash and cash equivalents................. $8,537 $4,083
Short-term investments.................... -- 4,929
Accounts receivable, net of allowance for
doubtful accounts of $14 in 1998 and
$64 in 1999............................ 146 1,341
Inventory................................. 47 663
Other..................................... 61 181
-------- --------
Total current assets....................... 8,791 11,197
Property and equipment, net................ 799 1,369
-------- --------
Total assets............................... $9,590 $12,566
======== ========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable.......................... $168 $373
Accrued liabilities....................... 158 278
Deferred revenue.......................... 74 120
-------- --------
Total current liabilities.................. 400 771
Deferred revenue........................... -- 600
Stockholders' equity:
Preferred Stock, $2 par value, 5,000,000
shares authorized:
Series A Convertible Preferred Stock, $2
stated value, shares issued and
outstanding: 457,250 in 1998 and 1999;
no shares pro forma................... 915 915 $--
Series B Convertible Preferred Stock, $40
stated value, shares issued and
outstanding: 150,000 in 1998 and 1999;
no shares pro forma................... 6,000 6,000 --
Series C Convertible Preferred Stock, $80
stated value, shares issued and
outstanding: 151,571 in 1998 and 1999;
no shares pro forma................... 12,126 12,126 --
Series D Convertible Preferred Stock,
$120 stated value, shares issued and
outstanding: 57,538 in 1999; no shares
pro forma............................. -- 6,905 --
Series E Convertible Preferred Stock,
$120 stated value, shares issued and
outstanding: 25,000 in 1999; no shares
pro forma............................. -- 3,000 --
Common Stock, $.001 par value, 25,000,000
shares authorized; shares issued and
outstanding: 6,438,162 and 6,454,782 in
1998 and 1999, respectively; 10,753,122
shares pro forma....................... 6 6 11
Warrants to purchase 262,500 shares of
Common Stock at $4 per share........... 180 180 180
Additional paid-in capital................ 343 960 29,901
Deferred stock compensation............... -- (69) (69)
Accumulated deficit....................... (10,380) (18,828) (18,828)
-------- -------- -------
Total stockholders' equity................. 9,190 11,195 $11,195
-------- -------- =======
Total liabilities and stockholders'
equity.................................. $9,590 $12,566
======== ========
See accompanying notes.
--------------------------------------------------------------------------------
F-3
Luminex Corporation
--------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
[Download Table]
Year ended December 31,
1997 1998 1999
------------------------------------------------------------------------------
Revenue:
Product........................................... $99 $386 $2,606
Grant............................................. -- -- 506
------- ------- -------
Total revenue...................................... 99 386 3,112
Cost of product revenue............................ 10 88 1,172
------- ------- -------
Gross margin....................................... 89 298 1,940
Operating expenses:
Research and development.......................... 1,594 3,611 5,741
Sales, general and administrative................. 1,426 2,566 4,422
Amortization of deferred stock and stock
compensation expense........................... -- -- 509
------- ------- -------
Total operating expenses........................... 3,020 6,177 10,672
------- ------- -------
Loss from operations............................... (2,931) (5,879) (8,732)
Interest income.................................... 178 283 284
------- ------- -------
Net loss........................................... $(2,753) $(5,596) $(8,448)
======= ======= =======
Net loss per share, basic and diluted ............. $(0.44) $(0.87) $(1.31)
======= ======= =======
Shares used in computing net loss per share, basic
and diluted..................................... 6,295 6,415 6,447
Pro forma net loss per share, basic and diluted
(unaudited)..................................... $(0.84)
=======
Shares used in computing pro forma net loss per
share, basic and diluted (unaudited)............ 10,060
See accompanying notes.
--------------------------------------------------------------------------------
F-4
Luminex Corporation
--------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(in thousands, except share amounts)
[Enlarge/Download Table]
Convertible Total
Preferred Stock Common Stock Additional Deferred Stockholders'
Number Number Paid-in Stock Accumulated Equity
of Shares Amount of Shares Amount Warrants Capital Compensation Deficit (Deficit)
---------------------------------------------------------------------------------------------------------------------------
Balance at December 31,
1996.................. 457,250 $915 6,295,250 $6 $-- $1,000 $-- $(2,031) $(110)
Issuance of Preferred
Stock,
Series B............. 150,000 6,000 -- -- -- -- -- -- 6,000
Stock issuance costs... -- -- -- -- 180 (353) -- -- (173)
Net loss............... -- -- -- -- -- -- -- (2,753) (2,753)
------- ------- ---------- --- ---- ------- ----- -------- -------
Balance at December 31,
1997.................. 607,250 6,915 6,295,250 6 180 647 -- (4,784) 2,964
Issuance of Preferred
Stock,
Series C............. 151,571 12,126 -- -- -- -- -- -- 12,126
Stock issuance costs... -- -- -- -- -- (868) -- -- (868)
Exercise of stock
options.............. -- -- 2,666 -- -- 3 -- -- 3
Common stock issued for
assets purchased..... -- -- 140,246 -- -- 561 -- -- 561
Net loss............... -- -- -- -- -- -- -- (5,596) (5,596)
------- ------- ---------- --- ---- ------- ----- -------- -------
Balance at December 31,
1998.................. 758,821 19,041 6,438,162 6 180 343 -- (10,380) 9,190
Issuance of Preferred
Stock,
Series D............. 57,538 6,905 -- -- -- -- -- -- 6,905
Issuance of Preferred
Stock,
Series E............. 25,000 3,000 -- -- -- -- -- -- 3,000
Stock issuance costs... -- -- -- -- -- (8) -- -- (8)
Exercise of stock
options.............. -- -- 16,620 -- -- 47 -- -- 47
Stock options granted
to consultants....... -- -- -- -- -- 578 (578) -- --
Amortization of
deferred stock and
stock compensation
expense.............. -- -- -- -- -- -- 509 -- 509
Net loss............... -- -- -- -- -- -- -- (8,448) (8,448)
------- ------- ---------- --- ---- ------- ----- -------- -------
Balance at December 31,
1999.................. 841,359 $28,946 6,454,782 $6 $180 $960 $(69) $(18,828) $11,195
======= ======= ========== === ==== ======= ===== ======== =======
Pro forma balance at
December 31, 1999
(unaudited)........... -- $-- 10,753,122 $11 $180 $29,901 $(69) $(18,828) $11,195
======= ======= ========== === ==== ======= ===== ======== =======
See accompanying notes.
--------------------------------------------------------------------------------
F-5
Luminex Corporation
--------------------------------------------------------------------------------
STATEMENTS OF CASH FLOWS
(in thousands)
[Download Table]
Year ended December 31,
1997 1998 1999
-------------------------------------------------------------------------------
Operating activities
Net loss........................................... $(2,753) $(5,596) $(8,448)
Adjustment to reconcile net loss to cash used in
operating activities:
Depreciation expense.............................. 69 220 330
Amortization expense.............................. -- 143 186
Amortization of deferred stock and stock
compensation expense........................... -- -- 509
Changes in operating assets and liabilities:
Accounts receivable.............................. (39) (108) (1,195)
Inventory........................................ (44) (3) (616)
Other assets..................................... (13) (48) (120)
Accounts payable................................. 59 64 205
Accrued liabilities.............................. (167) 107 120
Deferred revenue................................. -- 74 646
------- ------- -------
Net cash used in operating activities.............. (2,888) (5,147) (8,383)
Investing activities
Purchase of short-term investments................. -- -- (4,929)
Purchase of property and equipment................. (132) (399) (1,085)
------- ------- -------
Net cash used in investing activities.............. (132) (399) (6,014)
Financing activities
Proceeds from issuance of Common Stock............. -- 3 47
Proceeds from issuance of Preferred Stock.......... 6,000 12,126 9,904
Stock issuance costs............................... (173) (867) (8)
------- ------- -------
Net cash provided by financing activities.......... 5,827 11,262 9,943
Increase in cash and cash equivalents.............. 2,807 5,716 (4,454)
Cash and cash equivalents, beginning of year....... 14 2,821 8,537
------- ------- -------
Cash and cash equivalents, end of year............. $2,821 $8,537 $4,083
======= ======= =======
Non-cash activities
Common stock issued to acquire property and
equipment from related party.................... $-- $561 $--
See accompanying notes.
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F-6
Luminex Corporation
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
1. Organization and business
Luminex Corporation (the "Company") was incorporated in the state of Texas in
May 1995. In June 1998, the Company reincorporated in the state of Delaware.
Since its formation, the Company's activities have been focused primarily on
the research and development of a unique molecular measurement and analysis
system (the LabMAP System) capable of performing multiple tests rapidly and
economically on a single patient sample.
From its inception through December 31, 1998, the Company's activities were
focused primarily on research and development and raising capital and,
accordingly, the Company was considered to be a development stage company. In
1999, the Company commenced shipments of its intended product, the Luminex 100,
and is no longer considered a development stage company.
2. Summary of significant accounting policies
Use of estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the amounts reported in the financial statements and accompanying
notes. Actual amounts and results could differ from those estimates, and such
differences could be material to the financial statements.
Revenue recognition
Revenues from sales of the Company's products are recognized when persuasive
evidence of an agreement exists, delivery of the product has occurred, the fee
is fixed and determinable and collectibility is probable. The Company reserves
for the cost of estimated sales returns as well as uncollectible accounts based
upon experience.
Grant revenue is recorded as the research expenses relating to the grant are
incurred, provided that the amounts received are not refundable if the research
is not successful.
Cash equivalents
Cash equivalents consist of cash deposits and investments with original
maturities of three months or less when purchased.
Short-term investments
In accordance with Statement of Financial Accounting Standards ("SFAS") No.
115, Accounting for Certain Investments in Debt and Equity Securities, the
Company's short-term investments are classified as held-to-maturity. Short-term
investments are classified as held-to maturity as the Company has the positive
intent and ability to hold the securities to maturity. Held-to-maturity
securities are stated at amortized cost, adjusted for amortization of premiums
and accretion of discounts to maturity. Such amortization is included in
interest income. Interest on securities classified as held-to-maturity is also
included in interest income.
All of the short-term investments mature within one year of December 31, 1999.
Concentration of credit risk and significant customers
Financial instruments which potentially subject the Company to concentrations
of credit risk consist of short-term investments and trade receivables. The
Company's short-term investments consist of investments in high credit quality
financial institutions and issuers.
--------------------------------------------------------------------------------
F-7
Luminex Corporation
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
The Company provides credit, in the normal course of business, to a number of
customers geographically dispersed primarily throughout the U.S. The Company
performs ongoing credit evaluations of its customers and maintains allowances
for potential credit losses.
The following table summarizes the changes in the allowance for doubtful
accounts for 1997, 1998, and 1999 (in thousands):
[Download Table]
Balance at December 31, 1996............................................... $--
Additions charged to costs and expenses.................................. --
Write-off of uncollectible accounts...................................... --
---
Balance at December 31, 1997............................................... --
Additions charged to costs and expenses.................................. 14
Write-off of uncollectible accounts...................................... --
---
Balance at December 31, 1998............................................... 14
Additions charged to costs and expenses.................................. 64
Write-off of uncollectible accounts...................................... (14)
---
Balance at December 31, 1999............................................... $64
===
Sales to individual customers constituting 10% or more of total revenues for
each year were as follows (in thousands):
[Download Table]
Year ended
December 31,
1997 1998 1999
---------------------------------------------------------------------------------
Customer No. 1................................................... 14% -- --
Customer No. 2................................................... 10 -- --
Customer No. 3................................................... 10 -- --
Customer No. 4................................................... 10 -- --
Customer No. 5................................................... 10 -- --
Customer No. 6................................................... -- -- 10%
Inventory
Inventory, consisting primarily of raw materials and purchased components, is
stated at the lower of cost or market. Cost is determined by the weighted
average method.
Property and equipment
Property and equipment are stated at cost. Property and equipment are
depreciated on a straight-line basis over the useful lives of the assets, which
are generally three to seven years. Leasehold improvements are amortized on a
straight-line basis over the shorter of the remaining term of the lease or its
estimated useful life.
Software costs
Purchased software is capitalized at cost and amortized over the estimated
useful life, generally five years. Software developed for use in the Company's
products is expensed as incurred and is classified as research and development
expense.
--------------------------------------------------------------------------------
F-8
Luminex Corporation
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
Impairment of long-lived assets
In accordance with SFAS No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of, if indicators of impairment
exist, the Company assesses the recoverability of the affected long-lived
assets by determining whether the carrying value of such assets can be
recovered through undiscounted future operating cash flows. If impairment is
indicated, the Company will measure the amount of such impairment by comparing
the carrying value of the asset to the present value of the expected future
cash flows associated with the use of the asset. To date, no such indicators of
impairment have been identified.
Research and development costs
Research and development costs are expensed in the period incurred.
Patent costs
Costs related to patent applications and prosecution are expensed as incurred
as recoverability of such expenditures is uncertain.
Income taxes
The Company accounts for income taxes in accordance with SFAS No. 109,
Accounting for Income Taxes. This statement prescribes the use of the liability
method whereby deferred tax assets and liabilities are determined based on
differences between financial reporting and tax bases of assets and
liabilities, and are measured using enacted tax rates and laws that will be in
effect when the differences are expected to reverse.
Advertising costs
The Company expenses advertising costs as incurred. Advertising expenses were
not significant for all years presented.
Stock-based compensation
SFAS No. 123, Accounting for Stock-Based Compensation ("SFAS 123"), prescribes
accounting and reporting standards for all stock-based compensation plans,
including employee stock options. As allowed by Statement 123, the Company has
elected to continue to account for its employee stock-based compensation in
accordance with Accounting Principles Board Opinion No. 25, Accounting for
Stock Issued to Employees.
Comprehensive income
In June 1997, the Financial Accounting Standards Board issued Statement No.
130, Reporting Comprehensive Income ("SFAS 130"), which establishes standards
for reporting comprehensive income and its components in a full set of
financial statements. The Company adopted Statement 130 during the year ended
December 31, 1998. There was no impact to the Company as a result of the
adoption of SFAS 130, as there no differences between net loss and
comprehensive loss for all periods.
Segment reporting
The Company adopted SFAS No. 131, Disclosures About Segments of an Enterprise
and Related Information, during 1998. SFAS No. 131 requires the use of a
management approach in identifying segments of an enterprise. Management has
determined that the Company operates in one business segment.
--------------------------------------------------------------------------------
F-9
Luminex Corporation
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
Net loss per share
In accordance with SFAS No. 128, Earnings Per Share, and SEC Staff Accounting
Bulletin (or SAB) No. 98, basic net income (loss) per share is computed by
dividing the net income (loss) for the period by the weighted average number of
common shares outstanding during the period. Diluted net income (loss) per
share is computed by dividing the net income (loss) for the period by the
weighted average number of common and common equivalent shares outstanding
during the period. Potentially dilutive securities composed of incremental
common shares issuable upon the exercise of stock options and warrants, and
common shares issuable on conversion of preferred stock, were excluded from
historical diluted loss per share because of their anti-dilutive effect.
Under the provisions of SAB No. 98, common shares issued for nominal
consideration, if any, would be included in the per share calculations as if
they were outstanding for all periods presented. No common shares have been
issued for nominal consideration.
Pro forma net loss per share has been computed as described above and also
gives effect to common equivalent shares arising from preferred stock that will
automatically convert upon the closing of the initial public offering
contemplated by this prospectus (using the as-if converted method from the
original date of issuance).
The following is a reconciliation of the numerator and denominator of basic and
diluted net loss per share (in thousands, except per share amounts):
[Download Table]
Year Ended December 31,
1997 1998 1999
--------------------------------------------------------------------------------
Basic and diluted:
Net loss............................................ $(2,753) $(5,596) $(8,448)
======= ======= =======
Weighted average shares of common stock
outstanding...................................... 6,295 6,415 6,447
======= ======= =======
Basic and diluted net loss per share................ $(0.44) $(0.87) $(1.31)
======= ======= =======
Pro forma basic and diluted:
Shares used above................................... 6,447
Pro forma adjustment to reflect weighted average
effect of assumed conversion of preferred stock.. 3,613
-------
Shares used in computing pro forma basic and diluted
net loss per share............................... 10,060
=======
Basic and diluted pro forma net loss per share...... $(0.84)
=======
The Company has excluded all convertible preferred stock, outstanding stock
options, outstanding warrants to purchase stock and shares subject to
repurchase from the calculation of diluted loss per common share because all
such securities are antidilutive for all applicable periods presented. The
total number of shares excluded from the calculations of diluted net loss per
share, prior to application of the treasury stock method for options, was
3,045,750, 4,834,960 and 6,245,740 for the years ended December 31, 1997, 1998
and 1999, respectively. Such securities, had they been dilutive, would have
been included in the computations of diluted net loss per share. See Note 4 for
further information on these securities.
--------------------------------------------------------------------------------
F-10
Luminex Corporation
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
Unaudited pro forma stockholders' equity
The unaudited pro forma stockholders' equity information at December 31, 1999
reflects the conversion of the convertible preferred stock.
Recently issued accounting standards
In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, as amended by SFAS No. 137, which is
effective for fiscal years beginning after June 15, 2000. This statement
requires companies to record derivatives on the balance sheet as assets or
liabilities measured at fair value. Gains or losses resulting from changes in
the values of those derivatives would be accounted for depending on the use of
the derivative and whether it qualifies for hedge accounting. SFAS No. 133 will
be effective for the Company's financial statements for the year ending
December 31, 2001. Management believes that this statement will not have a
material impact on the Company's financial position or results of operations.
In March 1999, the FASB issued an exposure draft entitled "Accounting for
Certain Transactions involving Stock Compensation," which is a proposed
interpretation of APB Opinion No. 25. However, the exposure draft has not been
finalized. Once finalized and issued, the current accounting practices for
transactions involving stock compensation may need to change and such changes
could affect the Company's future operating results.
In December 1999, the Securities and Exchange Commission staff released Staff
Accounting Bulletin No. 101, Revenue Recognition in Financial Statements (SAB
No. 101), which provides guidance on the recognition, presentation and
disclosure of revenue in financial statements. The application of SAB No. 101
did not have a material impact on the financial statements of the Company.
Reclassification
Certain amounts in the prior year financial statements have been reclassified
to conform to current year presentation.
3. Property and equipment
Property and equipment consisted of the following at December 31 (in
thousands):
[Download Table]
1998 1999
--------------------------------------------------------------------------------
Laboratory equipment............................................ $783 $1,180
Computer equipment.............................................. 128 264
Leasehold improvements.......................................... 229 609
Purchased software and intangibles.............................. 56 123
Furniture and fixtures.......................................... 87 192
------ ------
1,283 2,368
Less accumulated amortization and depreciation.................. (484) (999)
------ ------
$799 $1,369
====== ======
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F-11
Luminex Corporation
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
4. Stockholders' equity
Series A Preferred Stock
A total of 457,250 shares of Series A Preferred Stock ("Series A Stock") were
issued in 1995 and 1996 at $2.00 per share. The Series A Stock does not
currently pay a dividend but is entitled to receive a dividend on a pro rata
basis if any dividend is paid to holders of the Common Stock. The Series A
Stock is entitled to one vote on all matters in which shares of Common Stock
are entitled to vote except in certain circumstances under the Delaware General
Corporation Law ("DGCL") where the holders are entitled to vote as a class.
Each share of Series A Stock is convertible at the option of the holder into
one share of Common Stock subject to adjustment to protect against dilution,
and has a preference in liquidation of $2.00.
With at least 30 days notice to each holder, the Company may, at its option,
redeem all but not part of the Series A Stock. All outstanding shares of Series
A Stock are subject to mandatory redemption on the date that a registration
statement registering any shares of Common Stock under the Securities Act is
declared effective by the Securities and Exchange Commission.
Series B Preferred Stock
A total of 150,000 shares of Series B Preferred Stock ("Series B Stock") were
issued in 1997 at $40.00 per share. The Series B Stock does not currently pay a
dividend but is entitled to receive a dividend on a pro rata basis if any
dividend is paid to the holders of the Common Stock. The Series B Stock is
entitled to ten votes on all matters in which shares of Common Stock are
entitled to vote except in certain circumstances under the DGCL where the
holders are entitled to vote as a class. Each share of Series B Stock is
convertible at the option of the holder into ten shares of Common Stock,
subject to adjustment to protect against dilution, and has a preference in
liquidation of $40.00.
The Company may at its option, with not less than 30 and not more than 60 days
notice, redeem all but not part of the Series B Stock for $40.00 per share. All
outstanding shares of Series B Stock are subject to mandatory redemption by the
Company at $40.00 per share, (with not less than 30 and not more than 60 days
notice) on the date that a registration statement registering any shares of
Common Stock is declared effective by the Securities and Exchange Commission.
Series C Preferred Stock
A total of 151,571 shares of Series C Preferred Stock ("Series C Stock") were
issued in 1998 at $80.00 per share. The Series C Stock does not currently pay a
dividend but is entitled to receive a dividend on a pro rata basis if any
dividend is paid to holders of the Common Stock. The Series C Stock is entitled
to ten votes on all matters in which shares of Common Stock are entitled to
vote except in certain circumstances under the DGCL where the holders are
entitled to vote as a class. Each share of Series C Stock is convertible at the
option of the holder into ten shares of Common Stock subject to adjustment to
protect against dilution, and has a preference in liquidation of $80.00.
The Company may, at its option, with not less than 30 and not more than 60 days
notice, redeem all but not part of the Series C Stock for $80.00 per share. All
outstanding shares of Series C Stock are subject to automatic conversion into
fully paid and nonassessable shares of Common Stock by the Company at $8.00 per
share of common stock, on the date that a registration statement registering
any shares of Common Stock under the Securities Act is declared effective by
the Securities and Exchange Commission.
--------------------------------------------------------------------------------
F-12
Luminex Corporation
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
Series D Preferred Stock
A total of 57,538 shares of Series D Preferred Stock ("Series D Stock") were
issued in 1999 at $120.00 per share. The Series D Stock does not currently pay
a dividend but is entitled to receive a dividend on a pro rata basis if any
dividend is paid to holders of the Common Stock. The Series D Stock is entitled
to ten votes on all matters in which shares of Common Stock are entitled to
vote except in certain circumstances under the DGCL where the holders are
entitled to vote as a class. Each share of Series D Stock is convertible at the
option of the holder into ten shares of Common Stock subject to adjustment to
protect against dilution, and has a preference in liquidation of $120.00.
The Company may, at its option, with not less than 30 and not more than 60 days
notice, redeem all but not part of the Series D Stock for $120.00 per share.
All outstanding shares of Series D Stock are subject to automatic conversion
into fully paid and nonassessable shares of Common Stock by the Company at
$12.00 per share of common stock, on the date that a registration statement
registering any shares of Common Stock under the Securities Act is declared
effective by the Securities and Exchange Commission.
Series E Preferred Stock
A total of 25,000 shares of Series E Preferred Stock ("Series E Stock") were
issued in 1999 at $120.00 per share. The Series E Stock does not currently pay
a dividend but is entitled to receive a dividend on a pro rata basis if any
dividend is paid to holders of the Common Stock. The Series E Stock is entitled
to ten votes on all matters in which shares of Common Stock are entitled to
vote except in certain circumstances under the DGCL where the holders are
entitled to vote as a class. Each share of Series E Stock is convertible at the
option of the holder into ten shares of Common Stock subject to adjustment to
protect against dilution, and has a preference in liquidation of $120.00.
The Company may, at its option, with not less than 30 and not more than 60 days
notice, redeem all but not part of the Series C Stock for $120.00 per share.
All outstanding shares of Series E Stock are subject to automatic conversion
into fully paid and nonassessable shares of Common Stock by the Company at
$12.00 per share of common stock, on the date that a registration statement
registering any shares of Common Stock under the Securities Act is declared
effective by the Securities and Exchange Commission.
Common Stock
At December 31, 1999, there were 6,454,782 shares of Common Stock issued and
outstanding. In addition, approximately 6,542,000 shares were reserved for
future issuance upon exercise of stock options and warrants and upon conversion
of convertible securities.
Warrants to purchase Common Stock
In conjunction with the sale of the Series B Stock, the Company issued warrants
to purchase an aggregate of 262,500 shares of Common Stock at an exercise price
of $4.00 per share. The warrants may be exercised, in whole or in part, at any
time prior to April 3, 2002. (See also Note 8.)
Stock option plan
Under the Company's Stock Option Plan, which was amended in May 1998 (the
"Plan"), options to purchase up to 2,000,000 shares of the Company's Common
Stock may be granted to employees, officers, non-employee directors and
advisors of the Company. The Plan is administered by the Stock Option Committee
of the Board of Directors which has the authority to determine the terms and
--------------------------------------------------------------------------------
F-13
Luminex Corporation
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
conditions under which options will be granted, including the number of shares,
option price, vesting schedule and term. Under certain circumstances, the
Company may repurchase previously granted options or shares issued upon the
exercise of a previously granted option.
Since inception, the Company has granted options to employees at estimated fair
market value on the date of grant. Employee options generally vest one-third on
each of the first, second and third anniversary dates from the date of grant
and have a term of five years.
In 1997, the Company granted a fully vested option to purchase 18,750 shares of
the Company's Common Stock to a consulting firm at an exercise price of $4.00
per share that expires on January 31, 2002. The Company granted an additional
181,250 options to this consulting firm with vesting based on the achievement
of identified milestones. No amount was allocated to the value of these options
as such amounts were insignificant. In 1999, the consulting firm surrendered
all the options in exchange for issuance by the Company of a fully vested
option to purchase 50,000 shares of the Company's Common Stock at an exercise
price of $4.00 per share. The Company recorded stock compensation in the amount
of approximately $433,000 in connection with the issuance of stock options to
the consulting firm.
Pro forma information regarding net loss is required by Statement 123, and has
been determined as if the Company had accounted for its employee stock options
under the minimum value method of that Statement. The minimum value for these
options was estimated at the date of grant using a minimum value option pricing
model with the following assumptions for 1997, 1998 and 1999; volatility of 0%;
risk free interest rate of 6%; expected life of the options of 5 years; and an
expected dividend yield of 0%.
For purposes of pro forma disclosures, the estimated fair value of the options
is expensed over the options' vesting periods. The Company's pro forma
information is as follows (in thousands):
[Download Table]
1997 1998 1999
-------------------------------------------------------------------------------
Net loss as reported................................ $(2,753) $(5,596) $(8,448)
Pro forma net loss.................................. (2,800) (5,753) (8,714)
Diluted net loss per share as reported.............. (0.44) (0.87) (1.31)
Pro forma diluted net loss per share................ (0.44) (0.90) (1.35)
The weighted average grant date fair value of options granted was $1.04, $1.72
and $2.13 for 1997, 1998 and 1999, respectively.
--------------------------------------------------------------------------------
F-14
Luminex Corporation
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
A summary of the changes in Common Stock options is as follows:
[Download Table]
Weighted
Range of Average
Exercise Exercise
Shares Prices Price
-------------------------------------------------------------------------------
Options outstanding, December 31, 1996........ 199,000 $1.00 $1.00
Granted...................................... 627,000 $4.00 $4.00
Exercised.................................... -- -- --
Surrendered.................................. -- -- --
--------- ------------ -----
Options outstanding, December 31, 1997........ 826,000 $1.00-$ 4.00 $3.28
Granted...................................... 281,500 $6.00-$ 8.00 $7.19
Exercised.................................... (2,666) $1.00 $1.00
Surrendered.................................. (5,334) $1.00-$ 6.00 $4.00
--------- ------------ -----
Options outstanding, December 31, 1998........ 1,099,500 $1.00-$ 8.00 $4.28
Granted...................................... 817,100 $4.00-$12.00 $8.23
Exercised.................................... (16,620) $1.00-$ 4.00 $2.81
Surrendered.................................. (215,000) $4.00 $4.00
--------- ------------ -----
Options outstanding, December 31, 1999........ 1,684,980 $1.00-$12.00 $6.25
========= ============
The following table summarizes information about options outstanding at
December 31, 1999:
[Download Table]
Options Outstanding Options Exercisable
Weighted Average Weighted Number Weighted
Exercise Number Remaining Average Exercisable Average
Price Outstanding Contractual Life Exercise Price and Vested Exercise Price
--------------------------------------------------------------------------------
$1.00 188,380 1.16 $1.00 158,380 $1.00
4.00 450,000 2.80 4.00 338,318 4.00
6.00 162,000 3.16 6.00 53,994 6.00
8.00 762,500 4.29 8.00 130,829 8.00
12.00 122,100 4.21 12.00 22,933 12.00
--------- -------
1,684,980 704,454
========= =======
5. Income taxes
As of December 31, 1999, the Company had federal net operating loss
carryforwards of approximately $17,077,000 and research and development credit
carryforwards of approximately $536,000 that will begin to expire in 2010 if
not utilized.
The Tax Reform Act of 1986 imposes substantial restrictions on the utilization
of net operating losses and tax credits in the event of an "ownership change"
of a corporation. The Company's utilization of the net operating losses may be
subject to a substantial annual limitation due to an "ownership change"
resulting from the sales of private equity securities. The annual limitation
may result in the expiration of net operating losses before utilization.
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F-15
Luminex Corporation
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amount of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of the Company's deferred tax liabilities and assets as of December 31 are as
follows (in thousands):
[Download Table]
1998 1999
--------------------------------------------------------------------------------
Deferred tax assets:
Deferred revenue.............................................. $-- $267
Depreciable assets............................................ -- 147
Accrued expenses.............................................. 5 40
Net operating loss and credit carryforwards................... 4,080 6,855
Start-up and organization costs............................... 17 11
Stock compensation............................................ -- 188
------- ------
Total deferred tax assets...................................... 4,102 7,508
Valuation allowance for deferred tax assets................... (4,086) (7,485)
------- ------
Net deferred taxes............................................. 16 23
Deferred tax liabilities:
Prepaid expenses.............................................. (16) (23)
------- ------
Total deferred tax liabilities................................. (16) (23)
------- ------
Net deferred taxes............................................. $-- $--
======= ======
The Company has established a valuation allowance equal to the net deferred tax
assets due to uncertainties regarding the realization of deferred tax assets
based on the Company's lack of earnings history. The valuation allowance
increased by approximately $2,161,000 and $3,399,000 during 1998 and 1999,
respectively.
The Company's provision for income taxes differs from the expected tax benefit
amount computed by applying the statutory federal income tax rate of 34% to
income before income taxes as a result of the following:
[Download Table]
Year Ended
December 31,
1997 1998 1999
--------------------------------------------------------------------------------
Statutory tax rate...................................... (34.0)% (34.0)% (34.0)%
State taxes, net of federal benefit..................... (3.0) (3.0) (3.0)
Nondeductible expenses.................................. -- 1.0 0.1
R&D credit generated.................................... (5.6) (2.6) (2.7)
Other................................................... -- -- (0.6)
Valuation allowance..................................... 42.6 38.6 40.2
----- ----- -----
-- % -- % -- %
===== ===== =====
6. Employee benefit plans
Beginning January 1, 1998, the Company instituted a Savings Incentive Match
Plan for Employees ("SIMPLE") under Section 408(p) of the Internal Revenue
Code. Each employee of the Company who received at least $5,000 of compensation
during the year from the Company was eligible to contribute
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F-16
Luminex Corporation
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
up to $6,000 annually. The Company matches such contributions on a dollar-for-
dollar basis up to a maximum of 3% of the employee's gross salary compensation.
All employee and employer contributions are immediately vested. The Company's
contributions totaled approximately $40,000 in 1998 and $92,000 in 1999.
7. Commitments
Lease arrangements
The Company has various operating leases related primarily to office
facilities. Rental expense for these operating leases for the years 1997, 1998
and 1999 totaled approximately $105,000, $152,000 and $399,000, respectively.
Minimum annual rental commitments as of December 31, 1999 under noncancelable
leases for each of the next five years and in the aggregate are as follows (in
thousands):
[Download Table]
2000....................................................................... $327
2001....................................................................... 304
2002....................................................................... 74
2003....................................................................... --
2004....................................................................... --
Thereafter................................................................. --
----
Total...................................................................... $705
====
Legal proceedings
As a result of a procedural omission by the Company's prior patent counsel, the
Company is unable to obtain a patent in Japan and certain other countries for
the Company's method of "real time" detection and quantification of multiple
analytes from a single sample. The Company has filed a lawsuit alleging
negligence on the part of its prior patent counsel in this matter and seeking
to recover the damages believed to result from the lack of this patent
protection in Japan and certain other countries. At this time, management
cannot predict whether this lawsuit will be successful and, if so, the amount
of any damages that may be recovered.
8. Related party transactions
The Company purchased certain office and laboratory equipment from Inland Labs
on January 1, 1998 for $769,766, which was based on the net book value of the
assets acquired by Inland Labs prior to July 1, 1995, and the cost of assets
acquired by Inland Labs subsequent to June 30, 1995. Dr. Chandler was paid
$208,782 in cash and was issued 140,246 shares of the Company's Common Stock. A
committee of outside directors determined that the transaction was fair and in
the best interest of the Company and its stockholders.
In 1997, the Company paid $136,000 to a stockholder and Director of the Company
for consulting services provided in conjunction with the development of the
Company's FlowMetrixTM System and the Luminex 100 diagnostic instrument.
In conjunction with the issuance of the Series B Preferred Stock in 1997, the
Company made cash payments totaling approximately $354,000 and issued warrants
to purchase 262,500 shares of
--------------------------------------------------------------------------------
F-17
Luminex Corporation
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
Common Stock to the predecessor of Loewenbaum & Company, Incorporated
("Loewenbaum"), which acted as the placement agent for the Series B Preferred
Stock. G. Walter Loewenbaum is a major stockholder and Director of Luminex and
is Chairman and Chief Executive Officer of Loewenbaum and held such offices
with its predecessor. The cash and warrants were paid to Loewenbaum's
predecessor as the placement fee for the Series B Preferred Stock. The warrants
may be exercised in whole or in part, at any time prior to April 3, 2002 at
$4.00 per share.
In conjunction with the issuance of the Series C Preferred Stock in 1998, the
Company made cash payments totaling approximately $849,000 to Loewenbaum, which
acted as the placement agent for the Series C Preferred Stock. G. Walter
Loewenbaum is a major stockholder and Director of Luminex and is Chairman and
Chief Executive Officer of Loewenbaum. The cash was paid to Loewenbaum as the
placement fee for the Series C Preferred Stock.
On June 1, 1999 the Company entered into a consulting agreement with a director
of Luminex for consulting services. In consideration for those services, the
Company paid the director $5,833 per month. On November 1, 1999, the Company
amended that agreement to increase the level of consulting services and to
increase the consulting fee to $11,666 per month. In addition, the Company
issued stock options for the purchase of 25,000 shares of the Company's common
stock to this Director of the Company. The Company recorded deferred stock
compensation in the amount of $74,500 in connection with such transaction of
which approximately $41,000 was amortized during the year.
On September 1, 1997, seven outside directors of Luminex were each granted
fully vested options to purchase 5,000 shares of common stock at an exercise
price of $4.00 per share, and one outside director of Luminex was granted fully
vested options to purchase 30,000 shares of common stock at an exercise price
of $4.00 per share.
On May 20, 1999, six outside directors of Luminex were each granted fully
vested options to purchase 15,000 shares of common stock at an exercise price
of $8.00 per share.
In December 1999, the Company issued 25,000 shares of Series E convertible
preferred stock for an aggregate price of $3,000,000 to Koerner Capital
Corporation, of which John E. Koerner III, one of the Company's directors is
the sole stockholder.
9. Joint venture research arrangement
In October 1998, the Company, along with a joint venture partner, was granted a
special assistance award by the National Institute of Standards and Technology
to conduct liquid array technology development. In September 1999, the Company
and its joint venture partner suspended all joint venture activities. During
the year, the Company incurred expenses related to liquid array development
activities totaling approximately $600,000 and recognized grant revenues of
approximately $506,000.
--------------------------------------------------------------------------------
F-18
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[Inside back cover]
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
[LOGO OF LUMINEX]
--------------------------------------------------------------------------------
Part II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. Other Expenses of Issuance and Distribution
The following is an itemized statement of the amounts of all expenses payable
by the Registrant in connection with the registration of the common stock
offered hereby (estimated except for the Registration Fee, NASD Filing Fee and
Nasdaq National Market listing fee), other than underwriting discounts and
commissions:
[Download Table]
Registration Fee--Securities and Exchange Commission................... $26,400
NASD Filing Fee........................................................ 10,500
Nasdaq National Market listing fee..................................... *
Blue Sky fees and expenses............................................. 5,000
Accountants' fees and expenses......................................... 175,000
Legal fees and expenses................................................ 250,000
Printing and engraving expenses........................................ 125,000
Transfer agent and registrar fees...................................... *
Miscellaneous.......................................................... *
-------
Total................................................................ $ *
=======
--------
*To be filed by amendment.
ITEM 14. Indemnification of Directors and Officers
Pursuant to Sections 102(b)(7) and 145 of the Delaware General Corporation Law,
our Restated Certificate of Incorporation and Amended and Restated Bylaws
include provisions eliminating or limiting the personal liability of the
members of our board of directors to our company and our stockholders for
monetary damages for breach of fiduciary duty as a director. This does not
apply for any breach of a director's duty of loyalty to our company or our
stockholders, for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of the law, for paying an
unlawful dividend or approving an illegal stock repurchase, or for any
transaction from which a director derived an improper personal benefit.
Our Restated Certificate of Incorporation and Amended and Restated Bylaws also
provide that we have the power to indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding (other than an action by or in the right of our
company) by reason of the fact that the person is or was a director, officer,
employee or agent of any corporation, partnership, joint venture, trust or
other enterprise, against any and all expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement and reasonably incurred in
connection with such action, suit or proceeding. Our power to indemnify applies
only if the person acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of our corporation, and with
respect to any criminal action or proceeding, had no reasonable cause to
believe the person's conduct was unlawful.
In the case of an action by or in the right of our company, no indemnification
may be made with respect to any claim, issue or matter as to which such person
shall have been adjudged to be liable to us unless and only to the extent that
the court in which such action or suit was brought shall determine that despite
the adjudication of liability such person is fairly and reasonably entitled to
indemnity for such expenses which the court shall deem proper. To the extent a
director or officer of our company has been successful in the defense of any
action, suit or proceeding referred to above or in the defense of any claim,
issue or matter therein, he shall be indemnified against expenses (including
attorney's fees) actually and reasonably incurred by him in connection
therewith.
II-1
We have the power to purchase and maintain insurance on behalf of any person
covering any liability incurred by such person in his capacity as a director,
officer, employee or agent of our company, or arising out of his status as
such, whether or not we would have the power to indemnify him against such
liability.
The foregoing summaries are necessarily subject to the complete text of the
statute, Amended and Restated Bylaws and Restated Certificate of Incorporation
referred to above and are qualified in their entirety by reference thereto.
ITEM 15. Recent Sales of Unregistered Securities
A. In the three years preceding the filing of this registration statement, the
Registrant from time to time has granted stock options to employees and
consultants in reliance upon exemption from registration pursuant to either
(1) Section 4(2) of the Securities Act of 1933 or (2) Rule 701 promulgated
under the Securities Act of 1933. The following table sets forth certain
information regarding such grants:
[Download Table]
Number Exercise
of shares prices
-------------------------------------------------------------------------------
January 1, 1997 to December 31, 1997.................... 627,000 $ 4.00
January 1, 1998 to December 31, 1998.................... 281,500 $ 6.00-$8.00
January 1, 1999 to December 31, 1999.................... 817,100 $4.00-$12.00
January 1, 2000 to January 31, 2000..................... -- --
For additional information concerning these transactions, please see
"Management -- Employee benefit plans" in the prospectus included in this
registration statement.
B. Set forth in chronological order is information regarding all securities
sold by the Registrant in the three years preceding the filing of this
registration statement.
(1) Since January 1, 1997, the Registrant has granted to employees,
directors and consultants options to purchase an aggregate of 1,725,600
shares of Common Stock under its 1996 Stock Option Plan at a weighted
average exercise price of $6.52.
(2) On April 2, 1997, the Registrant issued a warrant to purchase 262,500
shares of common stock to Southcoast Capital Corporation or its
permitted assigns for an aggregate purchase price of $1,050,000.
(3) In April 1997, the Registrant issued 150,000 shares of its Series B
convertible preferred stock to individuals and entities for an
aggregate purchase price of $6,000,000.
(4) In July 1999, the Registrant issued 151,571 shares of its Series C
convertible preferred stock to individuals and entities for an
aggregate purchase price of $12,125,680.
(5) In December 1999, the Registrant issued 57,538 shares of its Series D
convertible preferred stock to individuals and entities for an
aggregate price of $6,904,560.
(6) In December 1999, the Registrant issued 25,000 shares of our Series E
convertible preferred stock to an entity for an aggregate purchase
price of $3,000,000.
The sale of the above securities were deemed to be exempt from registration
under the Securities Act in reliance on Section 4(2) of the Securities Act, or
Regulation D promulgated thereunder, or, with respect
II-2
to issuances to employees, directors and consultants, Rule 701 promulgated
under Section 3(b) of the Securities Act as transactions by an issuer not
involving a public offering or transactions pursuant to compensatory benefit
plans and contracts relating to compensation as provided under such Rule 701.
Other than the placement agent utilized in connection with sales of our Series
B and C preferred stock, no underwriters were involved in the foregoing sales
of securities. Each share of the Registrant's convertible preferred stock
listed above will convert automatically into ten shares of the Registrant's
common stock upon the effectiveness of this registration statement.
ITEM 16. Exhibits and Financial Statement Schedules
(a)Exhibits
[Download Table]
Exhibit
Number Description
-------------------------------------------------------------------------------
1.1* Form of Underwriting Agreement
3.1 Form of Restated Certificate of Incorporation of the Registrant
3.2 Amended and Restated Bylaws of the Registrant
4.1* Form of Common Stock Certificate
4.2 Warrant for the Purchase of Shares of Common Stock dated as of April
2, 1997 by and between the Registrant and Southcoast Capital
Corporation.
5.1* Opinion of Thompson & Knight L.L.P.
10.1 1996 Stock Option Plan of the Registrant, as amended.
10.2 Form of Stock Option Agreement of the Registrant.
10.3 Form of Incentive Stock Option Agreement of the Registrant.
10.4* 2000 Long-Term Incentive Plan of the Registrant.
10.5* Form of Incentive Stock Option Award Agreement of the Registrant.
10.6* Form of Non-Qualified Stock Option Award Agreement of the Registrant.
10.7+ Development and Supply Agreement dated as of March 19, 1999 by and
between the Registrant and Bio-Rad Laboratories, Inc.
10.8+ Amendment to Development and Supply Agreement dated as of January 13,
2000 by and between the Registrant and Bio-Rad Laboratories, Inc.
10.9+ Agreement for Electronic Manufacturing Services dated as of January 1,
2000 by and between the Registrant and Sanmina Corporation.
10.10 Consultant Agreement dated as of June 1, 1999 by and between the
Registrant and A. Sidney Alpert.
10.11 Amendment to Consultant Agreement dated as of November 1, 1999 by and
between the Registrant and A. Sidney Alpert.
10.12 Standard Commercial Lease Agreement dated as of August 21, 1989 by and
between the Registrant and Aetna Life Insurance Company, as amended,
for facilities situated at 12112 Technology Boulevard, Austin, Texas
78727.
10.13 Sublease Agreement dated as of December 20, 1999 by and between the
Registrant and American Innovations, Ltd., for facilities situated at
12112 Technology Boulevard, Austin, Texas 78727.
10.14 First Amendment to Sublease Agreement dated as of December 20, 1999 by
and between the Registrant and American Innovations, Ltd., for
facilities situated at 12112 Technology Boulevard, Austin, Texas
78727.
23.1 Consent of Thompson & Knight L.L.P. (included as part of Exhibit 5.1
hereto)
23.2 Consent of Independent Auditors
24.1 Power of Attorney (included on signature page of the Registration
Statement hereto)
27.1 Financial Data Schedule
--------
* To be filed by amendment.
+ Confidential treatment requested for certain portions of this Exhibit
pursuant to Rule 406 promulgated under the Securities Act, which portions
are omitted and filed separately with the Securities and Exchange
Commission.
(b)Financial Statement Schedules
None.
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ITEM 17. Undertakings
The undersigned Registrant hereby undertakes to provide to the underwriters, at
the closing specified in the underwriting agreement, certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the SEC such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained
in a form of prospectus filed by the Registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to
be part of this registration statement as of the time it was declared
effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities
at the time shall be deemed to be the initial bona fide offering
thereof.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Austin, State of Texas,
on February 4, 2000.
Luminex Corporation
/s/ Mark B. Chandler, Ph.D.
By___________________________________
Mark B. Chandler, Ph.D.
Chief Executive Officer
KNOW ALL PERSONS BY THESE PRESENTS, that each of the persons whose names appear
below appoint and constitute Mark B. Chandler, Ph.D. and James L. Persky, and
each of them, his true and lawful attorney-in-fact and agent, with full power
of substitution and resubstitution, for him and in his name, place and stead,
in any and all capacities, to execute any and all amendments to the within
Registration Statement, and to sign any and all registration statements
relating to the same offering of securities as this Registration Statement that
are filed pursuant to Rule 462(b) of the Securities Act of 1933, as amended,
and to file the same, together with all exhibits thereto, with the Securities
and Exchange Commission, the National Association of Securities Dealers, Inc.,
and such other agencies, offices and persons as may be required by applicable
law, granting unto each said attorney-in-fact and agent, full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that each said attorney-in-fact and agent may lawfully do or cause to be done
by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons on February 4,
2000 in the capacities indicated
[Download Table]
Signature Title Date
--------- ----- ----
/s/ Mark B. Chandler, Ph.D. Chairman of the Board and February 4, 2000
____________________________________ Chief Executive Officer
Mark B. Chandler, Ph.D. (Principal Executive
Officer)
/s/ James L. Persky Vice President, Treasurer February 4, 2000
____________________________________ and Chief Financial Officer
James L. Persky (Principal Financial
Officer)
/s/ Harriss T. Currie Controller (Principal February 4, 2000
____________________________________ Accounting Officer)
Harriss T. Currie
/s/ G. Walter Loewenbaum Director February 4, 2000
____________________________________
G. Walter Loewenbaum
II-5
[Download Table]
Signature Title Date
--------- ----- ----
/s/ A. Sidney Alpert Director February 4, 2000
____________________________________
A. Sidney Alpert
/s/ Robert J. Cresci Director February 4, 2000
____________________________________
Robert J. Cresci
/s/ Laurence E. Hirsch Director February 4, 2000
____________________________________
Laurence E. Hirsch
/s/ Jim D. Kever Director February 4, 2000
____________________________________
Jim D. Kever
/s/ Fred C. Goad, Jr. Director February 4, 2000
____________________________________
Fred C. Goad, Jr.
/s/ John E. Koerner, III Director February 4, 2000
____________________________________
John E. Koerner, III
II-6
INDEX TO EXHIBITS
[Download Table]
Exhibit
Number Description
-------------------------------------------------------------------------------
1.1* Form of Underwriting Agreement
3.1 Form of Restated Certificate of Incorporation of the Registrant
3.2 Amended and Restated Bylaws of the Registrant
4.1* Form of Common Stock Certificate
4.2 Warrant for the Purchase of Shares of Common Stock dated as of April
2, 1997 by and between the Registrant and Southcoast Capital
Corporation.
5.1* Opinion of Thompson & Knight L.L.P.
10.1 1996 Stock Option Plan of the Registrant, as amended.
10.2 Form of Stock Option Agreement of the Registrant.
10.3 Form of Incentive Stock Option Agreement of the Registrant.
10.4* 2000 Long-Term Incentive Plan of the Registrant.
10.5* Form of Incentive Stock Option Award Agreement of the Registrant.
10.6* Form of Non-Qualified Stock Option Award Agreement of the Registrant.
10.7+ Development and Supply Agreement dated as of March 19, 1999 by and
between the Registrant and Bio-Rad Laboratories, Inc.
10.8+ Amendment to Development and Supply Agreement dated as of January 13,
2000 by and between the Registrant and Bio-Rad Laboratories, Inc.
10.9+ Agreement for Electronic Manufacturing Services dated as of January 1,
2000 by and between the Registrant and Sanmina Corporation.
10.10 Consultant Agreement dated as of June 1, 1999 by and between the
Registrant and A. Sidney Alpert.
10.11 Amendment to Consultant Agreement dated as of November 1, 1999 by and
between the Registrant and A. Sidney Alpert.
10.12 Standard Commercial Lease Agreement dated as of August 21, 1989 by and
between the Registrant and Aetna Life Insurance Company, as amended,
for facilities situated at 12112 Technology Boulevard, Austin, Texas
78727.
10.13 Sublease Agreement dated as of December 20, 1999 by and between the
Registrant and American Innovations, Ltd., for facilities situated at
12112 Technology Boulevard, Austin, Texas 78727.
10.14 First Amendment to Sublease Agreement dated as of December 20, 1999 by
and between the Registrant and American Innovations, Ltd., for
facilities situated at 12112 Technology Boulevard, Austin, Texas
78727.
23.1 Consent of Thompson & Knight L.L.P. (included as part of Exhibit 5.1
hereto)
23.2 Consent of Independent Auditors
24.1 Power of Attorney (included on signature page of the Registration
Statement hereto)
27.1 Financial Data Schedule
--------
* To be filed by amendment.
+ Confidential treatment requested for certain portions of this Exhibit
pursuant to Rule 406 promulgated under the Securities Act, which portions
are omitted and filed separately with the Securities and Exchange
Commission.
Dates Referenced Herein and Documents Incorporated by Reference
2 Subsequent Filings that Reference this Filing
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