1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended December 31, 2000
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from ____ to _____.
Commission File No. 000-30109
----------
LUMINEX CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 74-2747608
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
12212 TECHNOLOGY BLVD., AUSTIN, TEXAS 78727
(Address of principal executive offices) (Zip Code)
(512) 219-8020
(Registrant's telephone number, including area code)
----------
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $0.001
(Title of Class)
Indicate by check mark whether the Registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
Based on the closing sale price of common stock on The Nasdaq National
Market on March 23, 2001, the aggregate market value of the voting stock held by
non-affiliates of the Registrant was $260,791,662. Excludes an aggregate of
12,819,050 shares of common stock held by officers and directors and by each
person known by the Registrant to own 5% or more of the outstanding common
stock.
There were 28,103,543 shares of the Company's Common Stock, par value
$.001 per share, outstanding on March 23, 2001.
DOCUMENTS INCORPORATED BY REFERENCE
Listed below are documents parts of which are incorporated herein by
reference and the part of this report into which the document is incorporated:
Proxy Statement for the 2001 Annual Meeting of Stockholders - Part III
(which definitive proxy statement will be filed with the Securities and
Exchange Commission not later than 120 days subsequent to December 31,
2000).
2
LUMINEX CORPORATION
FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2000
TABLE OF CONTENTS
PAGE
----
PART I
Item 1. Business..................................................................................... 1
Item 2. Properties................................................................................... 15
Item 3. Legal Proceedings............................................................................ 15
Item 4. Submission of Matters to a Vote of Security Holders.......................................... 15
Executive Officers........................................................................... 15
PART II
Item 5. Market for Registrant's Common Stock and Related Stockholder Matters......................... 17
Item 6. Selected Financial Data...................................................................... 18
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations........ 19
Item 7A. Quantitative and Qualitative Disclosures about Market Risk................................... 24
Item 8. Financial Statements and Supplementary Data.................................................. 24
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ........ 41
PART III
Item 10. Directors and Executive Officers of the Registrant........................................... 41
Item 11. Executive Compensation....................................................................... 41
Item 12. Security Ownership of Certain Beneficial Owners and Management............................... 41
Item 13. Certain Relationships and Related Transactions............................................... 41
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.............................. 42
Signatures............................................................................................. 44
SAFE HARBOR CAUTIONARY STATEMENT
All statements in this report that do not discuss past results are
forward-looking statements. Generally, the words "believe," "expect," "intend,"
"estimate," "anticipate," "will" and similar expressions identify
forward-looking statements. All statements which address our outlook for our
businesses and their respective markets, such as projections of future
performance, statements of management's plans and objectives, forecasts of
market trends and other matters are forward-looking statements. It is important
to note that our actual results or performance could differ materially from
those projected in such forward-looking statements. Forward-looking statements
are based on management's current expectations and are therefore subject to
certain risks and uncertainties, including those discussed under the section
titled "Factors That May Affect Future Results" included in this report.
Specific uncertainties which could cause our actual results to differ materially
from those projected include risks and uncertainties relating to market demand
and acceptance, the dependence on strategic partners for development and
distribution of products, competition, our ability to scale-up manufacturing
operations, potential shortages of components and the timing of regulatory
approvals. We expressly disclaim any intent, obligation or undertaking to
release publicly any updates or revisions to any forward-looking statements
contained in this report to reflect any change in our expectations with regard
to such statements or any change in events, conditions or circumstances on which
any such statements are based.
----------
Luminex(R) and LabMAP(TM) are trademarks of Luminex Corporation. This
report also refers to trademarks, service marks and trade names of other
organizations.
i
3
PART I
ITEM 1. BUSINESS
OVERVIEW
Luminex Corporation manufactures and markets products incorporating a
proprietary technology that advances and simplifies biological testing for the
life sciences industry. This industry depends on a broad range of tests, called
bioassays, to perform diagnostic tests, to discover new drugs and to identify
new genes. Our LabMAP technology allows our Luminex 100 system to simultaneously
perform up to 100 bioassays on a single drop of fluid by reading biological
tests taking place on the surface of microscopic polystyrene beads called
microspheres. LabMAP technology combines this miniaturized liquid array bioassay
capability with small lasers, digital signal processors and proprietary software
to create a system offering advantages in speed, precision, flexibility and
cost. Our LabMAP technology is currently being used within the various segments
of the life sciences industry in the fields of drug discovery, clinical
diagnostics, genetic analysis and biomedical research.
Luminex was incorporated in May 1995 and began commercial production of
our first generation system in 1997. In April 2001, we completed an initial
public offering of 4,869,000 shares of our common stock at $17.00 per share,
resulting in net proceeds to us of $76.9 million. Our shares of common stock are
traded on The Nasdaq National Market under the symbol "LMNX."
Luminex is incorporated in the State of Delaware, our principal
executive offices are located at 12212 Technology Blvd., Austin, Texas 78727,
and our telephone number is (512) 219-8020.
INDUSTRY BACKGROUND
The life sciences industry uses bioassays to detect the presence of
certain biochemicals, proteins or genes in a sample. Drug discovery, genetic
analysis, pharmacogenomics, clinical diagnostics and general biomedical research
all use bioassays. For example, bioassays can be used to:
o measure the attraction, or affinity, between a chemical
compound and a disease target for drug discovery and
development;
o assist physicians in prescribing the appropriate drug therapy
to match the patient's unique genetic makeup, a process known
as pharmacogenomics;
o detect genetic variations, such as single nucleotide
polymorphisms (SNPs); and
o measure the presence and quantity of biochemicals in blood to
assist physicians in diagnosing, treating and monitoring
disease conditions.
Laboratories either develop bioassays internally to meet their specific
needs or purchase them in the form of off-the-shelf test kits or customized
services. Industry reports estimated the global market for tools used in drug
discovery and development, clinical diagnostics and biomedical research to have
been approximately $27.5 billion in 1998 and expect it to grow at an annual rate
of 7.2%.
The differing bioassay needs of life sciences laboratories have led to
the development of specialized techniques and instrumentation. As a result, most
laboratories have become compartmentalized. For example, clinical testing
facilities have traditionally been organized into functional groups, such as
chemistry, microbiology, immunology and infectious disease. Similarly,
pharmaceutical companies organize their laboratories by disease targets, such as
cancer and hypertension, as well as by the stages of the drug discovery process,
from initial bioassay development to toxicological testing. This has created
inefficiencies in many laboratories as they must currently purchase multiple
instruments, often from different vendors, to meet their testing needs. This
limits their abilities to standardize bioassay techniques, operator training and
hardware maintenance. While advances in bioassay technologies have delivered new
capabilities, most instrumentation systems remain highly specialized and
reinforce the problems associated with compartmentalization.
1
4
The table below briefly describes the key bioassay technologies in the
life sciences industry.
KEY TECHNOLOGIES DESCRIPTION MARKETS SERVED
- ---------------- ----------- --------------
BioChips High-density arrays of DNA Biomedical research
fragments attached to a flat glass
or silicon surface
Clinical immuno-analyzers Automated test-tube based platform Clinical diagnostics
Gels and blots Physical separation of analyses Clinical diagnostics and
for visualization biomedical research
Microarrays Low-density arrays of DNA Biomedical research
fragments attached to a flat glass
or silicon surface
Microfluidics chips Miniaturized liquid handling Biomedical research
system on a chip
Microtiter-based assays Plastic trays with discrete wells Drug discovery, clinical
in which assays are fixed diagnostics and biomedical
research
LABMAP TECHNOLOGY
Our LabMAP technology has been designed to provide a testing platform
that can perform a wide range of bioassays in a cost-effective manner. The key
features of LabMAP technology include the following:
o Multi-analyte/multi-format
LabMAP technology has been designed to simultaneously perform
up to 100 distinct bioassays in a single tube or well of a
microtiter plate using only a small amount of sample.
Moreover, unlike existing technologies that are capable of
performing only one type of bioassay, LabMAP can perform
enzymatic, genetic and immunologic tests on the same
instrumentation platform.
o Flexibility/scalability
LabMAP technology allows flexibility in customizing test
panels. Panels can be modified to include new bioassays in the
same tube by adding additional microsphere sets. It is also
scalable, meaning that there is no change in the manufacturing
process or the required labor, whether producing a small or
large number of microsphere-based tests.
o Throughput
Our technology's current ability to perform up to 100 tests in
a single tube with only a small amount of sample permits
efficient use for high throughput applications.
o Ease of use
Most LabMAP bioassays are simple to perform. A test sample is
added to a solution containing microspheres that have been
coated with reagents. The solution is then processed through
our LabMAP system which incorporates proprietary software to
automate data acquisition and analysis in real-time.
o Low cost
We have designed our LabMAP systems to be relatively
inexpensive to manufacture and utilize. Because LabMAP systems
are manufactured using many off-the-shelf electronic
components commonly used in consumer electronics, our products
have a comparatively low acquisition cost. In addition,
microsphere-based bioassays are inexpensive compared to other
technologies such as biochips.
Our LabMAP technology combines several existing biological testing
techniques with advanced digital signal processing and proprietary software.
With our technology, discrete bioassays are performed on the surface of
color-coded microspheres. These microspheres are read in a compact analyzer that
utilizes lasers and high-speed digital signal processing to simultaneously
identify the bioassay and measure its result.
2
5
Polystyrene microspheres, approximately 5.6 microns in diameter, are a
fundamental component of the LabMAP technology. We purchase undyed microspheres
and, in a proprietary process, dye them with varying intensities of a red and an
infrared fluorescent dye to achieve up to 100 distinct colors. The specific dye
proportions permit each color-coded microsphere to be readily identified based
on its distinctive fluorescent signature. Our customers create bioassays by
attaching different biochemical reactants to each distinctly colored 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 perform a bioassay using LabMAP technology, a researcher attaches
biochemicals, or reagents, to one or more sets of color-coded microspheres,
which are then mixed with a test sample. This mixture is injected into the
LabMAP analyzer, where the microspheres pass single-file in a fluid stream
through two laser beams. The first laser excites the internal dyes that are used
to identify the color of the microsphere and the test being performed on the
surface of the microsphere. The second laser excites a third fluorescent dye
that is used to quantify the result of the bioassay taking place. Our
proprietary optics, digital signal processors and software record the
fluorescent signature of each microsphere and compare the results to the known
identity of that color-coded microsphere set. The results are analyzed and
displayed in real-time with data stored on the computer database for reference,
evaluation and analysis.
BUSINESS STRATEGY
Our goal is to establish our LabMAP technology as the industry standard
for performing bioassays. To achieve this goal, we have implemented the
following strategies:
o Focus on large sectors
We will continue to focus our commercialization efforts on
large sectors of the life sciences industry. We have targeted
major pharmaceutical companies, 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 continued
adoption by these industry leaders will promote wider market
acceptance.
o 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 strategic partnerships with those
leaders in the life sciences industry that we believe can
convert core product lines to and develop new applications on
Luminex platforms. By leveraging our strategic partners'
market positions and utilizing their distribution channels and
marketing infrastructure, we believe we can continue to expand
our installed base.
o 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 relatively inexpensive consumables.
o Develop next generation products
Our research and development group is pursuing projects
intended to advance our LabMAP technology. We are also
collaborating with industry participants and biomedical
research institutions to develop additional LabMAP products.
PRODUCTS
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 in a single tube or well of a microtiter plate using only a small
amount of sample. 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(TM)-based personal computer and our proprietary
software.
3
6
We also offer two peripheral components for the Luminex 100, the XY
Platform and the Luminex SD. The XY Platform complements the Luminex 100 by
automating the sequential positioning of each well of a microtiter plate,
permitting up to 9,600 unattended tests per plate to be performed in less than
an hour. The XY Platform can also be connected to robotic systems that deliver
these plates to the Luminex 100, allowing integration into automated test
centers. The Luminex SD is a pressurized, external pump delivery system that
enhances the delivery of sheath fluid to the Luminex 100 by pumping sheath fluid
from an external bulk reservoir, enabling the Luminex 100 to operate for up to
24 hours without switching to a new reservoir of sheath fluid.
Luminex HTS (High-Throughput System). The high throughput version of
our LabMAP analyzer, the Luminex HTS, is interfaced with an automated liquid
handler. The Luminex HTS utilizes a higher pressure flow system which produces a
flow rate approximately ten times greater than the flow rate of the Luminex 100.
Full commercial production of the Luminex HTS is expected to begin in the second
half of 2001.
Consumables
Our LabMAP systems use polystyrene microspheres that are approximately
5.6 microns in size. We dye the microspheres in sets with varying intensities of
a red and an infrared fluorescent dye to achieve up to 100 distinct color sets.
Each microsphere can carry the reagents of an enzymatic, genetic or immunologic
bioassay. Consumables also include sheath fluid and spare parts.
SALES AND MARKETING
Our sales and marketing strategy is intended to expand the installed
base of LabMAP systems and generate recurring revenues from royalties on
bioassay kits and testing services developed or performed by others that use our
technology, as well as from the sale of microspheres. The key elements of our
strategy consist of:
o a strategic partner program with life sciences companies that
will develop applications or perform testing using our
technology platforms and distribute our systems to their
customers; and
o a direct sales effort to complement the strategic partner
program.
Strategic Partner Program
We intend to continue to use strategic partners as our primary
distribution channel. Strategic partners develop application-specific bioassay
kits for use on our systems that they sell to their customers generating
royalties for us. Certain strategic partners also perform services for third
parties using our technology that will also result in royalties for us. Some
strategic partners also buy our products and then resell those products to their
customers. As of December 31, 2000, we had entered into strategic partnerships
with 26 companies, consisting of 16 companies principally addressing the
clinical diagnostics market and 10 companies principally addressing the
pharmaceutical market. We believe our strategic partners provide us with
complementary capabilities in product development, regulatory expertise and
sales and marketing. By leveraging our strategic partners' customer
relationships and distribution channels, we believe that we can achieve rapid
market penetration without a large direct sales force.
We also serve as the original equipment manufacturer (OEM) for certain
strategic partners that choose to sell our LabMAP systems under their own
branding and marketing efforts. Additionally, we are developing detector modules
based on the Luminex 100 for inclusion into some of our strategic partners'
larger, integrated systems.
Direct sales
At December 31, 2000, we had a direct sales staff of four. Our direct
sales staff is supported by a team of in-house scientists with expertise in the
pharmaceutical industry, clinical diagnostics and biomedical research.
CUSTOMERS
At December 31, 2000, we had sold a total of 391 LabMAP systems to
customers in the biomedical research, clinical diagnostics and pharmaceutical
markets.
4
7
For the years ended December 31, 2000, 1999 and 1998, we had sales to
foreign customers of $2.2 million, $400,000 and $46,000, respectively,
representing 26.7%, 15.0% and 11.9%, respectively, of our total product revenues
for such periods. Bio-Rad Laboratories, Inc. accounted for approximately 13% of
our total revenues in 2000 and 10% in 1999. No other customer accounted for more
than 10% of our total revenues in 1998, 1999 or 2000.
TECHNICAL SUPPORT
Customer Service
Our in-house customer service department supports users through a
toll-free customer support hotline, facsimile and e-mail. Customer service
personnel also assist our strategic partners and customers with the development
of their bioassays.
In addition to resolving customer problems, our customer service group
also attends trade shows and visits customers to solicit feedback. Software is
utilized to allow tracking of customer interaction.
Training
Through our training group, we offer comprehensive programs in both
basic system training and instrument field service. For larger customers who
have many users, such as our strategic partners, training may be performed
on-site at their locations.
Field service
We currently have three field service personnel based in Austin, Texas.
Due to the increasing number of installed systems in California and the
northeast United States, we intend to base additional field service personnel on
the east and west coasts of the U.S. for quicker, more cost-effective support of
these customers. In addition, we intend to open a technical service facility in
Amsterdam, Netherlands to better support our increasing base of European
customers.
Applications Group
In order to allow customers to expedite the production of bioassays for
use on our systems, we have formed an applications group that includes
experienced biological scientists. This group will work closely with our
strategic partners in their development of bioassays with the ultimate goal of
faster adoption and commercialization.
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. In 2000, we had research and development expenditures of $9.0
million, as compared with $6.2 million for 1999 and $3.6 million in 1998. As of
December 31, 2000, we had 49 engineers, scientists and technicians dedicated to
research and development. In addition, we are collaborating with other companies
and academic institutions to increase the breadth of LabMAP applications.
Our current research and development projects include:
o Bioinformatics group
We have formed a bioinformatics group that intends to develop
a database of protein-based information using our LabMAP
technology. We expect to create the database by performing
large-scale multiplexed assays to detect proteins, and their
varying expression levels, in both normal and diseased blood
samples. The database will be analyzed using bioinformatics
software techniques intended to identify the combinations,
levels or absences of proteins associated with various disease
states. As protein patterns are identified, we intend to
patent the association of such patterns with the respective
disease state. We intend to market the database information to
pharmaceutical companies seeking new drug targets and also
believe that the information will have commercial applications
in the area of predictive medicine. We are seeking to enter
into one or more strategic partnerships or collaborations with
life sciences or other technology companies that can assist in
the development of the database.
5
8
o 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 testing closer to the patient delivers
significant medical benefits. For example, an ambulance-based
instrument could evaluate the multiple indicators of heart
attack. We may collaborate with one or more instrument
manufacturers in the development of such a point-of-care
device.
o Expanding our multiple testing capabilities
This effort is primarily driven by the pharmaceutical
industry's increasing demand for fast, cost-efficient DNA
analysis. In order to expand the number of tests performed in
a single tube or well to 1,000 or more, a more complex LabMAP
instrument will need to be developed, incorporating three
lasers instead of the two contained in the Luminex 100 and
incorporating a third dye for classification purposes. This
project is being conducted pursuant to our collaboration with
Invitrogen by means of a grant from the National Institute of
Standards and Technology's Advanced Technology Program.
o Integrating with liquid handling systems
We are collaborating with several of our strategic partners to
integrate our various LabMAP instruments with their liquid
handling equipment to increase bioassay throughput.
MANUFACTURING
Instruments
Certain components of our LabMAP instruments are assembled by a
contract manufacturer. The remaining assembly and manufacturing of our
instruments is performed by our employees at our facility in Austin, Texas. The
quality control and quality assurance protocols are also performed at this
facility. Parts and component assemblies that comprise our LabMAP instruments
are obtained from a number of sources.
Microspheres
We dye polystyrene microspheres using a proprietary method in our
Austin, Texas manufacturing facility in large lots with ten intensities of a red
and an infrared dye to produce 100 distinctly colored microsphere sets.
COMPETITION
We designed our LabMAP technology for use by customers across the
various segments of the life sciences industry. For this reason, much of our
competition is from existing technologies that perform many of the same
functions as our LabMAP technology. 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 their competitive efforts.
The pharmaceutical industry is the largest market for the genomic and
high throughput screening applications of the LabMAP technology. In each
application area, Luminex faces a different set of competitors. Genomic testing
for variability in DNA can also be performed by products available from
Affymetrix Inc., Applied Biosystems, a business group of Applera Corporation,
Aclara Biosciences, Inc., Clontech Laboratories, Inc., a wholly-owned subsidiary
of Becton Dickinson & Company, Perkin-Elmer Life Sciences, a business unit of
PerkinElmer, Inc., and Sequenom, Inc., among others. In high throughput
screening, Molecular Devices, IGEN, Amersham 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, Beckman
Coulter, Inc., Johnson & Johnson and Roche Bioscience, a division of F.
Hoffmann-La Roche Ltd., among others. These companies have technologies that can
perform a variety of established assays. While none currently offer
multi-analyte testing systems, these companies do offer integrated systems and
laboratory automation that are designed to meet the need for improved work
efficiencies in the clinical laboratory.
6
9
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, Applied
Biosystems, Molecular Devices Corporation and Stratagene Cloning Systems, Inc.
Any company in this field is a potential competitor with us.
INTELLECTUAL PROPERTY
To establish and protect our proprietary technologies and products, we
rely on a combination of patent, copyright, trademark and trade secrets laws and
confidentiality agreements.
We have implemented a patent strategy designed to maximize our
intellectual property rights. For core intellectual property, we are pursuing
patent coverage in the United States and those foreign countries that correspond
to the majority of our anticipated customer base. We currently own five 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. Our patents and allowed claims
provide, or will provide, additional protection for systems and technologies
that allow "real time" multiplexed analytical techniques for the detection and
quantification of many analyses from a single sample. We also hold a patent
covering the precision-dyeing process that we use to dye our microspheres. Other
issued patents and allowed or pending patent applications cover specific aspects
and applications of LabMAP technology to molecular research. However, as a
result of a procedural omission, we are unable to obtain patent protection in
Japan for one of our real-time technique patents.
The source code for our proprietary software is protected as a trade
secret and/or as a copyrighted work.
We also rely on trade secret protection of our intellectual property.
We attempt to protect our trade secrets by entering into confidentiality
agreements with strategic partners, 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.
GOVERNMENT REGULATION
The Food and Drug Administration regulates 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. Medical devices, as defined by statute, include
instruments, machines, in vitro reagents or other similar or related articles,
including any component, part or accessory of such articles that are intended
for use in the diagnosis of disease or other condition or in the cure,
mitigation, treatment or prevention of disease, or are intended to affect the
structure or function of the human body. The FDA classifies medical devices
intended for human use into three classes. For Class I devices, general controls
(for example, labeling and good manufacturing practices) are sufficient to
provide reasonable assurance of safety and effectiveness. Class II devices are
products where general controls are not sufficient to provide reasonable
assurance of safety and effectiveness and for which there is sufficient
information to establish special controls (for example, guidelines and patient
registries). Class III devices are purported or represented to be used to
support or sustain human life, are for a use that is of substantial importance
in preventing impairment of human health, or where the device presents a
potential unreasonable risk of illness or injury.
We manufacture a version of the Luminex 100, the Luminex 100 Integrated
System ("IS"), for use with diagnostic assay kits that are expected to become
available through our strategic partners. For FDA purposes, the Luminex 100 IS
is considered a component of our partners' kit products. Depending on the
particular kit's regulatory classification into Class I, II or III and its
intended use, kits manufactured by our strategic partners that are used in
conjunction with our technology may be subject to FDA clearance or approval
before they can be marketed and sold. After incorporating the Luminex 100 IS
into their products, our strategic partners are required to make various
premarket submissions such as premarket approval applications, premarket
notifications and/or investigational device exemption applications to the FDA
for their products. There can be no assurance that the FDA will file, clear or
approve our strategic partners' submissions.
In November 2000, we submitted a device master file with information
about the Luminex 100 IS to the FDA. Our strategic partners can reference the
device master file in their premarket submissions. While we have
7
10
filed our device master file with the FDA, until the agency reviews the file in
connection with one of our strategic partner's submissions, there can be no
assurance that the agency will accept its content. It is possible that the
agency will ask questions about the content of the device master file, and
although we intend to respond to the agency's questions in a timely fashion,
there can be no assurance that our responses will be acceptable to the FDA.
Our products use lasers to identify the bioassays and measure their
results. Therefore, we are required to ensure that our products comply with FDA
regulations pertaining to the performance of laser products. These regulations
are intended to ensure the safety of laser products by establishing standards to
prevent exposure to excess levels of laser radiation. There can be no assurance
that the FDA will agree with our interpretation and implementation of these
regulations.
We, and our strategic partners, may be subject to periodic inspection
by the FDA for compliance with the FDA's current good manufacturing practice
regulations. These regulations, also known as the Quality System Regulations,
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. Additionally, our strategic partners may be subject to
other premarket and postmarket controls such as labeling, complaint handling and
medical device reporting requirements. If the FDA has evidence demonstrating
that a company is not in compliance with applicable regulations, it can 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.
Medical device laws and regulations are also in effect in many
countries outside of the United States. These range from comprehensive
preapproval requirements for medical products to simpler requests for product
data or certification. The number and scope of these requirements are
increasing. There can be no assurance that we, and our strategic partners, will
be able to obtain any approvals that may be required to market LabMAP products
outside the U.S.
Failure by us, or our strategic partners, to comply with applicable
federal, state and foreign medical product laws and regulations would likely
have a material adverse effect on our business. In addition, federal, state and
foreign regulations regarding the manufacture and sale of medical devices and
components of such devices are subject to future changes. We cannot predict what
impact, if any, such changes might have on our business, but any such change
could have a material impact.
Through our bioinformatics group, we are working on developing new
technology designed to identify associations among the proteins in blood that
cause disease by testing different blood samples for a large number of protein
markers. By creating bioinformatics software that will manipulate and analyze
large amounts of data from blood samples from people who develop a specific
disease over a period of time, we intend to create a database and algorithms to
detect distinct disease patterns indicated by the presence or absence of these
protein markers. Some or all of the products that may result from the
bioinformatics software, database or algorithms may be subject to FDA regulation
and, therefore, may be subject to premarket controls such as premarket
clearance. There can be no assurance that the FDA will clear such products.
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 and
biohazards. 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 party liable without regard to negligence or fault on the part of
such party. 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 such acts 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.
8
11
EMPLOYEES
As of December 31, 2000, we had a total of 132 employees, including 49
in research and development, 33 in manufacturing, 12 in quality control and
quality assurance and 38 in general administration, accounting and legal. None
of our employees is represented by a collective bargaining agreement, and we
have not experienced any work stoppage. We believe that relations with our
employees are good.
FACTORS THAT MAY AFFECT FUTURE RESULTS
IF OUR TECHNOLOGY AND PRODUCTS DO NOT BECOME WIDELY USED IN THE LIFE SCIENCES
INDUSTRY, IT IS UNLIKELY THAT WE WILL EVER BECOME PROFITABLE.
Life sciences companies have historically conducted biological tests
using a variety of technologies, including bead-based screening. However,
compared to certain other technologies, our 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, we must
convince potential customers to utilize our system instead of competing
technologies. Market acceptance will depend on many factors, including our
ability to:
o convince prospective strategic partners and customers that our
technology is an attractive alternative to other technologies
for pharmaceutical, research, clinical and biomedical testing
and analysis;
o manufacture products in sufficient quantities with acceptable
quality and at an acceptable cost; and
o place and service sufficient quantities of our products.
Because of these and other factors, our products may not gain
sufficient market acceptance.
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 is highly dependent on our ability to establish successful strategic
relationships with a number of partners. 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. We will expend
substantial funds and management efforts 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. Some of the
companies we are targeting as strategic partners offer products competitive with
our LabMAP technology, which may hinder or prevent strategic relationships.
Termination of strategic relationships, or the failure to enter into a
sufficient number of additional agreements on favorable terms, could reduce
sales of our products, lower margins on our products and limit the creation of
market demand.
Our business plan contemplates that a significant portion of our future
revenues will come from sales of our systems and the development and sale of
bioassay kits utilizing our technology by our strategic partners, and from use
of our technology by our strategic partners in performing services offered to
third parties. We believe that our strategic partners will have economic
incentives to develop and market these products, but we cannot predict future
sales and royalty revenues because our existing strategic partner agreements do
not include minimum purchase requirements. In addition, we do not have the right
or ability to provide incentives to our strategic partners' sales personnel to
sell products based on LabMAP technology. 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 develop and market products incorporating our technology. Further, the
development and marketing of certain bioassay kits will require our strategic
partners to obtain governmental approvals, which could delay or prevent their
commercialization efforts. If our current or future strategic partners do not
effectively develop and market products based on our technology and obtain
necessary government approvals, our revenues from product sales and royalties
will be significantly reduced.
9
12
THE LIFE SCIENCES INDUSTRY IS HIGHLY COMPETITIVE AND SUBJECT TO RAPID
TECHNOLOGICAL CHANGE, AND WE MAY NOT HAVE THE RESOURCES NECESSARY TO
SUCCESSFULLY COMPETE.
We compete with companies in the United States and abroad that are
engaged in the development and production of similar products. We will continue
to face intense competition from existing competitors as well as other companies
seeking to develop new technologies. Many of our competitors have access to
greater financial, technical, scientific, research, marketing, sales,
distribution, service and other resources than we do. These organizations may
develop technologies that are superior alternatives to our technologies or 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 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
that are not covered by our patents. Further, there is a substantial backlog of
patent applications at the U.S. Patent and Trademark Office, and 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 analyses from a single
sample. As a result of a procedural omission, we are unable to obtain comparable
patent protection in Japan. Although we are pursuing patent protection in Japan
for other aspects of our technology, we may not be able to prevent competitors
from developing and marketing technologies similar to our LabMAP technology in
Japan.
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.
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.
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. 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
U.S. Patent and Trademark Office or the courts regarding the breadth of claims
allowed or the degree of protection afforded under patents like ours.
10
13
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 their rights are invalid or unenforceable.
Intellectual property litigation is costly, and, even if we prevail, the cost of
such litigation could affect our profitability. 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 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.
WE HAVE ONLY PRODUCED OUR PRODUCTS IN LIMITED QUANTITIES, AND WE MAY EXPERIENCE
PROBLEMS IN SCALING UP OUR MANUFACTURING OPERATIONS OR DELAYS OR COMPONENT
SHORTAGES THAT COULD LIMIT THE GROWTH OF OUR REVENUE.
To date, we have produced our products in limited quantities compared
to the quantities necessary to achieve projected revenues. We may not be able to
produce sufficient quantities or maintain consistency between differing lots of
consumables. If we encounter difficulties in scaling up our manufacturing
operations due to, among other things, quality control and assurance and
component and raw material supplies, we will likely experience reduced sales of
our products, increased repair or re-engineering costs due to product returns
and defects and increased expenses due to switching to alternative suppliers,
any of which would reduce our revenues and gross margins.
We presently outsource certain aspects of the assembly of our
instruments to a contract assembler. 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
all of our suppliers. Our reliance on our suppliers and contract assembler
exposes us to risks including:
o the possibility that one or more of our suppliers or our
assembler could terminate their services at any time without
penalty;
o the potential inability of our suppliers to obtain required
components;
o the potential delays and expenses of seeking alternative
sources of supply or manufacturing services; and
o reduced control over pricing, quality and timely delivery due
to the difficulties in switching to alternative suppliers or
assemblers.
Consequently, in the event that supplies of components or work
performed by our assembler are delayed or interrupted for any reason, our
ability to produce and supply our products could be impaired.
OUR NEWLY FORMED BIOINFORMATICS GROUP IS SUBJECT TO ADDITIONAL RISKS AND
UNCERTAINTIES.
Our bioinformatics group seeks to identify associations among the
proteins in blood that cause disease. We intend to identify these associations
by testing different blood samples for a large number of protein markers. The
creation of the database will be dependent on our ability to obtain a sufficient
number of blood samples and related medical histories to permit the observation
of these associations. These blood samples may need to include multiple samples
from persons who developed diseases over the period of time during which the
samples were collected. In addition, we will need to create large panels of
bioassays to test the blood samples. To the extent we are unable to
11
14
obtain sufficient quantities of relevant blood samples and medical histories, or
cannot develop a large panel of bioassays to test the samples, we will not be
able to produce meaningful information from the database.
If we encounter difficulties in developing the bioinformatics software
that will be used to analyze the database information or in maintaining the
database, our ability to identify useful information from the database will be
adversely affected. Our efforts to create the database and create algorithms to
analyze the information that will be contained in the database have only
recently begun. There can be no assurance that these efforts will be successful
or lead to useful scientific information. Our ability to attract customers for
any information that may be developed will be heavily dependent upon the
successful completion of the database and analyses thereof within the expected
time frames. In addition, because our bioinformatics business will require
manipulating and analyzing large amounts of data, we will be dependent on the
continuous, effective, reliable and secure operation of our computer hardware,
software, networks and related infrastructure. We expect that this database and
the bioinformatics software will be complex and sophisticated, and as such,
could contain data, design or software errors that could be difficult to detect
and correct.
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, including our research and development, customer support, technical
service and sales staff. The loss of services of any of our key members of
management could delay or reduce our product development, sales and customer
support efforts. In addition, recruiting and retaining qualified scientific and
other personnel to perform future research and development, customer support,
technical service and sales work will be critical to our success. There is a
shortage in our industry of qualified management and scientific personnel, and
competition for these individuals is intense. There can be no assurance that we
will be able to attract additional and retain existing personnel.
IF WE FAIL TO COMPLY WITH THE EXTENSIVE GOVERNMENTAL REGULATIONS THAT AFFECT OUR
BUSINESS, WE COULD BE SUBJECT TO ENFORCEMENT ACTIONS, INJUNCTIONS AND CIVIL AND
CRIMINAL PENALTIES THAT COULD DELAY OR PREVENT MARKETING OF OUR PRODUCTS.
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 FDA in
the United States and by similar agencies in other countries. Some of our
products and products based on our technology expected to be produced by our
strategic partners for in vitro diagnostic purposes are subject to approval or
clearance by the FDA prior to marketing for commercial use. No such approvals or
clearances have yet been obtained by us or by any of our strategic partners. 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.
Our bioinformatics group will also be subject to various governmental
regulations, which may delay or prohibit certain planned activities. Certain
biological testing has raised issues regarding confidentiality and the
appropriate uses of the resulting information. For example, concerns have been
expressed towards insurance carriers and employers using such tests to
discriminate on the basis of such information, resulting in barriers to the
12
15
acceptance of such tests by consumers. This could lead to governmental
authorities calling for limits on or regulation of the use of testing of the
type proposed to be performed. Such regulations would likely reduce the
potential markets for any products that might be developed.
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 in excess of our insurance
coverage or a recall of one of our products would have to be paid out of our
cash reserves.
BECAUSE WE RECEIVE REVENUES PRINCIPALLY FROM LIFE SCIENCE COMPANIES, 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 governmental regulation or price
controls, 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 cause our revenues to decline
and impact our profitability.
IF THIRD-PARTY PAYORS INCREASINGLY RESTRICT PAYMENTS FOR HEALTHCARE 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 healthcare.
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 healthcare 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.
OUR LIMITED OPERATING HISTORY AND RELIANCE ON STRATEGIC PARTNERS TO MARKET OUR
PRODUCTS MAKES FORECASTING DIFFICULT.
Because of our limited operating history, it is difficult to accurately
forecast future operating results. Our operating expenses are largely based on
anticipated revenue trends and a high percentage of our expenses are, and will
continue to be, fixed in the short term. As a result, if we do not achieve our
expected revenues, our operating results will be below our expectations. The
level of our revenues will depend upon the rate and timing of the adoption of
our technology as a method to perform bioassays. Due to our limited operating
history, predicting this timing and rate of adoption is difficult.
We anticipate that a large percentage of future sales of our products
will be made by our strategic partners. For the following reasons, estimating
the amount of sales that may be made by our strategic partners is particularly
difficult:
o We have no control over the timing or extent of product
development, marketing or sale of our products by our
strategic partners.
o Our strategic partners are not committed to minimum purchase
commitments and we do not have control over the incentives
provided by our strategic partners to their sales personnel.
o Of our 26 strategic partners at December 31, 2000, 16 intend
to produce clinical diagnostic applications that may need to
be approved by the United States Food and Drug Administration.
As a
13
16
result, these applications may not be commercially available
until our device master file for our system is reviewed and
accepted by the FDA and the FDA submission for each
application is approved.
o Certain strategic partners may have unique requirements for
their applications and systems. Assisting the various
strategic partners may strain our research and development and
manufacturing resources. To the extent that we are not able to
timely assist our strategic partners, the commercialization of
their products will likely be delayed.
We have a limited marketing, sales and distribution staff. As a result,
if our strategic partners fail to achieve projected levels of sales, we will
likely not achieve our estimated operating results.
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 typically is 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.
OUR STOCK PRICE HAS BEEN AND IS LIKELY TO CONTINUE TO BE VOLATILE.
The trading price of our common stock has been and is likely to
continue to be highly volatile and subject to wide fluctuations in price. This
volatility is in response to various factors, many of which are beyond our
control, including:
o general economic conditions and interest rates;
o actual or anticipated variations in quarterly operating
results from historical results or estimates of results
prepared by securities analysts;
o announcements of technological innovations by us or our
competitors;
o new products or services introduced or announced by us or our
competitors;
o changes in financial estimates by securities analysts;
o conditions or trends in the biotechnology and pharmaceutical
industries;
o announcements by us of significant acquisitions, strategic
partnerships, joint ventures or capital commitments;
o additions or departures of key personnel; and
o 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.
14
17
OUR DIRECTORS AND EXECUTIVE OFFICERS HAVE SUBSTANTIAL CONTROL OVER LUMINEX,
WHICH COULD DELAY OR PREVENT A MERGER OR OTHER CHANGE IN CONTROL TRANSACTION.
Our directors and executive officers beneficially owned approximately
45% of our outstanding common stock as of December 31, 2000. These persons 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.
ANTI-TAKEOVER PROVISIONS IN OUR CHARTER AND BYLAWS AND DELAWARE LAW COULD MAKE A
THIRD-PARTY ACQUISITION OF US DIFFICULT.
Our 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.
ITEM 2. PROPERTIES
Our principal research and development, manufacturing and
administrative facilities are currently located in approximately 54,000 square
feet of leased space in Austin, Texas. The leases for this space expire as
follows: as to approximately 2,900 square feet, the lease will expire on March
31, 2001, which we intend to renew; as to approximately 32,900 square feet, the
lease will expire in March 2002 and as to approximately 18,300 square feet, the
lease will expire in June 2003. We believe that our current facilities are
adequate for our needs through 2001.
ITEM 3. LEGAL PROCEEDINGS
As a result of a procedural omission, we are unable to pursue a patent
in Japan which corresponds to our issued U.S. patent directed to our method of
"real time" detection and quantification of multiple analytes from a single
sample. On January 31, 2000, we filed a lawsuit in Travis County, Texas state
district court alleging negligence on the part of our prior patent counsel in
this matter. The case is in the early stages of discovery. We cannot predict
whether this lawsuit will be successful and, if so, the amount of any damages we
may recover.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
EXECUTIVE OFFICERS
The following sets forth information regarding our executive officers:
Name Age Position
---- --- --------
Mark B. Chandler, Ph.d. 47 Chairman of the Board, President and Chief Executive Officer
Michael L. Bengtson 43 Executive Vice President, General Counsel and Secretary
Gail S. Page 45 Executive Vice President and Chief Operating Officer
Van S. Chandler 50 Vice President of Instruments
Randel S. Marfin 44 Vice President of Business Development
Ralph L. McDade, Ph.d. 46 Vice President of Scientific Affairs
James L. Persky 52 Vice President, Treasurer and Chief Financial Officer
Michael D. Spain, M.D. 48 Vice President of Clinical Affairs
Mark B. Chandler, Ph.D. Dr. Chandler co-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 LLP, High
Technology
15
18
Entrepreneur of the Year award in 1987. He received his Ph.D. in Immunology from
the University of Texas Southwestern Medical School in Dallas in 1981.
Michael L. Bengtson. Mr. Bengtson joined our company as Executive Vice
President, General Counsel and Secretary in March 2000. From 1984 to March 2000,
Mr. Bengtson was an attorney practicing corporate and securities law with the
law firm of Thompson & Knight LLP and was a partner in that firm since 1990.
Prior to attending law school, Mr. Bengtson was a certified public accountant
with KPMG LLP. Mr. Bengtson received a B.S. in Accounting and Business
Administration from the University of Kansas in 1980 and a J.D. from Arizona
State University in 1984.
Gail S. Page. Ms. Page joined our company in October 2000 as Executive
Vice President and Chief Operating Officer. From 1988 to 2000, Ms. Page held
various senior level management positions with Laboratory Corporation of
America. In 1993, she was named Senior Vice President, Office of Science and
Technology, responsible for the management of scientific affairs in addition to
the diagnostics business segment. Additionally, from 1995 to 1997, Ms. Page
headed the Cytology and Pathology Services business unit for LabCorp. From 1988
to 2000, she was a member of the Scientific Advisory Board and chaired the
committee from 1993 to 1997. She received her Medical Technology degree from the
University of Florida in 1976.
Van S. Chandler. Mr. Chandler, a 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 our instrumentation
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 B.B.A. in Statistics.
Randel S. Marfin. Mr. Marfin has served as Vice President of Business
Development since joining our company in June 1998 and has over 13 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 B.S. in Biochemistry and Biophysics from the University of Houston and
served in the United States Air Force.
Ralph L. McDade, Ph.D. 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 Ph.D. in
Microbiology from the University of Texas Southwestern Medical School 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 B.B.A. from the University of Texas in 1971 and
an M.S. in Accounting from the University of Houston in 1983. He has been a
Certified Public Accountant since 1979.
Michael D. Spain, M.D. Dr. Spain has served as Vice President of
Clinical Affairs since March 1997. From 1994 until joining us, he served as
Medical Director of Laboratory Corporation of America. From 1984 to 1994, he
served as Medical Director of Quest Laboratory (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 M.D. from the University of Texas Southwestern Medical School in Dallas in
1980.
16
19
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
MARKET INFORMATION
Our common stock began trading on The Nasdaq National Market on March
30, 2000 under the symbol LMNX. Prior to that date, there was no established
trading market for our common stock.
The following table sets forth the range of high and low sale prices on
The Nasdaq National Market since trading began in our stock on March 30, 2000.
2000 HIGH LOW
---- ---- ---
First Quarter............................ $ 26.00 $ 17.875
Second Quarter........................... $ 43.00 $ 13.25
Third Quarter............................ $ 64.125 $ 25.25
Fourth Quarter........................... $ 38.50 $ 18.75
HOLDERS
As of December 31, 2000, we had 448 holders of record of our common
stock. Because many of our shares are held by brokers and other institutions on
behalf of stockholders, we are unable to estimate the total number of beneficial
shareholders represented by these record holders.
DIVIDENDS
We have never declared or paid cash dividends on our common stock and,
while this policy is subject to periodic review by our board of directors, we
currently intend to retain any earnings for use in our business and do not
anticipate paying cash dividends in the foreseeable future.
On March 9, 2000, we effected a 2.04-for-1 common stock split by paying
a stock dividend to stockholders of record.
RECENT SALES OF UNREGISTERED SECURITIES
Between March 31, 2000 and December 31, 2000, we issued 355,673 shares
of common stock pursuant to the exercise of options granted to our directors,
employees and consultants pursuant to our 1996 Stock Option Plan for exercise
prices ranging from $.49 to $5.88 per share and a total of 117,185 shares of
common stock pursuant to the exercise of various warrants issued at an exercise
price of $1.96 per share. We issued all of these shares in reliance upon the
exemption from the registration requirements of the Securities Act of 1933 set
forth in Section 4(2) or Regulation 701 thereof.
17
20
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data should be read in
conjunction with the Consolidated Financial Statements and Notes thereto and
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and other financial data included elsewhere in this Report on Form
10-K. The consolidated statement of operations data for the years ended December
31, 2000, 1999 and 1998 and the consolidated balance sheet data at December 31,
2000 and 1999 are derived from the audited consolidated financial statements
included elsewhere in this Report on Form 10-K. The consolidated statement of
operations data for the years ended December 31, 1997 and 1996 and the
consolidated balance sheet data at December 31, 1997 and 1996 are derived from
audited consolidated financial statements not included in this Report on Form
10-K.
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
2000 1999 1998 1997 1996
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Consolidated Results of Operations Data:
Revenue .................................... $ 8,570 $ 3,112 $ 386 $ 99 $ --
Gross profit ............................... 3,230 1,940 298 89 --
Loss from operations ....................... (16,372) (9,486) (5,879) (2,931) (1,767)
Net loss ................................... (12,474) (9,202) (5,596) (2,753) (1,760)
Accretion of discount on convertible
preferred stock ....................... -- (3,406) -- -- --
-------- -------- -------- -------- --------
Net loss applicable to common
stockholders .......................... $(12,474) $(12,608) $ (5,596) $ (2,753) $ (1,760)
======== ======== ======== ======== ========
Net loss before per common share,
basic and diluted ..................... $ (0.52) $ (0.96) $ (0.43) $ (0.21) $ (0.16)
======== ======== ======== ======== ========
Shares used in computing net loss per
share, basic and diluted .............. 23,828 13,151 13,086 12,842 10,826
Consolidated Balance Sheet Data:
Cash and cash equivalents .................. $ 7,106 $ 4,083 $ 8,537 $ 2,821 $ 14
Short-term investments ..................... 66,521 4,929 -- -- --
Working capital (deficit) .................. 76,779 10,426 8,391 2,761 (249)
Total assets ............................... 83,668 12,566 9,590 3,119 154
Total stockholders' equity (deficit) ....... 78,688 11,195 9,190 2,964 (110)
18
21
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following information should be read in conjunction with the
consolidated financial statements and the accompanying notes included in Item 8
of this report and "Factors That May Affect Future Results" in this report.
OVERVIEW
For the years ended December 31, 2000, 1999 and 1998, we had net losses
of $12.5 million, $12.6 million and $5.6 million, respectively. We anticipate
that our quarterly results of operations will fluctuate for the foreseeable
future due to several factors, including the rate of market acceptance of
current and new products, the timing of the introduction by our strategic
partners of commercial products based on our technology, the timing of
regulatory approvals, our ability to scale up manufacturing operations and avoid
component shortages, 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.
Our ability to achieve sustained profitability will depend upon
our ability to continue to enter into strategic partnerships with companies that
will develop and market products incorporating our technology and market and
distribute our systems and consumables. Strategic partners will develop
application-specific bioassay kits for use on our systems that they will sell to
their customers generating royalties for us. Strategic partners may also perform
testing services for third parties using our technology that will also result in
royalties for us. Some strategic partners will also buy our products and then
resell those products to their customers. Through December 31, 2000, we have
entered into strategic partnerships with 26 companies.
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. Generally, these criteria are met at the time
our product is shipped. We expect that each system's sale will generate a
recurring revenue stream from the sale of consumable products. In addition, we
expect to generate royalty revenue from some of our strategic partners as they
sell products incorporating our technology or provide testing services to third
parties using our technology. In accordance with the terms of a federal grant
which we have received, grant revenue is recorded as research expenses relating
to the grant are incurred, provided that the amounts received are not refundable
if the research is not successful.
Cost of product revenue consists of direct and indirect manufacturing,
quality control, training, customer service and warranty costs. Our operating
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 both
new products and our bioinformatics group. Our bioinformatics group will be
incurring research and development expenses, including expenses related to the
acquisition of blood samples, development of the assays, development of the
software that will capture the data and analyze the results and establishment of
the laboratory. Our selling and marketing expenses will increase as we continue
to commercialize our products, and general and administrative expenses will
increase as we add personnel and expand our facilities.
Deferred stock compensation represents the difference between the
deemed fair value of our common stock and the exercise price of options or
warrants and the fair market value of restricted stock grants. For options
granted to employees and directors, this difference is calculated as of the
grant date and amortized ratably over the vesting period. For options or
warrants granted to consultants, the difference is recognized as of the vesting
date with adjustments made to the recognized deferred compensation amount up and
until that time based on the market value of our common stock. As a result of
stock options, warrants and restricted stock grants, we recorded $1.1 million
and $1.3 million in deferred stock compensation expense in the years ended
December 31, 2000 and 1999, respectively. Total unamortized deferred stock
compensation as of December 31, 2000 was $1.0 million.
Total deferred revenue as of December 31, 2000 was $1.6 million and
consisted of (i) payments received for sales to customers with rights of return
that had not yet expired and (ii) upfront payments from strategic partners to be
used for the purchase of instruments or to be applied towards future royalty
payments. Upfront payments from our strategic partners are nonrefundable and
will be recognized as revenue as our strategic partners purchase systems or
apply such amounts against royalty payments.
19
22
RESULTS OF OPERATIONS
The following table sets forth the percentage of net sales of certain
items in the Statements of Operations. The financial information and the
discussion below should be read in conjunction with the consolidated financial
statements and notes thereto.
YEAR ENDED DECEMBER 31,
----------------------------------
2000 1999 1998
-------- -------- --------
Revenue:
Product revenue ............................................ 95% 84% 100%
Grant revenue .............................................. 5% 16% --
-------- -------- --------
Total revenue ......................................... 100% 100% 100%
Cost of product revenue .................................... 62% 38% 10%
-------- -------- --------
Gross profit .......................................... 38% 62% 90%
Operating expenses:
Research and development ................................... 104% 199% 1,610%
Selling, general and administrative expenses ............... 124% 168% 1,440%
-------- -------- --------
Total operating expenses .............................. 228% 367% 3,051%
Loss from operations ....................................... (191)% (305)% (2,961)%
Interest income ............................................ 45% 9% 180%
-------- -------- --------
Net loss ................................................... (146)% (296)% (2,781)%
Accretion of discount on convertible preferred stock ....... -- (109)% --
-------- -------- --------
Net loss applicable to common stockholders ................. (146)% (405)% (2,781)%
======== ======== ========
YEAR ENDED DECEMBER 31, 2000 COMPARED TO YEAR ENDED DECEMBER 31, 1999
Revenue. Revenue increased to $8.6 million in 2000 from $3.1 million in
1999 primarily as a result of product revenue which increased 212% to $8.1
million in 2000 from $2.6 million in 1999. The increase was primarily
attributable to increased sales of the Luminex 100 analyzer with 297
placed in 2000 compared with 92 systems placed in 1999. We also placed 243
Luminex XY Platforms in 2000 compared with 26 placed in 1999. Included in
product revenue are consumables sales, which increased by 214% to $1.2 million
in 2000 from $379,000 in 1999. The increase in consumable sales was attributable
to the increase in the installed base of instrumentation.
Grant revenue decreased by 12% to $446,000 in 2000 from $506,000 in
1999. After being temporarily suspended in September 1999 when our prior joint
venture partner withdrew due to a change in its business strategy, the grant was
reinstated on July 1, 2000 with a new joint venture partner.
A breakdown of revenue for the years ended December 31, 2000 and 1999
is as follows (in thousands):
20
23
YEAR ENDED DECEMBER 31,
-----------------------
2000 1999
---------- ----------
Instrumentation sales ........ $ 6,804 $ 2,165
Consumables sales ............ 1,190 379
Grant revenue ................ 446 506
Other revenue ................ 130 62
---------- ----------
Total revenue ........ $ 8,570 $ 3,112
========== ==========
Gross Profit. Gross profit increased by 66% to $3.2 million in 2000
from $1.9 million in 1999. Gross margin (gross profit as a percentage of total
revenue) decreased from 62% for the year ended December 31, 1999 to 38% for the
year ended December 31, 2000. The decrease in gross margin was primarily
attributable to: (i) a reduction in the average selling price of our systems,
resulting from an increase in the number of sales to strategic partners which
are made at discounted prices, (ii) an increase in cost of product revenue
caused by higher material costs and (iii) the absence of grant revenue in the
first six months of 2000.
Research and Development Expense. Research and development expenses
increased 45% to $9.0 million in 2000 from $6.2 million in 1999. The increase
was attributable to several factors, including increased personnel costs of $1.4
million and increased consumption of parts and supplies of $1.4 million related
to the development of new products. These expenses were partially offset by a
$309,000 reduction in consulting and professional expenses.
Selling, General and Administrative Expense. Selling, general and
administrative expenses increased by 104% to $10.6 million in 2000 from $5.2
million in 1999. The increase was primarily attributable to increased personnel
costs of $2.0 million, increased non-cash stock compensation expenses of $1.2
million and increased sales and marketing expenses of $801,000.
Interest Income. Interest income increased to $3.9 million in 2000 from
$284,000 in 1999. The increase was attributable to an increase in the average
cash and short-term investment balances, resulting from investment of the net
proceeds of our initial public offering received in April 2000.
Income Taxes. As of December 31, 2000, we had federal net operating
loss carryforwards of $34.8 million and federal research tax credit
carryforwards of $828,000. 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 will be limited by the
change of ownership provisions contained in Section 382 of the Internal Revenue
Code. The annual limitation will result in the expiration of no more than
$750,000 of net operating losses before utilization.
YEAR ENDED DECEMBER 31, 1999 COMPARED WITH YEAR ENDED DECEMBER 31, 1998
Revenue. Revenue increased to $3.1 million in 1999 from $386,000 in
1998. The increase was primarily attributable to sales of the Luminex 100
analyzer, which commenced in the first quarter of 1999, and sales of
Luminex XY Platforms, which commenced in the fourth quarter of 1999. Revenue
from the sale of microspheres increased $314,000 in conjunction with sales of
the Luminex 100 instrument and the 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 system.
21
24
A breakdown of revenue for the years ended December 31, 1999 and 1998
is as follows (in thousands):
YEAR ENDED DECEMBER 31,
-----------------------
1999 1998
---------- ----------
Instrumentation sales ........ $ 2,165 $ 298
Consumables sales ............ 379 80
Grant revenue ................ 506 --
Other revenue ................ 62 8
---------- ----------
Total revenue ........ $ 3,112 $ 386
========== ==========
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 had no grant revenue in 1998.
Gross Profit. Gross profit increased 551% to $1.9 million in 1999 from
$298,000 in 1998. Gross margin decreased from 77% in 1998 to 62% in 1999. The
increase in gross profit was primarily attributable to higher revenue from
initial sales of the Luminex 100 analyzer in 1999, and the decrease in gross
margin was primarily attributable to the higher per unit cost of the Luminex
100, relative to the Luminex R/O system.
Research and development expense. Research and development expenses
increased to $6.2 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 and parts and supplies associated with research and
development projects. The increase was primarily attributable to an increase of
$789,000 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. The increase was also due to amortization of deferred
stock compensation of approximately $447,000 in 1999. The increase in
amortization of deferred stock compensation was primarily attributable to the
issuance of stock options to our consultants.
Selling, general and administrative expense. Selling, general and
administrative expenses increased to $5.2 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, the
costs of facilities, insurance, trade shows and legal support as well as the
amortization of deferred stock and stock compensation. 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, a $262,000 increase in facilities costs due to the
leasing of additional manufacturing space early in 1999 and amortization of
deferred stock and stock compensation expense of approximately $817,000.
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 in amortization of deferred stock and stock compensation expense 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 and federal research tax credit
carryforwards of $572,000. 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 will be limited by the
change of ownership provisions contained in Section 382 of the Internal Revenue
Code. The annual limitation will result in the expiration of no more than
$750,000 of net operating losses before utilization.
QUARTERLY RESULTS
The following table sets forth certain quarterly financial data for the
periods indicated (in thousands, except per share data).
22
25
QUARTER ENDED
--------------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
2000 2000 2000 2000
-------------- -------------- -------------- --------------
Revenue ...................... $ 1,390 $ 1,394 $ 2,315 $ 3,471
Gross profit ................. 667 409 899 1,255
Loss from operations ......... (2,723) (4,845) (4,041) (4,763)
Net loss ..................... (2,611) (3,644) (2,730) (3,489)
Basic loss per share ......... (0.19) (0.13) (0.10) (0.13)
QUARTER ENDED
--------------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
1999 1999 1999 1999
-------------- -------------- -------------- --------------
Revenue ...................... 539 697 456 1,420
Gross profit ................. 460 430 294 756
Loss from operations ......... (1,762) (1,836) (3,085) (2,803)
Net loss ..................... (1,680) (1,783) (3,027) (6,118)
Basic loss per share ......... (0.13) (0.14) (0.23) (0.46)
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 2000, we held cash, cash equivalents and short-term
investments of $73.6 million and had working capital of $76.8 million. At
December 31, 1999, we held cash, cash equivalents and short-term investments of
$9.0 million. We have funded our operations to date primarily through the
issuance of equity securities. Our cash reserves are held directly or indirectly
in a variety of short-term, interest-bearing instruments, including obligations
of the United States Government or agencies thereof and U.S. corporate debt
securities.
Cash used in operations was $10.4 million in 2000, compared with $8.4
million in 1999. Purchases of property and equipment in 2000 totaled $2.5
million, compared with $1.1 million in 1999.
We expect to incur increasing research and development expenses and
selling, general and administrative expenses, including expenses related to
additions to personnel, increased production and commercialization efforts and
increased expenditures for product development and for the development of our
bioinformatics group. Our future capital requirements will depend on a number of
factors, including our success in developing and expanding markets for our
products, payments under possible future strategic arrangements, 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 and the status of competitive
products. We believe that our existing cash, cash equivalents and short
term-investments 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 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 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 agreements on unattractive terms.
RECENT ACCOUNTING PRONOUNCEMENTS
As amended by SFAS No. 137, "Accounting for Derivative Instruments and
Hedging Activities - Deferral of the Effective Date of FASB Statement No. 133,"
SFAS No. 133, "Accounting for Derivative Instruments and
23
26
Hedging Activities" ("SFAS 133") 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.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our interest income is sensitive to changes in the general level of
U.S. interest rates, particularly since the majority of our investments are in
short-term instruments held to maturity. Due to the nature of our short-term
investments, we have concluded that there is no material market risk exposure.
All payments for our products are required to be made in U.S. dollars;
therefore, we do not engage in any foreign currency hedging activities.
Accordingly, our foreign currency market risk is limited.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Consolidated Financial Statements
PAGE
Report of Independent Auditors............................................................................ 25
Consolidated Balance Sheets............................................................................... 26
Consolidated Statements of Operations..................................................................... 27
Consolidated Statements of Cash Flows..................................................................... 28
Consolidated Statements of Changes in Stockholders' Equity................................................ 29
Notes to Consolidated Financial Statements................................................................ 30
24
27
Report of Independent Auditors
The Board of Directors
Luminex Corporation
We have audited the accompanying consolidated balance sheets of Luminex
Corporation and subsidiary as of December 31, 2000 and 1999, and the related
statements of operations, cash flows and changes in stockholders' equity for
each of the three years in the period ended December 31, 2000. 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Luminex
Corporation and subsidiary at December 31, 2000 and 1999, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 2000, in conformity with accounting principles generally accepted
in the United States.
/s/ Ernst & Young LLP
Austin, Texas
January 26, 2001
25
28
LUMINEX CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
December 31,
------------------------
2000 1999
---------- ----------
ASSETS
Current assets:
Cash and cash equivalents ................................................. $ 7,106 $ 4,083
Short-term investments .................................................... 66,521 4,929
Accounts receivable, net .................................................. 3,085 1,341
Inventories ............................................................... 2,408 663
Other ..................................................................... 1,739 181
---------- ----------
Total current assets .................................................. 80,859 11,197
Property, plant and equipment, net ............................................. 2,770 1,369
Other........................................................................... 39 --
---------- ----------
Total assets .......................................................... $ 83,668 $ 12,566
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable .......................................................... $ 2,741 $ 373
Accrued liabilities ....................................................... 673 278
Deferred revenue .......................................................... 666 120
---------- ----------
Total current liabilities ............................................. 4,080 771
Deferred revenue ............................................................... 900 600
Commitments and contingencies .................................................. -- --
Stockholders' equity:
Preferred Stock, $2 par value, 5,000,000 shares authorized:
Series A Convertible Preferred Stock, $2 stated value,
shares issued and outstanding: none in 2000; 457,250 in 1999 ..... -- 915
Series B Convertible Preferred Stock, $40 stated value,
shares issued and outstanding: none in 2000; 150,000 in 1999 ..... -- 6,000
Series C Convertible Preferred Stock, $80 stated value,
shares issued and outstanding: none in 2000; 151,571 in 1999 ..... -- 12,126
Series D Convertible Preferred Stock, $120 stated value,
shares issued and outstanding: none in 2000; 57,538 in 1999 ...... -- 6,905
Series E Convertible Preferred Stock, $120 stated value,
shares issued and outstanding: none in 2000; 25,000 in 1999 ...... -- 3,000
Common Stock, $.001 par value, 200,000,000 shares
authorized; issued and outstanding:
27,586,050 in 2000; 13,167,754 in 1999 ............................. 28 13
Additional paid-in capital ................................................ 115,651 5,691
Deferred stock compensation ............................................... (1,529) (467)
Accumulated deficit ....................................................... (35,462) (22,988)
---------- ----------
Total stockholders' equity ............................................ 78,688 11,195
---------- ----------
Total liabilities and stockholders' equity ............................ $ 83,668 $ 12,566
========== ==========
See the accompanying notes.
26
29
LUMINEX CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
Year Ended December 31,
--------------------------------------
2000 1999 1998
---------- ---------- ----------
Revenue:
Product ......................................................... $ 8,124 $ 2,606 $ 386
Grant ........................................................... 446 506 --
---------- ---------- ----------
Total revenue ............................................... 8,570 3,112 386
Cost of product revenue .............................................. 5,340 1,172 88
---------- ---------- ----------
Gross profit ................................................ 3,230 1,940 298
Operating expenses:
Research and development ........................................ 8,953 6,188 3,611
Selling, general and administrative ............................. 10,649 5,238 2,566
---------- ---------- ----------
Total operating expenses .................................... 19,602 11,426 6,177
---------- ---------- ----------
Loss from operations ................................................. (16,372) (9,486) (5,879)
Interest income ................................................. 3,898 284 283
---------- ---------- ----------
Net loss ............................................................. (12,474) (9,202) (5,596)
Accretion of discount on convertible preferred stock ................. -- (3,406) --
---------- ---------- ----------
Net loss applicable to common stockholders ........................... $ (12,474) $ (12,608) $ (5,596)
========== ========== ==========
Net loss per share, basic and diluted ................................ $ (0.52) $ (0.96) $ (0.43)
========== ========== ==========
Shares used in computing net loss per share, basic and diluted ....... 23,828 13,151 13,086
See the accompanying notes.
27
30
LUMINEX CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Year Ended December 31,
------------------------------------
2000 1999 1998
-------- -------- --------
Cash flows from operating activities:
Net loss ....................................................................... $(12,474) $ (9,202) $ (5,596)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation expense .................................................. 1,087 330 220
Amortization expense .................................................. -- 186 143
Amortization of deferred stock compensation and
stock compensation expense and unearned restricted stock ........... 2,440 1,263 --
Changes in operating assets and liabilities:
Accounts receivable ................................................ (1,744) (1,195) (108)
Inventories ........................................................ (1,745) (616) (3)
Other .............................................................. (1,523) (120) (48)
Accounts payable ................................................... 2,368 205 64
Accrued liabilities ................................................ 395 120 107
Deferred revenue ................................................... 846 646 74
-------- -------- --------
Net cash used in operating activities .......................................... (10,350) (8,383) (5,147)
Cash flows from investing activities:
Net purchase of short-term investments .................................... (61,592) (4,929) --
Purchase of property and equipment......................................... (2,488) (1,085) (399)
Other...................................................................... (74) -- --
-------- -------- --------
Net cash used in investing activities .......................................... (64,154) (6,014) (399)
Cash flows from financing activities:
Proceeds from issuance of Common Stock .................................... 78,769 47 3
Stock issuance costs ...................................................... (1,242) (8) (867)
Proceeds from issuance of Preferred Stock ................................. -- 9,904 12,126
-------- -------- --------
Net cash provided by financing activities ...................................... 77,527 9,943 11,262
Increase (decrease) in cash and cash equivalents ............................... 3,023 (4,454) 5,716
Cash and cash equivalents, beginning of year ................................... 4,083 8,537 2,821
-------- -------- --------
Cash and cash equivalents, end of year ......................................... $ 7,106 $ 4,083 $ 8,537
======== ======== ========
Supplemental disclosure of noncash activities:
Conversion of Preferred Stock .................................................. $ 28,946 $ -- $ --
Common stock issued to acquire property and equipment from related party ....... $ -- $ -- $ 561
See the accompanying notes.
28
31
LUMINEX CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(in thousands, except share amounts)
Convertible
Preferred Stock Common Stock
-------------------------- ------------------------- Additional
Number of Number of Paid-In
Shares Amount Shares Amount Capital
---------- ---------- ---------- ---------- ----------
Balance at December 31, 1997 ........................... 607,250 $ 6,915 12,842,308 $ 13 $ 820
Issuance of Preferred Stock,
Series C .................................... 151,571 12,126 -- -- --
Stock issuance costs ............................. -- -- -- -- (868)
Exercise of stock options ........................ -- -- 5,439 -- 3
Common Stock issued for
assets purchased ............................ -- -- 286,102 -- 561
Net loss ......................................... -- -- -- -- --
---------- ---------- ---------- ---------- ----------
Balance at December 31, 1998 ........................... 758,821 19,041 13,133,849 13 516
Issuance of Preferred Stock,
Series D, net of discount ................... 57,538 6,499 -- -- 406
Issuance of Preferred Stock,
Series E, net of discount ................... 25,000 -- -- -- 3,000
Stock issuance costs ............................. -- -- -- -- (8)
Accretion of discount on ......................... --
convertible Preferred Stock ................. -- 3,406 -- -- --
Exercise of stock options ........................ -- -- 33,905 -- 47
Deferred stock compensation
related to stock options .................... -- -- -- -- 1,730
Amortization of deferred stock
and stock compensation expense .............. -- -- -- -- --
Net loss ......................................... -- -- -- -- --
---------- ---------- ---------- ---------- ----------
Balance at December 31, 1999 ........................... 841,359 28,946 13,167,754 13 5,691
Conversion of Preferred Stock
to Common Stock ............................. (841,359) (28,946) 8,768,582 9 28,937
Initial public offering, net of offering cost .... -- -- 4,869,000 5 75,737
Exercise of stock options ........................ -- -- 648,529 1 1,735
Exercise of warrants ............................. -- -- 117,185 -- 49
Deferred stock compensation
related to stock options .................... -- -- -- -- 2,801
Warrants granted ................................. -- -- -- -- 135
Restricted stock granted ......................... -- -- 15,000 -- 566
Amortization of restricted stock ................. -- -- -- -- --
Amortization of deferred stock
and stock compensation expense .............. -- -- -- -- --
Net loss ......................................... -- -- -- -- --
---------- ---------- ---------- ---------- ----------
Balance at December 31, 2000 ........................... -- $ -- 27,586,050 $ 28 $ 115,651
========== ========== ========== ========== ==========
Deferred Total
Stock Accumulated Stockholders'
Compensation Deficit Equity
------------ ----------- -------------
Balance at December 31, 1997 ........................... $ -- $ (4,784) $ 2,964
Issuance of Preferred Stock,
Series C .................................... -- -- 12,126
Stock issuance costs ............................. -- -- (868)
Exercise of stock options ........................ -- -- 3
Common Stock issued for
assets purchased ............................ -- -- 561
Net loss ......................................... -- (5,596) (5,596)
---------- ---------- ----------
Balance at December 31, 1998 ........................... -- (10,380) 9,190
Issuance of Preferred Stock,
Series D, net of discount ................... -- -- 6,905
Issuance of Preferred Stock,
Series E, net of discount ................... -- -- 3,000
Stock issuance costs ............................. -- 0 (8)
Accretion of discount on .........................
convertible Preferred Stock ................. -- (3,406) --
Exercise of stock options ........................ -- -- 47
Deferred stock compensation
related to stock options .................... (1,730) -- --
Amortization of deferred stock
and stock compensation expense .............. 1,263 -- 1,263
Net loss ......................................... -- (9,202) (9,202)
---------- ---------- ----------
Balance at December 31, 1999 ........................... (467) (22,988) 11,195
Conversion of Preferred Stock
to Common Stock ............................. -- -- --
Initial public offering, net of offering cost .... -- -- 75,742
Exercise of stock options ........................ -- -- 1,736
Exercise of warrants ............................. -- -- 49
Deferred stock compensation
related to stock options .................... (2,801) -- --
Warrants granted ................................. -- -- 135
Restricted stock granted ......................... (566) -- --
Amortization of restricted stock ................. 78 -- 78
Amortization of deferred stock
and stock compensation expense .............. 2,227 -- 2,227
Net loss ......................................... -- (12,474) (12,474)
---------- ---------- ----------
Balance at December 31, 2000 ........................... $ (1,529) $ (35,462) $ 78,688
========== ========== ==========
See the accompanying notes.
29
32
NOTE 1 - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
Luminex Corporation (the "Company"), a Delaware corporation, designs,
develops, manufactures, markets, services and supplies proprietary molecular
measurement and analysis systems (the LabMAP System) capable of performing
multiple tests on a single patient sample.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiary. All significant intercompany
transactions and balances have been eliminated.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States 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.
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 since the
Company has the intent and ability to hold the securities to maturity.
Held-to-maturity securities are stated at cost, adjusted for amortization of
premiums and 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, 2000.
CONCENTRATION OF CREDIT RISK
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 corporate issuers.
The Company provides credit, in the normal course of business, to a
number of its customers geographically dispersed primarily throughout the U.S.
The Company attempts to limit its credit risk by performing ongoing credit
evaluations of its customers and maintaining adequate allowances for potential
credit losses.
In 2000, the Company had sales to domestic customers of $5.9 million
and sales to foreign customers of $2.2 million. One customer accounted for 13%
and 10% of the Company's total revenues in 2000 and 1999, respectively. No
customers accounted for more than 10% of the Company's total revenues in 1998.
INVENTORIES
Inventories, consisting primarily of raw materials and purchased
components, are stated at the lower of cost or market. The Company routinely
assesses its on-hand inventory for timely identification and measurement of
obsolete, slow-moving or otherwise impaired inventory.
30
33
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are carried at cost less accumulated
amounts for amortization and depreciation. Property, plant and equipment are
generally amortized or depreciated on a straight-line basis over the useful
lives of the assets, which range from three to seven years. Leasehold
improvements are amortized on a straight-line basis over the shorter of the
remaining term of the lease or the estimated useful life of the improvements.
SOFTWARE COSTS
During 2000, the Company adopted the American Institute of Certified
Public Accountants' Statement of Position ("SOP") 98-1, "Accounting for the
Costs of Computer Software Developed or Obtained for Internal Use." The Company
capitalizes eligible software development costs incurred subsequent to
completion of the preliminary project stage. After all substantial testing and
deployment is completed and software is ready for its intended use, development
costs are amortized over the shorter of the expected useful life of the software
or five years. The impact on the consolidated financial statements as of and for
the year ended December 31, 2000 was not material. Prior to adoption of SOP
98-1, the Company expensed these costs as incurred.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company monitors its long-lived assets to determine 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 estimated future operating cash flows. If
impairment is indicated, the amount of such impairment is determined by
comparing the carrying value of the asset to the present value of the estimated
future cash flows associated with the use of the asset. As of December 31, 2000,
no such indicators of impairment have been identified.
REVENUE RECOGNITION
Revenue 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.
Generally, these criteria are met at the time the product is shipped. Revenues
from royalties related to agreements with strategic partners are recognized when
such amounts are reported to the Company. No royalty revenues have been
recognized through December 31, 2000. Revenue from extended service agreements
are deferred and recognized ratably over the period of the agreement.
In accordance with the terms of a federal grant in which the Company
participates, grant revenue is recognized as research expenses relating to the
grant are incurred, provided that the amounts received are not refundable if the
research is not successful.
Amounts billed or collected in excess of revenue recognized are
recorded as deferred revenue.
In December 1999, the Securities and Exchange Commission released
Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial
Statements" ("SAB 101"), which provides guidance on the recognition,
presentation and disclosure of revenue in the financial statements. In June
2000, the Staff issued Staff Accounting Bulletin No. 101B, "Second Amendment:
Revenue Recognition in Financial Statements" ("SAB 101B"). SAB 101B delayed the
implementation of SAB 101, as amended, and did not have a material impact on the
Company's financial position, results of operations or cash flows.
WARRANTY PROGRAMS
The Company records a charge to cost of product revenue for the
estimated cost that may be incurred under its initial warranty program at the
time the related product is shipped.
31
34
RESEARCH AND DEVELOPMENT COSTS
Research and development costs are expensed in the period incurred.
ADVERTISING COSTS
The Company expenses advertising costs as incurred. Advertising
expenses were not significant for any of the years presented.
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 the basis for financial reporting purposes and the
tax bases of such assets and liabilities, and are measured using enacted tax
rates and laws that will be in effect when the differences are expected to
reverse.
NET LOSS PER SHARE
SFAS No. 128, "Earnings Per Share," and SAB No. 98, prescribe standards
for computing net income (loss) per share. 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.
STOCK-BASED COMPENSATION
SFAS No. 123, "Accounting for Stock-Based Compensation," prescribes
accounting and reporting standards for all stock-based compensation plans,
including employee stock options. As allowed by SFAS No. 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" ("APB 25").
In March 2000, the FASB issued Interpretation No. 44, "Accounting for
Certain Transactions Involving Stock Compensation" ("Interpretation 44"),
effective July 1, 2000. Interpretation 44 clarifies guidance for certain issues
that arose in the application of APB 25. The Company has applied the
requirements of APB 25 as clarified by Interpretation 44.
COMPREHENSIVE INCOME
SFAS No. 130, "Reporting Comprehensive Income," establishes standards
for reporting comprehensive income and its components in a full set of financial
statements. In accordance with SFAS No. 130, there were no differences between
net loss and comprehensive loss for any of the periods presented.
SEGMENT REPORTING
SFAS No. 131, "Disclosures About Segments of an Enterprise and Related
Information," requires the use of a management approach in identifying the
business segments of an enterprise. Management has determined that the Company
operates in one business segment.
32
35
RECENT PRONOUNCEMENTS
As amended by SFAS No. 137, "Accounting for Derivative Instruments and
Hedging Activities - Deferral of the Effective Date of FASB Statement No. 133,"
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" 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.
RECLASSIFICATION
Certain prior year amounts have been reclassified to conform to current
year presentation.
NOTE 2 - ACCOUNTS RECEIVABLE
Accounts receivable consisted of the following at December 31 (in
thousands):
2000 1999
----------- -----------
Accounts receivable ..................... $ 3,155 $ 1405
Less allowance for doubtful accounts .... (70) (64)
----------- -----------
$ 3,085 $ 1,341
=========== ===========
The following table summarizes the changes in the allowance for
doubtful accounts (in thousands):
Balance at December 31, 1997 ........................ $ --
Additions charged to costs and expenses .... 14
Write-offs of uncollectible accounts ....... --
----
Balance at December 31, 1998 ........................ 14
Additions charged to costs and expenses .... 64
Write-offs of uncollectible accounts ....... (14)
----
Balance at December 31, 1999 ........................ 64
Additions charged to costs and expenses .... 94
Write-offs of uncollectible accounts ....... (88)
----
Balance at December 31, 2000 ........................ $ 70
====
NOTE 3 - INVENTORIES
Inventories consisted of the following at December 31 (in thousands):
2000 1999
------ ------
Parts and supplies ..................... $2,002 $ 663
Work-in-progress and finished goods .... 406 --
------ ------
$2,408 $ 663
====== ======
As of December 31, 2000 and 1999, the Company had allowances for
obsolete raw materials of $90,000 and $--, respectively.
33
36
NOTE 4 - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following at December 31
(in thousands):
2000 1999
------- -------
Laboratory equipment .............................. $ 2,179 $ 1,180
Leasehold improvements ............................ 1,037 609
Computer equipment ................................ 673 264
Purchased software and intangibles ................ 480 123
Furniture and fixtures ............................ 349 192
------- -------
4,718 2,368
Less accumulated amortization and depreciation .... (1,948) (999)
------- -------
$ 2,770 $ 1,369
======= =======
NOTE 5 - INCOME TAXES
As of December 31, 2000, the Company had federal net operating loss
carryforwards of approximately $34.8 million and research and development credit
carryforwards of approximately $828,000 that will begin to expire in 2010 if not
utilized prior to that time.
Current federal income tax laws impose substantial restrictions on the
utilization of net operating losses and tax credits in the event of an
"ownership change," as defined in such laws, of a corporation. The Company's
utilization of the net operating losses will be subject to an annual limitation
due to an "ownership change" resulting from the sales of equity securities. The
annual limitations will result in the expiration of no more than $750,000 of net
operating losses before utilization.
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):
2000 1999
-------- --------
Deferred tax assets:
Deferred revenue ................................. $ 577 $ 267
Depreciable assets ............................... 352 147
Accrued expenses and other ....................... 192 40
Net operating losses and credit carryforwards .... 13,692 6,855
Start-up and organization costs .................. 5 11
Stock compensation ............................... 538 467
-------- --------
Total deferred tax assets .............................. 15,356 7,787
Valuation allowance for deferred tax assets ...... (15,274) (7,764)
-------- --------
Net deferred taxes ..................................... 82 23
Deferred tax liabilities:
Prepaid expenses ................................. (82) (23)
-------- --------
Total deferred tax liabilities ......................... (82) (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 $7.5 million during 2000. Approximately
$2.8 million of the valuation allowance relates to tax benefits for stock option
deductions included in the net operating loss carryforward, which
34
37
when realized, will be allocated directly to contributed capital to the extent
the benefits exceed amounts attributable to deferred compensation expense.
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:
Year Ended December 31,
--------------------------
2000 1999 1998
---- ---- ----
Statutory tax rate ..................... (34.0)% (34.0)% (34.0)%
State taxes, net of federal benefit .... (2.9) (3.0) (3.0)
Nondeductible expenses ................. 0.7 0.1 (1.0)
Research credit generated .............. (2.3) (2.7) (2.6)
Other .................................. 0.4 (0.6) --
Operating losses not benefited ......... 38.1 40.2 38.6
---- ---- ----
--% --% --%
==== ==== ====
NOTE 6 - NET LOSS PER SHARE
The following is a reconciliation of the numerator and denominator of
basic and diluted net loss per share (in thousands, except per share amounts):
Year Ended December 31,
------------------------------------
2000 1999 1998
-------- -------- --------
Basic and diluted:
Net loss applicable to common stockholders ................................. $(12,474) $(12,608) $ (5,596)
======== ======== ========
Weighted average shares of common stock outstanding ........................ 23,828 13,151 13,086
======== ======== ========
Basic and diluted net loss per share ....................................... $ (0.52) $ (0.96) $ (0.43)
======== ======== ========
Pro forma basic and diluted:
Net loss applicable to common stockholders ................................. $(12,474) $(12,608)
Add back accretion of discount on convertible preferred stock .............. -- 3,406
-------- --------
Pro forma net loss applicable to common stockholders ....................... $(12,474) $ (9,202)
======== ========
Shares used above .......................................................... 23,828 13,151
Pro forma adjustment to reflect weighted average effect of assumed
conversion of preferred stock .................................... 2,131 7,378
-------- --------
Shares used in computing pro forma basic and diluted net loss per share .... 25,959 20,529
======== ========
Basic and diluted pro forma net loss per share ............................. $ (0.48) $ (0.45)
======== ========
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 anti-dilutive 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
12,152,479; 12,741,278 and 9,863,318, for the years ended December 31, 2000,
1999 and 1998, respectively. Such securities, had they been dilutive, would have
been included in the computations of diluted net loss per share.
35
38
NOTE 7 - INITIAL PUBLIC OFFERING AND CAPITAL STOCK
INITIAL PUBLIC OFFERING
On March 30, 2000, trading of the Company's common stock on The Nasdaq
National Market commenced in conjunction with the Company's initial public
offering of 4,500,000 shares of common stock at $17 per share. Cash proceeds
from the offering, net of underwriting discounts and commissions, totaled
approximately $71.1 million and were received by the Company upon closing of the
offering on April 4, 2000. Concurrent with the initial public offering, a total
of 841,359 shares of convertible preferred stock, representing all of the
Company's issued and outstanding preferred stock, were converted into 8,768,582
shares of common stock.
On April 27, 2000, the underwriters of the initial public offering
exercised a portion of their over-allotment option and purchased an additional
369,000 shares of the Company's common stock, generating additional proceeds to
the Company of approximately $5.8 million, net of underwriting discounts and
commissions.
STOCK SPLIT
On March 30, 2000, the number of authorized shares of common stock was
increased to 200,000,000. Additionally, on March 9, 2000, the Board of Directors
of the Company approved a 2.04-for-1 stock split of common stock in the form of
a stock dividend. All common stock and per share information has been adjusted
to reflect the stock dividend as if such stock dividend had taken place at the
inception of the Company.
PREFERRED STOCK
The Company's Board of Directors has the authority to issue up to
5,000,000 shares of preferred stock in one or more series and to fix the rights,
preferences, privileges and restrictions thereof, including dividend rights,
dividend rates, conversion rights, voting rights, terms of redemption,
redemption prices, liquidation preferences and the number of shares constituting
any series or the designation of such series, without further vote or action by
the Company's stockholders.
The Company had previously issued Series A, Series B, Series C, Series
D and Series E Convertible Preferred Stock. Concurrent with the initial public
offering, these preferred stock shares were converted into common stock. The
following table summarizes the Company's preferred stock.
Number of Conversion Liquidation
Description Year Issued Shares Rate Price
----------- ----------- --------- ---------- -----------
Series A 1995/1996 457,250 1:2.04 $ 2.00
Series B 1997 150,000 1:20.4 $ 40.00
Series C 1998 151,571 1:20.4 $ 80.00
Series D 1999 57,538 1:20.4 $120.00
Series E 2000 25,000 1:20.4 $120.00
WARRANTS
In 2000, the Company granted warrants to purchase 13,000 shares of the
Company's common stock at $12.00 per share to a collaborative partner that
expire on March 29, 2005. The Company recorded, in selling, general and
administrative expense, stock compensation in the amount of $135,000 in
connection with the issuance of these warrants. At December 31, 2000, the
Company had outstanding warrants to purchase 426,258 shares of the Company's
common stock at prices ranging from $1.96 to $12.00 per share. The warrants may
be exercised, in whole or in part, at any time prior to various expiration dates
between April 2, 2002 and March 29, 2005.
36
39
DISCOUNT ON CONVERTIBLE PREFERRED STOCK
The Company recorded a beneficial conversion feature pursuant to the
requirements of FASB Emerging Issues Task Force Issue No. 98-5, "Accounting for
Convertible Securities with Beneficial Conversion Features or Contingently
Adjustable Conversion Ratios," for certain shares of preferred stock issued in
1999. The beneficial conversion feature was calculated as the difference between
the conversion price and the fair value of the common stock into which the
preferred stock was convertible. The Company recorded a discount of $406,000 for
Series D Stock issued in November 1999 and $3,000,000 for Series E Stock issued
in December 1999. The total discount of $3,406,000 was immediately accreted as a
preferred stock dividend since the Series D Stock and the Series E Stock were
immediately convertible upon their issuance.
NOTE 8 - EMPLOYEE BENEFIT PLANS
STOCK OPTION PLANS
Under the Company's 1996 Stock Option Plan (the "1996 Plan") and the
2000 Long-Term Incentive Plan (the "2000 Plan"), certain employees,
non-employees and non-employee directors have been granted options to purchase
shares of common stock. The stock options generally vest on a monthly or annual
basis over three years from the date of grant and expire either five or ten
years after the date of grant. Since approval of the 2000 Plan in February 2000,
no further option shares are authorized for issuance under the 1996 Plan.
The Company's 2000 Plan allows the Company to grant a variety of
incentive awards to key employees, directors and consultants of the Company. A
maximum of 3.6 million shares of common stock were authorized for issuance under
the 2000 Plan and can be awarded in the form of non-qualified stock options,
stock appreciation rights, restricted stock and other stock-based awards. A
total of 1.7 million shares had been issued or cancelled as of December 31,
2000.
The 1996 Plan and the 2000 Plan are administered by the Compensation
and Stock Option Committee of the Board of Directors which has the authority to
determine the terms and 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.
During the years ended December 31, 2000 and 1999, the Company recorded
deferred stock compensation of $2.3 million and $1.7 million in connection with
certain stock options granted. The amounts represent the difference between the
exercise price of stock option grants and the deemed fair value of the Company's
common stock at the time of such grants. During 2000, the Company granted
options to purchase 255,000 shares of common stock with an exercise price of
$11.76 per share and a fair value of $17 per share. During 1999, the Company
granted options to purchase 218,481 shares of common stock with exercise prices
ranging from $1.98 to $5.88 per share and fair values ranging from $3.92 and
$15.30 per share. The deferred compensation amounts are being amortized over the
vesting periods of the applicable options resulting in amortization of $1.7
million and $1.3 million in 2000 and 1999, respectively.
A summary of the changes in stock options is as follows:
37
40
Weighted
Range of average
exercise exercise
Shares prices price
-------------- -------------- --------------
Options outstanding, December 31, 1997 .... 1,685,040 $0.49 - $1.96 $ 1.61
Granted ........................... 574,260 $2.94 - $3.92 $ 3.52
Exercised ......................... (5,439) $0.49 $ 0.49
Surrendered ....................... (10,881) $0.49 - $2.94 $ 1.96
-------------- -------------- --------------
Options outstanding, December 31, 1998 .... 2,242,980 $0.49 - $3.92 $ 2.10
Granted ........................... 1,666,884 $1.96 - $5.88 $ 4.03
Exercised ......................... (33,905) $0.49 - $1.96 $ 1.38
Surrendered ....................... (438,600) $1.96 $ 1.96
-------------- -------------- --------------
Options outstanding, December 31, 1999 .... 3,437,359 $0.49 - $ 5.88 $ 3.06
Granted ........................... 1,718,000 $5.88 - $44.61 $ 9.88
Exercised ......................... (648,529) $0.49 - $18.63 $ 2.67
Surrendered ....................... (64,184) $1.96 - $17.00 $ 5.86
-------------- -------------- --------------
Options outstanding, December 31, 2000 .... 4,442,646 $0.49 - $44.61 $ 9.71
============== ============== ==============
The following table summarizes outstanding and exercisable options at
December 31, 2000:
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
--------------- ----------- ---------------- -------------- ---------- --------------
$ 0.49 - $ 2.94 1,178,190 1.47 $ 1.90 1,045,590 $ 1.84
$ 3.92 - $ 5.88 1,572,788 3.48 $ 4.18 676,888 $ 4.21
$11.76 - $18.63 1,107,168 8.89 $15.98 210,147 $15.79
$24.75 - $29.63 446,500 9.91 $25.22 1,666 $29.63
$30.25 - $44.61 138,000 9.68 $38.84 1,111 $35.63
--------- ---------
4,442,646 1,935,402
========= =========
SFAS No. 123, "Accounting for Stock-Based Compensation," allows
companies to estimate the pro forma fair value of their stock-based compensation
using a generally recognized option pricing model and provide those results in
the form of footnote disclosure. The fair value of each option grant was
estimated using the Black Scholes Option-Pricing model based on the date of
grant and the following weighted average assumptions:
2000 1999 1998
------ ------ ------
Dividend yield ............................... 0.0% 0.0% 0.0%
Expected volatility .......................... 0.6% 0.0% 0.0%
Risk-free rate of return ..................... 5.0% 6.0% 6.0%
Expected life ................................ 5 yrs 5 yrs 5 yrs
------ ------ ------
Weighted Average Fair Value at Grant Date .... $19.52 $ 1.04 $ 0.84
====== ====== ======
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, except per share amounts):
38
41
Year Ended December, 31
------------------------------------------
2000 1999 1998
---------- ---------- ----------
Net loss as reported ...................... $ (12,474) $ (9,202) $ (5,596)
Pro forma net loss ........................ (15,638) (9,468) (5,753)
Diluted net loss per share as reported .... (0.52) (0.70) (0.43)
Pro forma diluted net loss per share ...... (0.66) (0.72) (0.44)
EMPLOYEE SAVINGS PLANS
Beginning in 1998, the Company utilized a Savings Incentive Match Plan
for Employees ("SIMPLE") under Section 408(p) of the Internal Revenue Code. Each
employee of the Company was eligible to contribute up to $6,000 annually. The
Company matched such contributions on a dollar-for-dollar basis up to the lesser
of 3% of the employee's gross salary compensation or $6,000. All employee and
employer contributions were immediately vested. The Company's contributions
totaled approximately $128,000, $92,000 and $40,000 in 2000, 1999 and 1998,
respectively.
Effective January 1, 2001, the Company ceased its SIMPLE plan and began
sponsoring a retirement plan authorized by section 401(k) of the Internal
Revenue Code. In accordance with this plan, all employees are eligible to
participate in the plan on the first day of the month following the commencement
of full time employment. Each employee can contribute a percentage of
compensation up to a maximum of $10,500 per year with the Company matching 50%
of each employee's contributions.
RESTRICTED STOCK AWARDS
Restricted stock awards may be granted at the discretion of the Board
of Directors under the 2000 Plan in connection with the hiring or retention of
key employees and are subject to certain conditions. Restrictions expire at
certain dates after the grant date in accordance with specific provisions in the
employee's agreement. During the year ended December 31, 2000, the Company
awarded 15,000 shares of restricted common stock, which had a fair value at the
date of grant of $566,250. Compensation under the plan is charged to expense
over the restriction period and amounted to $78,000 in 2000. As of December 31,
2000, the Company had $487,000 of deferred stock compensation relating to
restricted stock awards.
NOTE 9 - COMMITMENTS AND CONTINGENCIES
LEASE ARRANGEMENTS
The Company has various operating leases related primarily to its
office facilities. Rental expense for these operating leases for the years 2000,
1999 and 1998 totaled approximately $548,000, $399,000 and $152,000,
respectively.
Minimum annual rental commitments as of December 31, 2000 under
noncancellable leases for each of the next five years and in the aggregate were
as follows (in thousands):
39
42
Year Ended December 31,
- ---------------------------------------------------------------------
2001.......................................................... $500
2002.......................................................... 269
2003.......................................................... 93
2004.......................................................... 5
Thereafter.................................................... --
----
Total................................................ $867
====
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. On January 31, 2001, the Company
filed a lawsuit alleging negligence on the part of its prior patent counsel in
this matter. At this time, management cannot predict whether this lawsuit will
be successful and, if so, the amount of any damages that may be recovered.
NOTE 10 - RELATED PARTY TRANSACTIONS
In December 1999, the Company issued 51,000 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.
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 amount of consulting services
provided to the Company and to increase the consulting fee to $11,666 per month.
In addition, the Company issued stock options for the purchase of 51,000 shares
of the Company's common stock to this Director. The Company recorded
compensation expense related to these options of approximately $1.0 million and
$332,000 in 2000 and 1999, respectively. The consulting agreement terminated on
October 31, 2000.
The Company purchased certain office and laboratory equipment from
Inland Labs on January 19, 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. An officer of the
Company was paid $208,782 in cash and was issued 286,102 shares of the Company's
common stock in connection with the transaction. A committee of outside
directors determined that the transaction was fair and in the best interest of
the Company and its stockholders.
In conjunction with the issuance of the Series C Preferred Stock in
1998, the Company made cash payments totaling approximately $849,000 to
Loewenbaum & Co. ("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.
NOTE 11 - JOINT VENTURE RESEARCH ARRANGEMENT
The Company, along with a joint venture partner, was granted a special
assistance award in October 1998, by the National Institute of Standards and
Technology to conduct liquid array technology development. The government grant
was reinstated July 1, 2000 with a new joint venture partner after being
temporarily suspended in September 1999 when the prior joint venture partner
withdrew due to a change in its business strategy. The Company incurred expenses
related to liquid array development activities totaling approximately $377,000
and $600,000 and recognized grant revenues of approximately $466,000 and
$506,000 during 2000 and 1999, respectively.
NOTE 12 - SEGMENT INFORMATION
We operate in one business segment, biological testing in the life
sciences industry. Luminex presently has no foreign operations but does export
its products to customers outside the United States. The table below provides
information regarding product revenues from our sales to customers within the
United States and in foreign countries for the years ended December 31 (in
thousands):
2000 1999 1998
---------- ---------- ----------
Domestic ................................. $ 5,966 $ 2,223 $ 340
Foreign:
Europe ................................. 1,392 259 44
Asia ................................... 361 106 --
Other .................................. 405 18 2
-------- -------- -------
$ 8,124 $ 2,606 $ 386
======== ======== =======
40
43
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item is incorporated by reference to
information under the caption "Proposal 1 - Election of Directors" and to the
information under the caption "Section 16(a) Beneficial Ownership Reporting
Compliance" in our definitive proxy statement for our annual meeting of
stockholders to be held on or about May 24, 2001. Our 2001 proxy statement will
be filed with the Securities and Exchange Commission not later than 120 days
subsequent to December 31, 2000.
Certain information with respect to our executive officers is set forth
under the caption "Executive Officers" in Part I of this report.
ITEM 11. EXECUTIVE COMPENSATION
Information concerning executive compensation is incorporated by
reference to the sections entitled "Executive Compensation" contained in our
proxy statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information concerning the security ownership of certain beneficial
owners and management is incorporated by reference to the section entitled
"Security Ownership of Certain Beneficial Owners and Management" contained in
our proxy statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information concerning certain relationships is incorporated by
reference to the section entitled "Certain Transactions" contained in our proxy
statement.
41
44
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as a part of this report:
(1) Financial Statements:
The Financial Statements required by this item are submitted
in Part II, Item 8 of this report.
(2) Financial Statement Schedules:
All schedules are omitted because they are not applicable or
the required information is shown in the Financial Statements
or in the notes thereto.
(3) Exhibits:
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------ -----------------------
3.1* Restated Certificate of Incorporation of the Company.
3.2* Amended and Restated Bylaws of the Company.
4.1* Warrant for the Purchase of Shares of Common Stock dated as of
April 2, 1997 by and between the Company and Southcoast Capital
Corporation.
10.1* 1996 Stock Option Plan of the Company, as amended.
10.2* Form of Stock Option Agreement of the Company.
10.3* Form of Incentive Stock Option Agreement of the Company.
10.4* 2000 Long-Term Incentive Plan of the Company.
10.5* Form of Stock Option Award Agreement of the Company.
10.6*+ Development and Supply Agreement dated as of March 19, 1999 by and
between the Company and Bio-Rad Laboratories, Inc.
10.7*+ Amendment to Development and Supply Agreement dated as of January
13, 2000 by and between the Company and Bio-Rad Laboratories, Inc.
10.8+ Second Amendment to Development and Supply Agreement dated as of
June 12, 2000 by and between the Company and Bio-Rad Laboratories,
Inc.
10.9*+ Agreement for Electronic Manufacturing Services dated as of
January 1, 2000 by and between the Company and Sanmina
Corporation.
10.10* Consultant Agreement dated as of June 1, 1999 by and between the
Company and A. Sidney Alpert.
10.11* Amendment to Consultant Agreement dated as of November 1, 1999 by
and between the Company and A. Sidney Alpert.
10.12* Standard Commercial Lease Agreement dated as of August 21, 1989 by
and between the Company and Aetna Life Insurance Company, as
amended, for facilities situated at 12112 Technology Boulevard,
Austin, Texas 78727.
10.13 Sixth Amendment to Lease Agreement between Aetna Life Insurance
Company, as Landlord, and Luminex Corporation, as Tenant, dated
April 25, 2000.
10.14* Sublease Agreement dated as of December 20, 1999 by and between
the Company and American Innovations, Ltd., for facilities
situated at 12112 Technology Boulevard, Austin, Texas 78727.
10.15* First Amendment to Sublease Agreement dated as of December 20,
1999 by and between the Company and American Innovations, Ltd.,
for facilities situated at 12112 Technology Boulevard, Austin,
Texas 78727.
42
45
10.16* Form of Employment Agreement between the Company and each of Mark
B Chandler, Ph.D., Michael L. Bengtson, Gail S. Page, Van S.
Chandler, Randel S. Marfin, Ralph L. McDade, Ph.D., James L.
Persky and Michael D. Spain, M.D.
10.17 Restricted Stock Agreement dated as of October 2, 2000 by and
between the Company and Gail S. Page.
21.1 Subsidiaries of the Company.
23.1 Consent of Independent Auditors.
24.1 Power of Attorney (incorporated in the signature page of this
report).
- ----------
* Previously filed as an Exhibit to the Company's Registration
Statement on Form S-1 (File No. 333-96317), filed February 7,
2000, as amended, and incorporated herein by this reference.
+ Confidential treatment requested for certain portions of this
Exhibit pursuant to Rule 406 promulgated under the Securities
Act and Rule 24b-2 promulgated under the Securities Exchange
Act, which portions are omitted and filed separately with the
Securities and Exchange Commission.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed by the Company during the quarter
ended December 31, 2000.
(c) See Exhibits listed under Item 14(a)(3)
43
46
SIGNATURES
Pursuant to the requirements of the Section 13 or 15(d) of the
Securities Exchange act of 1934, the Registrant has duly caused this Report to
be signed on its behalf by the undersigned, thereunto duly authorized, on March
22, 2001.
LUMINEX CORPORATION
By: /s/ MARK B. CHANDLER, PH.D.
-------------------------------------
Mark B. Chandler, Ph.D.
Chairman of the Board, President and
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENT, that each person whose signature
appears below constitutes and appoints Mark B. Chandler, Ph.D., and Michael L.
Bengtson, and each or any one 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 sign any and all amendments
(including post-effective amendments) to this Report, and to file the same, with
all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in connection therewith,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them, or their or his substitutes or substitute, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1934, this Report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
SIGNATURES TITLE DATE
- ---------- ----- ----
/s/ MARK B. CHANDLER, PH.D. Chairman of the Board, President March 22, 2001
- ------------------------------ and Chief Executive Officer
Mark B. Chandler, Ph.D. (principal executive officer)
/s/ JAMES L. PERSKY Chief Financial Officer March 22, 2001
- ------------------------------ (principal financial officer)
James L. Persky
/s/ HARRISS T. CURRIE Controller March 22, 2001
- ------------------------------ (principal accounting officer)
Harriss T. Currie
/s/ A. SIDNEY ALPERT Director March 22, 2001
- ------------------------------
A. Sidney Alpert
/s/ C. THOMAS CASKEY, M.D. Director March 22, 2001
- ------------------------------
C. Thomas Caskey, M.D.
/s/ ROBERT J. CRESCI Director March 22, 2001
- ------------------------------
Robert J. Cresci
/s/ FRED C. GOAD, JR. Director March 22, 2001
- ------------------------------
Fred C. Goad, Jr.
44
47
/s/ LAURENCE E. HIRSCH Director March 22, 2001
- ------------------------------
Laurence E. Hirsch
/s/ JIM D. KEVER Director March 22, 2001
- ------------------------------
Jim D. Kever
/s/ JOHN E. KOERNER, III Director March 22, 2001
- ------------------------------
John E. Koerner, III
/s/ G. WALTER LOEWENBAUM Director March 22, 2001
- ------------------------------
G. Walter Loewenbaum
/s/ WILLIAM L. ROPER, M.D. Director March 22, 2001
- ------------------------------
William L. Roper, M.D.
45
48
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
3.1* Restated Certificate of Incorporation of the Company.
3.2* Amended and Restated Bylaws of the Company.
4.1* Warrant for the Purchase of Shares of Common Stock dated as of
April 2, 1997 by and between the Company and Southcoast Capital
Corporation.
10.1* 1996 Stock Option Plan of the Company, as amended.
10.2* Form of Stock Option Agreement of the Company.
10.3* Form of Incentive Stock Option Agreement of the Company.
10.4* 2000 Long-Term Incentive Plan of the Company.
10.5* Form of Stock Option Award Agreement of the Company.
10.6*+ Development and Supply Agreement dated as of March 19, 1999 by and
between the Company and Bio-Rad Laboratories, Inc.
10.7*+ Amendment to Development and Supply Agreement dated as of January
13, 2000 by and between the Company and Bio-Rad Laboratories, Inc.
10.8+ Second Amendment to Development and Supply Agreement dated as of
June 12, 2000 by and between the Company and Bio-Rad Laboratories,
Inc.
10.9*+ Agreement for Electronic Manufacturing Services dated as of
January 1, 2000 by and between the Company and Sanmina
Corporation.
10.10* Consultant Agreement dated as of June 1, 1999 by and between the
Company and A. Sidney Alpert.
10.11* Amendment to Consultant Agreement dated as of November 1, 1999 by
and between the Company and A. Sidney Alpert.
10.12* Standard Commercial Lease Agreement dated as of August 21, 1989 by
and between the Company and Aetna Life Insurance Company, as
amended, for facilities situated at 12112 Technology Boulevard,
Austin, Texas 78727.
10.13 Sixth Amendment to Lease Agreement between Aetna Life Insurance
Company, as Landlord, and Luminex Corporation, as Tenant, dated
April 25, 2000.
10.14* Sublease Agreement dated as of December 20, 1999 by and between
the Company and American Innovations, Ltd., for facilities
situated at 12112 Technology Boulevard, Austin, Texas 78727.
10.15* First Amendment to Sublease Agreement dated as of December 20,
1999 by and between the Company and American Innovations, Ltd.,
for facilities situated at 12112 Technology Boulevard, Austin,
Texas 78727.
49
10.16* Form of Employment Agreement between the Company and each of Mark
B Chandler, Ph.D., Michael L. Bengtson, Gail S. Page, Van S.
Chandler, Randel S. Marfin, Ralph L. McDade, Ph.D., James L.
Persky and Michael D. Spain, M.D.
10.17 Restricted Stock Agreement dated as of October 2, 2000 by and
between the Company and Gail S. Page.
21.1 Subsidiaries of the Company.
23.1 Consent of Independent Auditors.
24.1 Power of Attorney (incorporated in the signature page of this
report).
- ----------
* Previously filed as an Exhibit to the Company's Registration
Statement on Form S-1 (File No. 333-96317), filed February 7,
2000, as amended, and incorporated herein by this reference.
+ Confidential treatment requested for certain portions of this
Exhibit pursuant to Rule 406 promulgated under the Securities
Act and Rule 24b-2 promulgated under the Securities Exchange
Act, which portions are omitted and filed separately with the
Securities and Exchange Commission.