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EXHIBIT 99
ADDITIONAL INFORMATION REGARDING FORWARD LOOKING STATEMENTS
The Company's Annual Report on Form 10-K for the year ended December 31,
1996 (the "Annual Report") contains various forward-looking statements which
reflect the Company's current views with respect to future events and financial
results. Forward-looking statements usually include the verbs "anticipates,"
"believes," "estimates," "expects," "intends," "plans," "projects,"
"understands" and other verbs suggesting uncertainty. The Company reminds
stockholders that forward-looking statements are merely predictions which are
inherently subject to uncertainties and other factors which could cause the
actual results to differ materially from the forward-looking statement. Some
of these uncertainties and other factors are discussed in the Annual Report.
See "Management Discussion and Analysis of Financial Condition and Results of
Operations--Forward Looking Statements." In this Exhibit 99, the Company has
attempted to identify additional uncertainties and other factors which may
affect its forward-looking statements.
Stockholders should understand that the uncertainties and other factors
identified in the Annual Report and this Exhibit 99 do not constitute a
comprehensive list of all the uncertainties and other factors which may affect
forward-looking statements. The Company has merely attempted to identity those
uncertainties and other factors which, in its view at the present time, have
the highest likelihood of significantly affecting its forward-looking
statements. In addition, the Company does not undertake any obligation to
update or revise any forward-looking statements or the list of uncertainties
and other factors which could affect such statements.
Capitalized terms not otherwise defined below have been defined in the
Annual Report.
LIQUIDITY AND CAPITAL RESOURCES
The Company's forward-looking statements assume, among others, that (i)
the Company will meet its planned goals for increased sales and (ii) the
Company will secure significant additional outside financing during the next
twelve months to repay outstanding principal on its long- term indebtedness and
to fund its long-term business strategy. Additional outside financing (or a
restructuring of existing obligations) could result in dilution to holders of
Common Stock and significant financial and operational restrictions on the
Company. See the Annual Report, "Business--Recent Acquisitions and Other
Significant Developments" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
RELIANCE ON UNIQUE PRODUCTS
The Company expects to continue to derive a substantial portion of its
revenues from sales of The Yellow IRIS family of urinalysis workstations and
related supplies and service. The Company believes that it is the only
supplier of laboratory systems which fully automate a complete urinalysis, and
that this has enabled it to achieve a certain level of gross margins on sales
of The Yellow IRIS family. Relatively modest declines in sales or gross
margins for these workstations could have a material adverse effect on the
Company's revenues and profits.
COMPETITION
There are numerous companies engaged in active research and development
programs within and outside of the clinical laboratory imaging systems field
that have considerable experience in areas of interest to the Company. The
Company cannot determine if other firms are currently engaged in potentially
competitive research. However, any one or more of these firms could develop
and introduce products comparable or superior to The Yellow IRIS, The White
IRIS, the PowerGene or any other product ultimately developed or acquired by
the Company. See the Annual Report, "Business--Competition."
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RELIANCE ON SINGLE SOURCE SUPPLIERS
Certain key components of the Company's instruments are manufactured
according to the Company's specifications or are available only from single
suppliers. Some of these suppliers have notified the Company that they have
discontinued, or will soon discontinue, production of key components.
Although, in the past, the Company has successfully transitioned to new
components to replace discontinued components, there can be no assurance that
the Company can successfully transition to satisfactory replacement components
or that the Company will have access to adequate supplies of discontinued
components on satisfactory terms during the transition period. The Company's
inability to transition successfully to replacement components or to secure
adequate supplies of discontinued components on satisfactory terms could have a
material adverse effect on the Company.
OPTION TO ACQUIRE POLY U/A SYSTEMS, INC.
In September 1995, the Company and Poly entered into a research and
development agreement to develop the Poly Products using the Company's
technology. The Company has an option until 121 days after termination of the
agreement with Poly to acquire all of the common stock of Poly for an aggregate
price increasing on August 1, 1997 from $4.4 million to $5.1 million payable in
cash or shares of Common Stock of the Company. If the Company elects to
exercise its option, the portion of the net cost of the acquisition allocated
to completed products would be capitalized and its subsequent amortization
would impact future earnings. For the portion of the net cost of the
acquisition allocated to in- process research and development, the Company
would record a nonrecurring, noncash (if purchased with Common Stock), charge
against then current earnings. See the Annual Report, "Business--Research and
Development" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Liquidity and Capital Resources."
The Company has not reached a decision whether to exercise its option to
acquire Poly and is under no obligation to do so. However, the Company will
periodically review the merits of acquiring Poly and may elect to exercise the
option in the future based on factors which are subject to change, including
(i) the progress of research and development of the Poly Products, (ii) the
Company's assessment of the commercial feasibility of the Poly Products, (iii)
the cost to acquire Poly and (iv) the market price of the Company's Common
Stock at the time the Company considers exercising the option.
DEPENDENCE ON KEY PERSONNEL
The Company's success depends in significant part upon the continued
service of certain key personnel, and its continuing ability to attract,
assimilate and retain such personnel. Competition for such personnel is
intense and there can be no assurance that the Company can retain its key
personnel or that it can attract, assimilate or retain other highly qualified
personnel in the future. While the Company generally enters into agreements
with its employees regarding patents, confidentiality and related matters, the
Company does not have employment agreements with most of its key employees.
The Company does not maintain life insurance polices on such employees. The
loss of key personnel, especially without advance notice, or the inability to
hire or retain qualified personnel could have a material adverse effect on the
Company.
DEPENDENCE ON COMPUTER PLATFORM
The Company currently uses the Macintosh computer, manufactured by Apple
Computer, as the platform for its PowerGene product line. Apple Computer
recently announced its intention to switch the Macintosh to a new operating
system in 1998. The Company is evaluating whether to continue use of the
Macintosh platform, switch to a Macintosh-compatible platform, or pursue the
use of a different platform, such as Windows NT, for the PowerGene product
line. In the event that the Company decides to use a Macintosh or a
Macintosh-compatible platform, there can be no assurance of Apple Computer's
successful and timely transition to a new Macintosh operating system or of the
Company's ability to secure adequate supplies and service from Apple Computer
or a Macintosh-compatible manufacturer. Any delay or disruption in platform
supply or service could adversely affect future sales of the PowerGene product
line. Furthermore, if the Company decides to pursue a
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different platform for its products, there can be no assurance of a successful
and timely transition to a new platform, and any delay or disruption in supply
or service of the new platforms could also adversely affect future sales of the
PowerGene product line.
DIFFICULTIES ASSOCIATED WITH INTRODUCTION OF FUTURE PRODUCTS
The commercial success of the future products and systems planned by the
Company depends upon their acceptance by the medical community.
Capital-intensive laboratory instruments such as The White IRIS and the
Company's other future products can significantly reduce labor costs, improve
precision and offer other distinctive benefits. However, often there is
resistance to products which require significant capital expenditures or which
eliminate jobs through automation.
There can be no assurance that the Company's new products and systems will
achieve significant market acceptance in the future or that sales of such
future products and systems will grow at the rates expected by management.
Furthermore, new product introductions or product enhancements by the Company's
competitors or the use of other technologies could cause a decline in sales or
gross margins on sales or loss of market acceptance of the Company's systems.
INTELLECTUAL PROPERTY RIGHTS
The Company's commercial success depends in part on its ability to protect
and maintain its proprietary technology. The Company has received patents with
respect to certain of its technologies. Receipt of such patents may not
insulate the Company from damaging competition. The validity and breadth of
claims in clinical laboratory instrumentation patents involve complex legal and
factual questions and, therefore, are highly uncertain. There can be no
assurance that the claims allowed under patents held by the Company or under
patents based on pending or future patent applications by the Company will be
sufficiently broad to protect what the Company believes to be its proprietary
rights, that issued patents will not be circumvented by competitors, or that
the rights granted under such patents will provide competitive advantages to
the Company. There also can be no assurance that other parties will not take,
or threaten to take, legal action against the Company, alleging infringement of
such parties' patents by current and proposed products of the Company or that
any of the Company's patents, or patents in which it has licensed rights, will
be held valid and enforceable if subsequently challenged.
The Company also has trade secrets and unpatented technology and
proprietary knowledge related to the sale, promotion, operation, development
and manufacturing of its products. While the Company generally enters into
confidentiality agreements with its employees and consultants, there can be no
assurance that the Company's trade secrets or proprietary technology will not
become known or be independently developed by competitors in such a manner that
the Company has no practical recourse. Nor can there be any assurance that
others will not develop or acquire equivalent expertise or develop products
which render the Company's current or future products noncompetitive or
obsolete.
The Company also claims copyrights in its software and the ways in which
it assembles and displays images and certain trademark rights in the United
States and other foreign countries. There can be no assurance that copyright
and trademark protection can be obtained, or if obtained, can or will be
enforced or will provide significant commercial advantage to the Company.
Litigation regarding patent and other intellectual property rights,
whether with or without merit, could be time-consuming and expensive and could
divert the Company's technical and management personnel. There can be no
assurance that the Company's litigation expenses will not increase in the
future. Any change in the Company's ability to protect and maintain its
proprietary rights could have a material adverse effect on the Company.
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TECHNOLOGICAL CHANGE
The market for the Company's systems is characterized by rapid
technological advances, changes in customer requirements and frequent new
product introductions and enhancements. The Company's future success depends
upon its ability to enhance its current product lines, to introduce new
products that keep pace with technological developments and to respond to
evolving customer requirements. Any failure by the Company to anticipate or
respond adequately to technological developments by its competitors or to
changes in customer requirements, or significant delays in product
introduction, could result in a loss of competitiveness and revenues. There
can be no assurance that the Company will be successful in developing and
marketing new products or product enhancements on a timely or cost-effective
basis, and such failure could have a material adverse effect on the Company.
GOVERNMENT REGULATION
Most of the Company's products are subject to stringent government
regulation in the United States and other countries. The regulatory process
can be lengthy, expensive and uncertain, and securing clearances or approvals
may require the submission of extensive official data and other supporting
information. Failure to comply with applicable requirements can result in
fines, recall or seizure of products, total or partial suspension of
production, withdrawal of existing product approvals or clearances, refusal to
approve or clear new applications or notices and criminal prosecution, any of
which could have a material adverse effect on the Company. Furthermore,
changes in existing federal, state or foreign laws or regulations, or in the
interpretation or enforcement thereof, or the discussion or promulgation of any
additional laws or regulations could have a material adverse effect on the
Company. See the Annual Report, "Business--Government Regulation."
ACQUISITIONS AND EXPANSION
As part of the Company's strategy to enhance and maintain its competitive
position, the Company may from time to time consider potential acquisitions of
complementary products, technologies and other businesses. The Company has
completed a number of acquisitions in the past two years. The evaluation,
negotiation and integration of acquisitions may consume significant time and
resources of the Company. There can be no assurance that acquisitions will not
have a material adverse effect upon the Company due to, among other things,
operational disruptions, integration issues, unexpected expenses and accounting
charges associated with such acquisitions.
HEALTHCARE REFORM POLICIES
Future legislation, regulation or payment policies of Medicare, Medicaid,
private health insurance plans, health maintenance organizations and other
third-party payors could adversely affect the demand for the Company's current
or future products and its ability to sell its products on a profitable basis.
Moreover, healthcare legislation is an area of extensive and dynamic change,
and the Company cannot predict future legislative changes in the healthcare
field or their impact on its business. See the Annual Report, "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Healthcare Reform Policies."
PRODUCT LIABILITY
The Company's products are used to gather information for medical
decisions and diagnosis. Accordingly, the manufacture and sale of the
Company's products entails an inherent risk of product liability arising from
an inaccurate, or allegedly inaccurate, test result. The Company has product
liability insurance coverage of $1.0 million per incident and $2.0 million in
the aggregate per year, and an umbrella policy of $5.0 million. There can be
no assurance that the Company's product liability insurance will be sufficient
to protect the Company in the event of a product liability claim.
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CURRENCY FLUCTUATIONS
The Company acquired a foreign subsidiary in the PSI Acquisition which
conducts business in various foreign currencies. Consequently, fluctuations in
exchange rates will affect the Company's future consolidated operating results
and such fluctuations could have an adverse effect on the Company. The impact
of future fluctuations in exchange rates cannot be predicted with any measure
of accuracy and will depend on the percentage of international sales. The
Company is not currently seeking to hedge the risks associated with
fluctuations in exchange rates and therefore continues to be subject to such
risks. In the future, the Company may undertake such transactions. If any
hedging techniques are implemented by the Company, there can be no assurance
that such techniques can be successful in eliminating or reducing the effects
of currency fluctuations.
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