e424b3
The information in
this prospectus supplement and the accompanying prospectus is
not complete and may be changed. This prospectus supplement and
the accompanying prospectus are not an offer to sell these
securities and are not soliciting an offer to buy these
securities in any state where the offer or sale is not
permitted.
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Filed pursuant to Rule 424(b)(3)
Registration No. 333-128329
Subject to completion, dated
November 13, 2006
PROSPECTUS SUPPLEMENT
To Prospectus dated December 20, 2005
870,000 Shares
Common Stock
$ per
share
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The selling shareholder is offering 870,000 shares of
Marlin Business Services Corp. We will not receive any net
proceeds from the sale of our shares by the selling shareholder.
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Trading symbol: Nasdaq Global Market MRLN
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The last reported sale price of our common stock on
November 10, 2006 was $22.26 per share.
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This investment involves risk. See Risk Factors
beginning on page 2 in the accompanying prospectus.
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Per Share
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Total
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Public offering price
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$
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$
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Underwriting discount
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$
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$
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Proceeds, before expenses, to the
selling shareholder
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$
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$
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The underwriter has a
30-day
option to purchase up to 130,000 additional shares of common
stock from the selling shareholder to cover over-allotments, if
any.
Neither the Securities and Exchange Commission nor any state
securities commission has approved of anyones investment
in these securities or determined if this prospectus supplement
and the accompanying prospectus are truthful or complete. Any
representation to the contrary is a criminal offense.
Piper Jaffray
The date of this prospectus supplement is
November , 2006.
TABLE OF
CONTENTS
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Page
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Prospectus Supplement
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S-1
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S-3
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S-3
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S-5
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S-5
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S-6
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S-6
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Prospectus
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Summary
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1
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Risk Factors
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2
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Forward-Looking Statements
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Use of Proceeds
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Selling Shareholders
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10
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Plan of Distribution
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11
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Legal Matters
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Experts
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About This Prospectus
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12
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Where You Can Find More Information
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You should rely only on the information contained in or
incorporated by reference into this prospectus supplement or the
accompanying prospectus. We have not, and the underwriter has
not, authorized any other person to provide you with different
information. This prospectus supplement and the accompanying
prospectus are not an offer to sell, nor are they seeking an
offer to buy, these securities in any state where the offer or
sale is not permitted. The information in this prospectus
supplement and the accompanying prospectus is complete and
accurate as of the date the information is presented, but the
information may have changed since that date.
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SUMMARY
The items in the following summary are described in more
detail later in the accompanying prospectus and in the
information incorporated by reference in this prospectus
supplement and the accompanying prospectus. This summary
provides an overview of selected information and does not
contain all the information you should consider. Therefore, you
should also read the more detailed information set out in the
accompanying prospectus and the financial statements and other
information incorporated by reference in this prospectus
supplement and the accompanying prospectus. Unless the context
otherwise requires, the terms Company,
registrant, we, us, and
our refer to Marlin Business Services Corp., a
Pennsylvania corporation, and its consolidated subsidiaries.
Business
of Marlin Business Services Corp.
We are a nationwide provider of equipment financing solutions
primarily to small businesses. We finance over
60 categories of commercial equipment important to
businesses including copiers, telephone systems, computers, and
certain commercial and industrial equipment. We access our end
user customers through origination sources comprised of our
existing network of independent equipment dealers and, to a
lesser extent, through relationships with lease brokers and
through direct solicitation of our end user customers. Our
leases are fixed-rate transactions with terms generally ranging
from 36 to 60 months. Since our founding in 1997, we
have grown to $886.9 million in total assets at
September 30, 2006. Our assets are substantially comprised
of our net investment in leases which totaled
$656.8 million at September 30, 2006. Our lease
portfolio grew approximately 17.7% in the twelve months ended
September 30, 2006. At September 30, 2006, our lease
portfolio consisted of approximately 109,000 accounts with
an average original term of 47 months and average original
transaction size of approximately $9,800. Since inception, we
have also added four regional sales offices to help us penetrate
certain targeted markets, with our most recent office opening in
Salt Lake City, Utah in 2006. Growing the lease portfolio while
maintaining asset quality remains the primary focus of
management. We expect our on-going investment in our sales teams
and regional offices to drive continued growth in our lease
portfolio.
In addition to our goal of lease portfolio growth, in November
2006 we announced the introduction of two new financial products
targeting the small business market: factoring and business
capital loans. Factoring provides small business customers
working capital funding through the discounted sale of their
accounts receivable to Marlin. Business capital loans provide
small business customers access to credit through term loans.
The small-ticket equipment leasing market is highly fragmented.
We estimate that there are up to 75,000 independent
equipment dealers who sell the types of equipment we finance. We
focus primarily on the segment of the market comprised of the
small and mid-size independent equipment dealers. We believe
this segment is underserved because:
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the large commercial finance companies and large commercial
banks typically concentrate their efforts on marketing their
products and services directly to equipment manufacturers and
larger distributors, rather than the independent equipment
dealers; and
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many smaller commercial finance companies and regional banking
institutions have not developed the systems and infrastructure
required to adequately service these equipment dealers on high
volume, low-balance transactions.
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S-1
We focus on establishing our relationships with independent
equipment dealers to meet their need for high quality,
convenient
point-of-sale
lease financing programs. We provide equipment dealers with the
ability to offer our lease financing and related services to
their customers as an integrated part of their selling process,
allowing them to increase their sales and provide better
customer service. We believe our personalized service approach
appeals to the independent equipment dealer by providing each
dealer with a single point of contact to access our flexible
lease programs, obtain rapid credit decisions and receive prompt
payment of the equipment cost. Our fully integrated account
origination platform enables us to solicit, process and service
a large number of low balance financing transactions.
Office
Location
Our headquarters is located at 300 Fellowship Road, Mount
Laurel, New Jersey, 08054, and our telephone number is
(888) 479-9111.
Our corporate Web site address is www.marlincorp.com. This
reference to our Web site is a textual reference only. We do not
incorporate the information on our Web site into this prospectus
and you should not consider any information on, or that can be
accessed through, our Web site as part of this prospectus.
The
Offering
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Common stock offered by the selling shareholder |
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870,000 shares |
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Common stock outstanding after the offering |
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12,014,989 shares |
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Offering price |
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$ per share |
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Use of proceeds |
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We will not receive any proceeds from the sale of shares of our
common stock by the selling shareholder. |
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Nasdaq Global Market symbol |
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MRLN |
The number of shares of common stock to be outstanding after
this offering is based on 12,014,989 shares outstanding on
October 31, 2006, which includes 207,731 shares of
non-vested restricted common stock. The number of shares to be
outstanding after this offering does not give effect to:
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925,977 shares of common stock issuable upon exercise of
outstanding options at a weighted average exercise price of
$11.55 per share as of October 31, 2006; or
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342,479 additional shares reserved for issuance under our stock
option plans as of October 31, 2006.
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Except as otherwise indicated, all information in this
prospectus supplement assumes no exercise of the
underwriters over-allotment option.
S-2
SELLING
SHAREHOLDER
The following table sets forth information, as of the date of
this prospectus supplement, with respect to the selling
shareholder, based on information provided by the selling
shareholder. Beneficial ownership is determined in accordance
with the rules of the Securities and Exchange Commission, and
generally includes voting or investment power with respect to
securities. The percentage of ownership for the selling
shareholder disclosed in this table is based on
12,014,989 shares of common stock outstanding as of
October 31, 2006.
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Shares
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Shares Beneficially
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Being Sold
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Shares Beneficially
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Owned Before the Offering
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in the
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Owned After the Offering
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Name of Beneficial Owner
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Number
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Percentage
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Offering
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Number
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Percentage
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Primus Venture Partners IV,
Inc.(1)
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1,985,013
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16.5
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870,000
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1,115,013
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9.3
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5900 Landerbrook Drive,
Suite 200 Cleveland, OH
44124-4020
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(1) |
The shares reported as beneficially owned by Primus Venture
Partners IV, Inc. (PVP IV Inc.) are held as follows:
1,905,612 shares are owned by Primus Capital Fund IV
Limited Partnership (PCF IV LP) and
79,401 shares are owned by Primus Executive
Fund Limited Partnership (PEF LP). Primus
Venture Partners IV Limited Partnership (PVP IV
LP), as the sole general partner of each of PCF IV LP and
PEF LP, may be deemed to have shared power to vote and dispose
of the 1,905,612 shares owned by PCF IV LP and the
79,401 shares owned by PEF LP. PVP IV Inc, as the sole
general partner of PVP IV LP, may be deemed to have shared power
to vote and dispose of the 1,905,612 shares owned by PCF IV
LP and the 79,401 shares owned by PEF LP. Loyal W. Wilson,
a former member of our Board of Directors, is one of five
shareholders and directors of PVP IV Inc. and may be deemed to
have shared power to vote and dispose of the
1,905,612 shares owned by PCF IV LP and the
79,401 shares owned by PEF LP along with the other four
shareholders and directors of PVP IV Inc., including William C.
Mulligan, Jonathan E. Dick, James T. Bartlett and Steven
Rothman, each of whom disclaims beneficial ownership in all of
such shares except to the extent of his pecuniary interest
therein.
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UNDERWRITING
Piper Jaffray & Co., as underwriter, has agreed to buy
from the selling shareholder, subject to the terms of a purchase
agreement, 870,000 shares of common stock. The underwriter
is committed to purchase and pay for all of the shares if any
are purchased.
The underwriter has advised us and the selling shareholder that
it proposes to offer the shares to the public at
$ per share. The underwriter
proposes to offer the shares to certain dealers at the same
price less a concession of not more than
$ per share. The underwriter
may allow and the dealers may reallow a concession of not more
than $ per share on sales to
certain other brokers and dealers. After the offering, these
figures may be changed by the underwriter.
The selling shareholder has granted to the underwriter an option
to purchase up to an additional 130,000 shares of common
stock at the same price to the public and with the same
underwriting discount described below. The underwriter may
exercise this option any time during the
30-day
period after the date of this prospectus supplement, but only to
cover over-allotments, if any.
S-3
The following table shows the underwriting fees to be paid to
the underwriter by the selling shareholder in connection with
this offering. These amounts are shown assuming both no exercise
and full exercise of the underwriters option to purchase
additional shares of common stock.
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No Exercise
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Full Exercise
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Total
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We are not paying any of the underwriting fees. We estimate that
the total fees and expenses payable by us in connection with
this offering will be approximately
$ .
We and the selling shareholder have agreed to indemnify the
underwriter against certain liabilities, including civil
liabilities under the Securities Act of 1933, as amended, or to
contribute to payments that the underwriter may be required to
make in respect of those liabilities.
The underwriter has informed us that it will not make sales of
the common stock offered by this prospectus supplement and the
accompanying prospectus to accounts over which it exercises
discretionary authority without the prior specific written
approval of the customer.
We, each of our executive officers and the selling shareholder
are subject to
lock-up
agreements that prohibit them from, among other things, offering
for sale, selling, contracting to sell, pledging, granting any
option for the sale of, entering into any transaction which is
designed to, or might reasonably be expected to, result in the
disposition, or otherwise issuing or disposing of any shares of
our common stock or any securities convertible into or
exchangeable for, or any options or rights to purchase or
acquire, our common stock for a period of at least 75 days
following the date of this prospectus supplement without the
prior written consent of the underwriter. The
lock-up
provisions applicable to us do not prohibit sales by us in
connection with the exercise of options granted or the granting
of options under the 2003 Equity Compensation Plan or pursuant
to the 2003 Employee Stock Purchase Plan. The
lock-up
provisions applicable to the selling shareholder do not prevent
the selling shareholder from selling shares to the underwriter
pursuant to the purchase agreement or from transferring its
shares or other securities to its affiliates, general partner or
limited partners, provided that the transferee of such
securities agrees to be
locked-up to
the same extent as the securityholder from whom it received the
shares. The
lock-up
provisions applicable to certain of our executive officers do
not prohibit the sale of shares pursuant to written trading
plans that have been established under
Rule 10b5-1
under the Securities Exchange Act of 1934, the sale of shares of
restricted stock awarded under our benefit plans upon vesting to
pay withholding taxes applicable to such vesting, the transfer
of shares pursuant to exchange agreements to which certain of
our executive officers are or become a party or the pledge or
transfer of shares pursuant to margin loans allowable under
brokerage account agreements to which certain of our executive
officers are a party.
The lock-up
period is subject to extension if (1) during the period
that begins on the date that is 18 calendar days before the last
day of the
lock-up
period and ends on the last day of the
lock-up
period, we issue an earnings release or material news or a
material event relating to us occurs or (2) prior to the
expiration of the
lock-up
period, we announce that we will release earnings results during
the 16-day
period beginning on the last day of the
lock-up
period, in which case the restrictions imposed in these
lock-up
agreements shall continue to apply until the expiration of the
18-day
period beginning on the issuance of the earnings release or the
occurrence of the material news or material event.
The shares are quoted on the Nasdaq Global Market under the
symbol MRLN.
S-4
To facilitate the offering, the underwriter may engage in
transactions that stabilize, maintain or otherwise affect the
price of the common stock during and after the offering.
Specifically, the underwriter may over-allot or otherwise create
a short position in the common stock for its own account by
selling more shares of common stock than the selling shareholder
has sold to it. Short sales involve the sale by the underwriter
of a greater number of shares than it is required to purchase in
the offering. The underwriter must close out any short position
by purchasing shares in the open market. A short position is
more likely to be created if the underwriter is concerned that
there may be downward pressure on the price of the common stock
in the open market after pricing that could adversely affect
investors who purchase in the offering.
In addition, the underwriter may stabilize or maintain the price
of the common stock by bidding for or purchasing shares of
common stock in the open market and may impose penalty bids. If
penalty bids are imposed, selling concessions allowed to other
broker-dealers participating in the offering are reclaimed if
shares of common stock previously distributed in the offering
are repurchased, whether in connection with stabilization
transactions or otherwise. The effect of these transactions may
be to stabilize or maintain the market price of the common stock
at a level above that which might otherwise prevail in the open
market. The imposition of a penalty bid may also affect the
price of the common stock to the extent that it discourages
resales of the common stock. The magnitude or effect of any
stabilization or other transactions is uncertain. These
transactions may be effected on the Nasdaq Global Market or
otherwise and, if commenced, may be discontinued at any time.
The underwriter may also engage in passive market making
transactions in our common stock. Passive market making consists
of displaying bids on the Nasdaq Global Market limited by the
prices of independent market makers and effecting purchases
limited by those prices in response to order flow. Rule 103
of Regulation M promulgated by the Securities and Exchange
Commission limits the amount of net purchases that each passive
market maker may make and the displayed size of each bid.
Passive market making may stabilize the market price of the
common stock at a level above that which might otherwise prevail
in the open market and, if commenced, may be discontinued at any
time.
This prospectus supplement and the accompanying prospectus may
be made available in electronic format on the Web sites
maintained by the underwriter and the underwriter participating
in this offering may distribute the prospectus supplement and
the accompanying prospectus electronically.
From time to time in the ordinary course of its business, the
underwriter and its affiliates may in the future engage in
investment banking transactions with us and our affiliates.
LEGAL
MATTERS
The validity of the securities offered by this prospectus
supplement will be passed upon for us by Morgan,
Lewis & Bockius LLP, Philadelphia, Pennsylvania. Piper
Jaffray & Co. is being represented by Sidley Austin
LLP, Chicago, Illinois.
EXPERTS
The consolidated financial statements of Marlin Business
Services Corp. and managements report on the effectiveness
of internal control over financial reporting incorporated in
this prospectus by reference from the Companys Annual
Report on
Form 10-K/A
for the year ended December 31, 2005 have been audited by
Deloitte & Touche LLP, an independent registered public
accounting firm, as stated in their report, which is
incorporated herein by reference, and have been so incorporated
in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
S-5
The consolidated financial statements of Marlin Business
Services Corp. as of December 31, 2004, and for each of the
years in the two-year period ended December 31, 2004, have
been incorporated by reference herein in reliance upon the
report of KPMG LLP, an independent registered public accounting
firm, incorporated by reference herein, and upon the authority
of said firm as experts in accounting and auditing.
WHERE YOU
CAN FIND MORE INFORMATION
This prospectus supplement and the accompanying prospectus are
part of a shelf registration statement that we filed
with the Securities and Exchange Commission. The
shelf registration statement that contains this
prospectus supplement and the accompanying prospectus, including
the exhibits to the shelf registration statement,
contains additional information about us and the securities
offered by this prospectus supplement and the accompanying
prospectus.
We file annual, quarterly and special reports, proxy statements
and other information with the Commission. You may read and copy
any document we file at the Commissions Public Reference
Room at 100 F Street, N.E., Washington, D.C. 20549. Please
call the Commission at
1-800-SEC-0330
for further information on the Public Reference Room. Our public
filings, including reports, proxy and information statements,
are also available on the Commissions Web site at
http://www.sec.gov.
INCORPORATION
OF CERTAIN DOCUMENTS BY REFERENCE
The Securities and Exchange Commission allows us to
incorporate by reference information from other
documents we file with them, which means that we can disclose
important information by referring to those documents. The
information incorporated by reference is considered to be part
of this prospectus supplement and the accompanying prospectus,
and information that we file later with the Commission will
automatically update and supersede this information. We
incorporate by reference into this prospectus supplement and the
accompanying prospectus the documents listed below, and any
future filings (other than the portions thereof deemed to be
furnished to the Commission pursuant to
Item 2.02 or Item 7.01 of Current Report on
Form 8-K)
we make with the Commission under Sections 13(a), 13(c), 14
or 15(d) of the Securities Exchange Act of 1934 prior to the
termination of this offering:
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our annual report on
Form 10-K
for the fiscal year ended December 31, 2005, filed with the
Commission on March 2, 2006;
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Amendment No. 1 to our annual report on
Form 10-K
for the fiscal year ended December 31, 2005, filed with the
Commission on April 14, 2006;
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our quarterly report on
Form 10-Q
for the quarter ended March 31, 2006, filed with the
Commission on May 9, 2006;
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our quarterly report on
Form 10-Q
for the quarter ended June 30, 2006, filed with the
Commission on August 8, 2006;
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our quarterly report on
Form 10-Q
for the quarter ended September 30, 2006, filed with the
Commission on November 6, 2006;
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S-6
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our current reports on
Form 8-K
filed with the Commission on September 29, 2006;
September 22, 2006; June 14, 2006; June 5, 2006;
May 25, 2006; April 13, 2006; and March 17, 2006;
and
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the description of our common stock contained in our
registration statement on
Form 8-A
filed under Section 12(g) of the Securities Exchange Act of
1934, as amended, with the Commission on October 30, 2003,
including any amendments or reports filed for the purpose of
updating such description.
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To the extent that any statement in this prospectus supplement
or the accompanying prospectus is inconsistent with any
statement that is incorporated by reference and that was made on
or before the date of this prospectus supplement or the
accompanying prospectus, the statement in this prospectus
supplement or the accompanying prospectus shall supersede such
incorporated statement. The incorporated statement shall not be
deemed, except as modified or superseded, to constitute a part
of this prospectus or the registration statement. Statements
contained in this prospectus supplement and the accompanying
prospectus as to the contents of any contract or other documents
are not necessarily complete and, in each instance, we refer you
to the copy of each contract or document filed as an exhibit to
the registration statement.
We will furnish without charge to each person, including any
beneficial owner of our securities, to whom a copy of this
prospectus supplement and the accompanying prospectus is
delivered, upon written or oral request, a copy of the
information that has been incorporated into this prospectus
supplement and the accompanying prospectus by reference (except
exhibits, unless they are specifically incorporated into this
prospectus supplement and the accompanying prospectus by
reference). You should direct any requests for copies to:
Marlin Business Services Corp.
300 Fellowship Road
Mount Laurel, New Jersey 08054
Attention: General Counsel
(888) 479-9111
S-7
PROSPECTUS
4,294,947 Shares
Common
Stock
This prospectus relates to the public offering, which is not
being underwritten, of 4,294,947 shares of common stock
that the selling shareholders named in this prospectus may offer
for sale from time to time. We are registering the common shares
in accordance with the exercise of registration rights by the
selling shareholders, but this does not necessarily mean that
the selling shareholders will offer to sell their shares.
The selling shareholders may offer for resale through this
prospectus the shares of common stock at various times at market
prices prevailing at the time of sale or at privately negotiated
prices. The selling shareholders may resell the common stock to
or through underwriters, broker-dealers or agents, who may
receive compensation in the form of discounts, concessions or
commissions. We will not receive any of the proceeds from the
resale of the common stock offered through this prospectus. We
will bear all costs, expenses and fees in connection with the
registration of the shares. The selling shareholders will bear
all commissions and discounts, if any, attributable to the sales
of the shares.
Our common stock is quoted on the Nasdaq National Market under
the symbol MRLN. On December 12, 2005, the last
reported sale price for our common stock on the Nasdaq National
Market was $22.77 per share.
Investing in our common stock involves risks. You should
carefully review the information contained in this prospectus
under the heading Risk Factors beginning on
page 2.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THE
SECURITIES DESCRIBED IN THIS PROSPECTUS OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this prospectus is December 20, 2005.
TABLE OF
CONTENTS
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i
SUMMARY
The following summary is qualified in its entirety by the
more detailed information appearing elsewhere in this prospectus
or incorporated by reference in this prospectus and may not
contain all the information that is important to you. Unless the
context otherwise requires, the terms Company,
registrant, we, us, and
our refer to Marlin Business Service Corp., a
Pennsylvania corporation, and its consolidated subsidiaries.
Our
Company
We are a nationwide provider of equipment financing solutions
primarily to small businesses. We finance over 60 categories of
commercial equipment important to businesses including copiers,
telephone systems, computers, and certain commercial and
industrial equipment. We access our end user customers through
origination sources comprised of our existing network of
independent equipment dealers and, to a lesser extent, through
relationships with lease brokers and through direct solicitation
of our end user customers. Our leases are generally fixed rate
transactions with terms generally ranging from 36 to
72 months.
About
Marlin Business Services Corp.
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Principal Executive Offices:
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Internet Address:
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300 Fellowship Road
Mount Laurel, New Jersey 08054
(888) 479-9111
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www.marlincorp.com
(Information contained on our Web
site is not a part of this prospectus.)
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RISK
FACTORS
Risks
Related to Our Business
If we
cannot obtain external financing, we may be unable to fund our
operations.
Our business requires a substantial amount of cash to operate.
Our cash requirements will increase if our lease originations
increase. We historically have obtained a substantial amount of
the cash required for operations through a variety of external
financing sources, such as borrowings under our revolving bank
facility, financing of leases through commercial paper
(CP) conduit warehouse facilities, and term note
securitizations. A failure to renew or increase the funding
commitment under our existing CP conduit warehouse facilities or
add new CP conduit warehouse facilities could affect our ability
to refinance leases originated through our revolving bank
facility and, accordingly, our ability to fund and originate new
leases. An inability to complete term note securitizations would
result in our inability to refinance amounts outstanding under
our CP conduit warehouse facilities and revolving bank facility
and would also negatively impact our ability to originate and
service new leases.
Our ability to complete CP conduit transactions and term note
securitizations, as well as obtain renewals of lenders
commitments, is affected by a number of factors, including:
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conditions in the securities and asset-backed securities markets;
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conditions in the market for commercial bank liquidity support
for CP programs;
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compliance of our leases with the eligibility requirements
established in connection with our CP conduit warehouse
facilities and term note securitizations, including the level of
lease delinquencies and defaults; and
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our ability to service the leases.
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We are and will continue to be dependent upon the availability
of credit from these external financing sources to continue to
originate leases and to satisfy our other working capital needs.
We may be unable to obtain additional financing on acceptable
terms or at all, as a result of prevailing interest rates or
other factors at the time, including the presence of covenants
or other restrictions under existing financing arrangements. If
any or all of our funding sources become unavailable on
acceptable terms or at all, we may not have access to the
financing necessary to conduct our business, which would limit
our ability to fund our operations. We do not have long term
commitments from any of our current funding sources. As a
result, we may be unable to continue to access these or other
funding sources. In the event we seek to obtain equity
financing, our shareholders may experience dilution as a result
of the issuance of additional equity securities. This dilution
may be significant depending upon the amount of equity
securities that we issue and the prices at which we issue such
securities.
Our
financing sources impose covenants, restrictions and default
provisions on us, which could lead to termination of our
financing facilities, acceleration of amounts outstanding under
our financing facilities and our removal as
servicer.
The legal agreements relating to our revolving bank facility,
our CP conduit warehouse facilities and our term note
securitizations contain numerous covenants, restrictions and
default provisions relating to, among other things, maximum
lease delinquency and default levels, a minimum net worth
requirement and a maximum debt to equity ratio. In addition, a
change in our Chief Executive Officer or President is an event
of default under our revolving bank facility and CP conduit
warehouse facilities unless we hire a replacement acceptable to
our lenders within 90 days. Such a change is also an
immediate event of servicer termination under our term note
securitizations. A merger or consolidation with another company
in which we are not the surviving entity, likewise, is an event
of default under our financing facilities. Further, our
revolving bank facility and CP conduit warehouse facilities
contain cross default provisions whereby certain defaults under
one facility would also be an event of default under the other
facilities. An event of default under the revolving bank
facility or a CP conduit warehouse facility could result in
termination of further funds being made available under these
facilities. An event of default under any of our facilities
could result in an acceleration of amounts outstanding under the
facilities, foreclosure on all or a
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portion of the leases financed by the facilities
and/or our
removal as a servicer of the leases financed by the facility.
This would reduce our revenues from servicing and, by delaying
any cash payment allowed to us under the financing facilities
until the lenders have been paid in full, reduce our liquidity
and cash flow.
If we
inaccurately assess the creditworthiness of our end user
customers, we may experience a higher number of lease defaults,
which may restrict our ability to obtain additional financing
and reduce our earnings.
We specialize in leasing equipment to small businesses. Small
businesses may be more vulnerable than large businesses to
economic downturns, typically depend upon the management talents
and efforts of one person or a small group of persons and often
need substantial additional capital to expand or compete. Small
business leases, therefore, may entail a greater risk of
delinquencies and defaults than leases entered into with larger,
more creditworthy leasing customers. In addition, there is
typically only limited publicly available financial and other
information about small businesses and they often do not have
audited financial statements. Accordingly, in making credit
decisions, our underwriting guidelines rely upon the accuracy of
information about these small businesses obtained from the small
business owner
and/or third
party sources, such as credit reporting agencies. If the
information we obtain from small business owners
and/or third
party sources is incorrect, our ability to make appropriate
credit decisions will be impaired. If we inaccurately assess the
creditworthiness of our end user customers, we may experience a
higher number of lease defaults and related decreases in our
earnings.
Defaulted leases and certain delinquent leases also do not
qualify as collateral against which initial advances may be made
under our revolving bank facility or CP conduit warehouse
facilities, and we cannot include them in our term note
securitizations. An increase in delinquencies or lease defaults
could reduce the funding available to us under our facilities
and could adversely affect our earnings, possibly materially. In
addition, increasing rates of delinquencies or charge-offs could
result in adverse changes in the structure of our future
financing facilities, including increased interest rates payable
to investors and the imposition of more burdensome covenants and
credit enhancement requirements. Any of these occurrences may
cause us to experience reduced earnings.
If we
are unable to effectively manage any future growth, we may
suffer material operating losses.
We have grown our lease originations and overall business
significantly since we commenced operations. However, our
ability to continue to increase originations at a comparable
rate depends upon our ability to implement our disciplined
growth strategy and upon our ability to evaluate, finance and
service increasing volumes of leases of suitable yield and
credit quality. Accomplishing such a result on a cost-effective
basis is largely a function of our marketing capabilities, our
management of the leasing process, our credit underwriting
guidelines, our ability to provide competent, attentive and
efficient servicing to our end user customers, our access to
financing sources on acceptable terms and our ability to attract
and retain high quality employees in all areas of our business.
Even if we are able to continue our growth in lease
originations, our future success will be dependent upon our
ability to manage our growth. Among the factors we would need to
manage are the training, supervision and integration of new
employees, as well as the development of infrastructure, systems
and procedures within our origination, underwriting, servicing,
collections and financing functions in a manner which enables us
to maintain higher volume in originations. Failure to
effectively manage these and other factors related to growth in
originations and our overall operations may cause us to suffer
material operating losses.
If
losses from leases exceed our allowance for credit losses, our
operating income will be reduced or eliminated.
In connection with our financing of leases, we record an
allowance for credit losses to provide for estimated losses. Our
allowance for credit losses is based on, among other things,
past collection experience, industry data, lease delinquency
data and our assessment of prospective collection risks.
Determining the appropriate level of the allowance is an
inherently uncertain process and therefore our determination of
this allowance may prove to be inadequate to cover losses in
connection with our portfolio of leases. Factors that could lead
to the inadequacy of our allowance may include our inability to
effectively manage collections, unanticipated adverse changes in
the economy or discrete events adversely affecting specific
leasing customers, industries or geographic areas. Losses in
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excess of our allowance for credit losses would cause us to
increase our provision for credit losses, reducing or
eliminating our operating income.
If we
cannot effectively compete within the equipment leasing
industry, we may be unable to increase our revenues or maintain
our current levels of operations.
The business of small-ticket equipment leasing is highly
fragmented and competitive. Many of our competitors are
substantially larger and have considerably greater financial,
technical and marketing resources than we do. For example, some
competitors may have a lower cost of funds and access to funding
sources that are not available to us. A lower cost of funds
could enable a competitor to offer leases with yields that are
lower than those we use to price our leases, potentially forcing
us to decrease our yields or lose origination volume. In
addition, certain of our competitors may have higher risk
tolerances or different risk assessments, which could allow them
to establish more origination source and end user customer
relationships and increase their market share. There are few
barriers to entry with respect to our business and, therefore,
new competitors could enter the business of small-ticket
equipment leasing at any time. The companies that typically
provide financing for large-ticket or middle-market transactions
could begin competing with us on small-ticket equipment leases.
If this occurs, or we are unable to compete effectively with our
competitors, we may be unable to sustain our operations at their
current levels or generate revenue growth.
If we
cannot maintain our relationships with origination sources, our
ability to generate lease transactions and related revenues may
be significantly impeded.
We have formed relationships with thousands of origination
sources, comprised primarily of independent equipment dealers
and, to a lesser extent, lease brokers. We rely on these
relationships to generate lease applications and originations.
We invest significant time and resources in establishing and
maintaining these relationships. Most of these relationships are
not formalized in written agreements and those that are
formalized by written agreements are typically terminable at
will. Our typical relationship does not commit the origination
source to provide a minimum number of lease transactions to us
nor does it require the origination source to direct all of its
lease transactions to us. The decision by a significant number
of our origination sources to refer their leasing transactions
to another company could impede our ability to generate lease
transactions and related revenues.
Hurricane
Katrina could negatively affect our operations, which could have
an adverse effect on our business or results of
operations.
In late August 2005, Hurricane Katrina struck the gulf coast of
Louisiana, Mississippi and Alabama and caused substantial
property damage. We cannot predict whether or to what extent
damage caused by Hurricane Katrina will affect our operations or
the economies in our market areas. Damage caused by Hurricane
Katrina could result in a decline in our leasing activity, a
decline in the value or destruction of leased property and an
increase in the risk of lease delinquencies and defaults. Our
business or results of operations may be adversely affected by
these and other negative effects of Hurricane Katrina.
The
departure of any of our key management personnel or our
inability to hire suitable replacements for our management may
result in defaults under our financing facilities, which could
restrict our ability to access funding and effectively operate
our business.
Our future success depends to a significant extent on the
continued service of our senior management team. A change in our
Chief Executive Officer or President is an event of default
under our revolving bank facility and CP conduit warehouse
facilities unless we hire a replacement acceptable to our
lenders within 90 days. Such a change is also an immediate
event of servicer termination under our term note
securitizations. The departure of any of our executive officers
or key employees could limit our access to funding and ability
to operate our business effectively.
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Failure
to realize the projected value of residual interests in
equipment we finance would reduce the residual value of
equipment recorded as assets on our balance sheet and may reduce
our operating income.
We estimate the residual value of the equipment which is
recorded as an asset on our balance sheet. Realization of
residual values depends on numerous factors, most of which are
outside of our control, including: the general market conditions
at the time of expiration of the lease; the cost of comparable
new equipment; the obsolescence of the leased equipment; any
unusual or excessive wear and tear on or damage to the
equipment; the effect of any additional or amended government
regulations; and the foreclosure by a secured party of our
interest in a defaulted lease. Our failure to realize our
recorded residual values would reduce the residual value of
equipment recorded as assets on our balance sheet and may reduce
our operating income.
The
termination or interruption of, or a decrease in volume under,
our property insurance program would cause us to experience
lower revenues and may result in a significant reduction in our
net income.
Our end user customers are required to obtain all-risk property
insurance for the replacement value of the leased equipment. The
end user customer has the option of either delivering a
certificate of insurance listing us as loss payee under a
commercial property policy issued by a third party insurer or
satisfying their insurance obligation through our insurance
program. Under our program, the end user customer purchases
coverage under a master property insurance policy written by a
national third party insurer (our primary insurer)
with whom our captive insurance subsidiary, AssuranceOne, Ltd.,
has entered into a 100% reinsurance arrangement. Termination or
interruption of our program could occur for a variety of
reasons, including:
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adverse changes in laws or regulations affecting our primary
insurer or AssuranceOne;
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a change in the financial condition or financial strength
ratings of our primary insurer or AssuranceOne;
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negative developments in the loss reserves or future loss
experience of AssuranceOne which render it uneconomical for us
to continue the program;
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termination or expiration of the reinsurance agreement with our
primary insurer, coupled with an inability by us to quickly
identify and negotiate an acceptable arrangement with a
replacement carrier; or
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competitive factors in the property insurance market.
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If there is a termination or interruption of this program or if
fewer end user customers elected to satisfy their insurance
obligations through our program, we would experience lower
revenues and our net income may be reduced.
If we
experience significant telecommunications or technology
downtime, our operations would be disrupted and our ability to
generate operating income could be negatively
impacted.
Our business depends in large part on our telecommunications and
information management systems. The temporary or permanent loss
of our computer systems, telecommunications equipment or
software systems, through casualty or operating malfunction,
could disrupt our operations and negatively impact our ability
to service our customers and lead to significant declines in our
operating income.
We
face risks relating to our recent accounting
restatement.
If we fail to maintain an effective system of internal controls,
we may not be able to accurately report our financial results.
As a result, current and potential investors could lose
confidence in our financial reporting, which would harm our
business and the trading price of our stock.
We have in the past discovered, and may in the future discover,
areas of our internal controls that need improvement including
control deficiencies that may constitute material weaknesses. A
material weakness is a significant deficiency, as defined in
Public Company Accounting Oversight Board Audit Standard
No. 2 or a combination of significant deficiencies, that
results in more than a remote likelihood that material
misstatements of
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our annual or interim financial statements would not be
prevented or detected by company personnel in the normal course
of performing their assigned functions.
In connection with the preparation of our Annual Report on
Form 10-K
for the fiscal year ended December 31, 2004, an evaluation
was performed under the supervision and with the participation
of our management, including our CEO and CFO, of the
effectiveness of the design and operation of our disclosure
controls and procedures. As a result of this evaluation, during
the first fiscal quarter of 2005, management identified and
concluded that a material weakness existed at December 31,
2004 in our controls over the selection and application of
accounting policies. Specifically, management concluded that we
had misapplied generally accepted accounting principles as they
pertain to the timing of recognition of interim rental income
since our inception in 1997 and, accordingly, we restated our
financial statements for the fiscal years ended
December 31, 2003 and December 31, 2002, and for the
four quarters of fiscal years 2004 and 2003, to correct this
error. The identified material weakness was fully remediated
during the first fiscal quarter of 2005. Our independent
registered public accounting firm has not affirmed the
remediation of the material weakness.
Consequently, management, including our CEO and CFO, have
concluded that our internal controls over financial reporting
were not designed or functioning effectively as of
December 31, 2004 to provide reasonable assurance that the
information required to be disclosed by us in reports filed
under the Securities Exchange Act of 1934 was recorded,
processed, summarized and reported within the time periods
specified in the SECs rules and forms and accumulated and
communicated to our management, including our CEO and CFO, as
appropriate, to allow timely decisions regarding disclosure.
Any failure to implement and maintain the improvements in our
internal control over financial reporting, or difficulties
encountered in the implementation of these improvements in our
controls, could cause us to fail to meet our reporting
obligations. Any failure to improve our internal controls to
address the identified material weakness could also cause
investors to lose confidence in our reported financial
information, which could have a negative impact on the trading
price of our stock.
Anti-takeover
provisions and our right to issue preferred stock could make a
third-party acquisition of us difficult.
We are a Pennsylvania corporation. Anti-takeover provisions of
Pennsylvania law could make it more difficult for a third party
to acquire control of us, even if such change in control would
be beneficial to our shareholders. Our amended and restated
articles of incorporation and our bylaws will contain certain
other provisions that would make it more difficult for a third
party to acquire control of us, including a provision that our
board of directors may issue preferred stock without shareholder
approval.
Risks
Related to Our Industry
If
interest rates change significantly, we may be subject to higher
interest costs on future term note securitizations and we may be
unable to effectively hedge our variable rate borrowings, which
may cause us to suffer material losses.
Because we generally fund our leases through a revolving bank
facility, CP conduit warehouse facilities and term note
securitizations, our margins could be reduced by an increase in
interest rates. Each of our leases is structured so that the sum
of all scheduled lease payments will equal the cost of the
equipment to us, less the residual, plus a return on the amount
of our investment. This return is known as the yield. The yield
on our leases is fixed because the scheduled payments are fixed
at the time of lease origination. When we originate or acquire
leases, we base our pricing in part on the spread we expect to
achieve between the yield on each lease and the effective
interest rate we expect to pay when we finance the lease. To the
extent that a lease is financed with variable rate funding,
increases in interest rates during the term of a lease could
narrow or eliminate the spread, or result in a negative spread.
A negative spread is an interest cost greater than the yield on
the lease. Currently, our revolving bank facility and our CP
conduit warehouse facilities have variable rates based on LIBOR,
prime rate or commercial paper interest rates. As a result,
because our assets have a fixed interest rate, increases in
LIBOR, prime rate or commercial paper interest rates would
negatively impact our earnings. If interest rates increase
faster than we are able to adjust the pricing under our new
leases, our net interest margin would be reduced. As required
under our
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financing facility agreements, we enter into interest rate cap
agreements to hedge against the risk of interest rate increases
in our CP conduit warehouse facilities. If our hedging
strategies are imperfectly implemented or if a counterparty
defaults on a hedging agreement, we could suffer losses relating
to our hedging activities. In addition, with respect to our
fixed rate borrowings, such as our term note securitizations,
increases in interest rates could have the effect of increasing
our borrowing costs on future term note transactions.
Deteriorated
economic or business conditions may lead to greater than
anticipated lease defaults and credit losses, which could limit
our ability to obtain additional financing and reduce our
operating income.
Our operating income may be reduced by various economic factors
and business conditions, including the level of economic
activity in the markets in which we operate. Delinquencies and
credit losses generally increase during economic slowdowns or
recessions. Because we extend credit primarily to small
businesses, many of our customers may be particularly
susceptible to economic slowdowns or recessions and may be
unable to make scheduled lease payments during these periods.
Therefore, to the extent that economic activity or business
conditions deteriorate, our delinquencies and credit losses may
increase. Unfavorable economic conditions may also make it more
difficult for us to maintain both our new lease origination
volume and the credit quality of new leases at levels previously
attained. Unfavorable economic conditions could also increase
our funding costs or operating cost structure, limit our access
to the securitization and other capital markets or result in a
decision by lenders not to extend credit to us. Any of these
events could reduce our operating income.
Regulatory
and legal uncertainties could result in significant financial
losses and may require us to alter our business strategy and
operations.
Laws or regulations may be adopted with respect to our equipment
leases or the equipment leasing, telemarketing and collection
processes. Any new legislation or regulation, or changes in the
interpretation of existing laws, which affect the equipment
leasing industry could increase our costs of compliance or
require us to alter our business strategy.
We, like other finance companies, face the risk of litigation,
including class action litigation, and regulatory investigations
and actions in connection with our business activities. These
matters may be difficult to assess or quantify, and their
magnitude may remain unknown for substantial periods of time. A
substantial legal liability or a significant regulatory action
against us could cause us to suffer significant costs and
expenses, and could require us to alter our business strategy
and the manner in which we operate our business.
Risks
Related to this Offering
Our
quarterly operating results may fluctuate
significantly.
Our operating results may differ from quarter to quarter, and
these differences may be significant. Factors that may cause
these differences include: changes in the volume of lease
applications, approvals and originations; changes in interest
rates; the timing of term note securitizations; the availability
of capital; the degree of competition we face; and general
economic conditions and other factors. The results of any one
quarter may not indicate what our performance may be in the
future.
Our
common stock price has been volatile and its trading volume has
been low. These conditions may continue or worsen.
Our common stock has often traded at very low volumes. In
addition, the trading price of our common stock may fluctuate
substantially depending on many factors, some of which are
beyond our control and may not be related to our operating
performance. These fluctuations could cause you to lose part or
all of your investment in our shares of common stock. Those
factors that could cause fluctuations include, but are not
limited to, the following:
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price and volume fluctuations in the overall stock market from
time to time;
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significant volatility in the market price and trading volume of
financial services companies;
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actual or anticipated changes in our earnings or fluctuations in
our operating results or in the expectations of market analysts;
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investor perceptions of the equipment leasing industry in
general and our company in particular;
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the operating and stock performance of comparable companies;
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general economic conditions and trends;
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major catastrophic events;
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loss of external funding sources;
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sales of large blocks of our stock or sales by insiders; or
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departures of key personnel.
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It is possible that in some future quarter our operating results
may be below the expectations of financial market analysts and
investors and, as a result of these and other factors, the price
of our common stock may decline.
The
selling shareholders own a large number of shares of our common
stock that can be sold in the public market. Future sales of our
common stock by the selling shareholders, or the perception that
such future sales may occur, may cause our stock price to
decline.
A substantial number of shares of our common stock could be sold
into the public market under this prospectus by the selling
shareholders. As of September 14, 2005, the selling
shareholders owned 4,294,947 shares of common stock,
representing 36.6% of our outstanding common stock as of
September 14, 2005. The sale of a substantial number of
shares of our common stock by the selling shareholders, or the
perception that such sales could occur, could materially and
adversely affect the market price of our common stock.
We
currently do not foresee any future cash dividend payments. As a
result, stockholders will benefit from an investment in our
common stock only if it appreciates in value.
We have not declared or paid any cash dividends on our common
stock since our initial public offering in November 2003.
Moreover, we currently intend to retain any future earnings to
finance our operations and to further expand and grow our
business. For that reason, we do not expect to pay any cash
dividends in the foreseeable future. As a result, the success of
an investment in our common stock will depend upon any future
appreciation in its value. We cannot guarantee that our common
stock will appreciate in value or even maintain the price at
which stockholders have purchased their shares.
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FORWARD-LOOKING
STATEMENTS
Certain statements in this prospectus may include the words or
phrases can be, expects,
plans, may, may affect,
may depend, believe,
estimate, intend, could,
should, would, if and
similar words and phrases that constitute forward-looking
statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Forward-looking statements are subject to
various known and unknown risks and uncertainties and we caution
that any forward-looking information provided by or on our
behalf is not a guarantee of future performance. Statements
regarding the following subjects are forward-looking by their
nature: (a) our business strategy; (b) our projected
operating results; (c) our ability to obtain external
financing; (d) our understanding of our competition; and
(e) industry and market trends. Our actual results could
differ materially from those anticipated by such forward-looking
statements due to a number of factors, some beyond our control,
including, without limitation:
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availability, terms and deployment of capital;
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general volatility of the securitization and capital markets;
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changes in our industry, interest rates or the general economy;
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changes in our business strategy;
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the degree and nature of our competition;
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availability of qualified personnel; and
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the factors set forth in the section captioned Risk
Factors beginning on page 2.
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Forward-looking statements apply only as of the date made and we
are not required to update forward-looking statements for
subsequent or unanticipated events or circumstances.
USE OF
PROCEEDS
We will not receive any proceeds from the resale of the common
stock offered through this prospectus.
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SELLING
SHAREHOLDERS
We issued the shares of common stock included in this prospectus
in connection with private placements of securities in February
1998, March 1999, June 1999, April 2000 and July 2001. Each
transaction took place prior to our initial public offering in
November 2003 and was exempt from the registration requirements
of the Securities Act of 1933, as amended. We have agreed with
each selling shareholder to file a registration statement to
register for resale the shares of common stock set forth below.
Except as noted in the footnotes below, none of the selling
shareholders has held any position or office with us or any of
our predecessors or affiliates within the last three years or
has had a material relationship with us or any of our
predecessors or affiliates within the past three years other
than as a result of the ownership of our shares or other
securities. Shares may also be sold by donees, pledgees and
other transferees or successors in interest of the selling
shareholders.
The following table sets forth information, as of
September 14, 2005 with respect to each selling
shareholder. The information below is based on information
provided by or on behalf of the selling shareholders. Beneficial
ownership is determined in accordance with the rules of the
Securities and Exchange Commission, or SEC, and generally
includes voting or investment power with respect to securities.
The percentage of ownership for the selling shareholders
disclosed in this table is based on 11,733,817 shares of
common stock outstanding as of September 14, 2005. Both the
number of shares listed as being offered by the selling
shareholders in the table and the holders respective
percentages of share ownership after the offering are based on
the assumptions that all of the shares being offered are sold
pursuant to this offering, and that no other shares of common
stock are acquired or disposed of by the selling shareholders
prior to the termination of this offering. Because the selling
shareholders may sell all, some or none of their shares or may
acquire or dispose of other shares of common stock, we cannot
estimate the aggregate number of shares that will be sold in
this offering or the number or percentage of shares of common
stock that the selling shareholders will own upon completion of
this offering.
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Shares Beneficially
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Shares Beneficially
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Owned Before Offering
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Shares
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Owned After Offering
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Name
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Number
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Percentage
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Offered Hereby
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Number
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Percentage
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WCI (Private Equity) LLC(2)
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2,309,934
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19.7
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%
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2,309,934
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1170 Peachtree Street,
Suite 1610
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Atlanta, GA 30309
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Primus Venture Partners IV, Inc.(1)
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1,985,013
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16.9
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%
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1,985,013
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5900 Landerbrook Drive,
Suite 200
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Cleveland, OH 44124-4020
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(1) |
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The shares reported as beneficially owned by Primus Venture
Partners IV, Inc. (PVP IV Inc.) are held as follows:
1,905,612 shares are owned by Primus Capital Fund IV
Limited Partnership (PCF IV LP) and
79,401 shares are owned by Primus Executive
Fund Limited Partnership (PEF LP). Primus
Venture Partners IV Limited Partnership (PVP IV
LP), as the sole general partner of each of PCF IV LP and
PEF LP, may be deemed to have shared power to vote and dispose
of the 1,905,612 shares owned by PCF IV LP and the
79,401 shares owned by PEF LP. Primus Venture Partners IV,
Inc. (PVP IV Inc.), as the sole general partner of
PVP IV LP, may be deemed to have shared power to vote and
dispose of the 1,905,612 shares owned by PCF IV LP and the
79,401 shares owned by PEF LP. Loyal W. Wilson, a former
member of our Board of Directors, is one of five shareholders
and directors of PVP IV Inc. and may be deemed to have shared
power to vote and dispose of the 1,905,612 shares owned by
PCF IV LP and the 79,401 shares owned by PEF LP along with
the other four shareholders and directors of PVP IV Inc.,
including William C. Mulligan, Jonathan E. Dick, James T.
Bartlett and Steven Rothman. Mr. Wilson disclaims
beneficial ownership in all of such shares except to the extent
of his pecuniary interest therein. Additionally, Mr. Wilson
beneficially owns 1,365 shares of our restricted Common
Stock (subject to vesting) and 2,750 shares of our Common
Stock issuable upon exercise of options. |
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(2) |
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The shares are directly owned by WCI (Private Equity) LLC
(WCI), whose sole manager is Peachtree Equity
Investment Management, Inc. (the Manager). The
Manager could be deemed to be an indirect beneficial owner of
the reported shares, and could be deemed to share such
beneficial ownership with WCI. Matthew J. Sullivan is the sole
director of the Manager, and could be deemed to be an indirect
beneficial owner of the reported shares, and could be deemed to
share such indirect beneficial ownership with the Manager and
WCI. |
10
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Mr. Sullivan beneficially owns 2,000 shares of our
Common Stock and disclaims beneficial ownership of the shares
reported in the table above except to the extent of his
pecuniary interest therein. Lawrence J. DeAngelo, one of our
directors, ceased to be an executive officer, a shareholder and
a director of the Manager in April 2005. In addition,
Mr. DeAngelo ceased to be a Managing Director and member of
Peachtree Equity Partners, L.P. (the Fund), which is
the sole member of WCI in April 2005. Mr. DeAngelo remains
a limited partner of the limited partnership that is in turn a
limited partner of the Fund. |
PLAN OF
DISTRIBUTION
The selling shareholders of the common stock registered under
this registration statement and any of their pledgees, assignees
and
successors-in-interest
may, from time to time, sell any or all of their shares of
common stock on any stock exchange, market or trading facility
on which the shares are traded or in private transactions. These
sales may be at fixed or negotiated prices. The selling
shareholder may use any one or more of the following methods
when selling shares:
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ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
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block trades in which the broker-dealer will attempt to sell the
shares as agent but may position and resell a portion of the
block as principal to facilitate the transaction;
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purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
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an exchange distribution in accordance with the rules of the
applicable exchange;
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privately negotiated transactions;
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settlement of short sales;
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broker-dealers may agree with the selling shareholders to sell a
specified number of such shares at a stipulated price per share;
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a combination of any such methods of sale;
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through the writing or settlement of options or other hedging
transactions, whether through an options exchange or
otherwise; or
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any other method permitted pursuant to applicable law.
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The selling shareholders may also sell shares under
Rule 144 under the Securities Act of 1933, as amended, if
available, rather than under this prospectus.
Broker-dealers engaged by the selling shareholders may arrange
for other brokers dealers to participate in sales.
Broker-dealers may receive commissions or discounts from the
selling shareholders (or, if any broker-dealer acts as agent for
the purchaser of shares, from the purchaser) in amounts to be
negotiated. The selling shareholders do not expect these
commissions and discounts to exceed what is customary in the
types of transactions involved.
In connection with the sale of our common stock or interests
therein, the selling shareholders may enter into hedging
transactions with broker-dealers or other financial
institutions, which may in turn engage in short sales of the
common stock in the course of hedging the positions they assume.
The selling shareholders may also sell shares of our common
stock short and deliver these securities to close out their
short positions, or loan or pledge the common stock to
broker-dealers that in turn may sell these securities. The
selling shareholders may also enter into option or other
transactions with broker-dealers or other financial institutions
or the creation of one or more derivative securities which
require the delivery to such broker-dealer or other financial
institution of shares offered by this prospectus, which shares
such broker-dealer or other financial institution may resell
pursuant to this prospectus (as supplemented or amended to
reflect such transaction).
The selling shareholders and any broker-dealers or agents that
are involved in selling the shares may be deemed to be
underwriters within the meaning of the Securities
Act in connection with such sales. In such event, any
commissions received by such broker-dealers or agents and any
profit on the resale of the shares purchased by them may be
deemed to be underwriting commissions or discounts under the
Securities Act. Each selling
11
shareholder has informed us that it does not have any agreement
or understanding, directly or indirectly, with any person to
distribute the shares of common stock registered hereunder.
We are required to pay certain fees and expenses incurred by us
incident to the registration of the shares. We have agreed to
indemnify the selling shareholders against certain losses,
claims, damages, and liabilities, including liabilities under
the Securities Act.
LEGAL
MATTERS
The validity of the securities offered by this prospectus will
be passed upon for us by Morgan, Lewis & Bockius LLP,
Philadelphia, Pennsylvania.
EXPERTS
The consolidated financial statements and schedule of Marlin
Business Services Corp. as of December 31, 2004 and 2003,
and for each of the years in the three-year period ended
December 31, 2004, have been incorporated by reference
herein and in the Registration Statement in reliance upon the
report of KPMG LLP, independent registered public accounting
firm, incorporated by reference herein, and upon the authority
of said firm as experts in accounting and auditing.
ABOUT
THIS PROSPECTUS
No person has been authorized to give any information or to make
any representations other than those contained in this
prospectus in connection with the offering made hereby, and if
given or made, such information or representations must not be
relied upon as having been authorized by us, any selling
shareholder or by any other person. Neither the delivery of this
prospectus nor any sale made hereunder shall, under any
circumstances, create any implication that information herein is
correct as of any time subsequent to the date hereof. This
prospectus does not constitute an offer to sell or a
solicitation of an offer to buy any security other than the
securities covered by this prospectus, nor does it constitute an
offer to or solicitation of any person in any jurisdiction in
which such offer or solicitation may not lawfully be made.
WHERE YOU
CAN FIND MORE INFORMATION
In this prospectus, we incorporate by reference the
information we file with the SEC, which means that we can
disclose important business, financial and other information to
you in this prospectus by referring you to the documents
containing this information. The information incorporated by
reference is considered to be part of this prospectus, and
information that we file with the SEC after the date of this
prospectus will automatically update and supersede this
information. However, any information contained herein shall
modify or supersede information contained in documents we filed
with the SEC before the date of this prospectus.
We incorporate by reference the documents listed below and any
future filings made with the SEC under Section 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934 until
the offering is completed:
(a) Our Annual Report on
Form 10-K
for the fiscal year ended December 31, 2004.
(b) Amendment No. 1 to our Annual Report on
Form 10-K
for the fiscal year ended December 31, 2004.
(c) Our Definitive Proxy Statement filed on April 25,
2005.
(d) Our Quarterly Reports on
Form 10-Q
for the quarter ended March 31, 2005, the quarter ended
June 30, 2005 and the quarter ended September 30, 2005.
(e) Amendment No. 1 to our Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2005.
(f) Amendment No. 1 to our Quarterly Report on
Form 10-Q
for the quarter ended June 30, 2005.
12
(g) Our Current Reports on
Form 8-K,
dated March 8, 2005 (Item 4.02), May 26, 2005,
June 24, 2005, August 19, 2005, August 26, 2005,
September 14, 2005, October 7, 2005 and
October 21, 2005.
(h) The description of our common stock contained in a
registration statement filed on
Form 8-A
under the Securities Exchange Act of 1934 filed on
October 30, 2003, including any amendment or report filed
for the purpose of updating such description.
We will provide to each person, including any beneficial owner,
to whom a prospectus is delivered, a copy of any or all of the
information that has been incorporated by reference in the
prospectus but not delivered with the prospectus. We will
provide this information upon written or oral request at no cost
the requester. However, we will not send exhibits to such
documents, unless such exhibits are specifically incorporated by
reference in such documents. You should direct requests for such
copies to Marlin Business Services Corp., 300 Fellowship Road,
Mount Laurel, New Jersey 08054, Attention: General Counsel,
telephone number:
(888) 479-9111.
In addition, we file reports, proxy statements, and other
information with the SEC under the Securities Exchange Act of
1934. You may read and copy any materials we file with the SEC
at the SECs Public Reference Room at 450 Fifth
Street, N.W., Washington, DC 20549. You may obtain information
on the operation of the Public Reference Room by calling the SEC
at (800) SEC-0330. The SEC maintains a Web site that
contains all information filed electronically by us. The address
of the SECs Web site is http://www.sec.gov. Our SEC
filings are also available to the public from our Web site at
http://www.marlincorp.com. However, the information our
Web site does not constitute a part of this prospectus.
13
WE HAVE NOT AUTHORIZED ANY PERSON TO MAKE A STATEMENT THAT
DIFFERS FROM WHAT IS IN THIS PROSPECTUS. IF ANY PERSON DOES MAKE
A STATEMENT THAT DIFFERS FROM WHAT IS IN THIS PROSPECTUS, YOU
SHOULD NOT RELY ON IT. THIS PROSPECTUS IS NOT AN OFFER TO SELL,
NOR IS IT SEEKING AN OFFER TO BUY, THESE SECURITIES IN ANY STATE
IN WHICH THE OFFER OR SALE IS NOT PERMITTED. THE INFORMATION IN
THIS PROSPECTUS IS COMPLETE AND ACCURATE AS OF ITS DATE, BUT THE
INFORMATION MAY CHANGE AFTER THAT DATE.
4,294,947
SHARES
OF COMMON STOCK
PROSPECTUS
December 20, 2005
870,000 Shares
Common Stock
PROSPECTUS SUPPLEMENT
Piper Jaffray
November , 2006