LTX CORP, 424B1, 1995-09-29

LTX CORP
424B1, 1995-09-29
INSTRUMENTS FOR MEAS & TESTING OF ELECTRICITY & ELEC SIGNALS

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<PAGE> 1
Filed pursuant to Rule 424(b)(1)
Registration No. 33-62125

PROSPECTUS
5,000,000 SHARES

[LOGO OF LTX]

LTX CORPORATION
COMMON STOCK
---------------------------

Of the 5,000,000 shares of Common Stock offered hereby, 4,500,000 are being
sold by LTX Corporation ("LTX" or the "Company") and 500,000 shares are being
sold by the Selling Shareholder. See "Principal and Selling Shareholders." The
Company will not receive any proceeds from the sale of shares by the Selling
Shareholder.

On September 28, 1995, the last reported sale price on the Nasdaq National
Market for the Common Stock was $11.625 per share. See "Price Range of Common
Stock." The Common Stock is quoted on the Nasdaq National Market under the
symbol "LTXX."
---------------------------

THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING AT PAGE 5.
---------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
Proceeds to
Price to Proceeds to Selling
Public Underwriting Company(2) Shareholder
Discounts and
Commissions(1)
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share............... $11.25 $0.57 $10.68 $10.68
- ------------------------------------------------------------------------------------------------
Total(3)................ $56,250,000 $2,850,000 $48,060,000 $5,340,000
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
</TABLE>

(1) The Company and the Selling Shareholder have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended (the "Securities Act"). See
"Underwriting."

(2) Before deducting estimated expenses of $240,000 payable by the Company.

(3) The Company has granted the Underwriters a 30-day option to purchase up to
750,000 additional shares of Common Stock to cover over-allotments, if any.
If such option is exercised in full, the total Price to Public, Underwriting
Discounts and Commissions and Proceeds to Company will be $64,687,500,
$3,277,500, and $56,070,000, respectively. See "Underwriting."
---------------------------

The shares of Common Stock offered by this Prospectus are offered by the
Underwriters subject to prior sale, to withdrawal, cancellation or modification
of the offer without notice, to delivery to and acceptance by the Underwriters
and to certain further conditions. It is expected that delivery of the shares
will be made at the offices of Lehman Brothers Inc., New York, New York, on or
about October 4, 1995.
---------------------------

LEHMAN BROTHERS NEEDHAM & COMPANY, INC.

September 28, 1995
<PAGE> 2

Linear/Mixed Signal Products

The Synchro is the latest
generation of linear/mixed signal
test systems. Synchro systems are
modular in design, which enables
customers to add new options to
their systems to meet their future
needs. The Synchro Series
includes: the Synchro Plus
Synchro II, and Synchro Production
PACs. The Synchro Plus allows
customers to test their most
advanced devices while the Synchro
ProductionPAC meets their volume
production needs.

Digital Products

LTX offers two lines of
digital test systems: the
Delta Series and the Master
Series, which are marketed
under the Trillium name. The
Delta Series includes: the
Delta 50, Delta/ST, and Delta
100. The Master Series
includes: the Deltamaster and
Micromaster test systems.
These digital systems offer a
broad range of test
capabilities which meet the
production test requirements
of microcontrollers and the
test requirements of high
performance microprocessors.

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS (AND SELLING GROUP
MEMBERS, IF ANY) MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON
STOCK ON THE NASDAQ NATIONAL MARKET IN ACCORDANCE WITH RULE 10B-6A UNDER THE
SECURITIES EXCHANGE ACT OF 1934. SEE "UNDERWRITING."

------------------------

LTX(R), Hiper(R) and enVision(TM) are all trademarks of the Company.

2
<PAGE> 3

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and financial statements (including the notes thereto) included or
incorporated by reference in this Prospectus. Unless otherwise indicated, all
information in this Prospectus assumes no exercise of the Underwriters'
over-allotment option.

THE COMPANY

LTX Corporation designs, manufactures and markets automatic test equipment
for the semiconductor industry that is used to test digital, linear and mixed
signal (a combination of digital and linear) integrated circuits ("ICs") and
discrete semiconductor components. The Company currently offers three lines of
test systems: digital test systems, which test digital ICs, including
microprocessors and microcontrollers; linear/mixed signal test systems, which
test a wide range of linear and mixed signal ICs; and discrete component test
systems, which test small signal and high power semiconductor components. The
Company also sells service and applications support for its test systems. The
semiconductors tested by the Company's systems are widely used in the computer,
communications, automotive and consumer electronics industries. The Company
markets its products worldwide to both manufacturers and users of digital,
linear and mixed signal ICs and discrete semiconductor components. The Company
sells its test systems to most of the major worldwide semiconductor
manufacturers. The Company's customers include ASAT, AT&T, Austria Mikro
Systeme, Hitachi, Intel, Motorola, National Semiconductor, Philips, SGS Thomson
and Sony.

All semiconductor manufacturers use semiconductor test equipment ("STE") to
design and manufacture semiconductors. Demand for STE is driven by capacity
expansion in the semiconductor industry and advances in semiconductor
technology. Advances in semiconductor technology have permitted the design and
manufacture of increasingly complex semiconductors with improved performance at
lower cost. As a result, semiconductors have become more widely used across a
broad spectrum of industries, including the computer, communications, automotive
and consumer electronics industries. The resulting business expansion in the
semiconductor industry, together with more advanced semiconductor technology,
have created a demand for STE that is faster, more versatile, more accurate,
more productive and easier to program and maintain. STE that meets this demand
also reduces the customer's total cost of testing.

The Company's strategy is to produce and supply high performance, modular
test systems using leading-edge technology and to provide complete test
solutions to its worldwide customer base through its substantial group of
engineers located throughout the world. This strategy enables the Company to
provide STE that is capable of testing advanced semiconductors in the design
phase and testing these devices at lower cost in the production phase. The
Company believes its strategy enables it to build strong long-term alliances
with its customers and to meet their demand for higher performance, more
cost-effective test systems.

The Company's test systems are also used by semiconductor manufacturers for
design verification, characterization, qualification and failure analysis of
ICs. In addition, certain large electronic equipment manufacturers use the
Company's test systems for incoming inspection and for further classification of
ICs. All of the Company's test systems are comprised of multiple
computer-controlled instruments which send signals to a device under test and
measure the responses of that device to classify the device by performance
characteristics and to ensure conformance with quality standards. The Company's
test system instrumentation is controlled by operating system software which is
developed by the Company. Current prices for the Company's test systems range
from approximately $400,000 for certain low pin count systems to approximately
$4,000,000 for a high pin count Delta Series test system.

The Company markets its products through its direct sales force in most
parts of the world. In Japan, the second largest market for STE, the Company
encounters significant competition from local STE manufacturers. In order to
better penetrate the Japanese market, the Company has entered into strategic
alliances with Sumitomo Metal Industries, Ltd., Ando Electric Co. Ltd., a
Japanese STE manufacturer and majority-owned subsidiary of Nippon Electric
Corporation, Ltd. (NEC), and Asia Electronics, Inc., a Japanese STE manufacturer
which is 50% owned by Toshiba Corporation.

LTX was incorporated in Massachusetts in August 1976. The Company's
principal executive offices are located at LTX Park at University Avenue,
Westwood, Massachusetts 02090, and its telephone number at that location is
(617) 461-1000.

3
<PAGE> 4

THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Company....................... 4,500,000 shares
Common Stock offered by the Selling Shareholder........... 500,000 shares
Common Stock to be outstanding after the offering(1)...... 33,827,836 shares
Use of proceeds by the Company............................ Working capital, capital expenditures,
debt repayment and other general
corporate purposes.
Nasdaq National Market symbol............................. LTXX
</TABLE>
- ---------------
(1) Based on the number of shares of Common Stock outstanding as of August 23,
1995 and excluding 1,975,059 shares of Common Stock reserved for issuance
pursuant to outstanding stock options, 2,042,017 shares of Common Stock
reserved for issuance pursuant to outstanding warrants and 406,000 shares of
Common Stock reserved for issuance upon conversion of the Company's 7 1/4%
Convertible Subordinated Debentures Due 2011.

SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JULY 31
--------------------------------------------------------
1991 1992 1993 1994 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Net sales............................... $200,361 $149,106 $172,932 $168,326 $210,319
Gross profit............................ 78,972 43,032 59,406 47,887 73,571
Restructuring charges................... -- 2,800 -- 14,376 --
Income (loss) from operations........... 11,165 (23,240) (2,886) (28,401) 14,840
Net income (loss)....................... 6,128 (24,260) (4,309) (31,304) 10,694
Fully diluted net income (loss) per
share................................. $ 0.36 $ (1.22) $ (0.20) $ (1.23) $ 0.36
Weighted average shares................. 21,963 19,888 21,089 25,485 29,787
</TABLE>
<TABLE>
<CAPTION>
FISCAL QUARTER ENDED
---------------------------------------------------------------------------------------------------
OCTOBER 31, JANUARY 31, APRIL 30, JULY 31, OCTOBER 31, JANUARY 31, APRIL 30, JULY 31,
1993 1994 1994 1994 1994 1995 1995 1995
----------- ----------- --------- -------- ----------- ----------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales......... $47,164 $38,119 $ 40,216 $ 42,827 $46,790 $50,017 $ 53,571 $ 59,941
Gross profit...... 14,945 7,455 11,494 13,993 15,861 17,469 18,691 21,550
Restructuring
charges......... -- 14,376 -- -- -- -- -- --
Income (loss) from
operations...... (754) (23,525) (3,653) (469) 2,037 3,135 4,070 5,598
Net income
(loss).......... (1,605) (24,005) (4,331) (1,363) 786 1,917 2,911 5,080
Fully diluted net
income (loss)
per share....... $ (0.06) $ (0.96) $ (0.17) $ (0.05) $ 0.03 $ 0.07 $ 0.10 $ 0.16
</TABLE>

<TABLE>
<CAPTION> JULY 31, 1995
-------------------------
ACTUAL AS ADJUSTED(1)
-------- --------------
<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital...................................................... $ 62,182 $110,002
Total assets......................................................... 145,917 193,737
Short-term debt...................................................... 8,816 8,816
Long-term debt....................................................... 28,267 28,267
Stockholders' equity................................................. 65,407 113,227
</TABLE>
- ---------------
(1) Adjusted to reflect the sale of 4,500,000 shares of Common Stock offered by
the Company hereby and the application of the estimated net proceeds
therefrom. See "Use of Proceeds."
4
<PAGE> 5

RISK FACTORS

In addition to the other information in this Prospectus, the following
factors should be carefully considered in evaluating the Company and its
business before purchasing any of the shares of Common Stock offered hereby.

CYCLICALITY OF SEMICONDUCTOR INDUSTRY

The Company's business is largely dependent upon the capital expenditures
of semiconductor manufacturers. The semiconductor industry is highly cyclical
and has historically experienced recurring periods of oversupply, which often
have had a severely detrimental effect on such industry's demand for test
equipment. Over the past two to three years, the semiconductor industry has been
experiencing significant growth, although there can be no assurance that such
growth will continue or that the Company's business and results of operations
will not be adversely affected by future downturns in the semiconductor
industry. The Company attempts to mitigate the risk of cyclicality in the
semiconductor industry and changes in particular segments of the industry by
offering products to a wide geographic base of customers in the digital, linear
and mixed signal IC and discrete component markets. However, any factor
adversely affecting any particular market or segment would adversely affect the
Company's business and results of operations. No assurance can be given that the
Company's business and results of operations will not be materially adversely
affected if downturns or changes in any particular market segments of the
semiconductor industry occur in the future, especially if all of the market
segments in which the Company participates experience downturns at the same
time.

OPERATING LOSSES; FLUCTUATIONS IN SALES AND OPERATING RESULTS

The Company incurred net losses in fiscal years 1992, 1993 and 1994.
Although the Company recognized a net profit of $10,694,000 in fiscal 1995,
there can be no assurance that the Company will be profitable in the future.

The Company's sales and operating results have fluctuated and could in the
future fluctuate significantly from period to period, including from one
quarterly period to another, due to a combination of factors, including the
cyclical demand of the semiconductor industry, the large selling prices of the
Company's test systems (which typically result in a long selling process),
competitive pricing pressures and the mix between and configuration of digital
and linear/mixed signal and discrete component test systems sold in a particular
period. The Company has also experienced significant fluctuations in its gross
margin on product sales. Given the relatively large selling prices of the
Company's test systems, sales of a limited number of test systems account for a
substantial portion of sales in any particular fiscal quarter and a small number
of transactions could therefore have a significant impact on sales and gross
margins for that fiscal quarter. The impact of these and other factors on the
Company's sales and operating results in any future period cannot be forecast
with accuracy. In addition, the need for continued investment in research and
development, for capital equipment requirements and for extensive worldwide
customer support capability results in significant fixed costs which would be
difficult to reduce in the event that the Company does not meet its sales
objectives. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Results of Operations."

IMPORTANCE OF NEW PRODUCT INTRODUCTIONS

The STE market is subject to rapid technological change and new product
introductions, as well as advancing industry standards. The development of
increasingly complex semiconductors and the utilization of semiconductors in a
broader spectrum of products has driven the need for more advanced test systems
to test such devices at an acceptable cost. The Company's ability to remain
competitive in the digital, linear and mixed signal IC and discrete component
markets will depend upon its ability to successfully enhance existing test
systems and develop new generations of test systems and to introduce these new
products on a timely and cost-effective basis. The Company also has to
manufacture its products in volume at a competitive price and on a timely basis
to enable customers to integrate them into their operations as they begin to
produce their next generation of semiconductors. The Company's failure to have a
competitive test system available when

5
<PAGE> 6

required by a semiconductor manufacturer would make it substantially more
difficult for the Company to sell test systems to that manufacturer for a number
of years. The Company has in the past experienced delays in introducing certain
of its products and enhancements, and there can be no assurance that it will not
encounter technical or other difficulties that could in the future delay the
introduction of new products or enhancements. If new products have reliability
or functionality problems, reduced orders, higher manufacturing costs, delays in
collecting accounts receivable and additional warranty expense may result, which
could reduce gross margins on new product sales. The Company's newly introduced
Delta Series of products is subject to the risks associated with new product
introductions, including the risk that reliability or functionality problems
could increase expenses and reduce gross margins on new product sales.
Furthermore, announcements by the Company or its competitors of new products
could cause customers to defer or forego purchases of the Company's existing
products, which would also adversely affect the Company's business and results
of operations. There can be no assurance that the Company will be successful in
the introduction and volume manufacture of its new products, that such
introduction will coincide with the development by semiconductor manufacturers
of their next generation semiconductors or that such products will satisfy
customer needs or achieve market acceptance. The failure to do so could
materially adversely affect the Company's business and results of operations.

HIGHLY COMPETITIVE INDUSTRY

The STE industry is highly competitive in all areas of the world. Most of
the Company's major competitors have substantially greater financial resources
and some have more extensive engineering, manufacturing, marketing and customer
support capabilities than the Company. The Company expects its competitors to
continue to improve the performance of their current products and to introduce
new products with improved price and performance characteristics. The Company's
major competitors in the market for digital test systems are Schlumberger
Limited, Teradyne, Inc. and Credence Systems Corporation, except in Japan where
the Company's major competitor is Advantest Corporation (an affiliate of Fujitsu
Limited). The Company's principal competitor for linear/mixed signal test
systems is Teradyne, Inc., except in Japan where the Company's major competitor
is Yokogawa Electric Works. The Company principally competes on the basis of
performance, cost of test, reliability, customer service, applications support,
price and ability to deliver its products on a timely basis. New product
introductions by the Company's competitors could cause a decline in sales or
loss of market acceptance of the Company's existing products and could prevent
the successful introduction of the Company's new products. In addition,
increased competitive pressure could lead to intensified price-based
competition, resulting in lower prices and adversely affecting the Company's
business and results of operations. In particular, at the end of a product life
cycle and as the Company and its competitors introduce more technologically
advanced products, it becomes more difficult to maintain established prices for
the earlier introduced product. From time to time, the Company's test systems
are sold by third parties as used equipment at prices substantially below the
prices of new test systems sold by the Company. Such sales of used test systems
may adversely affect the Company's sales of new test systems. Certain of the
Company's customers have also developed test equipment. The Company believes
that to remain competitive it will require significant financial resources for
investment in new product development and for the maintenance of customer
support centers worldwide. There can be no assurance that the Company will be
able to compete successfully in the future. See "Business -- Competition."

CUSTOMER CONCENTRATION

Although the composition of the Company's largest customers has changed
from year to year, sales to the Company's top ten customers accounted for 60% of
net sales in fiscal 1995 and 58% in both fiscal 1994 and fiscal 1993. The loss
of a major customer or reduction in orders by major customers, including
reductions due to market or competitive conditions in the semiconductor
industry, has had in the past and would have in the future an adverse effect on
the Company's business and results of operations. In addition, the Company's
ability to increase its sales will depend in part upon its ability to obtain
orders from new customers. Once a semiconductor manufacturer has selected a
particular semiconductor test equipment vendor's test system for a generation of
semiconductors and made a substantial investment to develop related test program
software and interfaces, the manufacturer is more likely to continue to purchase
test systems from that vendor for the entire

6
<PAGE> 7

generation of semiconductors and, possibly, subsequent generations of
semiconductors as well. The loss of one or more of its top ten customers could
have a material adverse effect on the Company's business and results of
operations. See "Business -- Customers."

INTERNATIONAL BUSINESS

Approximately 61% and 66% of the Company's sales for fiscal 1994 and fiscal
1995, respectively, were attributable to sales outside the United States. The
Company expects that international sales will continue to represent a
significant portion of its total sales. Sales to customers outside the United
States are subject to risks, including the imposition of governmental controls,
the need to comply with a wide variety of foreign and United States export laws,
political and economic instability, trade restrictions, changes in tariffs and
taxes, longer payment cycles typically associated with international sales, and
the greater difficulty of administering business overseas as well as general
economic conditions. Although substantially all of the Company's international
sales are denominated in United States dollars, a portion of all costs of the
Company's foreign operations are denominated in foreign currencies and,
accordingly, the Company's business and results of operations may be affected by
fluctuations in interest and currency exchange rates. The Company periodically
enters into foreign exchange contracts to hedge the risk that eventual net cash
flows will be adversely affected by changes in exchange rates. Furthermore,
although the Company endeavors to meet technical standards established by
foreign regulatory bodies, there can be no assurance that the Company will be
able to comply with changes in foreign standards in the future. The inability of
the Company to design products to comply with foreign standards could have a
material adverse effect on the Company. In addition, the laws of certain foreign
countries may not protect the Company's intellectual property to the same extent
as do the laws of the United States.

ACQUISITIONS

The Company from time to time may acquire technologies, product lines or
businesses that are complementary to those of the Company. Although the Company
believes that integration of acquired technologies, product lines and businesses
will result in long-term growth and profitability, there can be no assurance
that the Company will be able to successfully negotiate, finance or integrate
such acquired technologies, product lines or businesses. Furthermore, the
integration of an acquired company or business may cause a diversion of
management time and resources. There can be no assurance that a given
acquisition, if consummated, would not materially adversely affect the Company.

DEPENDENCE UPON KEY PERSONNEL

The Company's success is dependent upon certain key management and
technical personnel. There is intense competition for qualified employees among
companies in the semiconductor test equipment industry, and the loss of certain
of the Company's employees or an inability to attract and motivate highly
skilled employees could adversely affect its business.

PROPRIETARY RIGHTS

The Company's future success depends in part upon its proprietary
technology. Although the Company attempts to protect its proprietary technology
through a combination of contract provisions, trade secrets, copyrights and
patents, it believes that its future success depends more upon its engineering,
manufacturing, marketing and service skills. There can be no assurance that the
steps taken by the Company to protect its proprietary rights will be adequate to
prevent misappropriation of its technology or the independent development by
others of similar technology.

7
<PAGE> 8

license under the third party's intellectual property rights. There can be no
assurance, however, that a license will be available under reasonable terms or
at all. In addition, the Company could decide to resort to litigation to
challenge such claims or a third party could resort to litigation to enforce
such claims. Such litigation could be expensive and time consuming and could
materially adversely affect the Company's business and results of operations.
See "Business -- Proprietary Rights."

DEPENDENCE ON KEY SUPPLIERS

Most of the components for the Company's products are available from a
number of different suppliers; however, certain components are purchased from a
single supplier. Although LTX believes that all single-source components are
currently available in adequate amounts, there can be no assurance that
shortages will not develop in the future. Any disruption or termination of
supply of certain single-source components could have an adverse effect on the
Company's business and results of operations. See "Business -- Manufacturing and
Supply."

VOLATILITY OF STOCK PRICE

The Company's Common Stock has experienced substantial price volatility,
particularly as a result of quarter to quarter variations in the actual or
anticipated financial results of, or announcements by, the Company, its
competitors or its customers concerning technological innovations, new products
or developments concerning patents or proprietary rights. In addition, the stock
market has experienced extreme price and volume fluctuations which have
particularly affected the market price of many technology companies and which
have often been unrelated to the operating performance of these companies. These
broad market fluctuations, as well as general economic and political conditions,
may have an unfavorable effect on the market price of the Company's Common
Stock.

8
<PAGE> 9

USE OF PROCEEDS

The net proceeds to be received by the Company from the sale of the shares
of Common Stock offered hereby are estimated to be $47,820,000 ($55,830,000 if
the Underwriters' over-allotment option is exercised in full), after deducting
the underwriting discounts and commissions and estimated offering expenses
payable by the Company. The Company will not receive any proceeds from the sale
of shares by the Selling Shareholder. See "Principal and Selling Shareholders."

The net proceeds will be used to finance working capital, to fund capital
expenditures and for other general corporate purposes. The Company may apply a
portion of the net proceeds to redeem all or a portion of its 7 1/4% Convertible
Subordinated Debentures Due 2011. Whether the Company redeems these obligations
will depend upon a number of factors, including the market price of the
Company's Common Stock and interest rates at the time. The Company also may
apply a portion of the proceeds to acquire complementary businesses, assets or
technologies. Although there are no current negotiations, agreements or
understandings with respect to any such acquisition, the Company desires to be
able to respond to opportunities as they arise. In addition, the Company
believes that success in its industry requires substantial financial flexibility
to fund future growth. Pending such uses, the Company will invest the net
proceeds in short-term investment-grade, interest-bearing securities.

PRICE RANGE OF COMMON STOCK

The Company's Common Stock is traded on the Nasdaq National Market under
the symbol "LTXX." The following table sets forth for the periods indicated the
actual high and low sales prices per share of Common Stock, as reported on the
Nasdaq National Market:

<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
Fiscal Year Ended July 31, 1993:
First Quarter........................................................ $ 2 1/16 $1 3/8
Second Quarter....................................................... 4 1/2 1 3/4
Third Quarter........................................................ 5 7/8 3 1/8
Fourth Quarter....................................................... 6 1/2 4 5/8
Fiscal Year Ended July 31, 1994:
First Quarter........................................................ $ 8 1/4 $4 3/4
Second Quarter....................................................... 5 5/8 3 1/8
Third Quarter........................................................ 4 1/2 2
Fourth Quarter....................................................... 3 3/4 2
Fiscal Year Ended July 31, 1995:
First Quarter........................................................ $ 4 3/4 $3
Second Quarter....................................................... 5 11/16 3 1/2
Third Quarter........................................................ 6 7/16 4 7/8
Fourth Quarter....................................................... 11 5/8 6
Fiscal Year Ended July 31, 1996:
First Quarter (through September 28, 1995)........................... $14 1/8 $9 1/2
</TABLE>

See the cover page of this Prospectus for a recent last reported sale price
of the Common Stock.

DIVIDEND POLICY

The Company has never declared or paid cash dividends on the shares of
Common Stock and does not anticipate paying any cash dividends on the shares of
Common Stock in the foreseeable future. The Company currently intends to retain
future earnings to fund the development and growth of its business. Moreover,
the Company's credit agreement with a bank contains certain covenants which
prohibit the payment of cash dividends by the Company.

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<PAGE> 10

CAPITALIZATION

The following table sets forth the consolidated capitalization of the
Company at July 31, 1995 and as adjusted to reflect the sale of Common Stock
offered hereby and the application of the net proceeds therefrom, after
deducting the underwriting discounts and commissions and estimated offering
expenses payable by the Company.

<TABLE>
<CAPTION>
JULY 31, 1995
--------------------------------
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS, EXCEPT SHARE
AMOUNTS)
<S> <C> <C>
(UNAUDITED)
Short-term debt:
Notes payable....................................... $ 8,457 $ 8,457
Current portion of long-term debt................... 359 359
-------- --------
Total short-term debt....................... $ 8,816 $ 8,816
======== ========
Long-term debt:
Lease purchase obligations.......................... $ 1,318 $ 1,318
Subordinated note payable........................... 20,000 20,000
7 1/4% Convertible Subordinated Debentures Due
2011............................................. 7,308 7,308
-------- --------
Total long-term debt............................. 28,626 28,626
Less current portion............................. (359) (359)
-------- --------
Total....................................... 28,267 28,267
-------- --------
Stockholders' equity:
Common stock, $0.05 par value: 100,000,000 shares
authorized; 29,268,826 shares issued and
outstanding; 33,768,826 shares issued and
outstanding, as adjusted(1)...................... 1,463 1,688
Additional paid-in capital.......................... 131,425 179,020
Accumulated deficit................................. (67,481) (67,481)
-------- --------
Total stockholders' equity....................... 65,407 113,227
-------- --------
Total capitalization........................ $ 93,674 $141,494
======== ========
<FN>

- ---------------
(1) Excludes 2,034,069 shares of Common Stock reserved for issuance pursuant to
stock options outstanding at July 31, 1995, 2,042,017 shares of Common Stock
reserved for issuance pursuant to outstanding warrants and 406,000 shares of
Common Stock reserved for issuance upon conversion of the Company's 7 1/4%
Convertible Subordinated Debentures Due 2011.
</TABLE>

10
<PAGE> 11

<TABLE>

SELECTED CONSOLIDATED FINANCIAL DATA

The following table sets forth selected consolidated financial data of the
Company for and as of the end of each of the fiscal years in the five-year
period ended July 31, 1995. The selected consolidated financial data for and as
of the end of each of the five fiscal years in the period ended July 31, 1995
are derived from the consolidated financial statements of the Company, which
have been audited by Arthur Andersen LLP, independent public accountants. These
selected consolidated financial data should be read in conjunction with the
Company's Consolidated Financial Statements and the Notes thereto included or
incorporated by reference into this Prospectus.

<CAPTION>
FISCAL YEAR ENDED JULY 31
----------------------------------------------------
1991 1992 1993 1994 1995
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Net sales:
Product................................... $187,887 $134,353 $154,392 $145,688 $185,180
Service................................... 12,474 14,753 18,540 22,638 25,139
-------- -------- -------- -------- --------
Total net sales................... 200,361 149,106 172,932 168,326 210,319
Cost of sales:
Product................................... 113,124 96,024 102,005 104,189 122,509
Service................................... 8,265 10,050 11,521 12,750 14,239
Provision for excess inventories.......... -- -- -- 3,500 --
-------- -------- -------- -------- --------
Total cost of sales............... 121,389 106,074 113,526 120,439 136,748
-------- -------- -------- -------- --------
Gross profit................................ 78,972 43,032 59,406 47,887 73,571
Engineering and product development
expenses.................................. 21,859 21,943 19,744 19,604 19,778
Selling, general and administrative
expenses.................................. 45,948 41,529 42,548 42,308 38,953
Restructuring charges....................... -- 2,800 -- 14,376 --
-------- -------- -------- -------- --------
Income (loss) from operations............... 11,165 (23,240) (2,886) (28,401) 14,840
Interest expense, net....................... 5,550 3,520 3,979 3,874 3,774
-------- -------- -------- -------- --------
Income (loss) before income taxes and
minority interest......................... 5,615 (26,760) (6,865) (32,275) 11,066
Provision for income taxes.................. 1,095 -- -- -- 372
-------- -------- -------- -------- --------
Income (loss) before minority interest...... 4,520 (26,760) (6,865) (32,275) 10,694
Minority interest in net loss of
subsidiary................................ 1,608 2,500 2,556 971 --
-------- -------- -------- -------- --------
Net income (loss)........................... $ 6,128 $(24,260) $ (4,309) $(31,304) $ 10,694
======== ======== ======== ======== ========
Fully diluted net income (loss) per share... $ 0.36 $ (1.22) $ (0.20) $ (1.23) $ 0.36
Weighted average shares..................... 21,963 19,888 21,089 25,485 29,787

BALANCE SHEET DATA (AT END OF PERIOD):
Working capital............................. $ 73,578 $ 49,019 $ 55,624 $ 48,853 $ 62,182
Total assets................................ 144,829 118,284 138,257 130,636 145,917
Short-term debt............................. 4,044 9,430 10,047 7,307 8,816
Long-term debt.............................. 25,956 26,056 21,003 41,399 28,267
Stockholders' equity........................ 76,793 53,084 66,476 40,593 65,407
</TABLE>

11
<PAGE> 12

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

LTX designs, manufactures and markets automatic test equipment for the
semiconductor industry. The Company sells and supports its products worldwide to
both manufacturers and users of semiconductor components. LTX has been selling
equipment to test linear/mixed signal ICs since 1977 and digital ICs since 1985.
The Company's business is largely dependent upon the capital expenditures of
semiconductor manufacturers. The semiconductor industry is highly cyclical and
has historically experienced recurring periods of oversupply, which often have
had a severely detrimental effect on such industry's demand for test equipment.
As a result of these and other factors, the Company incurred losses in fiscal
years 1992, 1993 and 1994.

The Company has recently taken certain steps to attempt to mitigate the
effect on its business of the cyclical nature of the semiconductor industry. In
February 1994, the Company initiated a major restructuring program, including a
reorganization of senior management. This restructuring program lowered the
Company's break-even level of sales and aligned management responsibilities and
objectives along the Company's product lines. The Company consolidated
operations in Massachusetts and California, implemented a workforce reduction of
approximately 100 employees and eliminated several levels of management. Largely
as a result of these actions, quarterly operating expense levels were reduced
$2.1 million in the second half of fiscal 1994. In addition, product reliability
and product cost reduction programs were initiated to improve the Company's
gross margins.

In fiscal 1995, the Company began delivering its Delta Series digital test
systems and its Synchro ProductionPAC mixed signal test system. The Delta 50 and
Delta/ST systems were developed to meet the test requirements of newer high
volume, lower cost devices such as microcontrollers. The Synchro Production PAC
systems are lower cost, focused configurations aimed at the production
requirements of a variety of new mixed signal devices. In July 1994, the Company
strengthened its relationship with Ando Electric Company Ltd. ("Ando"), a
Japanese STE manufacturer and majority-owned subsidiary of Nippon Electric
Corporation, Ltd. (NEC). The Company received $20.0 million from Ando under a
term loan agreement that extends through July 2001. In fiscal 1993, the Company
entered into a development, manufacturing and marketing agreement with Ando
relating to the Delta 50.

Since the second quarter of fiscal 1994, the Company's operating results
have improved significantly. The Company returned to profitability in the first
quarter of fiscal 1995 and had net income of $10.7 million in fiscal 1995. The
Company has substantially increased its backlog position, while increasing
quarterly sales from $38.1 million in the second quarter of fiscal 1994 to $59.9
million in the fourth quarter of fiscal 1995. With the higher level of backlog,
the Company has been able to manufacture and deliver its test systems more
evenly within a quarter. Largely as a result of this, the Company generated
$19.5 million in net cash flow from operations in fiscal 1995.

12
<PAGE> 13

<TABLE>

RESULTS OF OPERATIONS

The following table sets forth for the periods indicated the items included
in the Consolidated Statement of Operations as percentages of total net sales.

<CAPTION>
PERCENTAGE OF NET SALES
-------------------------
YEAR ENDED JULY 31
-------------------------
1993 1994 1995
----- ----- -----
<S> <C> <C> <C>
Net sales:
Product........................................................... 89.3% 86.6% 88.0%
Service........................................................... 10.7 13.4 12.0
------ ------ ------
Total net sales............................................. 100.0 100.0 100.0
Cost of sales:
Product........................................................... 59.0 61.9 58.2
Service........................................................... 6.6 7.6 6.8
Provisions for excess inventories................................. -- 2.1 --
------ ------ ------
Total cost of sales......................................... 65.6 71.6 65.0
------ ------ ------
Gross profit........................................................ 34.4 28.4 35.0
Engineering and product development expenses........................ 11.5 11.6 9.4
Selling, general and administrative expenses........................ 24.6 25.1 18.5
Restructuring charges............................................... -- 8.6 --
------ ------ ------
Income (loss) from operations....................................... (1.7) (16.9) 7.1
Interest expense, net............................................... 2.3 2.3 1.8
------ ------ ------
Income (loss) before income taxes and minority interest............. (4.0) (19.2) 5.3
Provision for income taxes.......................................... -- -- 0.2
------ ------ ------
Income (loss) before minority interest.............................. (4.0) (19.2) 5.1
Minority interest in net loss of subsidiary......................... 1.5 0.6 --
------ ------ ------
Net income (loss)................................................... (2.5)% (18.6)% 5.1%
====== ====== ======
</TABLE>

Fiscal 1995 Compared to Fiscal 1994

Strong semiconductor industry conditions during fiscal 1995 resulted in a
significant increase in demand for the Company's test systems. Orders for the
Company's products and services were $236.9 million in fiscal 1995 as compared
to $197.9 million in fiscal 1994, an increase of approximately 20%. In the
fourth quarter of fiscal 1995, the Company achieved a record order level of
$83.7 million. Orders for the Company's linear and mixed signal test systems
remained at a high level in fiscal 1995, increasing 11% over fiscal 1994, while
orders for the Company's digital products increased 41% year-to-year. As a
result, the Company's backlog of unfilled orders for products and services was
$98.4 million at July 31, 1995 as compared to $71.8 million at July 31, 1994.

Net sales were $210.3 million in fiscal 1995 as compared to $168.3 million
in fiscal 1994, an increase of approximately 25%. Sales of the Company's linear
and mixed signal test systems were about 40% higher in fiscal 1995 as compared
to fiscal 1994. Sales of the Company's digital test systems in fiscal 1995 were
slightly higher than fiscal 1994. In the fourth quarter of fiscal 1995, sales of
the Company's digital test systems were almost 50% higher than the fourth
quarter of fiscal 1994. Service revenues were $25.1 million in fiscal 1995 as
compared to $22.6 million in fiscal 1994.

The gross profit margin was 35.0% of net sales in fiscal 1995 as compared
to 28.4% in fiscal 1994. The improvement in the gross profit margin was largely
a result of proportionately lower fixed manufacturing costs on the higher level
of shipments and higher average selling prices. In fiscal 1994, the gross profit
margin was reduced by 2.1% as a result of a $3.5 million provision for excess
inventories.

Engineering and product development expenses were $19.8 million, or 9.4% of
net sales, in fiscal 1995, as compared to $19.6 million, or 11.6% of net sales,
in fiscal 1994. Engineering and product development expenses have remained
approximately equal year-to-year reflecting the Company's continuing development
efforts, particularly for its Delta Series and Synchro product lines.

13
<PAGE> 14

Selling, general and administrative expenses were $39.0 million, or 18.5%
of net sales, in fiscal 1995, as compared to $42.3 million, or 25.1% of net
sales, in fiscal 1994. The decrease in selling, general and administrative
expenses of $3.3 million was largely a result of the Company's cost reduction
and restructuring measures initiated in fiscal 1994, which included a workforce
reduction and consolidation of facilities.

Net interest expense was $3.8 million in fiscal 1995 as compared to $3.9
million in fiscal 1994. In July 1995, the Company's 13 1/2% Convertible
Subordinated Debentures Due 2011 were converted into 2,241,000 shares of Common
Stock, reducing interest expense in the fourth quarter of fiscal 1995. In
addition, lower average bank borrowings reduced interest expense in fiscal 1995
as compared to fiscal 1994. This reduction in interest expense was largely
offset by an increase in interest due to a long-term loan the Company received
in July 1994.

The tax provision of $0.4 million in fiscal 1995 reflected certain state
and foreign tax provisions. The Company is in a net operating loss carryforward
position in most tax jurisdictions. There was no tax provision in fiscal 1994
due to the net operating loss for the year.

The Company's Japanese subsidiary's results of operations were break-even
in fiscal 1995. In fiscal 1994, the minority partner's share of the Company's
Japanese subsidiary's net loss was $1.0 million.

The Company had net income of $10.7 million, or $0.36 per share, in fiscal
1995, as compared to a net loss of $31.3 million, or $1.23 per share, in fiscal
1994. The net loss in fiscal 1994 included a restructuring charge of $14.4
million and a provision for excess inventories of $3.5 million. The Company's
operating results improved sequentially during fiscal 1995, beginning with net
income of $0.8 million in the first quarter and ending with net income of $5.1
million in the fourth quarter. The quarterly improvement in the Company's
results reflected the increasing level of sales, higher gross profit margin and
reduction of operating expenses as a percentage of net sales.

Fiscal 1994 Compared to Fiscal 1993

Net sales were $168.3 million in fiscal 1994 as compared to $172.9 million
in fiscal 1993, a decrease of approximately 3%. Sales of the Company's linear
and mixed signal products increased by over 30% in fiscal 1994 as compared to
fiscal 1993, and service revenues increased by over 20% year-to-year. However,
this improvement was offset by a reduction of over 30% in sales of the Company's
digital product line in fiscal 1994 as compared to fiscal 1993. The decline in
shipments of the Company's digital product line was due to lower demand from
customers, particularly in North America, for testing microprocessors and other
personal computer-related devices.

The gross profit margin was 28.4% of net sales in fiscal 1994 as compared
to 34.4% in fiscal 1993. In the second quarter of fiscal 1994, the Company
recorded a $3.5 million provision for excess inventories primarily as a result
of lower than anticipated shipment levels in the first half of fiscal 1994. This
provision lowered the gross profit margin by 2.1% of net sales in fiscal 1994.
In fiscal 1993, the gross profit margin was increased by 2.6% as a result of a
$6.5 million payment made by Ando under the terms of a development contract that
was included in product sales. There was no similar contract revenue in fiscal
1994. The gross profit margin in fiscal 1994 was also adversely affected by
proportionately higher fixed manufacturing costs on lower digital product sales
and by lower average selling prices for the Company's digital products.

Engineering and product development expenses were $19.6 million, or 11.6%
of net sales, in fiscal 1994 as compared to $19.7 million, or 11.5% of net
sales, in fiscal 1993. Engineering expenses in both fiscal 1994 and fiscal 1993
included significant development costs for the Company's new generation of
digital products, the Delta Series, as well as enhancements to the mixed signal
product line.

In March 1994, the Company announced a major restructuring program. The
restructuring consisted of a consolidation of facilities, primarily involving
the Company's leased facilities in Westwood, Massachusetts, and a workforce
reduction of approximately 100 employees. As a result of those decisions, the
Company took a $14.4 million restructuring charge to its second quarter results
of operations. The restructuring charge largely related to the Company's plan to
eliminate excess leased facilities and included amounts for severance payments
and outplacement benefits for terminated employees. Largely as a result of the
restructuring,

14
<PAGE> 15

engineering and product development expenses and selling, general and
administrative expenses, combined, were $2.1 million lower in the fourth quarter
of fiscal 1994 as compared to the second quarter of fiscal 1994.

Selling, general and administrative expenses were $42.3 million, or 25.1%
of net sales, in fiscal 1994 as compared to $42.5 million, or 24.6% of net
sales, in fiscal 1993. The decrease of $0.2 million was due to a translation
loss of $1.5 million in fiscal 1993, which was partially offset by personnel
additions and higher costs for sales activities in the first half of fiscal
1994.

Net interest expense was $3.9 million in fiscal 1994 as compared to $4.0
million in fiscal 1993. A decrease in interest expense in fiscal 1994 as a
result of the conversion of the Company's 10 1/2% Convertible Subordinated
Debentures Due 2010 into Common Stock in July 1993 was largely offset by an
increase in interest expense on higher average bank borrowings in fiscal 1994.

The Company's Japanese subsidiary had a net loss in fiscal 1994 and fiscal
1993. The minority interest in net loss of subsidiary represents the minority
partner's share of the Company's Japanese subsidiary's loss in both years. The
net loss in fiscal 1994 was reduced substantially from the prior fiscal year
primarily as a result of an increase in sales and gross margin in fiscal 1994
over fiscal 1993.

There was no tax provision in fiscal 1994 or fiscal 1993 due to the net
loss in both years.

The Company had a net loss of $31.3 million in fiscal 1994 as compared to a
net loss of $4.3 million in fiscal 1993. The Company reported a net loss of $1.6
million in the first quarter of fiscal 1994 and a net loss of $24.0 million in
the second quarter of fiscal 1994, including the restructuring charge of $14.4
million and a provision for excess inventories of $3.5 million. The Company
reduced its net loss to $4.3 million in the third quarter of fiscal 1994 and to
$1.4 million in the fourth quarter of fiscal 1994 as a result of a combination
of lower operating expenses from the restructuring effort initiated in March
1994 and an increase in the Company's shipment level and gross profit margin.

15
<PAGE> 16

QUARTERLY RESULTS OF OPERATIONS

The following tables set forth certain unaudited quarterly financial
information for each of the Company's last eight fiscal quarters, including such
amounts expressed as a percentage of total net sales. The Company believes that
this information includes all necessary adjustments (consisting only of normal
recurring adjustments) necessary for a fair presentation of such quarterly
information when read in conjunction with the consolidated financial statements
included or incorporated elsewhere herein. The operating results for any quarter
are not necessarily indicative of results of any future period. Generally,
orders are lower in the first quarter of the Company's fiscal year than in other
quarters of that fiscal year as a result of buying patterns in the semiconductor
industry, although the Company's net sales in a particular fiscal quarter are a
function of both orders and backlog.

<TABLE>
<CAPTION>
FISCAL 1994 FISCAL 1995
------------------------------------------------ ------------------------------------------------
OCTOBER 31, JANUARY 31, APRIL 30, JULY 31, OCTOBER 31, JANUARY 31, APRIL 30, JULY 31,
1993 1994 1994 1994 1994 1995 1995 1995
----------- ----------- --------- -------- ----------- ----------- --------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Net sales:
Products................ $42,466 $ 32,911 $34,164 $ 36,147 $40,828 $43,864 $47,318 $ 53,170
Service................. 4,698 5,208 6,052 6,680 5,962 6,153 6,253 6,771
------- ------- ------- ------- ------- ------- ------- --------
Total net sales.... 47,164 38,119 40,216 42,827 46,790 50,017 53,571 59,941
Cost of sales:
Products................ 29,275 23,982 25,485 25,447 27,409 28,883 31,451 34,766
Service................. 2,944 3,182 3,237 3,387 3,520 3,665 3,429 3,625
Provision for excess
inventories........... -- 3,500 -- -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- --------
Total cost of
sales............ 32,219 30,664 28,722 28,834 30,929 32,548 34,880 38,391
------- ------- ------- ------- ------- ------- ------- --------
Gross profit.............. 14,945 7,455 11,494 13,993 15,861 17,469 18,691 21,550
Engineering and product
development expenses.... 5,041 5,092 4,794 4,677 4,722 4,715 5,077 5,264
Selling, general and
administrative
expenses................ 10,658 11,512 10,353 9,785 9,102 9,619 9,544 10,688
Restructuring charges..... -- 14,376 -- -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- --------
Income (loss) from
operations.............. (754) (23,525) (3,653) (469) 2,037 3,135 4,070 5,598
Interest expense, net..... 851 900 994 1,129 1,251 1,123 1,055 345
------- ------- ------- ------- ------- ------- ------- --------
Income (loss) before
income taxes and
minority interest....... (1,605) (24,425) (4,647) (1,598) 786 2,012 3,015 5,253
Provision for income
taxes................... -- -- -- -- -- 95 104 173
------- ------- ------- ------- ------- ------- ------- --------
Income (loss) before
minority interest....... (1,605) (24,425) (4,647) (1,598) 786 1,917 2,911 5,080
Minority interest in net
loss of subsidiary...... -- 420 316 235 -- -- -- --
------- ------- ------- ------- ------- ------- ------- --------
Net income (loss)......... $(1,605) $ (24,005) $(4,331) $ (1,363) $ 786 $ 1,917 $ 2,911 $ 5,080
======= ======= ======= ======= ======= ======= ======= ========
Fully diluted net income
(loss) per share........ $ (0.06) $ (0.96) $ (0.17) $ (0.05) $ 0.03 $ 0.07 $ 0.10 $ 0.16

Net sales:
Products................ 90.0% 86.3% 85.0% 84.4% 87.3% 87.7% 88.3% 88.7%
Service................. 10.0 13.7 15.0 15.6 12.7 12.3 11.7 11.3
------- ------- ------- ------- ------- ------- ------- --------
Total net sales.... 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Cost of sales:
Products................ 62.1 62.9 63.4 59.4 58.6 57.8 58.7 58.0
Service................. 6.2 8.3 8.0 7.9 7.5 7.3 6.4 6.0
Provision for excess
inventories........... -- 9.2 -- -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- --------
Total cost of
sales............ 68.3 80.4 71.4 67.3 66.1 65.1 65.1 64.0
------- ------- ------- ------- ------- ------- ------- --------
Gross profit.............. 31.7 19.6 28.6 32.7 33.9 34.9 34.9 36.0
Engineering and product
development expenses.... 10.7 13.4 11.9 10.9 10.1 9.4 9.5 8.8
Selling, general and
administrative
expenses................ 22.6 30.2 25.8 22.9 19.4 19.2 17.8 17.9
Restructuring charges..... -- 37.7 -- -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- --------
Income (loss) from
operations.............. (1.6) (61.7) (9.1) (1.1) 4.4 6.3 7.6 9.3
Interest expense, net..... 1.8 2.4 2.5 2.6 2.7 2.3 2.0 0.5
------- ------- ------- ------- ------- ------- ------- --------
Income (loss) before
income taxes and
minority interest....... (3.4) (64.1) (11.6) (3.7) 1.7 4.0 5.6 8.8
Provision for income
taxes................... -- -- -- -- -- 0.2 0.2 0.3
------- ------- ------- ------- ------- ------- ------- --------
Income (loss) before
minority interest....... (3.4) (64.1) (11.6) (3.7) 1.7 3.8 5.4 8.5
Minority interest in net
loss of subsidiary...... -- 1.1 0.8 0.5 -- -- -- --
------- ------- ------- ------- ------- ------- ------- --------
Net income (loss)......... (3.4)% (63.0)% (10.8)% (3.2)% 1.7% 3.8% 5.4% 8.5%
======= ======= ======= ======= ======= ======= ======= ========
</TABLE>

16
<PAGE> 17

LIQUIDITY AND CAPITAL RESOURCES

Cash and equivalents were $29.2 million at July 31, 1995 as compared to
$17.2 million at July 31, 1994. The increase in cash and equivalents of $12.0
million was a result of $19.5 million of net cash provided by operating
activities, $10.2 million of net cash used for property and equipment
expenditures, $2.3 million of net cash provided by financing activities and $0.4
million of net cash provided by the effect of exchange rate changes.

The positive net cash flow from operating activities was primarily a result
of the net income for the fiscal year, before non-cash depreciation charges.
Although sales in the fourth quarter of fiscal 1995 were approximately 40%
higher than the fourth quarter of the prior year, accounts receivable were $0.5
million lower year-to-year. The decrease in accounts receivable reflected the
Company's ability to ship more evenly within a fiscal quarter and achieve a
higher level of collections on those shipments within the fiscal quarter.
Inventories increased $4.4 million during fiscal 1995 to meet the higher sales
levels and to allow for more even shipments during the year. The increase in
accounts payable of $6.2 million during fiscal 1995 relates to the higher level
of inventory purchases during the period. At July 31, 1995, the Company had
received $3.3 million in advance payments from customers for systems to be
delivered in fiscal 1996. At July 31, 1995, the Company had a restructuring
reserve of $6.1 million remaining to cover the estimated future cash flows
relating primarily to excess leased facilities. Cash outflows during fiscal 1995
were $4.8 million for excess leased facilities and $0.8 million for severance
payments. At July 31, 1995, the Company had working capital of $62.2 million and
a ratio of current assets to current liabilities of 2.2 to 1.0.

Additions to property and equipment were $10.2 million during fiscal 1995
and were slightly higher than depreciation charges of $9.7 million. Equipment
additions during fiscal 1995 were primarily for use in product development and
customer support activities. The Company anticipates that expenditures for
property and equipment in fiscal 1996 will be approximately $14.0 million.

The Company's Japanese subsidiary had bank borrowings of $8.5 million at
July 31, 1995 as compared to $6.9 million at July 31, 1994. The Company had no
borrowings outstanding under its domestic bank line at July 31, 1995 or July 31,
1994.

In July 1995, the Company's 13 1/2% Convertible Subordinated Debentures Due
2011 were converted into 2,241,000 shares of Common Stock. The outstanding
principal amount of $15.7 million of Debentures was converted at the conversion
price of $7.00 per share. As a result, long-term debt was reduced by $13.1
million for the book value of the Debentures and stockholders' equity was
increased by $12.1 million.

Management believes that the Company has sufficient cash resources to meet
at least its fiscal 1996 needs. These resources include existing cash balances,
borrowing availability under domestic and Japanese bank lines and future cash
flows from operations, together with the proceeds from the sale of Common Stock
offered by the Company hereby.

17
<PAGE> 18

BUSINESS

LTX designs, manufactures and markets automatic test equipment for the
semiconductor industry that is used to test digital, linear and mixed signal (a
combination of digital and linear) ICs and discrete semiconductor components.
The Company currently offers three lines of test systems: digital test systems,
which test digital ICs, including microprocessors and microcontrollers;
linear/mixed signal test systems, which test a wide range of linear and mixed
signal ICs; and discrete component test systems, which test small signal and
high power semiconductor components. The Company also sells service and
applications support for its test systems. The semiconductors tested by the
Company's systems are widely used in the computer, communications, automotive
and consumer electronics industries. The Company markets its products worldwide
to both manufacturers and users of digital, linear and mixed signal ICs and
discrete semiconductor components.

INDUSTRY BACKGROUND

All semiconductor manufacturers use STE in the design and manufacture of
ICs. During design, STE is used for design verification, characterization,
qualification and failure analysis of ICs. During manufacture, STE is used
during wafer probing to select usable ICs and after packaging to classify ICs by
performance characteristics and to assure conformance with quality standards.
Typically, all ICs are tested two or more times during the manufacturing
process. In addition, certain large electronic equipment manufacturers employ
STE for incoming inspection and for further classification of ICs.

Demand for STE is driven by overall business expansion in the semiconductor
industry and advances in semiconductor technology. When demand for
semiconductors increases, semiconductor manufacturers will often purchase STE to
meet their growing capacity requirements. Advances in semiconductor technology
have allowed for increasingly complex semiconductor devices with improved
performance, lower cost and greater reliability than earlier generations of
devices. As a result, the use of semiconductors has proliferated across many
industries, particularly in applications for the computer, communications,
automotive and consumer electronics industries. In turn, semiconductor
manufacturers are demanding STE that is faster, more versatile, more accurate,
more productive and easier to program and maintain.

According to industry sources, worldwide sales of STE totaled approximately
$2.3 billion in 1994. Sales of STE for testing of digital, linear and mixed
signal ICs and discrete components, which are the markets in which the Company
participates, accounted for approximately $1.5 billion of this total. STE for
testing of memory ICs accounted for the balance. Worldwide semiconductor
shipments increased by approximately 29% and 32% in 1993 and 1994, respectively,
and by approximately 45% in the first six months of 1995 over the comparable
1994 period. Worldwide shipments of STE increased by approximately 37% in 1994.

Prices of STE systems generally increase as their capabilities increase.
The acquisition of STE represents a significant investment on the part of the
Company's customers, who typically consider both the capital and long term
operating costs of the test system in the acquisition process. Factors that can
vary from one test system to another, and thereby affect the total cost of
testing, include:

Speed. A test system that offers faster test times or that is able to test
more than one device at a time is able to test a greater number of devices over
its product life, thus increasing the system's efficiency and reducing the
customer's cost of testing.

Accuracy. Superior accuracy improves the yield of the semiconductor
production process because it reduces the number of good devices that are
improperly rejected and permits the selection of a higher number of premium
devices.

Efficiency. Greater efficiency in test program preparation, loading and
debugging leads to faster time to market for newly-designed semiconductors.

Software. Test system operating software which is easier to use and more
powerful reduces the amount of engineering resources needed to develop test
programs and operate test systems.

18
<PAGE> 19

Reliability. A test system that operates with minimal downtime allows the
customer's production and engineering work to proceed without frequent
intervention and provides more cost-effective operation.

System Architecture. Test system architecture that is modular extends the
product life of a test system because the system can be adapted to meet the
customer's new requirements while largely retaining compatibility with existing
test programs.

Customer Support. Customer specific applications programs, worldwide
service and customer training contribute to the efficient use of STE and
minimize the customer's cost of testing.

COMPANY STRATEGY

LTX's objective is to be the leading supplier of STE in the markets in
which it participates. The key elements of the Company's strategy are as
follows:

Focus on Leading-Edge Devices

The Company's test systems are designed to meet the design and production
test requirements of leading-edge digital, linear and mixed signal ICs and
discrete components. Testing of these devices requires high performance test
systems. The Company believes that only STE manufacturers with sophisticated
technological ability are able to compete effectively in this sector of the STE
market. Moreover, the Company believes that by focusing on testing advanced
devices, it is able to gain valuable insight into future market opportunities.

Develop Adaptable Test Systems

The Company designs its test systems so that they may be adapted and
improved to meet its customers' future needs. This philosophy is reflected in
the modular architecture of many of the Company's products, which permits both
capacity additions and upgrading of performance as the Company develops new
modular options and associated software. When possible, the Company also seeks
to enable its customers to bridge different generations of the Company's
products. For example, the Company's enVision software has been designed to
operate on its new Delta Series products, as well as on its Master Series
products.

Provide Application Specific Solutions

The Company is committed to providing complete test solutions to its
customers by having a substantial group of engineers strategically located at
customer support centers throughout the world. By actively participating in the
application of its test systems, the Company is able to learn more about
requirements for new devices and to improve the design of future test systems.
LTX also believes that its participation in the application of its test systems
enables its customers to get devices to market more rapidly and builds stronger
ties with these customers.

Leverage Worldwide Presence

The semiconductor business is a worldwide industry, with well-established
manufacturers in the United States, Europe and the Far East. The Company has
nine offices in the United States, and in Europe maintains sales and support
offices in the United Kingdom, France, Italy and Germany. In recent years, an
increasing portion of semiconductor test and assembly operations has been
conducted in the Pacific Rim by manufacturers based in the United States and
Europe, as well as by local manufacturers. LTX has established sales and support
offices in Korea, Taiwan and Singapore to focus on the specific needs of the
markets within the Pacific Rim. In addition, through a majority-owned
subsidiary, the Company provides sales and support services at three locations
in Japan. The Company believes that this network of sales and support centers
improves its ability to sell and support its products to the world's major
semiconductor manufacturers.

19
<PAGE> 20

Execute Strategic Alliances in Japan

The Japanese semiconductor industry represents the second largest market in
the world for STE. In Japan, the Company encounters significant competition from
local STE manufacturers. In fiscal 1990, the Company strengthened its resources
and presence in Japan by forming a joint venture with Sumitomo Metal Industries,
Ltd. ("SMI") through which the Company currently sells and services its products
in Japan. In addition, in fiscal 1993, the Company entered into a development,
manufacturing and marketing agreement with Ando, a Japanese STE manufacturer and
majority owned subsidiary of NEC, relating to the Delta 50, a new digital test
system that the Company introduced in fiscal 1994. The Company believes that its
alliance with Ando will better enable it to penetrate the Japanese digital
production STE market. Moreover, since the Delta 50 is compatible with other
Delta Series machines, the Company believes that sales of Delta 50 test systems
to key Japanese semiconductor manufacturers will increase the Company's
opportunities to sell other Delta Series test systems to these same
manufacturers. In fiscal 1995, the Company entered into a development,
manufacturing and marketing agreement with Asia Electronics, Inc. ("Asia"), a
Japanese STE manufacturer which is 50% owned by Toshiba Corporation ("Toshiba"),
relating to a new discrete component test system for testing integrated power
modules that the Company plans to introduce in 1996. The Company believes that
its alliance with Asia will increase LTX's penetration of the market for
discrete component test systems in Japan.

Emphasize Quality and Reliability

The Company's People Driven Quality (PDQ) Program is designed to
continually improve all of its processes and increase the satisfaction of its
customers. The Company believes that this program will lead to: more efficient
and timely performance in engineering projects; improvement in manufacturing
costs through the reduction of defective products and manufacturing cycle time;
better on-time delivery performance; and greater reliability of its test
systems.

PRODUCTS AND MARKETS

Product Overview

The Company offers products in three broad product categories:

- Systems that are used to test linear and mixed signal devices, which
include the Synchro Series and Ninety;

- Systems that are used to test digital devices, which include the Delta
Series and Master Series, and enVision test development software; and

- Discrete component test systems, marketed as the iPTest product line.

Since its inception, the Company has shipped over $1.8 billion of products,
including approximately $1.2 billion of linear/mixed signal test systems and
approximately $600 million of digital test systems. In fiscal 1995, sales of
linear/mixed signal test systems, digital test systems and discrete component
test systems represented approximately 57%, 28% and 3%, respectively, of total
net sales of the Company with service revenues representing 12%.

The Company's test systems are used by semiconductor manufacturers for
design verification, characterization, qualification and failure analysis of
ICs. In addition, certain large electronic equipment manufacturers use the
Company's test systems for incoming inspection and for further classification of
ICs. All of the Company's test systems are comprised of multiple
computer-controlled instruments which send signals to a device under test and
measure the responses of that device to classify the device by performance
characteristics and to ensure conformance with quality standards. The Company's
test system instrumentation is controlled by operating system software which is
developed by the Company. The Company also develops and sells test programs for
specific devices and offers software packages for use by semiconductor
manufacturers for test simulation in engineering design and test program
generation, data collection and statistical analysis in manufacturing.

20
<PAGE> 21

Linear and Mixed Signal ICs

Linear ICs are used in almost every electronic application. Physical
occurrences, such as sound, images, temperature, pressure, speed, acceleration,
position and rotation, consist of continuously varying information. Linear ICs
are used to amplify, filter and shape this information. Mixed signal ICs convert
the signals from linear ICs into digital signals that can be processed by a
computer. Mixed signal devices also convert processed digital information into a
linear form to control physical phenomena or to improve sound and images.

Linear and mixed signal ICs are widely used in automobiles, appliances,
personal computers, telephones, personal communication products and home
entertainment products such as video cassette recorders, cameras, compact disc
players and video games. The complexity and density of these ICs have increased
rapidly over the past several years, as the demand for portable,
battery-operated products has required IC manufacturers to integrate more
functions on each chip and reduce size and power consumption. These
technological advances have resulted in increased demand for higher performance
linear/mixed signal test systems.

<TABLE>

Listed in the following table are certain customers for the Company's
linear/mixed signal test systems by market segment.
- --------------------------------------------------------------------------------

<CAPTION>
DEVICE APPLICATIONS CUSTOMERS
<S> <C>
- --------------------------------------------------------------------------------------------
Automotive General Motors, Motorola,
National Semiconductor
- --------------------------------------------------------------------------------------------
Consumer Motorola, National Semiconductor, Siemens,
Sony, SGS Thomson
- --------------------------------------------------------------------------------------------
Datacommunications Austria Mikro Systeme ("AMS"),
Newbridge Networks, Rockwell
- --------------------------------------------------------------------------------------------
Disk drives National Semiconductor, Philips, Silicon
Systems, SGS Thomson
- --------------------------------------------------------------------------------------------
Industrial Cardiac Pacemakers, Maxim,
National Semiconductor, Sony
- --------------------------------------------------------------------------------------------
Telecommunications AMS, AT&T, Philips, SGS Thomson
- --------------------------------------------------------------------------------------------
Wireless communications AMS, AT&T, Motorola, National Semiconductor
- --------------------------------------------------------------------------------------------
</TABLE>

Digital ICs

Digital ICs include microprocessors, microcontrollers, programmable DSPs
(digital signal processing), microperipherals and logic/ASIC (application
specific IC) devices. These ICs are used for computing, controlling and
calculating functions, and are at the heart of most electronic products. The
most well known of these devices is the microprocessor, which is the enabler of
personal computer technology. Microcontrollers, however, are much more broadly
used in automobiles, appliances, home entertainment products and many other
electronic products which utilize electronic control functions. According to
industry statistics, fewer than 200 million microprocessors were manufactured
worldwide during 1994, while more than 2.5 billion microcontrollers were
manufactured that year. The unit growth alone from 1993 to 1994 in
microcontrollers shipped was approximately double the total production for
microprocessors in 1994. Microprocessors can cost hundreds or even thousands of
dollars, while microcontrollers typically cost tens of dollars. However, testing
of microcontrollers can be as complex as microprocessors and requires high
performance test systems.

21
<PAGE> 22
<TABLE>

The following table sets forth types of devices tested by certain customers
of the Company's digital test systems.
- --------------------------------------------------------------------------------

<CAPTION>
DEVICE APPLICATIONS CUSTOMERS
<S> <C>
- --------------------------------------------------------------------------------------------
ASICs National Semiconductor, Silicon Systems,
Symbios Logic, Western Digital
- --------------------------------------------------------------------------------------------
Logic ASAT, Gould/AMI, Harris, Lucky Goldstar,
Silicon Systems
- --------------------------------------------------------------------------------------------
Microcontrollers Microchip Technology, National Semiconductor
- --------------------------------------------------------------------------------------------
Microprocessors Motorola, NEC, Symbios Logic
- --------------------------------------------------------------------------------------------
PC chip sets ACER, ASE Test, Samsung,
Taiwan Semiconductor (TSMC)
- --------------------------------------------------------------------------------------------
</TABLE>

LINEAR/MIXED SIGNAL PRODUCTS

LTX offers two product lines for testing linear/mixed signal ICs, the
Syncho Series and Ninety, introduced in 1990 and 1986, respectively.

Synchro Series

The Synchro is the latest generation of the Company's linear/mixed signal
test systems. Synchro test systems are designed for high throughput testing of
linear devices and for testing mixed signal devices that require high digital
pattern rates and high digital pin counts along with analog signal generation
and measurement requirements. The Synchro features DSP(digital signal
processor) - per-pin architecture which allows for concurrent control of both
linear and digital resources at each pin of the IC under test. This design
permits the generation of test signals and measurements on many device pins at
the same time, producing faster test times on high pin count ICs. The Synchro
systems are modular in design which enables customers to add new options to
their systems in the future. This allows customers to increase the capability of
their Synchro system to meet their new test requirements. Since its
introduction, the Company has significantly upgraded the performance and
capabilities of the Synchro through the introduction of new hardware and
software.

The Synchro Series includes the Synchro II, Synchro Plus and Synchro
ProductionPAC test systems:

Synchro II. The configuration of the Synchro II test system is flexible.
This permits LTX customers to choose from a wide array of options to meet the
test requirements of a broad range of linear/mixed signal devices.

Synchro Plus. The Synchro Plus test system is configured with SuperSpeed
Data Pins which can test mixed signal devices at data rates of up to 400 MHz.
The Synchro Plus system addresses the test requirements of new, high speed
devices used in applications such as disk drives for personal computers and
advanced ATM(Asynchronous Transfer Mode) interface boards used to support the
development of the information superhighway.

Synchro ProductionPAC. The Synchro ProductionPAC test systems are lower
cost, smaller footprint, specifically focused configurations that address the
production requirements of high volume, low cost mixed signal devices. The RFPAC
system is configured to test devices used in the rapidly expanding wireless
communications market. The PowerPAC addresses "smart" power devices that are
being increasingly used in automobiles and consumer electronics. The TelePAC
addresses commodity ICs used in telecommunications. The ConverterPAC is focused
on devices used in multimedia applications.

All Synchro Series test systems are fully compatible in hardware, software
and specification. Current prices range from approximately $400,000 for a
Synchro ProductionPAC system to approximately $2,000,000 for a high pin count
Synchro Plus system.

22
<PAGE> 23

Ninety

The Ninety system is an improved version of the LTX77, the Company's first
linear/mixed signal test system introduced in 1977. Although the Synchro has
largely superseded the Ninety, the Company continues to manufacture the Ninety,
primarily for customers who are already using the Ninety or LTX77 systems and
desire to expand capacity. Many of the Ninety or LTX77 systems the Company has
previously sold are currently still in use. In the past, the Company has
upgraded the performance and capabilities of the Ninety system through the
introduction of new hardware and software. As with the Synchro, a wide array of
options are available. The current prices for a Ninety system range from
approximately $200,000 to approximately $700,000, depending on the system
configuration.

Software Tools

The Company offers software for test program generation and debugging in
manufacturing, called Device Tool, with its Synchro test systems. The Company
also offers data collection and statistical analysis software, called
dataVision. This software is test system independent and provides customers with
solutions for integrated yield management in manufacturing and engineering
device characterization. Device Tool typically sells for approximately $25,000
and dataVision typically sells for approximately $100,000.

DIGITAL PRODUCTS

LTX offers two product lines for testing digital ICs, the Delta Series and
Master Series, which are marketed under the Trillium name. The Delta Series and
Master Series product lines are based on a resource-per-pin architecture which
allows for a complete set of the test system's key features (timing generators,
waveform formatting and pattern memory) for each pin channel of the test system.
The Company believes that this architecture provides for faster, simpler
characterization and engineering debugging of new ICs, better system timing
accuracy, and simplified interfacing with computer-aided design systems. The
Company's enVision test development software is sold with both the Delta Series
and Master Series product lines.

Delta Series

The Company's new line of digital test systems, the Delta Series, includes
the Delta 50, Delta/ST and the Delta 100. Introduced in 1994, the Delta 50 was
designed to meet the production test requirements of newer high volume, lower
cost devices such as microcontrollers. The Delta 50 has a compact design and is
capable of testing 512 pins at data rates of up to 50 MHz or 256 pins at data
rates of up to 100 MHz. The Delta/ST, introduced in 1995, incorporates Synchro
mixed signal technology with Delta Series digital technology to address the test
requirements of a new generation of devices with high performance analog signal
interfaces to complex digital functions. These new devices are enabling the
development of powerful, yet low cost consumer electronic products in areas such
as multimedia and portable communications. The Delta 100, also introduced in
1994, was designed to test high performance microprocessors and the ICs that
make up the chip sets that are used with them. The Delta 100 can test up to 512
pins at data rates of up to 100 MHz with timing accuracy of 150 pico seconds.
The Delta 50, Delta/ST, and Delta 100 operate with the Company's enVision
software providing customers with compatibility among these systems. The current
prices for the Delta Series test systems range from approximately $500,000 for a
low pin count Delta 50 to approximately $4,000,000 for a high pin count Delta
100.

In fiscal 1993, the Company entered into a development, manufacturing and
marketing agreement with Ando, a Japanese STE manufacturer and majority owned
subsidiary of NEC, relating to the Delta 50. The Company has developed the Delta
50 in conjunction with Ando and has granted Ando exclusive rights to manufacture
the Delta 50 in Japan. The Company has retained exclusive rights to manufacture
the Delta 50 outside of Japan. Ando has the exclusive right to sell the Delta 50
in Japan and the Company has exclusive marketing rights for the rest of the
world, with certain exceptions in each case. In connection with this agreement,
the Company has received a payment of $6.5 million from Ando and will receive
royalty payments on sales of the Delta 50 by Ando. In July 1994, the Company
amended its development agreement with Ando to allow for further development
enhancements to the Delta 50.

23
<PAGE> 24

Master Series

The Master Series product line includes the Deltamaster and Micromaster
test systems, which are enhanced versions of the Company's original digital test
system. The Deltamaster, introduced in 1990, is a high-performance system with
the capability of testing up to 256 pins at data rates of up to 80 MHz. The
Micromaster, introduced in 1987, is a lower-priced system that can test up to
256 pins at data rates of up to 40 MHz. The Micromaster is device interface and
software compatible with the Deltamaster. Although the Delta Series product line
is expected to eventually replace the Master Series, the Company will continue
to sell the Master Series test systems, primarily to customers who are already
using these systems and desire to expand capacity. The current prices for the
Master Series range from approximately $400,000 for a low pin count Micromaster
to approximately $2,000,000 for a high pin count Deltamaster.

enVision

In fiscal 1993, the Company completed the development of its new
object-oriented enVision programming software for use on all its digital test
systems. In earlier generation software languages, programming commands made
direct reference to the hardware of the test system, which required the user to
have a detailed knowledge of the system's hardware. In contrast, this detailed
knowledge is not required when using enVision, thereby allowing the programmer
to focus attention on refining the test program for the specific IC under test.
Thus, the Company has designed enVision to be more device oriented than tester
oriented. enVision permits a user to test multiple devices at the same time,
significantly improving the throughput of the Company's digital test systems.
enVision is an integral feature of the Delta Series product line and can be
purchased by customers of the Master Series product line. The current price for
enVision is approximately $15,000 per workstation.

DISCRETE PRODUCTS

The Company's iPTest systems are used to test discrete semiconductor
components, such as diodes, small signal transistors and power transistors, as
well as arrays of these components. These discrete components are used in every
area of electronics. For example, diodes are used in consumer, industrial and
automotive applications; small signal transistors are used in consumer
electronics, such as hearing aids and portable radios; and power transistors are
used in audio amplifiers, radios and televisions. iPTest systems are also
capable of accurately measuring the characteristics of transient voltage
suppression components, which are widely used to protect personal computers and
telecommunications products from harmful voltage spikes or surges.

The Company expects that arrays of discrete components, such as
multi-device modules, will replace transistors in electric motor control and
will permit a wider use of semiconductors in extremely high power applications,
such as air conditioners, domestic appliances, electric locomotives and
automobiles. These arrays of discrete components are mostly constructed from
high power transistors of IGBT (insulated gate bipolar transistor) technology.
In 1995, the Company introduced new options to its iPTest systems for high
volume production testing of these discrete power components. The Company
believes that these newer components may become the most significant market for
discrete component test systems. In 1995, the Company entered into a
development, manufacturing and marketing agreement with Asia, a Japanese STE
manufacturer which is 50% owned by Toshiba, relating to a new discrete component
test system.

Prices of iPTest systems currently range from approximately $100,000 to
approximately $700,000, depending on the system configuration and testing
specifications.

SERVICE

The Company considers service to be an important aspect of its business.
The Company's worldwide service organization is capable of performing
installations and all necessary maintenance of test systems sold by the Company,
including routine servicing of components manufactured by third parties. The
Company includes a one-year parts and three-month labor warranty on test systems
or options designed and manufactured by the Company, and a three-month labor
warranty on components that have been purchased

24
<PAGE> 25

from other manufacturers and incorporated into the Company's test systems. The
Company also provides training on the maintenance and operation of test systems
sold to its customers.

The Company offers a wide range of service contracts which gives its
customers flexibility to select the maintenance program best suited to their
needs. Customers may purchase service contracts which extend maintenance beyond
the initial warranty provided by the Company with the sale of its test systems.
Many customers enter into annual or multiple-year service contracts over the
life of the equipment. The pricing of contracts is based upon the level of
service provided to the customer and the time period of the service contract. As
the installed base of LTX test systems has grown, service revenues have been
increasing on an annual basis. The Company believes that service revenues should
be less affected by the cyclicality of the semiconductor industry than sales of
test equipment. The Company maintains 22 service centers around the world.

SALES AND DISTRIBUTION

The Company sells its products primarily through its worldwide sales
organization. In Japan, the Company sells, services and supports its products
through its joint venture with SMI, except that Ando has the right to
manufacture and sell the Delta 50 to certain customers in Japan and to sell the
Delta 100 to these customers. The Company will share with its SMI joint venture
specified portions of the royalties to be paid by Ando on any sales by it of the
Delta 50 and of the revenues received on the Delta 100. In the future, Asia will
be selling the Company's iPTest systems to certain customers in Japan. The
Company uses a small number of independent sales representatives in certain
other regions of the world.

<TABLE>
CUSTOMERS

The Company's customers include many of the world's leading semiconductor
manufacturers. The Company's major customers in fiscal 1995 included:

<S> <C>
ASAT Motorola
AT&T National Semiconductor
Austria Mikro Systeme Philips
Hitachi SGS Thomson
Intel Sony

</TABLE>

Sales to these major customers accounted for approximately 60% of net sales
in fiscal 1995. Sales to Philips accounted for approximately 17% of net sales in
fiscal 1995. No single customer accounted for 10% or more of net sales in fiscal
1994. Sales to Intel accounted for approximately 16% of net sales in fiscal
1993. See "Risk Factors -- Customer Concentration."

<TABLE>
GEOGRAPHIC SALES

The following table sets forth the Company's net sales by geographic area
as a percentage of total net sales for each of the Company's last three fiscal
years:

<CAPTION>
% OF TOTAL NET SALES
----------------------------
FISCAL FISCAL FISCAL
1993 1994 1995
------ ------ ------
<S> <C> <C> <C>
North America...................................................... 52.7% 38.8% 33.7%
Europe............................................................. 12.0 14.5 15.8
Japan.............................................................. 5.5 12.5 10.2
Rest of world (principally Pacific Rim)............................ 29.8 34.2 40.3
------ ------ ------
Total.................................................... 100.0% 100.0% 100.0%
====== ====== ======
</TABLE>

Sales to customers outside the United States are subject to risks,
including the imposition of governmental controls, the need to comply with a
wide variety of foreign and United States export laws, political and economic
instability, trade restrictions, changes in tariffs and taxes, longer payment
cycles typically associated with international sales, and the greater difficulty
of administering business overseas as well as general economic conditions. For
information about the Company's foreign operations and export sales, see "Risk

25
<PAGE> 26

Factors -- International Business" and Note 10 of Notes to the Company's
Consolidated Financial Statements.

ENGINEERING AND PRODUCT DEVELOPMENT

The STE market is characterized by rapid technological change and new
product introductions, as well as advancing industry standards. The Company's
ability to remain competitive in the digital, linear and mixed signal IC and
discrete component markets will depend upon its ability to successfully enhance
existing test systems and develop new generations of test systems and to
introduce these new products on a timely and cost-effective basis. Accordingly,
the Company devotes a significant portion of its personnel and financial
resources to engineering and product development programs and seeks to maintain
close relationships with its customers in order to be responsive to their
product needs. The Company's expenditures for engineering and product
development were $19.7 million, $19.6 million and $19.8 million during fiscal
1993, 1994 and 1995, respectively. See "Risk Factors -- Importance of New
Product Introductions."

The Company's engineering strategy is to develop its test systems in an
evolutionary manner so that they may be progressively upgraded. This approach
preserves its customers' substantial investments in test programs, and, in
general, maintains market acceptance for the Company's test systems. In order to
implement this strategy, the Company works closely with its customers to define
new product features and to identify emerging applications for its products.

MANUFACTURING AND SUPPLY

LTX's principal manufacturing operations consist of component parts
assembly, final assembly and testing at its manufacturing facilities in
Westwood, Massachusetts and San Jose, California. Over the past year, the
Company has significantly increased its outsourcing of certain subassemblies to
contract manufacturers. The Company uses standard components and prefabricated
parts manufactured to the Company's specifications. Most of the components for
the Company's products are available from a number of different suppliers;
however, certain components are purchased from a single supplier. Although LTX
believes that all single-source components currently are available in adequate
amounts, there can be no assurance that shortages will not develop in the
future. Any disruption or termination of supply of certain single-source
components could have an adverse effect on the Company's business and results of
operations. See "Risk Factors -- Dependence on Key Suppliers."

COMPETITION

The STE industry is highly competitive, with many other domestic and
foreign companies participating in the markets for each of the Company's
products. The Company's major competitors in the market for digital test systems
are Schlumberger Limited, Teradyne, Inc. and Credence Systems Corporation,
except in Japan where the Company's major competitor is Advantest Corporation
(an affiliate of Fujitsu Limited). The Company's principal competitor for
linear/mixed signal test systems is Teradyne, Inc., except in Japan where the
Company's major competitor is Yokogawa Electric Works. The Company's principal
competitor for discrete component test systems is Tesec, Ltd. Most of the
Company's major competitors are also suppliers of other types of automatic test
equipment and have significantly greater financial and other resources than the
Company.

The Company principally competes on the basis of performance, cost of test,
reliability, customer service, applications support, price and ability to
deliver its products on a timely basis. Although the Company believes that it
competes favorably with respect to each of these factors, new product
introductions by the Company's competitors could cause a decline in sales or
loss of market acceptance of the Company's existing products. In addition,
increased competitive pressure could lead to intensified price-based
competition, resulting in lower prices and adversely affecting the Company's
business and results of operations. See "Risk Factors -- Highly Competitive
Industry."

26
<PAGE> 27

BACKLOG

At July 31, 1995, the Company's backlog of unfilled orders for all products
and services was approximately $98.4 million, compared with approximately $71.8
million at July 31, 1994. The Company expects to deliver approximately 92% of
its July 31, 1995 backlog in fiscal 1996. While backlog is calculated on the
basis of firm orders, no assurance can be given that customers will purchase the
equipment subject to such orders. As a result, the Company's backlog at a
particular date is not necessarily indicative of actual sales for any succeeding
period.

PROPRIETARY RIGHTS

The development of the Company's products is largely based on proprietary
information. The Company relies upon a combination of contract provisions,
copyright, trademark and trade secret laws to protect its proprietary rights in
products. It also has a policy of seeking patents on technology considered of
particular strategic importance. Although the Company believes that the
copyrights, trademarks and patents it owns are of value, the Company believes
that they will not determine the Company's success, which depends principally
upon its engineering, manufacturing, marketing and service skills. However, the
Company intends to protect its rights when, in its view, these rights are
infringed upon.

The Company licenses some software programs from third party developers and
incorporates them in the Company's products. Generally, such agreements grant to
the Company non-exclusive licenses with respect to the subject program and
terminate only upon a material breach by the Company. The Company believes that
such licenses are generally available on commercial terms from a number of
licensors.

The use of patents to protect hardware and software has increased in the
STE industry. The Company has at times been notified of claims that it may be
infringing patents issued to others. Although there are no pending actions
against the Company regarding any patents, no assurance can be given that
infringement claims by third parties will not have a material adverse effect on
the Company's business and results of operations. As to any claims asserted
against the Company, the Company may seek or be required to obtain a license
under the third party's intellectual property rights. There can be no assurance,
however, that a license will be available under reasonable terms or at all. In
addition, the Company could decide to resort to litigation to challenge such
claims or a third party could resort to litigation to enforce such claims. Such
litigation could be expensive and time consuming and could materially adversely
affect the Company's business and results of operations. See "Risk
Factors -- Proprietary Rights".

EMPLOYEES

At July 31, 1995, the Company had a total of 944 employees, including 238
in engineering and product development, 185 in service and customer support, 323
in manufacturing and 198 in sales, marketing and administration. Many of the
Company's employees are highly skilled, and the Company believes its future
success will depend in large part on its ability to attract and retain such
employees. None of the Company's employees are represented by a labor union, and
the Company has experienced no work stoppages. The Company believes that its
employee relations are excellent.

FACILITIES

All of the Company's facilities are leased. The Company maintains its
headquarters in Westwood, Massachusetts, where corporate administration, sales
and customer support and manufacturing and engineering for its linear/mixed
signal products are located. In May 1995, the Company subleased a 208,000 square
foot facility at this location for a ten year term. The Company's lease of this
facility expires in 2010. The Company is currently consolidating its operations
into an adjacent 167,000 square foot facility. The lease of that facility
expires in 2007. Manufacturing and engineering for the Company's digital
products are located in a 70,000 square foot facility in San Jose, California.
The lease of this facility expires in 1999. The Company also leases seven sales
and customer support offices at various locations in the United States totaling
approximately 40,000 square feet.

27
<PAGE> 28

The Company's European headquarters is located in Woking, United Kingdom.
The Company also maintains sales and support offices in facilities at four other
locations in Europe. The manufacturing and engineering facilities for the
Company's iPTest systems are located in Guildford, United Kingdom. The Company
also maintains sales and support offices in six locations in the Far East.
Office space leased in Europe and the Far East totals approximately 100,000
square feet.

The headquarters of LTX Co., Ltd., the Company's joint venture with SMI, is
located in Kawasaki, Japan. The joint venture also leases additional offices in
four other locations in Japan. Office space leased in Japan totals approximately
15,000 square feet.

The Company believes that its existing facilities are adequate to meet its
current and foreseeable future requirements.

28
<PAGE> 29

MANAGEMENT

The executive officers and Directors of the Company are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------------------------------- --- --------------------------------------
<S> <C> <C>
Roger W. Blethen................................... 44 President and Director
Martin S. Francis.................................. 49 President and Director
John J. Arcari..................................... 50 Chief Financial Officer and Treasurer
Kenneth E. Daub.................................... 59 Senior Vice President
Graham C.C. Miller................................. 64 Chairman of the Board
Jacques Bouyer..................................... 67 Director
Fred J. Butler..................................... 66 Director
Roger J. Maggs..................................... 49 Director
Robert E. Moore.................................... 57 Director
Samuel Rubinovitz.................................. 65 Director
</TABLE>

Executive officers are chosen by and serve at the discretion of the Board
of Directors of the Company. Directors of the Company are elected at the annual
stockholders' meeting for staggered three-year terms and serve until their
successors are duly elected and qualified.

Roger W. Blethen was elected a President of the Company in February 1994.
Mr. Blethen has been a Director since 1980 and had been a Senior Vice President
of the Company from 1985 until February 1994. Mr. Blethen was a founder of LTX
and has served in a number of senior management positions with the Company since
its formation in 1976.

Martin S. Francis was elected a President of the Company in February 1994.
Mr. Francis has been a Director since 1991 and had been a Senior Vice President
of the Company from 1991 until 1994. Prior to 1991, Mr. Francis had held senior
management positions in the Company's European and Japanese operations from the
time that he joined LTX in 1982.

John J. Arcari has been Chief Financial Officer and Treasurer of the
Company since 1987. He had been Controller of LTX since joining the Company in
1981. Prior to joining LTX, Mr. Arcari spent ten years with the public
accounting firm of Price Waterhouse as a certified public accountant.

Kenneth E. Daub was appointed a Senior Vice President of the Company in
1991 and is responsible for North American and Pacific Rim sales. From the time
he joined the Company in 1987 until 1991, Mr. Daub served as Vice President
responsible for North American Sales. Prior to joining the Company in 1987, Mr.
Daub held various senior positions with Schlumberger Limited.

Graham C. C. Miller has been the Chairman of the Board of the Company since
its formation in 1976. Mr. Miller was a founder of the Company and was President
of the Company from 1976 until February 1994. Mr. Miller is also a director of
Newbridge Networks Corporation.

Jacques Bouyer was elected a Director of the Company in 1991. Mr. Bouyer
has been a management consultant since 1990. Mr. Bouyer was Chairman of the
Board and Chief Executive Officer of Philips Composants S.A., an electronics
company which is a wholly-owned subsidiary of Philips Electronics N.V. from 1986
until his retirement from that company in 1990. He is also a director of
Richardson Electronics, Ltd.

Fred J. Butler was elected a Director of the Company in 1993. Mr. Butler
was Vice President Finance of Thinking Machines Corporation, a manufacturer of
supercomputers, from 1988 until his retirement in 1994. From 1980 until 1988 Mr.
Butler was Senior Vice President Finance and Treasurer of Compugraphic
Corporation, a supplier of phototypesetting equipment.

Roger J. Maggs was elected a Director of the Company in 1994. Mr. Maggs is
currently President of Celtic House Investment Partners, a private investment
firm. Mr. Maggs was a Vice President of Alcan Aluminium Limited from 1986 until
June 1994.

29
<PAGE> 30

Robert E. Moore has been a Director of the Company since 1989. Mr. Moore is
currently President and Chairman of the Board of Reliable Power Meters, Inc., a
company founded by him in 1992 which manufacturers and sells power measurement
instruments. He also was a founder of Basic Measuring Instruments, Inc., which
manufactures and sells power measurement instruments, and served as a director
of that company from 1982 until 1990 and as a Senior Vice President responsible
for marketing and sales from 1985 until 1990.

Samuel Rubinovitz was elected a Director of the Company in September 1994.
He was Executive Vice President of EG&G, Inc., responsible for the aerospace,
optoelectronics and instrument product groups from 1989 until his retirement in
1994. He is a director of EG&G, Inc., Richardson Electronics, Ltd., KLA
Instruments Inc. and Kronos Inc.

<TABLE>

PRINCIPAL AND SELLING SHAREHOLDERS

The following table sets forth as of July 31, 1995 and as adjusted to
reflect the sale of shares offered hereby, certain information regarding
beneficial ownership of the Company's Common Stock by: (i) each person known by
the Company to own beneficially 5% or more of the Company's outstanding shares
of Common Stock; (ii) each Director of the Company; (iii) all Directors and
executive officers of the Company as a group; and (iv) the Selling Shareholder
listed below.

<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO OWNED AFTER
OFFERING(1)(2) OFFERING(1)(2)(3)
------------------- NUMBER OF -------------------
DIRECTORS AND FIVE PERCENT STOCKHOLDERS NUMBER PERCENT SHARES OFFERED NUMBER PERCENT
- -------------------------------------------------- --------- ------- -------------- --------- -------
<S> <C> <C> <C> <C> <C>
State of Wisconsin Investment Board(4)............ 2,575,000 8.8% -- 2,575,000 7.6%
Gruber & McBaine Capital Mgmt.(5)................. 2,278,800 7.9 -- 2,278,800 6.7
Ando Electric Co., Ltd.(6)........................ 2,000,000 6.8 -- 2,000,000 5.9
Graham C.C. Miller................................ 809,180 2.8 -- 809,180 2.4
Roger W. Blethen.................................. 132,150 * -- 132,150 *
Martin S. Francis................................. 110,932 * -- 110,932 *
Jacques Bouyer.................................... 15,000 * -- 15,000 *
Fred J. Butler.................................... 10,334 * -- 10,334 *
Roger J. Maggs.................................... 4,000 * -- 4,000 *
Robert E. Moore................................... 3,000 * -- 3,000 *
Samuel Rubinovitz................................. 6,668 * -- 6,668 *
All Directors and executive officers as a group
(10) persons.................................... 1,203,132 4.1 -- 1,203,132 3.6
</TABLE>

<TABLE>
<CAPTION>
SELLING SHAREHOLDER
- --------------------------------------------------
<S> <C> <C> <C> <C> <C>
2985314 Canada Inc.(7)............................ 727,273 2.5 500,000 227,273 *
<FN>
- ---------------
* Represents beneficial ownership of less than one percent of the outstanding
Common Stock.

(1) Except as otherwise indicated in the footnotes to this table, the listed
beneficial owner has sole voting and investment power with respect to such
shares.

(2) Includes shares purchasable within 60 days after July 31, 1995 pursuant to
the exercise of options covering 200,600 shares for Mr. Miller, 55,305
shares for Mr. Blethen, 86,400 shares for Mr. Francis, 9,000 shares for Mr.
Bouyer, 1,000 shares for Mr. Moore, 4,000 shares for Mr. Maggs, 6,668 shares
for Mr. Rubinovitz, and 467,623 shares for all Directors and executive
officers as a group.

(3) Assumes the Underwriters do not exercise their option to purchase up to
750,000 additional shares of Common Stock from the Company to cover
over-allotments.

(4) Based on a Schedule 13G filed in February 1995 by the State of Wisconsin
Investment Board.

(5) Based on a Schedule 13D filed in April 1995 by Gruber & McBaine Capital
Management, Inc. and various related parties as a group; these shares
represent the aggregate holdings of members of this group.

(6) All shares purchasable within 60 days after July 31, 1995 pursuant to the
exercise of a warrant.

(7) The Selling Shareholder is a corporation controlled by Terence H. Matthews,
Chairman of the Board of Directors and Chief Executive Officer of Newbridge
Networks Corporation, a manufacturer of digital networking products. Mr.
Miller is also a director of Newbridge Networks Corporation.

</TABLE>

30
<PAGE> 31

DESCRIPTION OF COMMON STOCK

The Company's By-laws provide that holders of the Common Stock are entitled
to one vote per share on all matters to be voted upon by the stockholders.
Stockholders are not entitled to cumulative voting in the election of directors.
Holders of Common Stock are entitled to receive such dividends as may be
declared from time to time by the Board of Directors out of funds legally
available therefor. See "Dividend Policy". In the event of liquidation,
dissolution or winding up of the Company, the holders of Common Stock are
entitled to share ratably in all assets remaining after payment of liabilities.
The Common Stock has no preemptive or conversion rights and is not subject to
further calls or assessments by the Company. There are no redemption or sinking
fund provisions applicable to the Common Stock. The Common Stock currently
outstanding is, and the Common Stock offered by this Prospectus will be, validly
issued, fully paid and non-assessable. Under the Company's By-laws, a special
meeting of stockholders may be called by stockholders only if called by one or
more stockholders who hold at least 40% in interest of the Company's capital
stock entitled to vote at such meeting.

The transfer agent and registrar for the Common Stock is The First National
Bank of Boston.

The Company furnishes to its stockholders annual reports containing
financial statements that have been examined and reported upon, with an opinion
expressed, by its independent public accountants and quarterly reports
containing unaudited financial information for the first three quarters of each
fiscal year.

RIGHTS AGREEMENT

The Board of Directors of the Company adopted a Rights Agreement, dated as
of May 11, 1989, between the Company and The First National Bank of Boston, as
rights agent (the "Rights Agreement") and in connection therewith issued one
common share purchase right for each share of Common Stock then or thereafter
outstanding. The rights will become exercisable (the "Stock Acquisition Date")
only if a person or group acquires 20% or more of the Company's Common Stock or
announces a tender offer that would result in ownership of 30% or more of the
Common Stock. Initially, each right will entitle a stockholder to buy one share
of Common Stock of the Company at a purchase price of $30.00 per share, subject
to adjustment depending upon the occurrence thereafter of certain events.
Generally, in the event that a person or group becomes the beneficial owner of
20% or more of the Company's outstanding Common Stock (a "Flip-In Event"), each
right, other than rights owned by the acquirer, will thereafter entitle the
holder to receive, upon exercise of the right, Common Stock having a value equal
to two times the exercise price of the right. In the event that, at any time
after the Stock Acquisition Date, the Company is acquired in a merger or other
business combination transaction or more than 50% of the Company's assets or
earning power is sold or transferred (a "Flip-Over Event"), each right, other
than rights owned by the acquirer, will thereafter entitle the holder to
receive, upon the exercise of the right, common stock of the acquirer having a
value equal to two times the exercise price of the right.

Before any person or group has acquired 20% or more of the Common Stock of
the Company, the rights are redeemable by the Company at $0.01 per right. The
rights will expire on May 11, 1999, unless redeemed by the Company prior to that
date.

CLASSIFIED BOARD

The Company's Board of Directors is divided into three classes, with two
classes consisting of three directors and one class consisting of two directors.
Each class serves three years, with the terms of office of the respective
classes expiring in successive years.

MASSACHUSETTS LAW

Under Chapter 110F of the Massachusetts General Laws, a Massachusetts
corporation with more than 200 stockholders may not engage in a "business
combination" with an "interested stockholder" for a period of three years after
the date of the transaction in which the person becomes an interested
stockholder, unless (i) the interested stockholder obtains the approval of the
Board of Directors prior to becoming an interested

31
<PAGE> 32

stockholder, (ii) the interested stockholder acquires 90% of the outstanding
voting stock of the corporation (excluding shares held by certain affiliates of
the corporation) at the time it becomes an interested stockholder or (iii) the
business combination is approved by both the Board of Directors and the holders
of two-thirds of the outstanding voting stock of the corporation (excluding
shares held by the interested stockholder). An "interested stockholder" is a
person who, together with affiliates and associates, owns (or at any time within
the prior three years did own) 5% (or, for persons eligible to use SEC Schedule
13G, 15%) or more of the outstanding voting stock of the corporation. A
"business combination" includes a merger, stock or asset sale, and certain other
specified transactions resulting in a financial benefit to the interested
stockholder.

CERTAIN EFFECTS

The above described provisions of the Company's By-laws, the Rights
Agreement, the classified board and Massachusetts law may discourage potential
takeover attempts. The Company's Rights Agreement, in particular, may discourage
a future acquisition of the Company not approved by the Board of Directors in
which stockholders might otherwise receive a higher value for their shares or
which a substantial number and perhaps even a majority of the Company's
stockholders believes to be in the best interests of all stockholders. As a
result, stockholders who might desire to participate in such a transaction may
not have the opportunity to do so. These provisions could have an adverse effect
on the market price of the Common Stock.

32
<PAGE> 33

UNDERWRITING

<TABLE>
Subject to the terms and conditions of the Underwriting Agreement, each of
the Underwriters named below, for whom Lehman Brothers Inc. and Needham &
Company, Inc. are acting as Representatives (the "Representatives"), has
severally agreed to purchase from the Company and the Selling Shareholder, and
the Company and the Selling Shareholder have agreed to sell to each Underwriter,
the aggregate number of shares of Common Stock set forth opposite their
respective names in the table below:

<CAPTION>
NUMBER
UNDERWRITER OF SHARES
------------ ---------
<S> <C>
Lehman Brothers Inc. ..................................................... 1,575,000
Needham & Company, Inc. .................................................. 1,575,000
CS First Boston Corporation............................................... 150,000
Donaldson, Lufkin & Jenrette Securities Corporation....................... 150,000
A.G. Edwards & Sons, Inc. ................................................ 150,000
Hambrecht & Quist LLC..................................................... 150,000
PaineWebber Incorporated.................................................. 150,000
Prudential Securities Incorporated........................................ 150,000
Robertson, Stephens & Company, L.P. ...................................... 150,000
Smith Barney Inc. ........................................................ 150,000
Gruntal & Co., Incorporated............................................... 150,000
Cowen & Company........................................................... 100,000
Pryor, McClendon, Counts & Co., Inc. ..................................... 100,000
SoundView Financial Group, Inc. .......................................... 100,000
Unterberg Harris.......................................................... 100,000
Wessels, Arnold & Henderson, L.L.C. ...................................... 100,000
---------
Total........................................................... 5,000,000
=========
</TABLE>

The Underwriting Agreement provides that the obligations of the
Underwriters to pay for and accept delivery of the shares of Common Stock are
subject to certain conditions precedent, and that the Underwriters are committed
to purchase and pay for all shares if any shares are purchased.

The Company and the Selling Shareholder have been advised that the
Underwriters propose initially to offer the shares of Common Stock to the public
at the offering price set forth on the cover page of this Prospectus and to
certain dealers (who may include the Underwriters) at such price less a
concession not in excess of $.35 per share. The Underwriters may allow, and such
dealers may reallow, a concession to certain other dealers (who may include the
Underwriters) not in excess of $.10 per share. After the initial offering to the
public, the offering price and other selling terms may be changed by the
Representatives.

The Company has granted an option to the Underwriters, exercisable during
the 30-day period after the date of this Prospectus, to purchase up to a maximum
of 750,000 shares of Common Stock at the public offering price per share, less
the underwriting discounts and commissions, set forth on the cover page of this
Prospectus. The Underwriters may exercise such option only to cover
over-allotments made in connection with the sale of the Common Stock offered
hereby. To the extent the Underwriters exercise such option, each of the
Underwriters will be committed, subject to certain conditions, to purchase
approximately the same percentage of such additional shares as the number of
shares of Common Stock to be purchased by such Underwriter as shown in the above
table bears to the total shown.

In the Underwriting Agreement, the Company and the Selling Shareholder have
agreed to indemnify the Underwriters against certain liabilities that may be
incurred in connection with this offering, including liabilities under the
Securities Act, or to contribute to payments that the Underwriters may be
required to make in respect thereof.

The Company, the Selling Shareholder, the Directors and executive officers
of the Company, and Ando have agreed that, without the prior consent of Lehman
Brothers Inc., they will not directly or indirectly offer to

33
<PAGE> 34

sell, sell, or otherwise dispose of shares of Common Stock or any securities
convertible or exchangeable therefor, for a period of 90 days following the date
of this Prospectus, subject to certain limited exceptions. Consent to earlier
sale of such shares may be granted by Lehman Brothers Inc. at its discretion.

In connection with this offering, certain Underwriters and selling group
members (if any) who are qualifying registered market makers on the Nasdaq
National Market may engage in passive market making transactions in the Common
Stock of the Company on the Nasdaq National Market in accordance with Rule
10b-6A under the Securities Exchange Act of 1934, as amended (the "Exchange
Act") during the two business day period before commencement of offers or sales
of the Common Stock. The passive market making transactions must comply with
applicable volume and price limits and be identified as such. In general, a
passive market maker may display its bid at a price not in excess of the highest
independent bid for the security; if all independent bids are lowered below the
passive market maker's bid, however, such bid must then be lowered when certain
purchase limits are exceeded.

LEGAL MATTERS

The validity of the Common Stock will be passed upon for the Company by
Pamela A. Keating, General Counsel of the Company. Ms. Keating owns or has the
right to acquire pursuant to stock options 13,625 shares of the Company's Common
Stock. Certain legal matters will be passed upon for the Underwriters by Testa,
Hurwitz & Thibeault, Boston, Massachusetts.

EXPERTS

The financial statements of the Company as of July 31, 1995 and 1994 and
for each of the years in the three-year period ended July 31, 1995 included or
incorporated by reference in this Prospectus have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their reports with
respect thereto, and are included or incorporated by reference herein in
reliance upon the authority of said firm as experts in giving said reports.

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Exchange
Act, and, in accordance therewith, files reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission"). Such
reports, proxy statements and other information filed by the Company can be
inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549,
and at the following Regional Offices of the Commission: New York Regional
Office, 7 World Trade Center, Suite 1300, New York, New York 10048; and Chicago
Regional Office, Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such material may be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.,
at prescribed rates. The Common Stock is traded on the Nasdaq National Market.
Reports and other information concerning the Company may be inspected at the
office of Nasdaq Operations, 1735 K Street, N.W., Washington, D.C. 20006.

A Registration Statement on Form S-3 relating to the Common Stock offered
hereby has been filed by the Company with the Commission. This Prospectus, which
constitutes a part of the Registration Statement, does not contain all of the
information set forth in the Registration Statement and the exhibits thereto.
For further information with respect to the Company and the securities offered
hereby, reference is made to such Registration Statement and exhibits.
Statements contained in this Prospectus as to the contents of any contract or
other document referred to are not necessarily complete, and in each instance
reference is made to the copy of such contract or other document filed as an
exhibit to the Registration Statement or otherwise filed with the Commission,
each such statement being qualified in all respects by such reference. A copy of
the Registration Statement may be inspected without charge at the Commission's
principal offices in Washington, D.C., and copies of all or any part thereof may
be obtained from the Commission upon the payment of certain fees prescribed by
the Commission.

34
<PAGE> 35

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The Company's Annual Report on Form 10-K for the fiscal year ended July 31,
1995, the description of the Company's Common Stock contained in the Company's
Registration Statement on Form 8-A filed on November 24, 1982, as amended by the
Company's Form 8-A/A filed with the Commission on September 30, 1993, and the
description of the Company's Common Stock Purchase Rights (the "Rights")
contained in the Company's Registration Statement on Form 8-A filed with the
Commission on May 17, 1989, as amended by the Company's Form 8-A/A filed with
the Commission on September 30, 1993, are incorporated herein by reference. All
documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of
the Exchange Act subsequent to the date of this Prospectus and prior to the
termination of the offering of the Common Stock offered hereby shall be deemed
to be incorporated by reference in this Prospectus and to be a part hereof from
the respective dates of filing of such documents. Any statement contained in a
document incorporated or deemed to be incorporated herein by reference shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated herein by reference
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.

The Company will provide without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, upon written or oral
request from such person, a copy of any and all of the documents that have been
incorporated by reference in this Prospectus, other than exhibits to such
documents not specifically incorporated by reference. Written or telephone
requests for such documents should be directed to LTX Corporation, LTX Park at
University Avenue, Westwood, Massachusetts 02090 (Telephone (617) 461-1000),
Attention: John J. Arcari, Chief Financial Officer.

35
<PAGE> 36

<TABLE>

LTX CORPORATION

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<CAPTION>
PAGE
-----
<S> <C>
Report of Independent Public Accountants.............................................. F-2
Consolidated Statement of Operations.................................................. F-3
Consolidated Balance Sheet............................................................ F-4
Consolidated Statement of Stockholders' Equity........................................ F-5
Consolidated Statement of Cash Flows.................................................. F-6
Notes to Consolidated Financial Statements............................................ F-7
</TABLE>

F-1
<PAGE> 37

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholders of LTX Corporation:

We have audited the accompanying consolidated balance sheet of LTX
Corporation and subsidiaries as of July 31, 1994 and 1995, and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the three years in the period ended July 31, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of LTX Corporation and
subsidiaries as of July 31, 1994 and 1995, and the results of their operations
and their cash flows for each of the three years in the period ended July 31,
1995, in conformity with generally accepted accounting principles.

ARTHUR ANDERSEN LLP
Boston, Massachusetts
September 8, 1995

F-2
<PAGE> 38

<TABLE>

LTX CORPORATION

CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<CAPTION>
YEAR ENDED JULY 31
-------------------------------------
1993 1994 1995
-------- -------- -----------
<S> <C> <C> <C>
Net sales:
Product.......................................... $154,392 $145,688 $ 185,180
Service.......................................... 18,540 22,638 25,139
-------- -------- -----------
Total net sales............................. 172,932 168,326 210,319
Cost of sales:
Product.......................................... 102,005 104,189 122,509
Service.......................................... 11,521 12,750 14,239
Provision for excess inventories................. -- 3,500 --
-------- -------- -----------
Total cost of sales......................... 113,526 120,439 136,748
-------- -------- -----------
Gross profit................................ 59,406 47,887 73,571
Engineering and product development expenses.......... 19,744 19,604 19,778
Selling, general and administrative expenses.......... 41,080 42,308 38,953
Restructuring charges................................. -- 14,376 --
Translation losses.................................... 1,468 -- --
-------- -------- -----------
Income (loss) from operations............... (2,886) (28,401) 14,840
Other income (expense):
Interest expense................................. (4,277) (4,286) (4,254)
Interest income.................................. 298 412 480
-------- -------- -----------
Income (loss) before income taxes and
minority interest......................... (6,865) (32,275) 11,066
Provision for income taxes............................ -- -- 372
-------- -------- -----------
Income (loss) before minority interest...... (6,865) (32,275) 10,694
Minority interest in net loss of subsidiary........... 2,556 971 --
-------- -------- -----------
Net income (loss)........................... $ (4,309) $(31,304) $ 10,694
======== ======== ===========
Net income (loss) per share:
Primary.......................................... $ (0.20) $ (1.23) $ 0.37
Fully diluted.................................... $ (0.20) $ (1.23) $ 0.36
Weighted average shares:
Primary.......................................... 21,089 25,485 28,805
Fully diluted.................................... 21,089 25,485 29,787
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-3
<PAGE> 39

<TABLE>

LTX CORPORATION

CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE DATA)

<CAPTION>
JULY 31
-----------------------
1994 1995
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents............................................. $ 17,226 $ 29,183
Accounts receivable, less allowances of $700 and $700............ 33,323 32,785
Inventories...................................................... 42,672 47,101
Other current assets............................................. 3,848 4,929
-------- -----------
Total current assets................................... 97,069 113,998
-------- -----------
Property and equipment, net...................................... 28,946 28,407
Other assets..................................................... 4,621 3,512
-------- -----------
$130,636 $ 145,917
======== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable.................................................... $ 6,870 $ 8,457
Current portion of long-term liabilities......................... 437 359
Accounts payable................................................. 15,545 21,744
Accrued compensation............................................. 2,512 3,155
Unearned service revenues and customer advances.................. 3,867 7,157
Restructuring charges............................................ 11,710 6,087
Other accrued expenses........................................... 7,275 4,857
-------- -----------
Total current liabilities.............................. 48,216 51,816
-------- -----------
Long-term liabilities, less current portion........................... 21,204 20,959
Convertible subordinated debentures................................... 20,195 7,308
Deferred compensation................................................. 428 427
Stockholders' equity:
Common stock, $0.05 par value:
100,000,000 shares authorized; 26,223,942 shares and
29,268,826 shares issued and outstanding.................... 1,311 1,463
Additional paid-in capital....................................... 117,457 131,425
Accumulated deficit.............................................. (78,175) (67,481)
-------- -----------
Total stockholders' equity............................. 40,593 65,407
-------- -----------
$130,636 $ 145,917
======== =========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-4
<PAGE> 40

<TABLE>

LTX CORPORATION

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)

<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
-------------------- PAID-IN ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT CAPITAL DEFICIT EQUITY
--------- ------ -------- -------- -------
<S> <C> <C> <C> <C> <C>
BALANCE, JULY 31, 1992............... 20,094,773 $1,005 $ 94,641 $(42,562) $53,084
Sale of common stock................. 2,458,000 123 9,709 9,832
Exercise of stock options............ 408,695 20 845 865
Issuance of shares under employees'
stock purchase plan................ 254,902 13 616 629
Conversion of 10 1/2% Convertible
Subordinated Debenture Due 2010.... 1,500,000 75 6,300 6,375
Net loss............................. (4,309) (4,309)
---------- ------ -------- -------- -------
BALANCE, JULY 31, 1993............... 24,716,370 1,236 112,111 (46,871) 66,476
Sale of common stock................. 971,515 48 3,959 4,007
Exercise of stock options............ 255,285 13 538 551
Issuance of shares under employees'
stock purchase plan................ 280,772 14 849 863
Net loss............................. (31,304) (31,304)
---------- ------ -------- -------- -------
BALANCE, JULY 31, 1994............... 26,223,942 1,311 117,457 (78,175) 40,593
Conversion of 13 1/2% Convertible
Subordinated Debentures Due 2011... 2,240,581 112 11,943 12,055
Exercise of stock options............ 504,595 25 965 990
Issuance of shares under employees'
stock purchase plan................ 299,708 15 1,060 1,075
Net income........................... 10,694 10,694
---------- ------ -------- -------- -------
BALANCE, JULY 31, 1995............... 29,268,826 $1,463 $131,425 $(67,481) $65,407
========== ====== ======== ======== =======
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-5
<PAGE> 41

<TABLE>

LTX CORPORATION

CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)

<CAPTION>
YEAR ENDED JULY 31
--------------------------------
1993 1994 1995
----- ----- -----
<S> <C> <C> <C>
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net income (loss)............................................ $(4,309) $(31,304) $10,694
Add (deduct) non-cash items:
Minority interest in subsidiary......................... (2,556) (971) --
Depreciation and amortization........................... 9,159 9,158 9,701
Original issue discount amortization.................... 262 252 263
Translation loss........................................ 1,468 320 178
(Increase) decrease in:
Accounts receivable..................................... (4,563) 1,739 990
Inventories............................................. (5,027) 2,508 (4,429)
Other current assets.................................... 538 268 (980)
Other assets............................................ (361) 413 382
Increase (decrease) in:
Accounts payable........................................ 14,441 (11,450) 6,033
Accrued expenses, compensation and restructuring
charges.............................................. 123 12,717 (6,626)
Unearned service revenues and customer advances......... (2,797) (804) 3,290
------- -------- --------
Net cash provided by (used in) operating activities....... 6,378 (17,154) 19,496
------- -------- --------
CASH USED IN INVESTING ACTIVITIES:
Expenditures for property and equipment................... (7,797) (12,687) (10,222)
------- -------- --------
Net cash used in investing activities..................... (7,797) (12,687) (10,222)
------- -------- --------
CASH PROVIDED BY FINANCING ACTIVITIES:
Proceeds from stock plans:
Employees' stock purchase plan............................ 629 863 1,075
Exercise of stock options................................. 865 551 990
Sale of common stock......................................... 9,832 4,007 --
Increase (decrease) in notes payable......................... (518) (3,385) 1,187
Proceeds from sale and leaseback of equipment................ 1,142 3,483 --
Payments of long-term debt................................... (769) (221) (627)
Costs of debenture conversion................................ -- -- (367)
Proceeds from long-term debt................................. -- 20,000 --
------- -------- -------
Net cash provided by financing activities.................... 11,181 25,298 2,258
------- -------- -------
Effect of exchange rate changes on cash........................ 249 44 425
Net increase (decrease) in cash and equivalents................ 10,011 (4,499) 11,957
Cash and equivalents at beginning of year...................... 11,714 21,725 17,226
------- -------- --------
Cash and equivalents at end of year............................ $21,725 $ 17,226 $29,183
======= ======== =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest.................................................. $ 4,390 $ 4,237 $ 4,872
Income taxes.............................................. -- -- 364
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES:
Conversion of convertible subordinated debentures to common
stock (See Note 6)........................................ $ 6,375 -- $12,415
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-6
<PAGE> 42

LTX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The consolidated financial statements include the accounts of the Company
and its wholly-owned domestic subsidiaries and wholly-owned and majority-owned
foreign subsidiaries. All significant intercompany transactions and balances
have been eliminated in consolidation.

Minority interest in net loss of subsidiary represents the minority
shareholder's proportionate share of the results of operations of the Company's
majority-owned Japanese subsidiary (see Note 12).

Foreign Currency Translation

The financial statements of the Company's foreign subsidiaries are
translated in accordance with Statement of Financial Accounting Standards No.
52. The Company's functional currency is the U.S. dollar. Accordingly, the
Company's foreign subsidiaries translate monetary assets and liabilities at
year-end exchange rates while nonmonetary items are translated at historical
rates. Income and expense accounts are translated at the average rates in effect
during the year, except for sales, cost of sales and depreciation which are
primarily translated at historical rates. Net realized and unrealized gains and
losses resulting from foreign currency remeasurement and transaction gains and
losses, which have not been significant in the past three fiscal years, are
included in the results of operations.

Cash Equivalents

Cash equivalents consist of short-term investments with maturity dates of
one month or less and which are readily convertible into cash. The Consolidated
Statement of Cash Flows for fiscal year 1993 and fiscal year 1994 has been
reclassified to conform with the current year's presentation.

Inventories

Inventories are stated at the lower of cost or market, cost being
determined on the first-in, first-out method, and include materials, labor and
manufacturing overhead.

Property and Equipment

Property and equipment is recorded at cost. The Company provides for
depreciation and amortization on the straight-line method. Charges are made to
operating expenses in amounts which are sufficient to amortize the cost of the
assets over their estimated useful lives.

Revenue Recognition

Revenue from product sales is recognized at the time of shipment. Service
revenues are recognized over the applicable contractual periods or as services
are performed. Revenues from engineering contracts are recognized over the
contract period on a percentage of completion basis.

Warranty Costs

Warranty costs incurred by the Company during the three years ended July
31, 1995 were not significant. Future warranty costs are not expected to be
significant, and therefore, the Company has not provided any warranty reserves.

Engineering and Product Development Costs

The Company expenses all engineering, research and development costs as
incurred. Expenses subject to capitalization in accordance with the Statement of
Financial Accounting Standards No. 86, relating to certain software development
costs, were insignificant.

F-7
<PAGE> 43

LTX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Income Taxes

The Company adopted Statement of Financial Accounting Standards No. 109 in
fiscal 1994. The change in accounting principles was not material to the results
of operations for the year ended July 31, 1993.

Deferred income taxes are recorded for temporary differences between the
financial reporting and tax basis of assets and liabilities. Research and
development tax credits are recognized for financial reporting purposes to the
extent they can be used to reduce the tax provision. The Company has not
provided for federal income taxes on the cumulative undistributed earnings of
its foreign subsidiaries in the past since it reinvested those earnings. At July
31, 1995, the Company's foreign subsidiaries had accumulated deficits.

Net Income (Loss) per Share

Primary and fully diluted earnings per share are based on the weighted
average number of shares of common stock and common stock equivalents (shares
issuable under stock option plans and warrants) outstanding. None of the
Company's Convertible Subordinated Debentures are common stock equivalents. Net
loss per share is based on the weighted average number of shares of common stock
outstanding only, as the inclusion of common stock equivalents would be
anti-dilutive.

<TABLE>

2. INVENTORIES

Inventories consist of the following:

<CAPTION>
JULY 31
-------------------------
1994 1995
---------- ----------
<S> <C> <C>
Raw materials................................. $12,075,000 $12,388,000
Work-in-process............................... 18,810,000 24,680,000
Finished goods................................ 11,787,000 10,033,000
---------- ----------
$42,672,000 $47,101,000
=========== ===========
</TABLE>

<TABLE>

3. PROPERTY AND EQUIPMENT

Property and equipment are summarized as follows:

<CAPTION>
JULY 31 DEPRECIABLE
------------------------- LIFE IN
1994 1995 YEARS
---------- ---------- ------------
<S> <C> <C> <C>
Machinery and equipment................... $68,365,000 $73,147,000 5
Office furniture and equipment............ 3,917,000 3,881,000 3-7
Leasehold improvements.................... 7,297,000 4,499,000 10 or term
of lease
---------- ----------
79,579,000 81,527,000
Less: accumulated depreciation and
amortization............................ (50,633,000) (53,120,000)
----------- -----------
$28,946,000 $28,407,000
=========== ===========
</TABLE>

4. NOTES PAYABLE

The Company's Japanese subsidiary had borrowings outstanding of $8,457,000
at July 31, 1995 under demand bank lines of credit. Borrowings of $7,662,000, at
the local prime rate plus 1/4%, are guaranteed by the Company's minority
partner in Japan, and borrowings of $795,000, at the local prime rate plus
1 1/8%, under a $2,273,000 demand bank line, are guaranteed by the Company. At
July 31, 1994, the Company's Japanese subsidiary had borrowings outstanding of
$6,870,000 under demand bank lines of credit.

The Company had no borrowings outstanding under a $5,000,000 domestic bank
line at July 31, 1995 and July 31, 1994. This line of credit matures in December
1995 and bears interest at the bank's prime rate plus

F-8
<PAGE> 44

LTX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

1%. Borrowing availability under the line is on a formula basis and borrowings
are secured by accounts receivable and inventories. The line of credit has
financial covenants which largely relate to results of operations and a minimum
level of liquidity.

<TABLE>

5. LONG-TERM LIABILITIES

Long-term liabilities consist of the following:

<CAPTION>
JULY 31
------------------------------
1994 1995
---------- ----------
<S> <C> <C>
Subordinated note payable
with interest at 8%.................. $20,000,000 $20,000,000
Lease purchase obligations at various
interest rates, net of deferred
interest............................. 1,641,000 1,318,000
----------- -----------
21,641,000 21,318,000
Less -- current portion................ (437,000) (359,000)
----------- -----------
$21,204,000 $20,959,000
=========== ===========
</TABLE>

In July 1994, the Company received $20,000,000 from Ando Electric Co., Ltd.
of Japan ("Ando") under a long-term loan agreement which extends through July
2001. The loan bears interest at 8%, which is payable semi-annually and has
semi-annual principal payments of $2,000,000 beginning in January 1997. The loan
is secured by the Company's inventories and capital equipment and is
subordinated in right of payment to senior indebtedness of the Company. In
connection with this loan agreement, the Company issued to Ando a warrant to
purchase up to 2,000,000 shares of common stock during the term of the loan
agreement (See Note 8). The Company also expanded its existing license and
development agreement with Ando to allow for further joint development of the
Company's Delta 50 technology. Proceeds from the loan were used to repay
domestic bank borrowings and to finance working capital requirements.

<TABLE>

6. CONVERTIBLE SUBORDINATED DEBENTURES

Convertible subordinated debentures consist of:

<CAPTION>
JULY 31
----------------------------
1994 1995
---------- ---------
<S> <C> <C>
13 1/2% Debentures Due 2011................. $12,887,000 $ --
7 1/4% Debentures Due 2011................. 7,308,000 7,308,000
----------- ----------
$20,195,000 $7,308,000
=========== ==========
</TABLE>

In July 1995, the Company's 13 1/2% Convertible Subordinated Debentures Due
2011 were converted into 2,240,581 shares of common stock. The outstanding
principal amount of $15,693,000 of Debentures was converted at the conversion
price of $7.00 per share. On the conversion date, the Debentures had a book
value of $13,149,000, which included the remaining unamortized original issue
discount of $2,544,000.

On April 25, 1986, the Company issued and sold at par $35,000,000 of 7 1/4%
Convertible Subordinated Debentures Due 2011. A total of $7,308,000 of the
original issue of $35,000,000 of 7 1/4% Convertible Subordinated Debentures
remain outstanding on July 31, 1995. The debentures are subordinated in right of
payment to senior indebtedness and are convertible by the holders into common
stock at $18 per share at any time prior to redemption or maturity. The
debentures are redeemable at the Company's option at any time, in whole or in
part, at 100% of the principal amount. Annual sinking fund payments of $366,000
are required beginning April 15, 1996. Interest is payable semi-annually on
April 15 and October 15.

On July 30, 1993 Sumitomo Metal Industries, Ltd. of Japan converted its
$6,375,000 10 1/2% Convertible Subordinated Debenture Due 2010 into 1,500,000
shares of common stock of the Company. The Company had issued the debenture to
Sumitomo Metal Industries, Ltd. in May 1990 (see Note 12).

F-9
<PAGE> 45

LTX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

7. INCOME TAXES

At July 31, 1995 the Company had, for tax purposes, $2,330,000 of federal
tax credits available for carryforward, which expire in fiscal years 2000
through 2004. In addition, the Company had, for tax purposes, a federal net
operating loss carryforward available of $30,500,000 which expires in fiscal
years 2007 through 2010.

The tax provision of $372,000 in fiscal 1995 consisted of $50,000 in
currently payable state income taxes and $322,000 in currently payable foreign
income taxes.

<TABLE>

Reconciliations of the U.S. federal statutory rate to the Company's
effective tax rate are as follows:

<CAPTION>
YEAR ENDED JULY 31
-------------------------
1993 1994 1995
----- ----- -----
<S> <C> <C> <C>
U.S. federal statutory rate.................................. (34.0)% (35.0)% 35.0%
State income taxes, net of federal income tax effect......... -- -- 0.3
Foreign income taxes......................................... -- -- (2.0)
Realization of deferred tax assets........................... -- -- (29.9)
Losses without current tax benefit........................... 34.0 35.0 --
----- ----- -----
Effective tax rate........................................... 0.0% 0.0% 3.4%
===== ===== =====
</TABLE>

<TABLE>

The temporary differences and carryforwards which created the deferred tax
assets and liabilities as of July 31, 1994 and July 31, 1995 are as follows:

<CAPTION>
JULY 31
-----------------------------
1994 1995
------------ ------------
<S> <C> <C>
Deferred tax assets:
Net operating losses.................................... $ 10,476,000 $ 10,675,000
Tax credits............................................. 2,330,000 2,330,000
Inventory valuation reserves............................ 4,426,000 3,643,000
Restructuring charges................................... 4,099,000 1,977,000
Spares amortization..................................... 2,435,000 2,989,000
Unearned service revenues............................... 949,000 151,000
Other................................................... 710,000 687,000
----------- -----------
Total deferred tax assets............................. 25,425,000 22,452,000
Valuation allowance..................................... (24,073,000) (21,784,000)
----------- -----------
Net deferred tax assets............................... $ 1,352,000 $ 668,000
=========== ===========
Deferred tax liabilities:
Depreciation............................................ $ (177,000) $ (418,000)
Basis difference -- debenture exchange.................. (807,000) --
Other................................................... (368,000) (250,000)
----------- -----------
Total deferred tax liabilities........................ $ (1,352,000) $ (668,000)
=========== ===========
Net deferred taxes recorded........................... $ -- $ --
=========== ===========
</TABLE>

Deferred tax assets and liabilities as of July 31, 1994 have been
reclassified to reflect the tax returns as actually filed. The valuation
allowance relates to uncertainty surrounding the realization of the deferred tax
assets, principally the tax loss carryforwards.

F-10
<PAGE> 46

LTX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

8. STOCKHOLDERS' EQUITY

Authorized Shares

At the Company's Annual Meeting of Stockholders in December 1993, the
stockholders approved an increase in the Company's authorized common stock from
50,000,000 shares to 100,000,000 shares.

Stock Option Plans

The Company has two stock option plans: the 1990 Stock Option Plan ("1990
Plan") and the 1995 LTX (Europe) Ltd. Approved Stock Option Plan ("U.K. Plan").

The 1990 Plan and the U.K. Plan provide for the granting of options to
employees to purchase shares of common stock at not less than 100% of the fair
market value on the date of grant. The 1990 Plan also provides for the granting
of options to key employees, directors and advisors of the Company to purchase
shares of common stock at prices to be determined by the Board of Directors.
Compensation expense relating to shares granted under this plan at less than
fair market value has been charged to operations over the applicable vesting
period. Options under both plans are exercisable over vesting periods which are
typically three-years beginning one year from the date of grant. In December
1994, the stockholders of the Company approved an increase to the number of
shares of common stock that may be granted under the 1990 Plan, through October
2000, from 1,500,000 shares to 2,700,000 shares. At July 31, 1995, options to
purchase 1,374,143 shares had been granted, and 1,325,857 shares were subject to
future grant under the 1990 Plan. At July 31, 1995, 100,000 shares were subject
to future grant under the U.K. Plan.

<TABLE>

The following table summarizes stock option activity for the three years
ended July 31, 1995:

<CAPTION>
RANGE OF
SHARES OPTION PRICES
-------- -------------
<S> <C> <C>
Outstanding at July 31, 1992................................... 2,096,028 $0.05 - $6.88
Granted................................................... 569,000 0.05 - 1.88
Exercised................................................. (408,695) 0.50 - 3.75
Terminated................................................ (143,895) 1.88 - 3.75
---------
Outstanding at July 31, 1993................................... 2,112,438 0.05 - 6.88
Granted................................................... 398,000 0.05 - 3.94
Exercised................................................. (255,285) 0.05 - 3.75
Terminated................................................ (71,814) 1.75 - 3.75
---------
Outstanding at July 31, 1994................................... 2,183,339 0.05 - 6.88
---------
Granted................................................... 391,000 1.00 - 5.56
Exercised................................................. (504,595) 0.05 - 3.75
Terminated................................................ (35,675) 1.88 - 4.13
---------
Outstanding at July 31, 1995................................... 2,034,069 0.05 - 6.88
=========
</TABLE>

Of the total options outstanding at July 31, 1995, 1,135,014 shares were
exercisable.

Warrants

In July 1994, in connection with a term loan agreement, the Company issued
to Ando Electric Co., Ltd. a warrant to purchase up to 2,000,000 shares of
common stock, at the fair market value of $2.31 per share, during the term of
the loan agreement (see Note 5). At July 31, 1995, the total warrant was
outstanding.

Employees' Stock Purchase Plan

In December 1993, the stockholders of the Company approved the adoption of
the 1993 Employees' Stock Purchase Plan, which replaced the 1983 Employees'
Stock Purchase Plan which expired in December 1993. Under this plan, eligible
employees may contribute up to 15% of their annual compensation for the purchase
of common stock of the Company up to $25,000 of fair market value of the stock
per calendar year. The plan limits the number of shares which can be issued for
any semi-annual plan period to 150,000 shares

F-11
<PAGE> 47

LTX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

and, over the term of the plan, the Company may issue up to 600,000 shares.
Under the plan, 299,708 shares were issued in fiscal 1995 and 19,520 shares were
available for future issuance under this plan at July 31, 1995.

Rights Agreement

The Board of Directors of the Company adopted a Rights Agreement, dated as
of May 11, 1989, between the Company and The First National Bank of Boston, as
rights agent, and in connection therewith, distributed one common share purchase
right for each outstanding share of common stock. The rights will become
exercisable only if a person or group acquires 20% or more of the Company's
common stock or announces a tender offer that would result in ownership of 30%
or more of the common stock. Initially, each right will entitle a stockholder to
buy one share of common stock of the Company at a purchase price of $30.00 per
share, subject to significant adjustment depending upon the occurrence
thereafter of certain events. Before any person or group has acquired 20% or
more of the common stock of the Company, the rights are redeemable by the Board
of Directors at $0.01 per right. The rights will expire on May 11, 1999, unless
redeemed by the Company prior to that date.

9. RETIREMENT PLAN

The Company's retirement plan provides for an annual discretionary
contribution by the Company from current or accumulated profits of an amount not
to exceed 5% of the eligible compensation of the participants in the plan.
Amounts are allocated to the accounts of the participants based on their
compensation and years of service and are subject to certain vesting provisions.
No contributions were made in the past three fiscal years. Eligible employees
may also make voluntary contributions to the plan through a salary reduction
contract up to the statutory limit or 15% of their annual compensation.
Beginning in October 1995, the Company will begin matching, up to certain
prescribed limits, employees' voluntary contributions to the plan.

<TABLE>

10. GEOGRAPHIC AREA INFORMATION

The Company's operations by geographic segment for the three years ended
July 31, 1995 are summarized as follows:

<CAPTION>
YEAR ENDED JULY 31
-----------------------------------------
1993 1994 1995
----------- ----------- -----------
<S> <C> <C> <C>
Sales to unaffiliated customers
North America................................. $ 91,248,000 $ 65,240,000 $ 70,797,000
Europe........................................ 20,744,000 24,423,000 33,268,000
Japan......................................... 9,447,000 21,106,000 21,352,000
Rest of world (principally Pacific Rim)....... 51,493,000 57,557,000 84,902,000
------------ ------------ ------------
Total sales to unaffiliated customers.... $172,932,000 $168,326,000 $210,319,000
============ ============ ============
Transfers between geographic areas
United States................................. $ 51,003,000 $ 67,225,000 $ 81,666,000
Europe........................................ 5,857,000 7,751,000 10,966,000
Japan......................................... 142,000 364,000 519,000
------------ ------------ ------------
Total transfers between geographic
areas.................................. $ 57,002,000 $ 75,340,000 $ 93,151,000
============ ============ ============
Income (loss) from operations
United States................................. $ 2,288,000 $(25,991,000) $ 9,228,000
Europe........................................ (212,000) (613,000) 2,853,000
Japan......................................... (5,717,000) (1,892,000) 569,000
Eliminations.................................. 755,000 95,000 2,190,000
------------ ------------- ------------
Total income (loss) from operations...... $(2,886,000) $(28,401,000) $ 14,840,000
============ ============ ============
</TABLE>

F-12
<PAGE> 48

LTX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
YEAR ENDED JULY 31
-----------------------------------------
1993 1994 1995
----------- ----------- -----------
<S> <C> <C> <C>
Identifiable assets
United States................................. $135,962,000 $124,029,000 $136,563,000
Europe........................................ 9,382,000 20,730,000 17,866,000
Japan......................................... 12,428,000 13,180,000 13,296,000
Eliminations.................................. (19,515,000) (27,303,000) (21,808,000)
------------ ------------ ------------
Total identifiable assets................ $138,257,000 $130,636,000 $145,917,000
============ ============ ============
</TABLE>

Transfer prices on products sold to foreign subsidiaries are intended to
produce profit margins that correspond to the subsidiary's sale and support
efforts.

11. COMMITMENTS

<TABLE>

The Company has operating lease commitments for certain facilities and
equipment and capital lease commitments for certain equipment. Minimum lease
payments under non-cancelable leases at July 31, 1995 are as follows:

<CAPTION>
TOTAL TOTAL
REAL OPERATING CAPITAL
ESTATE EQUIPMENT LEASES LEASES
---------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Year ended July 31,
1996................................ $5,212,000 $2,031,000 $ 7,243,000 $ 435,000
1997................................ 4,096,000 841,000 4,937,000 235,000
1998................................ 3,750,000 347,000 4,097,000 235,000
1999................................ 3,301,000 42,000 3,343,000 235,000
2000................................ 3,538,000 25,000 3,563,000 235,000
2001 and thereafter................. 22,107,000 -- 22,107,000 157,000
---------- ---------- ----------- ----------
Total minimum lease payments............. $42,004,000 $3,286,000 $45,290,000 $1,532,000
========== ========== ===========
Less: amount representing interest....... (214,000)
----------
Present value of total capital leases.... $1,318,000
===========
</TABLE>

Total rental expense for fiscal 1993, 1994 and 1995 was $10,822,000,
$9,849,000 and $9,611,000, respectively.

As a result of the Company's restructuring in fiscal 1994, certain excess
leased facilities have been sub-leased. At July 31, 1995, the Company had
accrued $1,159,000, which is included in restructuring charges on the
accompanying balance sheet, relating to the lease commitments on these
facilities.

12. JOINT VENTURE AGREEMENT

In May 1990, the Company completed a joint venture agreement with Sumitomo
Metal Industries, Ltd. ("SMI") of Japan to manufacture, sell and support the
Company's semiconductor test equipment products in Japan. Under this agreement,
the Company owns 50.5% of the shares of its Japanese subsidiary and 49.5% are
owned by SMI.

At July 31, 1995, other assets include a minority interest receivable from
SMI of $2,320,000 which arose as a result of cumulative losses of the Company's
Japanese subsidiary allocable to SMI, exceeding SMI's investment in the
Company's subsidiary. The Company believes this asset is fully realizable from
SMI due to SMI's guarantee of a portion of the Company's Japanese subsidiary's
bank lines of credit.

F-13
<PAGE> 49

Discrete Products

The iPTest system is used to test
discrete semiconductor components:
diodes, small signal transistors and
power transistors. These discrete
components are used in every area of
electronics. LTX expects that arrays
of discrete components, such as
multi-device modules, will replace
transistors in electric motor control
and will permit a wider use of
semiconductors in extremely high
power applications, such as air
conditioners, domestic appliances,
electric locomotives and automobiles.
iPTest systems are capable of indexed
parallel test for high volume,
cost-effective testing.

Device Tool

Device Tool is the first in a
series of layered software
options for the Synchro test
development environment.
Device Tool is the first test
development tool in the
industry which addresses
multiple phases of the IC
development process, including
test design, program creation,
loadboard design, test program
debug and documentation.

enVisionTM

enVision is the LTX
object-oriented
programming software used
on its digital test
systems. LTX has designed
enVision to be device
oriented rather than
tester oriented. In
earlier generation
software language,
programming commands made
direct reference to the
hardware of the test
system, which required the
user to have a detailed
knowledge of the system's
hardware. In contrast,
this detailed knowledge is
not required when using
enVision, thereby allowing
the programmer to focus
attention on refining the
test program for the
specific IC under test.
<PAGE> 50

===============================================================================

NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION
NOT CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS, AND ANY
INFORMATION OR REPRESENTATION NOT CONTAINED OR INCORPORATED BY REFERENCE HEREIN
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, THE SELLING
SHAREHOLDER OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF
ANY SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT RELATES OR AN
OFFER TO ANY PERSON IN ANY JURISDICTION WHERE SUCH AN OFFER WOULD BE UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALES MADE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.

---------------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 5
Use of Proceeds....................... 9
Price Range of Common Stock........... 9
Dividend Policy....................... 9
Capitalization........................ 10
Selected Consolidated Financial
Data................................ 11
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 12
Business.............................. 18
Management............................ 29
Principal and Selling Shareholders.... 30
Description of Common Stock........... 31
Underwriting.......................... 33
Legal Matters......................... 34
Experts............................... 34
Available Information................. 34
Incorporation of Certain Documents by
Reference........................... 35
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>

===============================================================================

5,000,000 SHARES

[LOGO OF LTX]

LTX CORPORATION

COMMON STOCK

---------------------------
PROSPECTUS

SEPTEMBER 28, 1995

---------------------------
LEHMAN BROTHERS

NEEDHAM & COMPANY, INC.

===============================================================================