<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 11, 1997
REGISTRATION NO. 333-26079
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Amendment No. 2 to
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-----------------------------
BIOCIRCUITS CORPORATION
(Exact name of Registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C> <C>
DELAWARE ---- 94-3060271
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification
incorporation or organization) Classification Code Number) Number)
</TABLE>
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1324 CHESAPEAKE TERRACE
SUNNYVALE, CALIFORNIA 94089
(408) 745-1961
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
---------------------
JAMES WELCH
VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
1324 CHESAPEAKE TERRACE
SUNNYVALE, CALIFORNIA 94089
(408) 745-1961
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
---------------------
COPY TO:
DEBORAH A. MARSHALL, ESQ.
LANA K. HAWKINS, ESQ.
COOLEY GODWARD LLP
FIVE PALO ALTO SQUARE
3000 EL CAMINO REAL
PALO ALTO, CA 94306-2155
(415) 843-5000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
---------------------
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is filed in a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement of the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
---------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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TITLE OF EACH CLASS OF AMOUNT TO BE PROPOSED MAXIMUM OFFERING PROPOSED MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PRICE PER SHARE OFFERING PRICE REGISTRATION FEE
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<S> <C> <C> <C> <C>
Common Stock 2,896,226(1) $0.9375(2) $ 2,715,211.88(2) $ 822.79(2)(3)
Common Stock 13,707,134(4) $1.06 (5) $14,529,562.04(5) $4,402.90(5)
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</TABLE>
(1) Previously included in the Registration Statement filed by the
Company on April 29, 1997. Includes all shares of Common Stock
issuable upon exercise of warrants issued on April 15, 1997
pursuant to a private placement and a warrant issued to a
manufacturing supplier.
(2) Estimated in accordance with Rule 457(c) solely for the purpose of
computing the amount of the registration fee based on the average
of the high and low prices of the Company's Common Stock as reported
on the Nasdaq National Market on April 23, 1997.
(3) Previously paid with the filing of the Company's Registration
Statement on April 29, 1997.
(4) Includes all shares of Common Stock issuable upon exercise of
warrants issued on July 3, 1997 pursuant to a private placement.
(5) Estimated in accordance with Rule 457(c) solely for the purpose
of computing the amount of the registration fee based on the average
of the high and low prices of the Company's Common Stock as reported
on the Nasdaq National Market on July 16, 1997.
----------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
<PAGE>
BIOCIRCUITS CORPORATION
Cross Reference Sheet pursuant to Item 501(b) of Regulation S-K showing location
in prospectus of information required by Items of Form S-3
Cross Reference Sheet showing the location in the Prospectus of the Items on
Form S-3
<TABLE>
<CAPTION>
FORM S-3 ITEM AND CAPTION LOCATION IN PROSPECTUS
<S> <C> <C>
1. Forepart of Registration Statement and
Outside Cover Page of Prospectus . . . . . . . . .Outside Front Cover Page
2. Inside Front and Outside Back Inside Front and Outside Back
Cover Pages of Prospectus. . . . . . . . . . . . . . . . . . . Cover Pages
3. Summary Information, Risk Factors and
Ratio of Earnings to Fixed Charges . . . . . . . The Company; Risk Factors
4. Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . Use of Proceeds
5. Determination of Offering Price. . . . . . . . . . . . . . . . . . . . . *
6. Dilution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . *
7. Selling Security Holders . . . . . . . . . . . . . Selling Securityholders
Outside Front Cover Page;
8. Plan of Distribution . . . . . . . . . . . . . . . . .Plan of Distribution
9. Description of Securities to Be Registered . . . . . . . . . . . . . . . *
10. Interests of Named Experts and Counsel . . . . . . . . . . . . . . . . . *
11. Material Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . *
12. Incorporation of Certain Information
by Reference. . . . . . . . . . . . . . . . . . . Inside Front Cover Page
13. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities . . . . . . . . . . . . . *
</TABLE>
- -------------------
* Such item is inapplicable or the answer thereto is in the negative.
<PAGE>
PROSPECTUS
16,603,360 SHARES
BIOCIRCUITS CORPORATION
-----------------
COMMON STOCK
-----------------
This Prospectus relates to a total of 16,603,360 shares of Common
Stock (the "Shares"), with a par value of $0.001 (the "Common Stock"), (i)
531,250 of which were issued by Biocircuits Corporation ("the Company") on
April 15, 1997 pursuant to a private placement (the "April Common Stock
Financing"), (ii) 1,157,488 of which were issued by the Company on April 15,
1997 pursuant to a private placement of units consisting of one share of
Common Stock and one warrant to purchase one share of Common Stock (the
"April Units Financing"), (iii) 1,157,488 of which are issuable upon exercise
of warrants issued pursuant to the April Units Financing (the "April
Financing Warrants"), (iv) 6,853,567 of which were issued by the Company on
July 3, 1997 pursuant to a private placement (the "July Financing"), (v)
6,853,567 of which are issusable upon exercise of warrants issused pursuant
to the July Financing (the "July Financing Warrants"), and (vi) 50,000 of
which are issuable upon exercise of one Common Stock warrant issued in
connection with a manufacturing arrangement (the "KMC Warrant"). All of the
Shares are being offered on behalf of certain security holders of the Company
described herein (the "Selling Securityholders"). The April Financing
Warrants are exercisable for an aggregate of 1,157,488 shares at $0.75 per
share at any time on or after June 5, 1997 and before November 23, 1998,
subject to certain adjustments. The July Financing Warrants are exercisable
for an aggregate of 6,853,567 shares at $0.75 per share at any time within
eighteen months of July 3, 1997, subject to certain adjustments. The KMC
Warrant is exercisable for an aggregate of 50,000 shares at $0.01 per share
at any time on or after March 28, 1997 and before June 30, 1998. The April
Financing Warrants, the July Financing Warrants and the KMC Warrant are
collectively referred to herein as the "Warrants."
The Shares may be offered by the Selling Securityholders from time to
time in transactions on the Nasdaq National Market, in privately negotiated
transactions or a combination of such methods of sale, at fixed prices that
may be changed, at market prices prevailing at the time of sale, at prices
related to such prevailing market prices or at negotiated prices. The
Selling Securityholders may effect such transactions by selling the Shares to
or through broker-dealers, and such broker-dealers may receive compensation
in the form of discounts, concessions or commissions from the Selling
Securityholders or the purchasers of the Shares for whom such broker-dealers
may act as agent or to whom they sell as principal or both (which
compensation to a particular broker-dealer might be in excess of customary
commissions). See "Selling Securityholders" and "Plan of Distribution."
The Warrants may or may not be exercised. The Company will receive all of
the proceeds from any exercise of the Warrants but will not receive any
proceeds from the sale of the shares of Common Stock by the Selling
Securityholders hereof. See "Plan of Distribution."
The Selling Securityholders, directly or through agents, dealers or
underwriters, may sell the Common Stock offered hereby from time to time on
terms to be determined at the time of sale. The Company's Common Stock is
traded on the Nasdaq National Market under the symbol BIOC. The last
reported sales price on the Company's Common Stock on the Nasdaq National
Market on July 16, 1997 was $1.06 per share.
-----------------
THE SHARES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" ON 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.
No underwriting commissions or discounts will be paid by the Company in
connection with this offering. Estimated expenses payable by the Company in
connection with this offering are $30,225.69. The aggregate proceeds to the
Selling Securityholders from the sale of the Shares will be the purchase price
of the Shares sold less the aggregate agents' commissions and underwriters'
discounts, if any, and other expenses of issuance and distribution not borne by
the Company. See "Plan of Distribution."
The Selling Securityholders and any broker-dealers, agents or underwriters
that participate with the Selling Securityholders in the distribution of the
Shares may be deemed to be "underwriters" within the meaning of the Securities
Act of 1933, as amended (the "Securities Act"), and any commission received by
them and any profit on the resale of the Shares purchased by them may be deemed
to be underwriting commissions or discounts under the Securities Act. The
Company has agreed to indemnify the Selling Securityholders and certain other
persons against certain liabilities, including liabilities under the Securities
Act.
The date of this Prospectus is August __, 1997.
<PAGE>
No person is authorized in connection with any offering made hereby 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 herein must not be relied upon as having been
authorized by the Company. This Prospectus does not constitute an offer to sell,
or a solicitation of an offer to buy, by any person in any jurisdiction in which
it is unlawful for such person to make such offer or solicitation. Neither the
delivery of this Prospectus at any time nor any sale made hereunder shall, under
any circumstances, imply that the information herein is correct as of any date
subsequent to the date hereof.
AVAILABLE INFORMATION
The Company is subject to the informational reporting requirements of the
Securities Exchange Act of 1934, as amended (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 can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Judiciary Plaza, Washington, D.C. 20549, and at the Commission's
following Regional Offices: Chicago Regional Office, Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511; and New York Regional
Office, 7 World Trade Center, Suite 1300, New York, New York 10048. Copies of
such material can be obtained at prescribed rates from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Judiciary Plaza,
Washington, D.C. 20549. The Commission maintains a Web site that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission. The address of such
Web site is http://www.sec.gov. The Company's Common Stock is quoted on the
Nasdaq National Market, and such reports, proxy statements and other information
can also be inspected at the offices of The Nasdaq Operations, 1735 K Street,
N.W., Washington, D.C. 20006.
Additional information regarding the Company and the Shares offered hereby
is contained in the Registration Statement on Form S-3 and the exhibits thereto
filed with the Commission under the Securities Act. This Prospectus does not
contain all of the information contained in such Registration Statement and the
exhibits thereto. Statements contained in this Prospectus regarding the contents
of any document or contract may be incomplete and, in each instance, reference
is made to the copy of such contract or document filed as an exhibit to the
Registration Statement. For further information pertaining to the Company and
the Shares, reference is made to the Registration Statement and the exhibits
thereto, which may be inspected without charge at, and copies thereof may be
obtained at prescribed rates from, the office of the Commission at 450 Fifth
Street, N.W., Judiciary Plaza, Washington, D.C. 20549.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission pursuant
to the Exchange Act is by this reference incorporated in and made a part of
this Prospectus:
(i) The Company's Annual Report on Form 10-K, as amended by Form 10-K/A-3,
for the fiscal year ended December 31, 1996;
(ii) The Company's Quarterly Report on Form 10-Q, as amended by Form
10-Q/A-2, for the quarterly period ended March 31, 1997;
(iii) the Company's Report on Form 8-K, filed on July 18, 1997; and
(iv) the description of the Company's Common Stock contained in the
Company's Registration Statement filed on Form 8-A, filed on March 20, 1992.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act after the date of this Prospectus and prior to
the termination of the offering shall be deemed to be incorporated by
reference herein and to be a part of this Prospectus from the date of filing
of such documents. Any statement contained in a document incorporated or
deemed to be incorporated by reference herein 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 by reference herein 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.
Copies of all documents which are incorporated herein by reference (not
including the exhibits to such documents, unless such exhibits are
specifically incorporated by reference into such documents or into this
Prospectus) will be provided without charge to each person, including any
beneficial owner to whom this Prospectus is delivered, upon a written or oral
request to Biocircuits Corporation, Attention: James Welch, Vice President
and Chief Financial Officer, 1324 Chesapeake Terrace, Sunnyvale, California,
94089, telephone number (408) 745-1961.
2.
<PAGE>
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THE COMPANY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS INCORPORATED BY REFERENCE IN THIS
PROSPECTUS.
Biocircuits was founded in 1989 to develop new immunodiagnostic testing
systems. Immunodiagnostic tests, or "assays," are performed on samples of
bodily fluids to diagnose a variety of infectious diseases and other
conditions, such as endocrine dysfunctions, and to conduct therapeutic drug
monitoring. Immunodiagnostic tests utilize biological reagents, such as
antibodies, and an instrument to detect the presence of a substance of
interest, or "analyte," such as a virus or hormone.
The Company's IOS point-of-care immunodiagnostic testing system consists
of a compact, inexpensive instrument and disposable test cartridges that can
be operated by a user with no special skills or training. The system enables
users to perform tests at many locations, including physicians' offices,
ambulatory clinics and small clinical laboratories. In the first quarter of
1996, the Company began marketing its IOS system with cartridges capable of
performing T4 and T Uptake tests, two of the most commonly requested
immunodiagnostic tests for assessing thyroid function. In September 1996,
the Company announced clearance from the United States Food and Drug
Administration (the "FDA") to market a qualitative serum pregnancy assay, a
test designed to allow physicians to perform this common pregnancy test in
their offices during the patient visit where they can provide more immediate
pre-natal care to patients. In December 1996, the Company announced FDA
clearance to market a quantitative hCG assay, a test to track the progress of
early pregnancies. Also in December 1996, the Company launched its Thyroid
Stimulating Hormone ("TSH") assay on a second generation cartridge. The TSH
assay is a test to assess thyroid function. The second generation cartridge
will be required for the market launch of all new assays. In addition,
existing assays will be converted to the new cartridge in the near future.
Biocircuits is currently developing three additional assays: a prostate
specific antigen ("PSA") test for management of prostate cancer patients, a
Digoxin test for monitoring the therapeutic usage of this drug in the
treatment of heart disease and a Free T4 test for diagnosing true clinical
thyroid status. The Company plans to continue to develop additional
immunodiagnostic assays commonly requested by office-based physicians.
The Company believes that its IOS system is the first low-cost,
commercially available product which permits a physician to perform
immunodiagnostic tests at the point of patient care. Performing tests with
current immunodiagnostic testing systems is time consuming, expensive and
requires multiple steps and skilled technicians. The Company believes that
the IOS system reduces the cost of immunodiagnostic testing by providing test
results more rapidly than other current testing procedures.
Biocircuits is targeting the approximately 36,000 small- to medium-sized
physician office practices and free-standing alternate site laboratories
which are licensed under the Clinical Laboratories Improvement Act of 1967
and Amendments of 1988 ("CLIA") for high or moderate complexity testing. Most
of these sites do not currently have an immunodiagnostic testing capability.
The IOS system is approved for moderately complex testing.
To perform a test, the operator inserts the test cartridge into the IOS
instrument, which then reads the relevant assay information contained on the
cartridge's bar code. The cartridge is then partially released from the
instrument, enabling the operator to place the specimen (blood, urine or
other samples) into one to two wells in the cartridge, depending on the test.
The sample automatically flows to the test zone, where it produces a signal
that the instrument uses to determine the test results. The IOS instrument
provides a liquid crystal display and a printed output in approximately 20 to
35 minutes, with the time varying by test. Receiving results within this
time frame enables the doctor to make a treatment decision before the patient
leaves the office, facilitating earlier treatment and obviating the need for
an additional visit or telephone call.
Biocircuits has developed significant knowledge about lipid/polymer
biomaterials in the past eight years that the Company believes could be
useful in other diagnostic system applications. In August 1995, Biocircuits
entered into an agreement with Beckman Instruments, Inc. ("Beckman") and
received $3,500,000 in the form of convertible debt (the "Note") in exchange
for granting Beckman options for licensing and marketing rights to certain
testing applications using the Company's lipid-polymer technology. Pursuant
to the terms of the agreement, Biocircuits completed a feasibility study in
August 1996. Because Beckman subsequently elected not to exercise its
development license option, Biocircuits regained full rights to the
lipid-polymer technology in December 1996, including all improvements made
during the feasibility study. In connection with the decision, Beckman also
elected to convert the Note into 1,111,727 shares of the Company's Common
Stock and a warrant to purchase the Company's Common Stock. The warrant is
exercisable for an aggregate of 222,345 shares of the Company's Common Stock
at approximately $3.45 per share at any time between December 13, 1996 and
August 15, 2000.
On June 27, 1997, the Company entered into a letter of intent (the
"Letter of Intent") with the Becton-Dickinson Microbiology Systems Division
of Becton, Dickinson and Company ("Becton") to enter into an agreement (the
"Agreement") that would give Becton exclusive worldwide marketing rights to
the IOS system and all cartridges currently available as well as those that
will be developed in the future. It is also possible that Becton will assume
responsibility for manufacturing the IOS instrument in 1998. The Company
currently plans to continue to manufacture cartridges for transfer to Becton
as well as to develop new test cartridges. The Letter of Intent is not
legally binding and the Agreement, which is currently being negotiated by the
parties, may never be finalized and executed. If the Agreement is executed,
the Company's operations will be materially affected and the Company's
results could differ materially from those anticipated herein.
The Company has incurred a loss in each period since its inception. At
June 30, 1997, the Company's accumulated deficit was $57.4 million.
Biocircuits expects to incur additional losses over the next several years.
The losses may vary from period to period, including from quarter to quarter,
and may increase due to the uncertainty of whether the sales and marketing
programs of the Company will achieve the desired results. The Company does
not expect to realize any significant revenue until at least 1998.
The Company historically has financed its operations primarily through
sales of common and preferred stock, interest income on the cash balances
available after such financings, long term debt and capital asset lease
financings. Since its inception through June 30, 1997, the Company raised a
total of approximately $63 million in the sale of common and preferred
stock, including $40.6 million and $21.5 million from private and public
financings, respectively.
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3.
<PAGE>
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THE OFFERING
Shares offered. . . . . . . . . . . . Up to 16,603,360 shares, all of which
are being offered by the Selling
Securityholders.(1)
Common Stock outstanding after
the offering. . . . . . . . . . . . . 25,396,660 shares.(2)
Use of Proceeds . . . . . . . . . . . The Warrants may or may not be exercised.
The net proceeds received by the Company
from any exercise of the Warrants will
be considered uncommitted funds that may
be used by the Company for general
corporate purposes, including sales and
marketing and research and development.
The Company will not receive any of the
proceeds from the sale of the Common
Stock by the Selling Securityholders.
Nasdaq Symbol . . . . . . . . . . . . BIOC.
(1) Includes (i) 531,250 shares issued pursuant to the April Common Stock
Financing, (ii) 1,157,488 shares issued pursuant to the April Units
Financing, (iii) 1,157,488 shares issuable upon exercise of the
April Financing Warrants, (iv) 6,853,567 shares issued pursuant to
the July Financing, (v) 6,853,567 shares issuable upon exercise of
the July Financing Warrants, and (vi) 50,000 shares issuable upon
exercise of the KMC Warrant.
(2) Assumes the exercise of all of the Warrants and the sale of all of the
Shares.
Biocircuits Corporation and IOS are registered trademarks of the Company.
- --------------------------------------------------------------------------------
4.
<PAGE>
RISK FACTORS
THE FOLLOWING FACTORS SHOULD BE CONSIDERED CAREFULLY WITH THE INFORMATION
PROVIDED ELSEWHERE IN THIS PROSPECTUS IN EVALUATING AN INVESTMENT IN THE SHARES
OFFERED HEREBY.
THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS WHICH INVOLVE RISKS AND
UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE
ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN FACTORS,
INCLUDING THOSE SET FORTH IN THE FOLLOWING RISK FACTORS AND ELSEWHERE IN THIS
PROSPECTUS.
ON JUNE 27, 1997, THE COMPANY ENTERED INTO A LETTER OF INTENT WITH THE
MICROBIOLOGY SYSTEMS DIVISION OF BECTON, DICKINSON AND COMPANY ("BECTON") TO
ENTER INTO AN AGREEMENT THAT WOULD GIVE BECTON EXCLUSIVE WORLDWIDE MARKETING
RIGHTS TO THE IOS SYSTEM AND ALL CARTRIDGES CURRENTLY AVAILABLE AS WELL AS
THOSE THAT WILL BE DEVELOPED IN THE FUTURE. IT IS ALSO POSSIBLE THAT BECTON
WILL ASSUME RESPONSIBILITY FOR MANUFACTURING THE IOS INSTRUMENT IN 1998. THE
COMPANY CURRENTLY PLANS TO CONTINUE TO MANUFACTURE CARTRIDGES FOR TRANSFER TO
BECTON AS WELL AS TO DEVELOP NEW TEST CARTRIDGES. THE LETTER OF INTENT IS NOT
LEGALLY BINDING AND THE AGREEMENT, WHICH IS CURRENTLY BEING NEGOTIATED BY THE
PARTIES, MAY NEVER BE FINALIZED AND EXECUTED. IF THE AGREEMENT IS EXECUTED,
THE COMPANY'S OPERATIONS WILL BE MATERIALLY AFFECTED AND THE COMPANY'S
RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED HEREIN.
FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FUNDING; MAINTENANCE OF NASDAQ
LISTING
Obtaining additional funds will be critical to the Company's ability to
maintain operations through 1998. The Company will therefore continue to seek
funding from various equity financing sources. Raising additional funds from
public or private sources will result in significant dilution to then
existing shareholders. If adequate funding is not available on a timely
basis, the Company will be required to curtail its operations significantly
or to cease operations. There can be no assurance that the Company will be
successful in obtaining additional financing. The report issued by the
Company's auditors for the year ended 1996 contains an explanatory paragraph
expressing substantial doubt about the Company's ability to continue as a
going concern.
On April 15, 1997, the Company closed the first tranche in two private
placements in which the Company sold its common stock and issued warrants to
purchase common stock (defined hereinafter, collectively, as the April 1997
Financings"). The first private placement, the April Common Stock Financing,
was to consist of the sale of 2,500,000 shares of common stock at $1.00 per
share to be issued in three tranches. The second private placement, the April
Unit Financing, was to consist of the sale of 5,447,000 units at $1.00 per
unit, each unit consisting of one share of common stock and one warrant to
purchase one share of common stock at $0.75 per share, to be issued in two
tranches.
The closing of the second tranche of the April 1997 Financings was
conditional upon the Company installing a minimum of eighty-eight (88) Good
Manufacturing Practices ("GMP") units of the IOS system during the three
month period ended June 30, 1997 that were sold directly or indirectly by the
Company. Although the Company implemented various sales and marketing
programs, including evaluation programs targeted to physicians and incentive
programs for its sales representatives and distributor sales representatives
in order to reach this milestone, the milestone was not met by the Company
and the second tranche of the April 1997 Financings did not close. The
closing of the third tranche of the April Common Stock Financing was
conditional upon the Company installing a minimum of two hundred thirty-five
(235) GMP units of the IOS system that are sold directly or indirectly by the
Company. Investors in the April Common Stock Financing have elected not to
fund the third tranche.
The Company issued 531,250 shares of its common stock in the first
tranche of the April Common Stock Financing and 1,157,488 units in the first
tranche of the April Units Financing. The April Financing Warrants expire
eighteen months after April 15, 1997, subject to certain adjustments. At the
Company's option, the Company may shorten the exercise period of the April
Financing Warrants in which case they may become redeemable by the Company at
$0.01 per share if the closing price for the Company's common stock is
greater than or equal to $2.00 per share for ten days. The first tranche of
the April 1997 Financings resulted in gross proceeds to the Company of
approximately $1.7 million. With these funds, the Company's cash resources
were adequate to satisfy its requirements until the end of the second quarter
of 1997.
On July 3, 1997, the Company closed the July Financing in which the
Company sold 6,853,567 units at $0.75 per unit, each unit consisting of one
share of common stock and one warrant to purchase one share of common stock
at $0.75 per share. The warrants issued in the July Financing expire eighteen
months after July 3, 1997, subject to certain adjustments. The July Financing
resulted in gross proceeds to the Company of approximately $5.1 million. With
these funds, the Company believes its cash resources will be adequate to
satisfy its requirements until the end of the second quarter of 1998.
The Company believes that maintaining its listing on the Nasdaq National
Market ("Nasdaq") is central to its ability to raise additional funds as well
as to provide liquidity to investors. The conversion of the Beckman Note
resulted in the Company meeting Nasdaq listing requirements at year end 1996.
The Company failed temporarily to meet the Nasdaq net tangible asset listing
requirement at the end of the first quarter of 1997. However, the proceeds
from the first tranche of the April 1997 Financings allowed the Company to
meet the Nasdaq net tangible asset listing requirement, on a proforma basis,
for the first quarter of 1997. Proceeds from the July Financing allowed the
Company to meet the Nasdaq net tangible asset listing requirement, on a
proforma basis, for the second quarter of 1997. In addition, the Company
believes the proceeds from the July Financing will result in it meeting
Nasdaq listing requirements through third quarter 1997. Thereafter, the
Company may be required to generate sufficient revenue or raise additional
capital to maintain Nasdaq listing requirements through year end 1997.
Nasdaq Marketplace Rule 4450(a)(5) currently provides that in order to
remain eligible for continued inclusion in the Nasdaq National Market, a
security must have a bid price of at least $1 per share, or in the
alternative (i) the aggregate market value of publicly held shares, excluding
shares held by officers, directors and greater than 10% beneficial owners
must be at least $3,000,000 (the "Public Float Test") and (ii) a company's
net tangible assets must be at least $4,000,000 (the "Net Tangible Asset
Test", and, together with the Public Float Test, the "Alternative Test"). If
the bid price of the Company's common stock is below $1 per share for ten
consecutive days, under current Nasdaq Rules the Company must meet the
Alternative Test in order to maintain its Nasdaq listing. Although the bid
price of the Company's common stock is currently above $1 per share and the
Company does not have to rely on the Alternative Test in order to maintain
its Nasdaq listing, there can be no assurance that the bid price will remain
above $1 per share in the future. In addition, although the Company currently
meets the Alternative Test and is therefore in compliance with Nasdaq's
listing requirements, there can be no assurance that the Company will
continue to meet the Alternative Test in the future. Nasdaq has proposed new
rules for consideration by the Securities and Exchange Commission that would
eliminate the Alternative Test. If the rules are approved by the Securities
and Exchange Commission, the bid price of the Company's common stock must
remain at or above $1 per share in order to maintain its Nasdaq listing. The
Company's shareholders have authorized its Board of Directors to effect a
1-for 2.50 reverse stock split at any time prior to the Company's 1998 Annual
Meeting. Therefore, if the bid price of the Company's common stock is below
$1 per share for ten consecutive days, the Company may effect the reverse
stock split to increase the common stock price.
The Company believes its cash requirements may increase in future
periods due to higher expenses. The Company expects to incur substantial
additional costs, including costs related to ongoing research and development
activities, either alone or in collaboration with strategic partners,
clinical trials, expansion of manufacturing, research and development and
administrative facilities, development of manufacturing capabilities,
obtaining regulatory
5.
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approvals and establishing sales, marketing and distribution capabilities. The
Company's long-term capital requirements will depend on numerous factors,
including the progress of the Company's research and product development, the
timing and cost of obtaining regulatory approvals, the costs associated with
patents and other intellectual property rights, the levels of resources devoted
to the development of manufacturing and marketing capabilities and potential
collaborative partnerships. The Company may also seek additional funding
through collaborative relationships and the acquisition of capital equipment,
including lease financing, if available on attractive terms. The Company also
may attempt to obtain funds through arrangements with strategic partners or
others that may require the Company to relinquish rights to certain of its
technologies, products or marketing territories in exchange for funding. If
adequate funds are not available from these sources, the Company may be required
to curtail its operations significantly. No assurance can be given that any
additional financing will be available, or, if available, that it will be
available on acceptable terms.
NEED TO RETAIN AND ATTRACT KEY EMPLOYEES; REDUCTION IN WORK FORCE
On April 3, 1997, in order to reduce its losses and conserve
approximately $250,000 per month, the Company reduced its work
force from 92 to 54 employees. Of the existing work force, 14 employees are
engaged in development activities, 21 are engaged in manufacturing, and 19
are devoted to sales, marketing and administrative activities, including 9
sales representatives.
The Company is highly dependent upon the principal members of its
management and scientific staff and key individuals in all areas of the
Company. Although the Company believes it has retained sufficient employees
to achieve its near-term business objectives after its reduction in force on
April 3, 1997, there can be no assurance that the loss of services of such
employees might not impede the achievement of the Company's business
objectives. Furthermore, there can be no assurance that the reduction in
force will not adversely affect the Company's ability to retain its remaining
employees. The Company has implemented certain programs which it believes
will help in retaining key employees. Such programs include retention
packages granted to officers and certain Company employees which provide for
lump sum payments equal to twelve and six months, respectively, of salary if
such employees are employed on the closing date of a merger or sale of the
Company prior to March 20, 1998 and the repricing of outstanding options to
purchase common stock to the current market price of the Company's common
stock on March 20, 1997. The Company faces competition for qualified
individuals from numerous manufacturers of medical products and other high
technology products, as well as universities and academic institutions.
There can be no assurance that the Company will be able to attract new
qualified personnel on acceptable terms. The Company maintains life insurance
policies equal to the lesser of one times the annual salary or $150,000 for
all officers and employees.
DEVELOPMENT STAGE COMPANY; PRODUCTS UNDER DEVELOPMENT
Biocircuits was founded in 1989 and is a development stage company. To
achieve profitable operations, the Company, alone or with others, must, among
other things, successfully develop, obtain regulatory approval for,
manufacture, introduce and market its current and potential products. The
time frame necessary to develop the Company's products is uncertain. The
Company has experienced significant delays in the scheduled completion of its
IOS point-of-care instrument and test cartridges, and there can be no
assurance that further product development delays will not occur in the
future.
The Company's first sale and shipment of its IOS system, with cartridges
capable of performing T4 and T Uptake tests, occurred in March 1996. Certain
design changes to the IOS instrument were required since the first sale and
shipment of the IOS system. In April 1996, problems in some of the instrument
circuitry and software, which caused the instrument to cease operating,
required certain parts and software modifications. Further product shipments
were suspended at that time while the problems were diagnosed and corrected.
In order to correct the problems, the Company changed some electrical
components within the instrument, revised an electronic circuit board,
revised the embedded software which operates the instrument, and upgraded all
systems, including instruments in inventory at the Company's instrument
supplier. All changes were validated and documented, and shipments to
distributors were resumed in the middle of June. In addition, all instruments
previously shipped to customers were retrofitted.
In September 1996, the Company received FDA clearance to market a
qualitative serum pregnancy assay. The Company received clearance from the
FDA for a TSH assay in November 1996 and a quantitative hCG assay in December
1996. During 1996, the Company developed an improved second generation
cartridge for its new assays as well as existing assays. Development of the
second generation cartridge and optimization of the assays in the new
cartridge took several months longer than anticipated due to design
iterations. Product optimization followed cartridge design completion.
Optimization is also an iterative process of developing the specific
chemistries and system fluidies to ensure each assay performs at its claimed
specifications. As a result, launch of the new assays (TSH, Quantitative hCG
& Serum hCG) have experienced delays. In December 1996, the Company launched
its TSH assay on the second generation cartridge. In March 1997, the Company
began shipping the T4 and T Uptake tests on the second generation cartridge.
The second generation cartridge will be required for the market launch of all
future assays. Biocircuits is currently developing three additional assays: a
prostate specific antigen ("PSA") test for management of prostate cancer
patients, a Digoxin test for monitoring the therapeutic usage of this drug in
the treatment of heart disease and a Free T4 test for diagnosing true
clinical thyroid status. The Company does not expect to realize any
significant revenue until at least 1998.
There can be no assurance that the IOS point-of-care system and tests will
perform reliably and in accordance with the Company's specifications, that
additional design changes may not be required in the future, that the Company
will be able to develop successfully or obtain regulatory clearance for
additional tests or any other future products, that the reduction in assay
development employees will not result in further delays in developing those
tests, that the second generation cartridge will perform as planned, that any of
the Company's products can be manufactured in
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sufficient quantity, at acceptable cost and with appropriate quality, or that
any products, if and when approved, can be successfully marketed. Failure to
meet one or more of these challenges could have a material adverse effect on the
Company.
UNCERTAIN MARKET ACCEPTANCE OF POINT-OF CARE PRODUCT
Substantially all immunodiagnostic testing currently is performed at
large clinical laboratories rather than point-of-care sites. There can be no
assurance that the Company will be successful in developing and penetrating
the point-of-care market for immunodiagnostic testing. The Company currently
employs 8 sales representatives to develop its relationships with
distributors which supply a substantial portion of medical and test products.
The Company believes it must expand its sales force to between 12 and 20
sales representatives and further develop its relationships with distributors
which currently supply a substantial portion of medical and test products to
physicians. Due to its limited cash resources, the Company is uncertain when
or if it will be able to attain a sales force of at least 12 sales
representatives. The selling process typically requires the Company's sales
force to work closely with distributors, generate qualified physician leads
and perform demonstrations for the IOS system in physicians' offices. The
selling process can be time-consuming and there can be no assurance that the
Company will be successful in marketing the IOS system, that the rate of
sales growth will meet expectations or that the marketing programs of the
Company will achieve the desired results. To date, the number of instrument
sales to distributors and placements in physicians' offices have been, and
continue to be, significantly less than the Company's expectations, due
primarily to the technical problems the Company encountered with the
performance of the IOS system, which resulted in a loss of momentum within
the Company's distribution network. The Company believes that if instrument
sales continue to be below expectations, the Company's revenue and financial
performance will be materially adversely affected. Certain design changes to
the IOS instrument were required since the first sale and shipment of the IOS
system. In April 1996, problems in some of the instrument circuitry and
software required certain parts and software modifications. Further product
shipments were suspended at that time while the problems were diagnosed and
corrected. All changes were validated and documented, and shipments to
distributors were resumed in the middle of June 1996. In addition, all
instruments previously shipped to customers were retrofitted. The
requirements to make certain design changes to the instrument and the
suspension of product shipments had an adverse impact on 1996 revenue and
overall financial performance. There can be no assurance that additional
design changes may not be required in the future or that the system
performance will be reliable over time.
In general, market acceptance of the Company's initial point-of-care system
will depend upon the Company's ability to demonstrate the accuracy and value of
its system and to persuade physicians to perform the Company's initial tests in
their own facilities rather than send those tests to clinical laboratories. More
specifically, in order for the Company to have success in penetrating the
point-of-care immunodiagnostic market and to achieve significant sales of IOS
systems and test cartridges, the Company believes it will need to expand its
menu of tests. The Company believes that TSH, along with the Company's
additional products in development, are test key elements in penetrating the
physicians' office market. There can be no assurance that the TSH test will have
the desired impact in increasing the market acceptance of the Company's IOS
system.
HISTORY OF LOSSES; EXPECTATION OF FUTURE LOSSES
At June 30, 1997, the Company's accumulated deficit was approximately
$57.4 million. Biocircuits expects to incur additional losses over the next
several years. The Company expects that currently available funds will be used
primarily for sales and marketing programs for its IOS point-of-care system and
development of additional tests for the IOS point-of-care system. The losses may
vary from period to period, including from quarter to quarter, and may increase,
due to the uncertainty of whether the sales and marketing programs of the
Company will achieve the desired results. Accordingly, the Company believes that
quarter-to-quarter results are not a useful indicator of the Company's
performance. There can be no assurance that any products will be manufactured
or marketed successfully, or that profitability will ever be achieved.
COMPETITION
Human immunodiagnostics is an intensely competitive field in which there
are a number of well established companies. Many of these competitors have
substantially greater financial resources and larger, more established sales,
marketing, and service organizations. The primary bases of competition in the
immunodiagnostic testing market are throughput, ease of use, price, breadth
of test menu, quality of results and service. There can be no assurance that
the Company will be able to compete successfully on any of these bases.
The Company believes that its principal competitors will be large
companies with a diagnostics division such as Abbott Laboratories; Becton,
Dickinson and Company; Boehringer Mannheim, GmbH; Chiron/Ciba-Corning
Diagnostics Corporation; Diagnostic Products Corporation and Johnson &
Johnson. Each of these companies has an established position in the clinical
laboratory test market with systems based on traditional immunoassay
technology. No assurance can be given that the Company's products will
compete successfully with existing or future products of such competitors or
that new competitors will not enter the market with competing technologies.
The Company expects that in the future, one or more of these companies or
others will develop and introduce new systems for the point-of-care market.
If any such company is able to develop or acquire rights to a better
immunodiagnostic testing system, the Company's business would be materially
adversely affected.
MANUFACTURING RISKS; RELIANCE ON CONTRACT MANUFACTURERS
The Company has established its proprietary manufacturing capability for
the test cartridges for its IOS system. Various plastic components and other
material for the cartridges are and will be obtained from contract
manufacturers, some of which are sole source supply agreements. In order to
meet increased cartridge demand, the Company's cartridge manufacturing
milestones include improving manufacturing process yields, reducing the
direct labor content of its disposable tests, reducing the material cost
component of the cartridges, expanding mold and cartridge manufacturing
capacity as both the test menu and test manufacturing volume expand,
increasing the level of automation and manufacturing the cartridge at the
Company's targeted cost. Following the introduction of the second generation
cartridge and several manufacturing process improvements, yields have
improved to the targeted levels of 90% and the Company has not experienced
any backlogs. The Company plans further manufacturing improvements including
the use of a multiple cavity mold and a 30% increase in capacity with no
increase in direct labor. There can be no assurance that the Company will be
successful in achieving these milestones or that these milestones will be
achieved on a timely basis. The scale-up process will require the Company to
develop advanced manufacturing techniques and rigorous process controls and
the automation efforts will be critical to meet the Company's longer-term
cartridge manufacturing demands and cost targets. In addition, the Company
must be able to manufacture its products in compliance with regulatory
requirements, including the FDA's GMP guidelines. No assurance can be given
as to the ability of the Company to acquire the required materials and
produce commercial quantities of cartridges in compliance with applicable
regulations at an acceptable costs.
In December 1992, the Company entered into an agreement with KMC Systems
Inc. ("Kollsman") pursuant to which Kollsman was appointed the exclusive
North American supplier of the IOS instrument. The agreement with Kollsman
contained certain minimum purchase requirements and expired three years from
the date of first commercial production, subject to certain rights of earlier
termination. In April 1996, the Company and Kollsman executed a letter
agreement to amend the 1992 agreement (the "Letter Agreement"), pursuant to
which Kollsman will be the exclusive supplier of the IOS instrument through
1997, the minimum purchase requirements were eliminated and the Company and
Kollsman agreed to an acceptable fixed transfer price to be paid through
1997, the revised term of the agreement. Also pursuant to the Letter
Agreement, the Company agreed to issue Kollsman a warrant to purchase 250,000
shares of Common Stock at an exercise price of $7.00 per share, subject to an
increase of 50,000 shares under certain circumstances. The warrant expires
at year end 1997, subject to certain extension rights. In November 1996, the
Company and Kollsman amended the Letter Agreement to extend the expiration
date of the warrant to June 1998, subject to certain extension rights. In
order to secure an adequate supply of IOS instruments, the Company
established a standby letter of credit for the benefit of Kollsman. In late
March 1997, the Company and Kollsman agreed to reduce the amount of the
standby letter of credit by $249,000 in exchange for reducing the exercise
price of the warrant from $7.00 to $2.00 per share. Also in late March 1997,
the Company and Kollsman agreed to issue Kollsman a warrant to purchase
50,000 shares of Common Stock in exchange for a one month shutdown of
instrument production. In the quarter ended March 31, 1997, the Company
recorded a $124,000 expense as manufacturing overhead, $60,000 for the
warrant price reduction from $7.00 to $2.00 per share and $64,000 for the
issuance of the 50,000 warrant to purchase Common Stock. Such expense
determination was calculated according to Financial Accounting Standard Board
Statement No. 123. In early May 1997, the Company subsequently agreed with
Kollsman to extend the instrument production line shutdown until August 1997.
The Company further agreed to and has paid Kollsman $436,000 to cover the
cost of raw material and work in process currently at, or to be delivered to,
Kollsman. Such prepaid inventory will be credited back against future
deliveries of IOS instruments to Biocircuits. In return, Kollsman canceled
the $700,000 standby letter of credit and the associated funds collateralized
by the Company's bank have been released back to the Company. The Company is
entirely dependent on Kollsman as the sole source of production of its IOS
instruments. Kollsman, in turn, relies upon sole-source suppliers for certain
components. Failure of Kollsman's suppliers to deliver the required
quantities on a timely basis and at commercially reasonable prices, or
Kollsman's failure to deliver the IOS instruments to the Company on a timely
basis or at commercially reasonable costs could materially adversely affect
the Company.
GOVERNMENT REGULATION
The Biocircuits IOS point-of-care system is regulated in the United
States as a medical device by the FDA and as such, requires regulatory
clearance or approval prior to commercialization. Pursuant to the Federal
Food, Drug and Cosmetic Act (the "FDC Act"), and the regulations
promulgated thereunder, the FDA regulates, among other things, the clinical
testing, manufacture, labeling, promotion, distribution, sale and use of
medical devices in the United States. Failure of the Company to comply with
applicable regulatory requirements can result in, among other things, warning
letters, fines, injunctions, civil penalties, recall or seizure of products,
total or partial suspension of production, the government's refusal to grant
premarket clearance or premarket approval of devices, withdrawal of marketing
approvals, and criminal prosecution.
In the United States, medical devices are classified into one of three
classes, Class I, II or III, based on the controls necessary to reasonably
ensure their safety and effectiveness. Class I devices are those devices
whose safety and effectiveness can reasonably be ensured through general
controls, such as adequate labeling, pre-market notification, and adherence
to GMP regulations. Class II devices are those devices whose safety and
effectiveness can reasonably be ensured through the use of general special
controls, such as performance standards, post-market surveillance, patient
registries, and FDA guidelines. Class III devices are devices which must
receive pre-market approval by the FDA to ensure their safety and
effectiveness. Generally, Class III devices are life-sustaining,
life-supporting or implantable devices, or new devices which have been found
not to be substantially equivalent to legally marketed devices.
Before a new medical device may be introduced into the market in the
United States, the manufacturer or distributor generally must obtain either
FDA clearance of a section 510(k) premarket notification or FDA approval of a
premarket approval ("PMA") application.
If the manufacturer or distributor can establish that the device is
"substantially equivalent" to a legally marketed Class I or Class II
medical device or to a Class III medical device for which the FDA has not
required a PMA (the "predicated device"), the manufacturer or distributor
may seek FDA marketing clearance for the device by filing a 510(k)
notification. In a 510(k) filing, the manufacturer or distributor is required
to demonstrate that the device has the same intended use and the same
technological characteristics as the predicate device or has different
technological characteristics that do not raise different questions of safety
and efficacy than the predicate device. A 510(k) notification must contain
information to support the claim of substantial equivalence, which may
include laboratory test results or the results of clinical studies.
Following submission of a 510(k) notification, the manufacturer or
distributor may not place the device into commercial distribution until an
order of substantial equivalence is issued by the FDA. The Company
understands that the FDA has been requiring a more rigorous demonstration of
substantial equivalence in connection with 510(k) notifications. Although it
generally takes from four to twelve months from the date of submission to
obtain a 510(k) clearance, it may take longer. FDA regulations do not specify
the time in which it must respond to a 510(k) submission. The FDA may
determine that the proposed device is not substantially equivalent to a
legally marketed device, or may require further information, such as
additional test data, before the FDA is able to make a substantial
equivalence determination. Such determination or request for additional
information could delay the Company's market introduction of its future
products and could have a materially adverse effect on the Company's
continued operations. Further, for any of the Company's devices cleared
through the 510(k) process, modifications or enhancements that could
significantly change safety or effectiveness or constitute a major change in
the intended use of the device will require a new 510(k) submission. The
Company's IOS point-of-care instrument tests currently are regulated as Class
II medical devices. The Company has received 510(k) clearances for the
instrument and the T4 and T Uptake tests, the T4-only test, the qualitative
serum pregnancy test, the TSH test and the quantitative hCG test in 1995 and
1996.
If a manufacturer or distributor cannot establish that a proposed device
is substantially equivalent to another legally marketed predicate device, the
manufacturer or distributor must seek pre-market approval of the proposed
device through submission of a PMA application. A PMA application must be
supported by extensive data, including pre-clinical and clinical trial data
to prove the safety and efficacy of the device, as well as extensive
manufacturing information. If human clinical trials are required and the
device presents "a significant risk," the sponsor of the trial (usually the
manufacturer or distributor) is required to file an investigational device
exemption ("IDE") application with the FDA before commencing human clinical
trials. The IDE application must be supported by data, typically including
the results of laboratory and animal testing. If the IDE application is
approved by the FDA and one or more appropriate institutional review boards
("IRBs"), human clinical trials may begin at a specific number of
investigational sites with a specific number of subjects, as approved by FDA.
If the device presents a "nonsignificant risk" to subjects, a sponsor may
begin the clinical trial after obtaining approval of one or more appropriate
IRBs without the need for FDA approval. An IDE supplement must be submitted
to and approved by the FDA before a sponsor or investigator may make a change
to the investigational plan that may affect its scientific soundness or the
rights, safety or welfare of human subjects. A PMA application must contain
the results of clinical trials, the results of any relevant bench tests,
laboratory and animal studies, a complete description of the device and its
components, and a detailed description of the methods, facilities and
controls used to manufacture the device. The submission also must include the
proposed labeling, advertising and training methods, if required. Upon
receipt, the FDA conducts a preliminary review of the PMA application to
determine whether the submission is sufficiently complete to permit a
substantive review. If sufficiently complete, the submission is declared
fileable by the FDA. By statute, the FDA has 180 days to review a PMA
application, although the review time often is extended significantly by the
FDA asking for more information or clarification of information already
provided in the submission. While the FDA has responded to PMA applications
within the allotted time period, PMA reviews more often occur over a
significantly protracted time period and generally take approximately 12 to
24 months or more from the date of filing to approval. The FDA also will
inspect the manufacturing facilities to ensure compliance with the FDA's GMP
requirements prior to approval of a PMA. This is a lengthy and expensive
process, and there can be no assurance that such approval will be obtained
for any future product the Company may develop which may be determined to be
subject to such requirements. A number of devices for which PMA marketing
clearance has been sought by others have never been cleared for marketing.
Modifications to a device that is the subject of an approved PMA, its
labeling or manufacturing process may require FDA approval of new PMAs or PMA
supplements, which often require submission of the same type of information
required for the initial PMA. There can be no assurance that any of the
Company's future products will ever obtain the necessary FDA regulatory
clearance for commercial distribution.
Any products distributed by Biocircuits pursuant to the above described
clearances are subject to pervasive and continuing regulation by the FDA. The
Company also will be required to manufacture its products in registered
establishments and in accordance with GMP regulations. There can be no
assurance that the Company or its OEM suppliers' facilities will meet GMP
requirements. Failure to meet such requirements could result in certain
actions by the FDA, including the possible shutdown of the Company's
manufacturing facilities. In addition, the FDA has enacted changes to the
GMP regulations that may increase the cost of compliance with GMPs. The
Company's facility will be subject to periodic inspections by the FDA for
compliance with GMP and other applicable requirements. Labeling and
promotional activities are subject to scrutiny by the FDA and, in certain
instances, by the Federal Trade Commission. Current FDA enforcement policy
strictly prohibits marketing of medical devices for unapproved uses. The
export of medical devices also is subject to regulation in certain instances.
In addition, the use of the Company's products may be regulated by various
state agencies. For example, the Company was required to obtain a license
from the State of California to manufacture its proposed products. There can
be no assurance that the Company's proposed products will be able to comply
successfully with any such requirements or regulations.
The potential market for the Company's products may be affected by CLIA.
CLIA establishes requirements for any facility that performs laboratory
testing on human specimens for the purpose of providing information for
diagnosis or treatment of human beings. CLIA covers such testing in virtually
all settings, including physicians' offices. Regulations implementing CLIA
establish requirements for laboratories in such areas as administration,
participation in proficiency testing, patient test management, quality
control, personnel, quality assurance and inspection. Under these
regulations, the specific requirements that a laboratory must meet depend
upon the complexity of the tests performed by the laboratory. Laboratory
tests are categorized as either waived tests, tests of moderate complexity or
tests of high complexity. Laboratories that perform either moderate or high
complexity tests must meet standards in all areas, with the major difference
in requirements between moderate and high complexity testing concerning
quality control and personnel standards. Quality control standards for
moderate complexity testing are being implemented in stages. Laboratories
performing high complexity testing must meet all the quality control
requirements by the effective date of the regulations. Personnel standards
for high complexity testing are more rigorous than those for moderate
complexity testing. In general, personnel conducting high complexity testing
will need more education and experience than those doing moderate complexity
testing. Under the CLIA regulations, all laboratories performing moderately
complex or highly complex tests will be required to obtain either a
registration certificate or certification of accreditation from the Health
Care Financing Administration ("HCFA").
The Company's IOS system has been classified as moderately complex, and
thus any laboratory using such products would have to meet the regulatory
requirements for testing of moderate complexity testing.
The Company understands that laboratories, including physician office
laboratories, will be evaluating the requirements of CLIA in determining
whether to perform certain types of moderate and high complexity diagnostic
tests. The Company believes that the sale of its proposed products will not
be adversely affected by CLIA. However, no assurances can be given that the
statute and its implementing regulations will not have a materially adverse
impact on the Company and its ability to market and sell its IOS system or
any future products that the Company may develop.
Although Biocircuits believes that it will be able to comply with all
applicable regulations regarding the manufacture and sale of diagnostic
devices, such regulations are always subject to change and depend heavily
upon administrative interpretations. There can be no assurance that future
changes in regulations or interpretations made by the U.S. Department of
Health and Human Services, FDA, HCFA or other regulatory bodies, with
possible retroactive effect, will not adversely affect the Company. In
addition to the foregoing, Biocircuits is subject to numerous federal, state
and local laws and regulations relating to such matters as safe working
conditions, laboratory and manufacturing practices, environmental, fire
hazard control, and disposal of hazardous or potentially hazardous
substances. To date, compliance with these laws and regulations has not had a
material effect on the Company's financial results, capital requirements or
competitive position, and the Company has no plans for material capital
expenditures relating to such matters. However, there can be no assurance
that it will not be required to incur significant costs to comply with such
laws and regulations in the future, or that such laws or regulations will not
have a materially adverse effect upon the Company's ability to do business.
Sales of medical devices outside the United States are subject to
foreign regulatory requirements that vary widely from country to country. The
time required to obtain registrations or approvals required by foreign
countries may be longer or shorter than that required for FDA clearance or
approval, and requirements for licensing may differ significantly from FDA
requirements. Some countries historically have permitted human studies
earlier in the product development cycle than regulations in the United
States permit. Other countries have requirements similar to those of the
United States. This disparity in the regulation of medical devices may result
in slower product clearance in certain countries than in others. Furthermore,
the introduction of the Company's IOS system or any future products in
foreign markets might require obtaining foreign regulatory clearances. There
can be no assurance that the Company will be able to obtain regulatory
clearances for its current or any future products in the United States or in
foreign markets.
THIRD PARTY REIMBURSEMENT
Political, economic and regulatory influences are subjecting the
healthcare industry in the United States to fundamental change. Although
Congress has failed to pass comprehensive health care reform legislation to
date, the Company anticipates that Congress, state legislatures and the
private sector will continue to review and assess alternative benefits,
controls on health care spending through limitations on the growth of private
health insurance premiums and Medicare and Medicaid spending, the creation of
large insurance purchasing groups, price controls on pharmaceuticals and
other fundamental changes to the health care delivery system. Any such
proposed or actual changes could cause any potential partners of the Company
to limit or eliminate spending on collaborative development projects.
Legislative debate is expected to continue in the future, market forces are
expected to demand reduced costs and the Company cannot predict what impact
the adoption of any federal or state health care reform measures or future
private sector reforms may have on its business.
In both domestic and foreign markets, sales of the Company's IOS
point-of-care system and other potential products, if any, will depend in
part on the availability of reimbursement from third-party payors such as
government health administration authorities, private health insurers and
other organizations. Third-party payors are increasingly challenging the
price and cost effectiveness of medical products and services. Significant
uncertainty exists as to the reimbursement status of newly approved health
care products. There can be no assurance that the Company's products will be
considered cost effective or that adequate third-party reimbursement will be
available to enable Biocircuits to maintain price levels sufficient to
realize an appropriate return on its investment in product development.
Legislation and regulations affecting the pricing of health care services may
change, which could affect the Company's products and could further limit
reimbursement for medical products and services.
RISK OF PRODUCT LIABILITY; POSSIBLE UNAVAILABILITY OF INSURANCE
Testing, manufacturing and marketing of the Company's potential products
will entail risk of product liability. The Company currently has product
liability insurance. However, there can be no assurance that the Company will be
able to maintain such insurance at a reasonable cost or in sufficient amounts to
protect the Company against losses
7.
<PAGE>
due to product liability. An inability to maintain insurance at an acceptable
cost or to otherwise protect against potential product liability could prevent
or inhibit the commercialization of the Company's products. In addition, a
product liability claim or recall could have a material adverse effect on the
business or financial condition of Biocircuits.
HAZARDOUS MATERIALS
The Company's research and development involves the controlled use of
hazardous materials and chemicals. Although the Company believes that its safety
procedures for handling and disposing of such materials comply with the
standards prescribed by state and federal regulations, the risk of accidental
contamination or injury from these materials cannot be completely eliminated.
In the event of such an accident, the Company could be held liable for any
damages that result and any such liability could exceed the resources of the
Company. The Company may incur substantial costs to comply with environmental
regulations.
ANTI-TAKEOVER EFFECT OF DELAWARE LAW AND CERTAIN CHARTER PROVISIONS
The Board of Directors has authority to issue up to 10,000,000 shares of
Preferred Stock, in addition to the 30,000,000 designated shares of Series A
Preferred Stock, of which 11,643,237 were outstanding on July 16, 1997, and
to fix the rights, preferences, privileges and restrictions, including voting
rights, of those shares without any further vote or action by the
stockholders. The rights of the holders of the Common Stock will be subject
to, and may be adversely affected by, the rights of the holders of the
outstanding Series A Preferred Stock and any other Preferred Stock that may
be issued in the future. The outstanding Series A Preferred Stock could have
the effect of making it more difficult for a third party to acquire a
majority of the outstanding voting stock of the Company. Furthermore,
certain provisions of the Company's Amended and Restated Certificate of
Incorporation, such as a classified Board of Directors, its Amended and
Restated Bylaws and of Delaware law could delay or make more difficult a
merger, tender offer or proxy contest involving the Company.
VOLATILITY OF STOCK PRICE
The market price of the Company's Common Stock, like that of the common
stock of many other medical device and other high technology companies, has been
highly volatile. Factors such as delays in obtaining FDA approval for the IOS
point-of-care system, fluctuations in the Company's actual or anticipated
operating results, announcements of technological innovations or new commercial
products by the Company or its competitors, governmental regulation, changes in
the current structure of the health care financing and payment systems in the
United States, developments in or disputes regarding patent or other proprietary
rights, economic and other external factors and general market conditions may
have a significant effect on the market price of the Common Stock.
CONCENTRATION OF SHARE OWNERSHIP
Based upon the shares owned and outstanding as of July 16, 1997, the
Company's officers, directors and 5% stockholders of the Company as a group
beneficially owned approximately 65% of the Company's outstanding Common
Stock (on an as-converted basis). As a result, these stockholders will be
able to exercise significant influence over all matters requiring stockholder
approval, including the election of directors and approval of significant
corporate transactions.
THE COMPANY
Biocircuits Corporation was incorporated in Delaware in March 1989. The
Company's executive offices are located at 1324 Chesapeake Terrace, Sunnyvale,
California 94089, and its telephone number is (408) 745-1961.
USE OF PROCEEDS
8.
<PAGE>
The Company will not receive any of the proceeds from the sale of the
Common Stock by the Selling Securityholders. The net proceeds received by
the Company from the exercise of the Warrants will be considered uncommitted
funds that may be used by the Company for general corporate purposes,
including sales and marketing and research and development.
DIVIDEND POLICY
The Company has never paid cash dividends. The Company's Board of
Directors currently intends to retain any earnings for use in the Company's
business and does not anticipate paying any cash dividends in the foreseeable
future.
9.
<PAGE>
SELLING SECURITYHOLDERS
The following table sets forth the names of the Selling Securityholders,
the number of shares of Common Stock (on an as-converted basis) beneficially
owned by each Selling Securityholder prior to this offering, the number of
shares of Common Stock being offered for the account of each Selling
Securityholder and the number and percentage of Common Stock to be owned by each
Selling Securityholder after completion of this offering. This information is
based upon information provided by the Selling Securityholders. Because the
Selling Securityholders may offer all, some or none of their Common Stock, no
definitive estimate as to the number of shares thereof that will be held by the
Selling Securityholders after such offering can be provided.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO OWNED AFTER
OFFERING(1)(2) OFFERING(1)(3)
------------------------------ ----------------------------
SHARES BEING
SELLING SECURITYHOLDER NUMBER PERCENT OFFERED NUMBER PERCENT
---------------------- ------ ---------- ---------- ------ ----------
<S> <C> <C> <C> <C> <C>
Entities affiliated with
Special Situations Fund III,
L.P.(4) 9,345,899 37.73% 9,062,498 283,401 *
Entities affiliated with
The Sprout Group(5) 3,892,567 18.61% 1,758,334 2,134,233 10.20%
H&Q Biocircuits Investors,
L.P.(6) 3,032,192 14.10% 2,525,000 507,192 2.36%
Glenbrook Partners, L.P.(7) 1,152,840 5.55% 1,024,600 128,240 *
Entities affiliated with
Sanderling(8) 896,408 4.40% 255,000 641,408 3.15%
Cove Investments Limited
Partnership(9) 584,590 2.86% 141,950 442,640 2.17%
Entities affiliated with
J.F. Shea(10) 485,181 2.32% 252,500 232,681 1.10%
Kaiser Survivor Trust(11) 432,744 2.12% 253,100 179,644 *
Lancaster Investment
Partners(12) 385,000 1.88% 300,000 85,000 *
KMC Instruments, Inc.(13) 300,000 1.44% 50,000 250,000 1.2%
Richard H. Osgood,
Inc.(14) 260,385 1.27% 234,584 25,801 *
Porter Partners, L.P.(15) 216,250 1.06% 85,000 131,250 *
Julie T. Berlacher(16) 181,667 * 150,000 31,667 *
Rogers Family Trust(17) 164,683 * 95,834 68,849 *
Stephen J. Massocca(18) 126,250 * 100,000 26,250 *
C. Fred Toney, Jr.(19) 109,585 * 74,584 35,001 *
EDJ Limited(20) 108,125 * 42,500 65,625 *
George L. Farinsky and
Barbara J. Farinsky,
Trustees of the Farinsky
1992 Trust(21) 99,403 * 21,250 78,154 *
Irwin Friedman 53,125 * 53,125 0 *
Lambda Financial Service
Corp. 53,125 * 53,125 0 *
John C. Coleman, Jr.(22) 67,999 * 50,500 17,499 *
Christopher J. Whitcomb(23) 17,750 * 17,750 0 *
Thomas J. Dietz(24) 2,126 * 2,126 0 *
</TABLE>
- -------------------------------------
* Less than one percent.
10.
<PAGE>
(1) Unless otherwise indicated below, the persons named in the table have or
will have sole voting and investment power with respect to all shares
beneficially owned by them, subject to community property laws where
applicable. Applicable percentage of ownership is based on 20,246,414
shares of Common Stock (on an as-converted basis) outstanding on July
15, 1997, adjusted as required by rules promulgated by the Commission.
(2) Assumes exercise of the April Financing Warrants, the July Financing
Warrants and the KMC Warrant.
(3) Assumes the sale of all shares offered hereby. The Company has agreed
to pay all reasonable fees and expenses incident to the filing of this
offering. See "Plan of Distribution."
(4) Includes 626,667 shares of Common Stock held of record by Special
Situations Cayman Fund, L.P. ("SSCF"); 51,042 shares of Common Stock
issuable upon the exercise of warrants held of record by SSCF; 63,750
shares of Common Stock issuable upon the exercise of April Financing
Warrants held of record by SSCF; 533,333 shares of Common Stock
issuable upon the exercise of July Financing Warrants held by SSCF;
2,037,983 shares of Common Stock held of record by Special Situations
Fund III, L.P. ("SSFIII"); 153,125 shares of Common Stock issuable
upon the exercise of warrants held of record by SSFIII; 255,000 shares
of Common Stock issuable upon the exercise of April Financing Warrants
held of record by SSFIII; 1,733,333 shares of Common Stock issuable
upon the exercise of July Financing Warrants held by SSFIII; 1,945,833
shares of Common Stock held of record by Special Situations Private
Equity Fund, L.P. ("SSPEF"); 212,500 shares of Common Stock issuable
upon the exercise of April Financing Warrants held of record by SSPEF;
1,733,333 shares of Common Stock issuable upon the exercise of July
Financing Warrants held by SSPEF.
(5) Includes 42,362 shares of Common Stock held of record by DLJ Capital
Corporation ("DLJ"); 25,870 shares of Common Stock issuable upon the
exercise of July Financing Warrants held by DLJ; 310,440 shares of
Series A Convertible Preferred Stock held by DLJ; 508,886 shares of
Common Stock held of record by Sprout Capital VII, L.P. ("SCVII");
310,770 shares of Common Stock issuable upon the exercise of July
Financing Warrants held by SCVII; 3,729,240 shares of Series A
Convertible Preferred Stock held of record by SCVII; 267,502 shares of
Common Stock held of record by Sprout Capital VI, L.P. ("SCVI");
163,360 shares of Common Stock issuable upon the exercise of July
Financing Warrants held by SCVI; 1,960,320 shares of Series A
Convertible Preferred Stock held of record by SCVI; 401,734 shares of
Common Stock held by record by ML Venture Partners II, L.P. ("ML
Venture"); 166,667 shares of Common Stock issuable upon the exercise
of July Financing Warrants held by ML Venture; 2,000,000 shares of
Series A Convertible Preferred Stock held of record by ML Venture, all
of which Robert Curry, Ph.D., a director of the Company and a general
partner of the Sprout Group (the submanager of ML Venture), disclaims
beneficial ownership of, except to the extent of any partnership
interest therein; and 5,416 shares subject to stock options held by
Dr. Curry, exercisable within 60 days of the date of this table, all
of such options shall be assigned to ML Venture upon exercise.
(6) Includes 212,500 shares of Common Stock issuable upon the exercise of
April Financing Warrants held of record by H&Q Biocircuits Investors,
L.P. and 1,050,000 shares of Common Stock issuable upon the exercise of
July Financing Warrants.
(7) Includes 42,000 shares of Common Stock issuable upon the exercise of
warrants held of record by Glenbrook Partners, L.P. ("Glenbrook");
27,200 shares of Common Stock issuable upon the exercise of April
Financing Warrants held of record by Glenbrook; and 485,100 shares of
Common Stock issuable upon the exercise of July Financing Warrants.
(8) Includes 439,631 shares of Common Stock held of record by Sanderling
Venture Partners III, L.P. ("SVPIII"); 74,464 shares of Common Stock
issuable upon the exercise of April Financing Warrants held of record
by SVPIII; 227,733 shares of Common Stock held of record by Sanderling
III Limited Partnership ("SIIILP"); 38,573 shares of Common Stock
issuable upon the exercise of April Financing Warrants held of record
by SIIILP; 75,766 shares of Common Stock held of record by Sanderling
III Biomedical, L.P. ("SIIIB"); 12,833 shares of Common Stock issuable
upon the exercise of April Financing Warrants held of record by SIIIB;
25,778 shares of Common Stock held of record by Sanderling Ventures
Management ("SVM"); 1,630 shares of Common Stock issuable upon the
exercise of April Financing Warrants held of record by SVM.
(9) Includes 125,000 shares of Common Stock issuable upon the exercise of
warrants held of record by Cove Investments Limited Partnership
("Cove"); and 70,975 shares of Common Stock issuable upon the exercise
of April Financing Warrants held of record by Cove.
(10) Includes 248,140 shares of Common Stock held of record by E&M RP Trust
("E&M"), 10,625 shares of Common Stock issuable upon the exercise of
April Financing Warrants held of record by E&M; 52,500 shares of
Common Stock issuable upon the exercise of July Financing Warrants
held by E&M; 110,791 shares of Common Stock held of record by Tahoe
Partnership I ("Tahoe"); 10,625 shares of Common Stock issuable upon
the exercise of April Financing Warrants held of record by Tahoe;
52,500 shares of Common Stock issuable upon the exercise of April
Financing Warrants held of record by Tahoe; and 52,500 shares
of Common Stock issuable upon the exercise of July Financing Warrants
held by record by Tahoe.
(11) Includes 78,252 shares of Common Stock and 70,000 shares of Series
A Stock held of record by the Kaiser Living Trust under a Trust dated
March 7, 1991; 126,550 shares of Common Stock held of record by the
Kaiser Survivor's Trust; 21,250 shares of Common Stock issuable upon
the exercise of April Financing Warrants held of record by the Kaiser
Survivor's Trust; 105,300 shares of Common Stock issuable upon the
exercise of July Financing Warrants held by the Kaiser Survivor's
Trust; and 83,892 shares of Common Stock subject to stock Options held
by Mr. Kaiser exercisable within 60 days of the date of this table.
(12) Includes 35,000 shares of Common Stock issuable upon the exercise of
warrants held of record by Lancaster Investment Partners ("Lancaster");
10,625 shares of Common Stock issuable upon the exercise of
April Financing Warrants held of record by Lancaster; and 139,375
shares of Common Stock issuable upon the exercise of July Financing
Warrants.
(13) Includes 300,000 shares of Common Stock issuable upon the exercise of
warrants held of record by KMC Instruments, Inc.
(14) Includes 11,667 shares of Common Stock issuable upon the exercise of
warrants held of record by Mr. Osgood; 10,625 shares of Common Stock
issuable upon the exercise of April Financing Warrants held of record by
Mr. Osgood; and 106,667 shares of Common Stock issuable upon the
exercise of July Financing Warrants.
(15) Includes 43,750 shares of Common Stock issuable upon the exercise of
warrants held of record by Porter Partners, L.P. ("Porter"); and 42,500
shares of Common Stock issuable upon the exercise of April Financing
Warrants held by record by Porter.
(16) Includes 11,667 shares of Common Stock issuable upon the exercise of
warrants held of record by Ms. Berlacher; 6,375 shares of Common
Stock issuable upon the exercise of April Financing Warrants held of
record by Ms. Berlacher; and 68,625 shares of Common Stock issuable
upon the exercise of July Financing Warrants.
(17) Includes 21,250 shares of Common Stock issuable upon the exercise of
April Financing Warrants held of record by the Rogers Family Trust;
and 26,667 shares of Common Stock issuable upon the exercise of July
Financing Warrants.
(18) Includes 8,750 shares of Common Stock issuable upon the exercise of
warrants held of record by Mr. Massocca; 6,375 shares of Common
Stock issuable upon the exercise of April Financing Warrants held of
record by Mr. Massocca; and 43,625 shares of Common Stock issuable
upon the exercise of July Financing Warrants.
(19) Includes 11,667 shares of Common Stock issuable upon the exercise of
warrants held of record by Mr. Toney; 10,625 shares of Common Stock
issuable upon exercise of April Financing Warrants held of record by
Mr. Toney.
(20) Includes 21,875 shares of Common Stock issuable upon the exercise of
warrants held of record by EDJ Limited ("EDJ"); and 21,250 shares of
Common Stock issuable upon the exercise of April Financing Warrants
held of record by EDJ.
(21) Includes 312,614 shares of Series A Convertible Preferred Stock held of
record by George L. Farinsky and Barbara J. Farinsky, Trustees of the
Farinsky 1992 Trust (the "Farinsky Trust"); and 10,625 shares of Common
Stock issuable upon the exercise of April Financing Warrants held of
record by the Farinsky Trust.
11.
<PAGE>
(22) Includes 5,833 shares of Common Stock issuable upon the exercise of
warrants held of record by Mr. Coleman; 4,250 shares of Common Stock
issuable upon the exercise of April Financing Warrants held of record by
Mr. Coleman; and 21,000 shares of Common Stock issuable upon the exercise
of July Financing Warrants.
(23) Includes 8,875 shares of Common Stock issuable upon the exercise of
July Financing Warrants held of record by Mr. Whitcomb.
(24) Includes 1,063 shares of Common Stock issuable upon the exercise of
April Financing Warrants held of record by Mr. Dietz.
12.
<PAGE>
PLAN OF DISTRIBUTION
The Shares may be offered by the Selling Securityholders from time to time
in transactions on the Nasdaq National Market, in privately negotiated
transactions or a combination of such methods of sale, at fixed prices that may
be changed, at market prices prevailing at the time of sale, at prices related
to such prevailing market prices or at negotiated prices. The Selling
Securityholders may effect such transactions by selling the Shares directly or
by or through agents or broker-dealers who may receive compensation in the form
of discounts, concessions or commissions from the Selling Securityholders or the
purchasers of the Shares for whom such broker-dealers may act as agent or to
whom they sell as principal or both (which compensation to a particular
broker-dealer might be in excess of customary commissions).
The Selling Securityholders and any underwriters, dealers or agents that
participate in the distribution of the Shares may be deemed to be "underwriters"
within the meaning of the Securities Act, and any discounts, commissions or
concessions received by them and any provided pursuant to the sale of the Shares
by them might be deemed to be underwriting discounts and commissions under the
Securities Act. In order to comply with the securities laws of certain states,
if applicable, the Shares will be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states the
Shares may not be sold unless it has been registered or qualified for sale in
the applicable state or an exemption from the registration or qualification
requirement is available and is complied with.
Under applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of the Shares may not simultaneously engage in
market making activities with respect to such Shares for a period of nine
business days prior to the commencement of such distribution. In addition and
without limiting the foregoing, each Selling Securityholder will be subject to
applicable provisions of the Exchange Act and the rules and regulations
thereunder, including, without limitation, Rules 10b-2, 10b-6 and 10b-7, which
may limit the timing of purchases and sales of the Shares by the Selling
Securityholders.
The Company entered into agreements with the Selling Securityholders to
register their Shares under applicable federal and state securities laws. The
Company will pay substantially all of the expenses incident to the offering and
sale of the Shares to the public, other than commissions, concessions and
discounts of underwriters, dealers or agents. Such expenses (excluding such
commissions and discounts) are estimated to be $30,225.69. Such agreements
provide for cross-indemnification of the Selling Securityholders and the Company
to the extent permitted by law, for losses, claims, damages, liabilities and
expenses arising, under certain circumstances, out of any registration of the
Shares.
13.
<PAGE>
LEGAL MATTERS
The validity of the securities offered hereby will be passed upon for the
Company by Cooley Godward LLP, Palo Alto, California.
EXPERTS
The financial statements of Biocircuits Corporation appearing in
Biocircuits Corporation's Annual Report (Form 10-K/A-3) for the year ended
December 31, 1996 have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon (which contains an explanatory
paragraph with respect to the Company's ability to continue as a going
concern) included therein and incorporated herein by reference. Such
financial statements are, and audited financial statements to be included in
subsequently filed documents will be, incorporated herein in reliance upon
the reports of Ernst & Young LLP pertaining to such financial statements (to
the extent covered by consents filed with the Securities and Exchange
Commission) given upon the authority of such firm as experts in accounting
and auditing.
14.
<PAGE>
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NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER OF ANY SECURITIES OTHER THAN THOSE TO WHICH IT RELATES OR AN OFFER TO
SELL, OR A SOLICITATION OF AN OFFER TO BUY, TO ANY PERSON IN ANY JURISDICTION
WHERE SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO THE DATE HEREOF.
---------------------
TABLE OF CONTENTS
PAGE
----
Available Information.........................................................2
Incorporation of Certain Documents by Reference...............................2
Summary Information...........................................................3
The Offering..................................................................4
Risk Factors..................................................................5
The Company...................................................................8
Use of Proceeds...............................................................8
Dividend Policy...............................................................9
Selling Securityholders.......................................................10
Plan of Distribution..........................................................13
Legal Matters.................................................................14
Experts.......................................................................14
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16,603,360 SHARES
BIOCIRCUITS CORPORATION
COMMON STOCK
------------
PROSPECTUS
------------
August __, 1997
- --------------------------------------------------------------------------------
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<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the expenses payable by the Company in
connection with the sale, issuance and distribution of the securities being
registered, other than underwriting discounts and commissions. All amounts are
estimates except the SEC registration fee. None of these expenses will be paid
by the Selling Securityholders.
SEC Registration Fee . . . . . . . . . . . . $ 5,225.69
Printing and Engraving Expenses. . . . . . . 2,500.00
Legal Fees and Expenses. . . . . . . . . . . 15,000.00
Accounting Fees and Expenses . . . . . . . . 7,500.00
Total. . . . . . . . . . . . . . . . . . . . $ 30,225.69
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Registrant's Amended and Restated Certificate of Incorporation and
Amended and Restated Bylaws include provisions to (i) eliminate the personal
liability of its directors for monetary damages resulting from breaches of their
fiduciary duty to the extent permitted by Section 102(b)(7) of the General
Corporation Law of Delaware (the "Delaware Law") and (ii) require the Registrant
to indemnify its directors and officers to the fullest extent permitted by
Section 145 of the Delaware Law, including circumstances in which
indemnification is otherwise discretionary. Pursuant to Section 145 of the
Delaware Law, a corporation generally has the power to indemnify its present and
former directors, officers, employees and agents against expenses incurred by
them in connection with any suit to which they are, or are threatened to be
made, a party by reason of their serving in such positions so long as they acted
in good faith and in a manner they reasonably believed to be in, or not opposed
to, the best interests of a corporation, and, with respect to any criminal
action, they had no reasonable cause to believe their conduct was unlawful. The
Registrant believes that these provisions are necessary to attract and retain
qualified persons as directors and officers. These provisions do not eliminate
liability for breach of the director's duty of loyalty to the Registrant or its
stockholders, for acts or omissions not in good faith or involving intentional
misconduct or knowing violations of law, for any transaction from which the
director derived an improper personal benefit or for any willful or negligent
payment of any unlawful dividend or any unlawful stock purchase agreement or
redemption.
The Registrant has entered into agreements with its directors and executive
officers that require the Registrant to indemnify such persons against expenses,
judgments, fines, settlements and other amounts actually and reasonably incurred
(including expenses of a derivative action) in connection with any proceeding,
whether actual or threatened, to which any such person may be made a party by
reason of the fact that such person is or was a director or officer of the
Registrant or any of its listed enterprises, provided such person acted in good
faith and in a manner such person reasonably believed to be in or not opposed to
the best interests of the Registrant and, with respect to any criminal
proceeding, had no reasonable cause to believe his or her conduct was unlawful.
The indemnification agreements also set forth certain procedures that will apply
in the event of a claim for indemnification thereunder.
II-1
<PAGE>
ITEM 16. EXHIBITS.
EXHIBIT
NUMBER DESCRIPTION
3.1 Amended and Restated Certificate of Incorporation.(1)
3.2 Amended and Restated Bylaws.(2)
4.1 Specimen Stock Certificate.(1)
4.2 Common Stock Purchase Agreement, dated April 15, 1997, among
the Registrant and the Purchasers named therein.(3)
4.3 Common Stock and Warrant Purchase Agreement, dated April 15,
1997, among the Registrant and the Purchasers named
therein.(3)
4.4 Form of Warrant issued pursuant to the Common Stock and
Warrant Purchase Agreement, dated April 15, 1997.(3)
4.5 Form of Warrant issued to KMC Systems, Inc.(3)
4.6 Common Stock and Warrant Purchase Agreement, dated
July 2, 1997, among the Registrant and the Purchasers
named therein.(4)
4.7 Form of Warrant issued pursuant to the Common Stock and
Warrant Purchase Agreement, dated July 2, 1997.(4)
5.1 Opinion of Cooley Godward LLP.(5)
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2 Consent of Cooley Godward LLP. Reference is made to 5.1.
24.1 Power of Attorney.(3)
- ----------------------
(1) Filed as an exhibit to the Registration Statement on Form S-3 (No.
33-93736), as amended, incorporated herein by reference.
(2) Filed as an exhibit to the Registration Statement on Form S-1 (No.
33-46587), as amended, and incorporated herein by reference.
(3) Filed as an exhibit to the Registration Statement on Form S-3
(No. 333-26079), filed April 29, 1997, and incorporated herein by
reference.
(4) Filed as an exhibit to Amendment No. 1 to the Registration Statement on
Form S-3 (No. 333-26079), filed July 18, 1997, and incorporated herein by
reference.
(5) Opinion of Cooley Godward LLP regarding 2,896,226 of the Shares being
registered filed as an exhibit to the Registration Statement on Form S-3
(No. 333-26079), filed April 29, 1997, and incorporated herein by
reference. Opinion of Cooley Godward LLP regarding 13,707,134 of the
Shares being registered filed as an exhibit to Amendment No. 1 to the
Registration Statement on Form S-3 (No. 333-26079), filed July 18, 1997,
and incorporated herein by reference.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement to include any
material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material change
to such information in the registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof; and
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of
the offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing
of the registrant's annual report pursuant to Section 13(a) or 15(d) of
the Securities Exchange Act of 1934 (and, where applicable, each filing
of an employee benefit plan's annual report pursuant to Section 15(d) of
the Securities Exchange Act of 1934) that is incorporated by reference
in the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering
of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the registrant pursuant to provisions described in Item 15, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in
connection with the securities being registered, the
II-2
<PAGE>
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this amendment to the
registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the city of Sunnyvale, State of California, on
August 11, 1997.
BIOCIRCUITS CORPORATION
By /s/ John Kaiser
--------------------------
John Kaiser
Chairman of the Board, President
and Chief Executive Officer
By /s/ James Welch
--------------------------
James Welch
Vice President and Chief Financial
Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATE INDICATED.
SIGNATURE TITLE DATE
/s/ John Kaiser
- ----------------------------- Chairman of the Board, August 11, 1997
John Kaiser President and Chief Executive
Officer (Principal Executive
Officer)
/s/ James Welch
- ----------------------------- Vice President and Chief August 11, 1997
James Welch Financial Officer
(Principal Financial and
Accounting Officer)
/s/ Robert Curry, Ph.D.*
- ----------------------------- Director August 11, 1997
Robert Curry, Ph.D.
/s/ Patrick Latterell*
- ----------------------------- Director August 11, 1997
Patrick Latterell
/s/ David Rubinfien*
- ----------------------------- Director August 11, 1997
David Rubinfien
* By /s/ John Kaiser
- -----------------------------
Attorney-in-fact
II-4
<PAGE>
INDEX TO EXHIBITS
EXHIBIT NUMBER EXHIBITS
3.1 Amended and Restated Certificate of Incorporation.(1)
3.2 Amended and Restated Bylaws.(2)
4.1 Specimen Stock Certificate.(1)
4.2 Common Stock Purchase Agreement, dated April 15, 1997, among
the Registrant and the Purchasers named therein.(3)
4.3 Common Stock and Warrant Purchase Agreement, dated April 15,
1997, among the Registrant and the Purchasers named
therein.(3)
4.4 Form of Warrant issued pursuant to the Common Stock and
Warrant Purchase Agreement, dated April 15, 1997.(3)
4.5 Form of Warrant issued to KMC Systems, Inc.(3)
4.6 Common Stock and Warrant Purchase Agreement, dated
July 2, 1997, among the Registrant and the Purchasers
named therein.(4)
4.7 Form of Warrant issued pursuant to the Common Stock and
Warrant Purchase Agreement, dated July 2, 1997.(4)
5.1 Opinion of Cooley Godward LLP.(5)
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2 Consent of Cooley Godward LLP. Reference is made to 5.1.
24.1 Power of Attorney.(3)
- ----------------------
(1) Filed as an exhibit to the Registration Statement on Form S-3 (No.
33-93736), as amended, incorporated herein by reference.
(2) Filed as an exhibit to the Registration Statement on Form S-1 (No.
33-46587), as amended, and incorporated herein by reference.
(3) Filed as an exhibit to the Registration Statement on Form S-3
(No. 333-26079), filed April 29, 1997, and incorporated herein by
reference.
(4) Filed as an exhibit to Amendment No. 1 to the Registration Statement on
Form S-3 (No. 333-26079), filed July 18, 1997, and incorporated herein by
reference.
(5) Opinion of Cooley Godward LLP regarding 2,896,226 of the Shares being
registered filed as an exhibit to the Registration Statement on Form S-3
(No. 333-26079), filed April 29, 1997, and incorporated herein by
reference. Opinion of Cooley Godward LLP regarding 13,707,134 of the
Shares being registered filed as an exhibit to Amendment No. 1 to the
Registration Statement on Form S-3 (No. 333-26079), filed July 18, 1997,
and incorporated herein by reference.
<PAGE>
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Amendment No. 3 to the Registration Statement (Form S-3 No. 333-26079) and
related Prospectus of Biocircuits Corporation for the registration of
16,603,360 shares of its common stock and to the incorporation by reference
therein of our report dated January 13, 1997 with respect to the financial
statements of Biocircuits Corporation included in its Annual Report (Form
10-K/A) for the year ended December 31, 1996, filed with the Securities and
Exchange Commission.
/S/ ERNST & YOUNG LLP
Palo Alto, California
August 8, 1997
