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PROSPECTUS
1,588,677 SHARES
BIOCIRCUITS CORPORATION
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COMMON STOCK
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This Prospectus relates to a total of 1,588,677 shares of Common Stock
(the "Shares"), with a par value of $0.001 (the "Common Stock") of
Biocircuits Corporation (the "Company") which are being offered and sold by
certain stockholders of the Company (the "Selling Securityholders"). Of such
Shares (i) 1,111,727 were issued by the Company in connection with the
conversion of a secured promissory note (the "Note") into Common Stock of the
Company on December 13, 1996 (the "Conversion"), (ii) 222,345 are issuable
pursuant to the exercise of a warrant which was issued in connection with the
Conversion (the "Beckman Warrant"), (iii) 250,000 are issuable pursuant to
the exercise of a warrant which was issued in connection with a manufacturing
arrangement (the "Kollsman Warrant") and (iv) 4,605 are issuable pursuant to
the exercise of a warrant issued in connection with a standby letter of
credit issued on August 6, 1996 (the "Credit Warrant"). The Beckman Warrant,
the Kollsman Warrant and the Credit Warrant are referred to herein
collectively as the "Warrants".
The Shares may be offered by the Selling Securityholders from time to
time in transactions on the Nasdaq National Market System, 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 Company will not receive any of the proceeds from the sale of the
Shares by the Selling Securityholders hereof. See "Plan of Distribution."
The Selling Securityholders, directly or through agents, dealers or
underwriters, may sell the Shares 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 System under the symbol BIOC. The last
reported sales price on the Company's Common Stock on the Nasdaq National
Market on January 13, 1996 was $3.31 per share.
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THE SHARES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" ON PAGE 7.
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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 $21,565.00. 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 "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 Act. The Company has agreed to indemnify the Selling
Securityholders and certain other persons against certain liabilities,
including liabilities under the Act.
The date of this Prospectus is January 30, 1997.
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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 System, 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 of 1933,
as amended (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 are by this reference incorporated in and made a part of
this Prospectus:
(1) The Annual Report on Form 10-K for the fiscal year ended December 31, 1995
filed on March 31, 1996, including all matters incorporated by reference
therein;
(2) The Proxy Statement filed on April 18, 1996, including all matters
incorporated by reference therein;
(3) The Quarterly Report on Form 10-Q for the quarterly period ended March 31,
1996, filed on May 14, 1996, including all matters incorporated by
reference therein;
(4) The Quarterly Report on Form 10-Q for the quarterly period ended June 30,
1996, filed on August 13, 1996, including all matters incorporated by
reference therein; and
(5) The Quarterly Report on Form 10-Q for the quarterly period ended
September 30, 1996, filed on November 14, 1996, including all matters
incorporated by reference therein.
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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: Donald Hawthorne, 1324
Chesapeake Terrace, Sunnyvale, California, 94089, telephone number (408)
745-1961.
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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 41,000 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, although the time varies 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 seven 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 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, including
all improvements made during the feasibility study. In connection with the
Conversion, Beckman elected to convert the Note into the Company's
Common Stock and the Beckman Warrant. Biocircuits will continue its internal
efforts to develop further the lipid-polymer technology and will also look
for licensing partners. The Company believes the lipid-polymer technology
could be used in a next generation IOS system.
5.
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THE OFFERING
Shares offered . . . . . . . . . . . Up to 1,588,677 Shares, all of which
are being offered by the Selling
Securityholders.(1)
Use of Proceeds . . . . . . . . . . . The Company will not receive any of
the proceeds from the sale of the
Shares by the Selling Securityholders.
The net proceeds from the exercise of
the Warrants received by the Company
will be considered uncommitted funds
that may be used by the Company for
general corporate purposes, including
sales and marketing and research and
development.
Nasdaq Symbol . . . . . . . . . . . BIOC.
(1) (i) 1,111,727 were issued by the Company in connection with the
Conversion, (ii) 222,345 are issuable pursuant to the exercise of the
Beckman Warrant, (iii) 250,000 are issuable pursuant to the exercise
of the Kollsman Warrant and (iv) 4,605 are issuable pursuant to the
Credit Warrant. Assumes the exercise of all of the Warrants.
Biocircuits Corporation and IOS are registered trademarks of the Company.
6.
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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.
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, introduce
and market its current and potential products. The time frame necessary to
develop the Company's diagnostic instruments and tests is uncertain. The
Company has experienced 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 two of the most commonly requested
immunodiagnostic tests, T4 and T Uptake, occurred in March 1996. In
September 1996, the Company received FDA clearance to market a qualitative
serum pregnancy assay. The Company received clearances from the FDA for a TSH
assay in November 1996 and a quantitative hCG assay in December 1996.
Biocircuits is currently developing three additional assays: a PSA test, a
Digoxin test, and a Free T4 test. In December 1996, the Company launched its
TSH assay on a second generation cartridge. 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.
The Company does not expect to realize any significant revenue from related
instrument sales until at least the second quarter of 1997.
There can be no assurance that the IOS point-of-care system and tests
will perform in accordance with the Company's specifications, that the
Company will be able to develop successfully or obtain regulatory clearance
for additional tests or any other future products, that the second generation
cartridge will perform as planned, that any of the Company's products can be
manufactured in 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 the point-of-care site. There can be
no assurance that the Company will be successful in developing and
penetrating the point-of-care market for immunodiagnostic testing. In order
to be successful, the Company must expand its existing sales force of 6 sales
representatives 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. 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 significantly less than the
Company's initial expectations.
7.
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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 beyond the T4 and T Uptake
tests. The Company believes that a TSH test may be a key element 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.
LACK OF MARKETING EXPERIENCE; INTERNATIONAL SALES
The Company plans to target the estimated 41,000 physician practices
and alternate site laboratories that are licensed under the Clinical
Laboratories Improvement Act of 1967 and Amendments of 1988 (CLIA) for high
or moderate complexity testing, most of which currently do not have an
immunodiagnostic testing capability. The Company plans to market its IOS
point-of-care system to physicians' offices and alternative site laboratories
through distributors supported by its own sales force in the United States
and through distributors and marketing partners outside the United States.
The Company has entered into agreements with medical supply distributors with
distribution sites throughout the United States and sales representatives
with expertise in selling testing and other medical equipment to the
physicians' office laboratory market. Although the Company's first sale and
shipment of its IOS system occurred in March 1996, there can be no assurance
that the Company will be successful in marketing its products, directly or
through distributors. In addition, since the Company first established
relationships with its distributors, some of the distributors of the
Company's products have consolidated with companies that distribute products
that may compete with the Company's products. There can be no assurance that
such consolidation will not continue, and if it does continue, that such
consolidation will not have an adverse impact on the Company's operations.
In addition to its relationships with distributors, the Company must
expand its marketing and customer service programs and its sales force in
order to penetrate successfully the point-of-care market for immunodiagnostic
testing. In order to compete successfully, the Company will be required to
provide prompt service to its customers. However, there can be no assurance
that the Company will be able to establish the necessary programs or that
such programs and service will be consistently reliable.
The Company expects that international sales will represent a portion
of its net sales and that the Company's success will be dependent upon, among
other things, its ability to form relationships with established
international marketing partners. To date, no such relationships have been
established. If such relationships are established, the Company will be
subject to normal risks of international sales, such as currency
fluctuations, export controls and other regulations. In addition, the laws
of certain foreign countries may not protect the Company's intellectual
property rights to the same extent as do the laws of the United States.
RELATIONSHIP WITH BECKMAN AND OTHER POTENTIAL LICENSEES
Biocircuits has developed significant knowledge about lipid/polymer
biomaterials in the past seven 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 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, including
all improvements made during the feasibility study. In connection with the
Conversion, Beckman also elected to convert the Note into the Company's
Common Stock and the Beckman Warrant to purchase the Company's Common Stock.
Biocircuits will continue its internal efforts to develop further the
lipid-polymer technology and will also look for licensing partners. The
Company believes the lipid-polymer technology could be used in a next
generation IOS system. There can be no assurance, however, that the Company
will be able to enter into any licensing
8.
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partnerships, that any such partnerships would be successful, or that the
lipid-polymer technology can be developed successfully for use in future
products.
LACK OF MANUFACTURING EXPERIENCE; RELIANCE ON CONTRACT MANUFACTURERS
Biocircuits has developed a proprietary manufacturing process for
producing the test cartridges for its IOS point-of-care system. The Company
has established its initial manufacturing capability for the single-use
cartridges. Various plastic components and other materials for the cartridges
are and will be obtained from contract manufacturers. The Company's near
term cartridge manufacturing milestones include improving manufacturing
efficiencies, expanding mold and cartridge manufacturing capacity as both the
test menu and test manufacturing volume expand, initiating manufacturing
automation efforts and manufacturing the cartridge at the Company's targeted
cost. 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. This automation effort will be critical to meeting the
Company's longer-term cartridge manufacturing demands and cost targets. The
cartridge manufacturing scale-up process will require the Company to develop
advanced manufacturing techniques and rigorous process controls. There can
be no assurance that the Company will be successful in these efforts or that
such efforts will result in the Company meeting expected cartridge demand or
achieving the Company's longer-term cartridge manufacturing cost targets.
The Company has registered its manufacturing facility with the FDA and
with the Department of Health Services of the State of California, and will
be subject to state and federal inspections confirming the Company's
compliance with good manufacturing practice ("GMP") guidelines. Prior to the
first sale and shipment of its IOS point-of-care system in March 1996, the
Company believes it completed setting up this initial manufacturing capability
in compliance with GMP requirements. No assurance can be given as to the
ability of the Company to produce commercial quantities of cartridges in
compliance with applicable regulations at an acceptable cost.
In August and December 1995, the Company entered into agreements with
NalgeNunc International, Inc. ("Nunc") to manufacture the plastic components
of its disposable test cartridges. Under the terms of the agreement, Nunc has
the exclusive right to supply the plastic components for the test cartridges
for all sales in North America. The Company will be entirely dependent on
Nunc as the sole source for the plastic components and the molding thereof.
There can be no assurance that Nunc will be able to deliver the required
quantities of test cartridge components on schedule or at costs acceptable to
the Company.
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 was to expire 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 has established a standby letter of credit for the
benefit of Kollsman. 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.
9.
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The Company has experienced delays from Kollsman in the past,
resulting in delays in the development of the TSH, qualitative serum
pregnancy and quantitative hCG assays and delays in the introduction of the
IOS system and initial assays. There can be no assurance that similar delays
will not be encountered in the future. In the event that shipments are
delayed and orders for the IOS point-of-care system become significantly
backlogged, the delay could have a material adverse impact on the Company.
HISTORY OF LOSSES; EXPECTATION OF FUTURE LOSSES
At September 30, 1996, the Company's accumulated deficit was
approximately $48.0 million. Biocircuits expects to incur additional losses
over the next several years. The Company expects that currently available
funds will be used primarily for the continued launch of the 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 are generally expected to increase, due to the
recent launch of the Company's IOS point-of-care system. 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.
FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FUNDING; MAINTENANCE OF
NASDAQ LISTING
Additional funds will be required in 1997 to carry the Company beyond
the initial sales of the IOS system and to enable the Company to develop and
obtain regulatory approval for additional tests. The Company believes that
its existing capital resources will be adequate to satisfy its requirements
into the second quarter of 1997, assuming no exercise of outstanding
warrants. If the remaining warrants issued by the Company in June 1995,
which expire on February 14, 1997, are exercised in full for cash, the
Company would receive an aggregate amount of $2.1 million, which the Company
estimates would satisfy the Company's cash requirements until late second
quarter 1997. If the warrants issued by the Company in an October 1996
private financing (the "Financing Warrants") are exercised prior to the end
of second quarter 1997, the Company believes its cash resources will be
adequate to satisfy its requirements through late in the third quarter of
1997. However, since the Financing Warrants expire in October 1997, there
can be no assurance that they will be exercised prior to the end of second
quarter 1997. The Company has the right to call the Financing Warrants in
the second half of their one year life if the Common Stock price equals or
exceeds $5.25 per share. The Company's ability to continue its planned
operations will be dependent upon its ability to obtain additional funds from
existing investors, new investors or corporate partners. The Company intends
to pursue all of these financing options, but there can be no assurance that
the Company will be successful. If not successful in obtaining financing,
the Company's business will be materially and adversely affected.
The Company believes that maintaining its listing on the Nasdaq
National Market System ("Nasdaq") is central to its ability to raise
additional funds as well as to provide liquidity to investors. The Company
believes that the Conversion of the Note will result in the Company
meeting Nasdaq listing requirements until the end of first quarter 1997. If
approximately one-third of the warrants which expire in February 1997 are
exercised for cash, the Company believes it will meet Nasdaq listing
requirements until the end of second quarter 1997. If the Financing Warrants
are exercised before June 30, 1997, the Company believes it will meet Nasdaq
listing requirements until the end of third quarter 1997. Thereafter, the
Company will be required to generate sufficient revenues or raise additional
capital to maintain Nasdaq listing requirements.
The Company expects its cash requirements to increase significantly 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 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
10.
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marketing capabilities and potential collaborative partnerships. The Company
intends to seek additional funding through collaborative relationships and
public or private financings. Other methods of financing the acquisition of
capital equipment, including lease financing, may be utilized if available on
attractive terms. Raising additional funds from public or private financings
may result in further dilution to then-existing shareholders. 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 will 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.
COMPETITION
Human immunodiagnostics is an intensely competitive field in which
there are a number of well-established companies. Many of the Company's
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 diagnostic division such as Abbott Laboratories, Becton,
Dickinson and Company, Boehringer Mannheim, GmbH, Chiron/Ciba-Corning
Diagnostics 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.
UNCERTAINTY OF PROTECTION OF PATENTS AND PROPRIETARY TECHNOLOGY
The Company has aggressively pursued the development of a patent
portfolio to protect its technology. However, the patent positions of any
medical device manufacturer, including Biocircuits, are uncertain and involve
complex legal and factual questions for which important legal principles are
largely unresolved. In addition, the coverage claimed in a patent application
can be significantly reduced before a patent is issued. Consequently, there
can be no assurance that any patent applications will result in the issuance
of patents or, with respect to issued patents, whether they will provide
significant proprietary protection or will be circumvented or invalidated.
Since patent applications in the United States are maintained in secrecy
until patents issue, and since publication of discoveries in the scientific
or patent literature often lag behind actual discoveries, the Company cannot
be certain that it or any licensor was the first to file a patent application
for such invention. Moreover, the Company might have to participate in
interference proceedings declared by the United States Patent and Trademark
Office to eventually determine priority of invention, which could result in
substantial costs to the Company, even if the patents, if issued, would be
held valid by a court or if a competitor's technology or product would be
found to infringe such patents.
The Company also relies upon trade secret protection for its
confidential and proprietary information. There can be no assurance that
others will not independently develop substantially equivalent proprietary
information and techniques or otherwise gain access to the Company's trade
secrets or disclose such technology, or that the Company can meaningfully
protect its trade secrets.
Biocircuits requires its employees, consultants and advisors to
execute confidentiality agreements upon the commencement of an employment or
consulting relationship with the Company. Each agreement provides that all
confidential information developed or made known to the individual during the
course of the relationship will be kept confidential and not disclosed to
third parties except in specified circumstances. In the case of employees,
the
11.
<PAGE>
agreements provide that all inventions conceived by an individual shall be
the exclusive property of the Company, other than inventions unrelated to the
Company's business and developed entirely on the employee's own time. There
can be no assurance, however, that these agreements will provide meaningful
protection or adequate remedies for the Company's trade secrets in the event
of unauthorized use or disclosure of such information.
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
12.
<PAGE>
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 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 the
CLIA. The 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. The CLIA covers such
testing in virtually all settings, including physicians' offices.
13.
<PAGE>
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 testing of moderate
complexity, and thus any laboratory using such products would have to meet
the regulatory requirements for testing of moderate complexity. However, it
is possible that the Company's products could be categorized as tests of high
complexity in the future, in which case the Company's penetration of the
point-of-care market would be reduced since not all laboratories would meet
the standards required to conduct such tests. The Company understands that
laboratories, including physician office laboratories, will be evaluating the
requirements of the 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 the 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.
14.
<PAGE>
NEED TO RETAIN AND ATTRACT KEY EMPLOYEES
The Company is highly dependent upon the principal members of its
management and scientific staff, the loss of whose services might impede the
achievement of the Company's business objectives. Furthermore, recruiting and
retaining additional qualified scientific, manufacturing, marketing and sales
personnel also will be critical to the Company's success. 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 and retain qualified personnel on acceptable terms.
POTENTIAL ADVERSE IMPACT OF REIMBURSEMENT POLICIES
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 Biocircuits 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 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.
15.
<PAGE>
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, 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 outstanding as of September 30, 1996, the
Company's officers, directors and their affiliates as a group beneficially
owned approximately 52.54% of the Company's outstanding Common Stock and
Series A Preferred 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.
16.
<PAGE>
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
The Company will not receive any of the proceeds from the sale of the
Shares by the Selling Securityholders. The net proceeds from the exercise of
the Warrants received by the Company 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.
17.
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SELLING SECURITYHOLDERS
The following table sets forth the names of the Selling Securityholders,
the number of shares of Common Stock 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 of shares 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 BEING SHARES BENEFICIALLY
SELLING SECURITYHOLDER OWNED PRIOR TO OFFERING (1)(2) OFFERED(2) OWNED AFTER OFFERING(1)(3)
- ---------------------- ------------------------------ ------------ --------------------------
<S> <C> <C> <C>
Beckman Instruments, Inc. 1,334,072 1,334,072 0
KMC Systems, Inc. 250,000 250,000 0
Venture Lending, a division of
Cupertino National Bank & Trust
Company 12,233(4) 4,605 7,628
Total: 1,588,677
</TABLE>
- ----------------------
(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.
(2) Assumes exercise of the Warrants.
(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 7,628 shares of Common Stock issuable upon the exercise of
Warrants issued in previous financings.
18.
<PAGE>
PLAN OF DISTRIBUTION
The Shares may be offered by the Selling Securityholders from time to
time in transactions on the Nasdaq National Market System, 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 $21,565.00.
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.
19.
<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) for the year ended
December 31, 1995 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.
20.
<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.
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TABLE OF CONTENTS
Page
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Available Information.....................................................3
Incorporation of Certain Documents by Reference...........................3
Summary Information.......................................................5
The Offering..............................................................6
Risk Factors..............................................................7
The Company...............................................................17
Use of Proceeds...........................................................17
Dividend Policy...........................................................17
Selling Securityholders...................................................18
Plan of Distribution......................................................19
Legal Matters.............................................................20
Experts...................................................................20
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1,588,677 SHARES
BIOCIRCUITS CORPORATION
COMMON STOCK
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PROSPECTUS
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JANUARY 15, 1997
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